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17th of January 2018

New Zealand

Synlait to build new facility in supply deal with Foodstuffs

Dunsandel milk company Synlait intends spending about $125 million on an advanced liquid dairy facility to supply Foodstuffs South Island from early 2019.

Synlait and Foodstuffs jointly announced their partnership yesterday, which allows Synlait to become Foodstuffs SI's exclusive supplier of its private label fresh milk and cream.

The brands will be packaged in Value and Pams branded products, which are available in New World, Pak'n Save, Four Square and On the Spot stores.

Synlait managing director John Penno said the investment established a way for Synlait to pursue a range of dairy-based products for domestic and export markets in the future.

''This will be one of the most sophisticated fresh milk and cream processing facilities in New Zealand,'' he said.

''Combined, the partnership with Foodstuffs SI and investment in a new facility is a further and significant step towards our goal of being a more diversified and balanced business.''

The partnership opened up a new category of ''everyday milk'' which had the potential to improve the company's current position and explore new customers and markets, he said.

''Our long-term success in this category will be based on our ability to win customers in the New Zealand market first, and today we're taking a foundational step towards that.''

Synlait's partnership with Foodstuffs SI was strategic for both parties, Mr Penno said.

The deal came after the milk company said earlier it would move into new categories and branded consumer goods, provided it did not conflict with existing partnerships.

The new facility would have a minimum annual capacity of 110million litres and be capable of producing pasteurised milk and cream for domestic use, extended shelf life dairy products, long-life milk and cream for export, ready-to-drink liquid infant formula and toddlers milks, and other blended dairy-based beverage products.

Analysts had said Synlait would seek to ''de-risk'' investment in new facilities by securing a foundation customer.

Discussing the move into new markets during a conference call in September, Mr Penno said Synlait saw areas in new categories that could be Synlait branded.

Foodstuffs chief executive Steve Anderson said the partnership allowed the co-operative to provide high quality fresh milk and cream to its customers.

It also gave customers surety about milk supply with an innovative New Zealand-based supplier.

In time, Foodstuffs was looking forward to collaborating with Synlait to create a range of new and innovative dairy-based products for customers, he said.

Last month, Mr Penno announced he would step down after 12 years leading the company.

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