Fonterra is about to pump more money into producing butter and cream cheese as shoppers continue to feel the pinch of high prices in supermarkets.
The co-op revealed plans to step up manufacturing of them as part of a $1 billion growth investment after this week announcing a record payout, dividend and $26b revenue for the last financial year to July.
Already in construction are a new $75 million advanced protein hub at its Studholme site, more cheese storage at Whareroa and a $150m new UHT cream plant at Edendale — all due to be completed within a year.
That is unlikely to provide much comfort for shoppers balking at butter prices in supermarket aisles, which are mainly determined by global demand.
Grocery price tags rose in Statistics NZ’s latest figures by nearly 5% in the year to August, much of the increase coming from higher prices for milk, cheese and butter.
Average prices based on the cheapest options were $4.72 for two litres of milk, up 16.3%, $12.89 for a kilogram block of cheese, up 26.2%, and $8.58 for a 500g block of butter, up nearly 32%.
Internationally, butter prices peaked at the co-op’s Global Dairy Trade auction in May at about $13,870 ($US7992) a tonne.
They have since softened, apart from a July rally, to about $11,960 at the September 16 auction.
Chief executive Miles Hurrell said high global demand for the products supported more manufacturing plant investment.
“We will put stainless steel into clearly what value-add products are important to us. You will see more investment in butter. We think there is a strong future in butter and we have talked about some cream cheese capacity and we also see a future with continued growth in cream cheese globally.”
He said more demand could be expected for pastry sheets which included butter, croissants and other bakery goods.
Cream cheese demand is rising in China for the likes of baked cheesecakes and as an ingredient for a frothy topping on macchiato tea, coffee and even on beer.
Mr Hurrell said cream cheese was a growing category as 500 million people of China’s 1.3-odd billion population moved into the middle class.
