A milk producer is getting a Government loan of up to $6 million to develop a plant-based beverage manufacturing facility north of Invercargill.
Once complete, the $50 million carbon-neutral processing plant at Makarewa will be able to produce up to 80 million litres of plant-based milk a year, Regional Development Minister Stuart Nash said.
He said the loan for low-emissions oat milk manufacturer New Zealand Functional Foods will come from the Regional Strategic Partnership Fund - the successor to the Provincial Growth Fund.
The $200 million fund aims to grow regional economies by helping people develop projects specific to their communities.
Nash said producing oat milk locally is a "lucrative" way to strengthen New Zealand's position as a food producer.
"Plant-based milk alternatives are a fast-growing segment of domestic and international consumer markets, with the amount spent by Kiwis on plant-based milks almost tripling from $52 million in 2017 to $144 million in 2019 - so the demand is definitely there."
Nash said New Zealand currently didn't have the "appropriate processing facilities" to make the large volumes of oat milk needed to make ripples in the growing market.
"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.
"Producing oat milk locally is a lucrative way to diversify our strength as a quality food producer."
The funding comes as the Government tries to help the Southland region transition from its reliance on the Tiwai Point aluminum smelter, which is expected to close some time after 2024.
The smelter employed 1000 people directly and created a further 1600 indirect jobs in Southland.
Three other projects have received support from the Regional Strategic Partnership Fund since it launched in May 2021. Among the firms tapping into the fund is plant-based meat alternative business Sustainable Foods Ltd, which received approval for a loan of up to $1.25 million.