Dairy giant Fonterra has welcomed a trade deal with Malaysia as it expands its production facilities in Kuala Lumpur.
Prime Minister John Key and Fonterra Chairman Henry van der Heyden opened a new $12 million expansion of the Fonterra Dairymas cultured foods plant in the Malaysian capital on Tuesday.
Speaking at the site opening, Van der Heyden said the investment was an excellent example of how the co-operative was adding value and growing earnings for New Zealand farmer-shareholders.
"Our operations in Malaysia are based solely on New Zealand milk, which we then further process in market to add further value," he said.
Fonterra earnings from the Asia/Africa Middle East region were up 19% in the 2008/09 financial year.
Cultured dairy product sales grew 71%.
Van der Heyden said the investment in additional capacity at Dairymas would allow Fonterra to capitalise on the fast growing, cultured dairy category in Malaysia, using dairy ingredients made from New Zealand milk.
Mark Wilson, regional manager director for Fonterra Asia/Africa and Middle East said: "There is huge opportunity for Fonterra in Malaysia where, with a climate not suited to dairying, they rely upon imports to meet over 95% of domestic dairy consumption."
Wilson said the cultured dairy market in Malaysia was expected to grow in double digits over the next couple of years, well beyond the 4-5% annual growth of the overall dairy category.
"We have doubled the size of the market with the introduction of Fernleaf CalciYum, which is now the No 1 yoghurt brand in Malaysia.
"With the site expansion, we are well positioned to continue to grow with the category.
The Dairymas site was first opened in 1999, as a yoghurt and UHT manufacturing plant.
However, as of last year, the plant shifted its production focus to cultured product CalciYum, cultured milk drink Solivite and the Anlene yoghurt range.
The upgrade will add a second line for cultured milk drink packing, form-fill-seal yoghurt packing and coolstore expansion.
Van der Heyden said plant expansion was a great example of Fonterra's added value strategy, which in the consumer brands business meant a focus on producing high value, high margin products.
"We are taking New Zealand milk and tapping into new categories by turning it into higher margin products," he said.
Van der Heyden said the signing of the Malaysia- New Zealand Free Trade Agreement would encourage more commercial investment in Malaysia.
"Fonterra will certainly be looking into where we can invest further in this high growth market," he said.
