The New Zealand co-op said it was increasingly focused on the fast-growing dairy ingredients market in Europe and had wanted to establish a production base in Europe rather than importing from New Zealand.
"New Zealand is far away, plus we're increasingly pushing New Zealand milk into emerging markets in Asia, so there's less available for Europe," said Fonterra Europe MD Koert Liekelema. Producing whey products in Europe rather than importing them also meant Fonterra would avoid paying import duties, which Liekelema said was an "extra benefit" though, he stressed, duty considerations had not been the key driver behind the First Milk joint venture.
Whey is a by-product of cheese production, and Liekelema said Fonterra had looked at all big cheese manufacturers in Europe before deciding to partner with First Milk, which had been especially positive in its response.
First Milk will produce premium whey products for the joint venture at its Lake District creamery in Cumbria, which will then be sold to manufacturers of sports nutrition products and yoghurts around Europe. The facility, which currently produces standard whey powder, will be ready to begin production in the next six months.
Fonterra and First Milk would not be drawn on how much they planned to produce, but said there was the option of expanding production to other First Milk sites in the future.
The venture was widely welcomed as a positive development for the UK industry. "We have the world's largest dairy joining with a British dairy company to gear production of milk in the UK," said Dairy UK director general Jim Begg. Food and farming minister Jim Paice also praised the deal at the Dairy Event on Tuesday.