Peters framed the policy as a necessary strategic response to Fonterra’s divestment of its global consumer brands business to French multinational Lactalis for $4.2 billion. Pointing to Parliament’s original legislative intent in creating Fonterra as an export champion of national scale, Peters argued that the cooperative’s retreat from consumer-facing finished goods creates a mandate for national policy to step in. The existing 50-million-litre threshold, he argued, was intentionally designed to assist startup processors but actively discourages investment in large-scale, advanced manufacturing infrastructure.

Under the proposed regulatory mechanism, eligible manufacturers would be permitted to draw up to 500 million litres per year at a full allocation for the first six years of operation. To prevent permanent market distortion and incentivize independent supply integration, the raw milk entitlement would progressively taper over the subsequent four seasons—scaling down to 80 percent, 60 percent, 40 percent, and finally 20 percent before expiring completely. To qualify, commercial entities would be required to establish physical processing operations within New Zealand and actively brand and market New Zealand dairy products to international markets.

The policy framework stipulates that the allocated milk pool would not be state-subsidized. Commercial processors utilizing the regulated volume would be required to pay the standard farmgate milk price alongside efficient transport and collection costs, ensuring that Fonterra and its shareholder-suppliers receive fair commercial compensation for raw solids. Peters stressed that the primary objective is removing volumetric supply barriers to give prospective high-value ingredient and consumer dairy investors long-term raw material certainty.