New Zealand dairy giant Fonterra is to establish a NZ$16m (US$11.0m) dairy innovation centre in Melbourne to focus on consumer dairy products, complementing its main research facilities in Palmerston North.

The centre, due to open in April 2007, will employ around 150 people. It will be Fonterra Innovation's second-largest research facility after Palmerston North, which employs more than 300 staff.

Fonterra's director of innovation, Bob Major, said that the facility will be an important contributor to Fonterra's new product development resources, which include centres in Mexico, Germany, Malaysia and Chile.

"Fonterra's R&D resources reflect that dairy innovation is key to the success of every part of Fonterra's business and to its ability to grow returns for shareholders," he said.

"We need to invest significantly in innovation for our brands and ingredients businesses to ensure that we remain at the forefront of developing the specialty ingredients and consumer products that will continue to increase our share of the growing global dairy market and our earnings from it," he added.

Fonterra CEO Andrew Ferrier said that the decision to base the consumer innovation centre in Melbourne was largely driven by the needs of Fonterra's consumer business, Fonterra Brands, which is a significant player in the Australian market and also exports to Asia.