Government Pumps $6m into Southland-based oat milk plant

Published on 25 July 2022 3 minute read

(republished from the Southland Times)
The Government has backed Southland-based oat milk producer New Zealand Functional Foods through a $6 million contribution.
New Zealand Functional Foods is the company developing a carbon-neutral oat milk factory at Makarewa, north of Invercargill, with the capacity to produce up to 80 million litres of plant-based milk a year.
Sir Stephen Tindall’s investment company K1W1 is the majority shareholder alongside the Southland regional development agency Great South.
Economic and Regional Development Minister Stuart Nash said it had not yet been sorted if the Government’s contribution to New Zealand Functional Foods would be made up of a loan, or it would look for equity in the company.
Nash’s preference was for equity in the company from its Regional Strategic Partnership Fund. He believed there was a compelling business case, and it would be a good opportunity for the taxpayer to get a return on the contribution.
“These guys are going to do really, really well. So if we are investing taxpayer money why shouldn’t we get some of the benefits when they go through the roof.”
Nash said plant-based milk alternatives were fast-growing domestic and international consumer market.
“The amount spent by Kiwis on plant-based milk almost tripling from $52 million in 2017 to $144 million in 2019 – so the demand is definitely there.”
“We know that oats grow well in Southland, and being low in water use, land use and emissions, they are an excellent raw ingredient for an environmentally sustainable alternative-milk option.”
At the moment 80% of the oat milk drunk in New Zealand is imported from overseas, despite oats being grown in New Zealand.
It made sense to develop a large-scale plant-based milk manufacturing factory in New Zealand, Nash said.
“It’s like our logs, why are we growing it here and then sending it off overseas for somebody else to process?”
New Zealand Functional Foods is looking to raise $60 million for the factory development and working capital.
Acting chief executive Roger Carruthers said the Government undertook a robust due diligence process before supporting the project.
He felt that would send a strong and positive message to other investors.
Carruthers said they were working with potential investors but could not publicly confirm any additional investors at this stage.
While Nash felt the oat milk production had a sound business case he said it also played into all the Government’s strategies around decarbonising the economy.
“[The factory] is going to be built in a way it’s green and carbon friendly. And of course, oats don’t burp or fart, which is great for the atmosphere,” he said.
Although, Nash quickly followed that up by saying it was not a quest to replace the dairy sector with a plant-based milk industry.
“It’s not dairy or oat milk, it’s dairy and oat milk. For a whole lot of reasons some people can’t drink dairy, and oat milk is a fantastic substitute.”
Carruthers said the plan is to be operating by the end of 2023 and at full capacity would employ about 50 people.
Nash also visited Invercargill Central’s city block development and the Murihiku Marae, which is also being redeveloped, on Monday.