He has also chaired both the European arm of Cott Beverages and dried fruit company Whitworths.
Mustoe took up the role on Thursday at First Milk's agm, replacing Richard Greenhalgh, a former Unilever UK chairman, who has been chairman since November 2004. Greenhalgh announced his decision to step down from the role in September.
"Over the past few weeks we have assessed a number of internal and external candidates in our search to find the right person to lead the First Milk Board," said CEO Peter Humphreys.
"Bill has more than 30 years experience spanning a number of consumer goods sectors and will be an asset to our business," he said. "I look forward to working with him to deliver value for members."
Last month, First Milk reported a £7m loss for the year to 31 March following volatility in the global dairy ingredients market.