This brings to more than $360m the dairy giant is investing in the South following a $75m advanced protein hub being developed at Studholme, a $150m new UHT cream plant at Edendale and a $64m boiler project at Clandeboye.
Once completed, the new butter line will nearly double production to 70,000 tonnes a year in a range of butter products for global ingredient customers and professional kitchens.
Construction is due to start in December, with the first butter expected to come off the line in 2027.
The Clandeboye expansion follows Fonterra signalling at its annual meeting it was in a phase of strategic investment.
Chief executive Miles Hurrell said the co-op planned to invest up to $1 billion over the next three to four years in projects that would generate further value for farmers and make its operations more cost-effective.
He said global demand for butter continued to grow and the investment would position Fonterra in a better place to serve customers worldwide.
The plant will generate butter products for diverse markets including Halal and Kosher certifications, as well as support growth in international markets.
Clandeboye is Fonterra’s only site producing butter in the South Island.
Chief operating officer Anna Palairet said the expanded Clandeboye site would strengthen Fonterra’s network in the South Island by improving flexibility and resilience.
"This investment is part of Fonterra’s broader strategic asset roadmap supporting long-term growth in high-value dairy categories. The expansion will create 16 new jobs at the site, supporting the local economy."
The new line will produce traditional churned lactic butter and unsalted butter.
Lactic butter is sold directly as an ingredient to customers. The European-style product made using a high-speed version of traditional hand-churning is popular in Middle Eastern cuisine as well as Western and local bakery products.
Unsalted butter will be used for ingredients and food-service customers for products such as croissants, danishes, bread, cakes and cookies, and increasingly Chinese pastries.
This is Fonterra’s third investment in the South Island in the past year.
Studholme’s advanced protein hub is expected to be completed early next year with construction of Edendale’s UHT cream plant ending in mid-2026.
The conversion of two coal boilers to wood pellets at Clandeboye in a step towards exiting coal by 2037 was completed last August.
Fonterra said the manufacturing of high-value products and improving its product mix by adding value to milkfat was part of a strategy to make up for lost earnings from the sale of the Mainland businesses.
