New Zealand dairy giant Fonterra will be the sole supplier of cheese to Domino's Pizza in Australia and New Zealand under a new A$30m (US$21.9m) per annum long-term agreement for an initial term of five years, Domino's has announced.

Recent milk supply challenges in Australia had prompted Domino's Pizza to look for a cheese maker who could maintain supply. Domino's Pizza CEO Don Meij said Fonterra was chosen because of its ability to deliver the quantity and quality of cheese, at competitive prices, needed to serve Domino's Pizza's customers.

"Importantly this new agreement, in combination with other initiatives, will ensure that our margins are preserved despite price increases in the wider cheese market," Meij said.

"While Fonterra will be manufacturing Domino's Pizza specific cheese, its strong R&D focus and exceptional cheese making technology will provide Domino's Pizza with the opportunity to explore new products from time to time," he added.

Domino's Pizza and its franchisees operate 407 stores across Australia and New Zealand, employing more than 11,000 full-time and part-time staff and making more than 40 million pizzas each year.