Transforming Dairy: How AI is Revolutionizing Fonterra's Operations

Fonterra, New Zealand's largest business, is a cooperative that serves over 100 countries and processes around 22 billion liters of milk solids each season. Managing this vast operation involves a complex web of logistical, operational, and strategic challenges. In the face of such complexity, even seemingly minor improvements in quality, consistency, sustainability, and productivity can create significant value. Enter artificial intelligence (AI)—a transformative tool that Fonterra has harnessed to streamline its operations and make better, more consistent strategic decisions.

AI on the Factory Floor

One of the most tangible impacts of AI at Fonterra can be observed in its manufacturing processes. At the Clandeboye site in South Canterbury, AI is integrated into the production line to monitor butter packaging across various stages. This system can detect faults and pause the line, ensuring quality control is maintained without human intervention. Previously reliant on spreadsheets for scheduling, Fonterra now employs AI to automate this process, allowing for more efficient and responsive production planning.

Moreover, the integration of real-time Internet of Things (IoT) data from machinery across more than 100 plants into the Microsoft cloud facilitates predictive maintenance. This predictive approach ensures that plants experience less downtime and disruption, substantially reducing maintenance costs and enhancing operational efficiency.

Building AI into Everyday Work

AI's influence extends beyond the factory floor and into the everyday operations at Fonterra's offices. As an early adopter of Microsoft 365 Copilot, Fonterra has identified hundreds of practical use cases for AI across its business. By February 2026, 35% of its global workforce was actively using AI tools, generating nearly one million interactions in a single month across various applications like Copilot Chat, Copilot Studio agents, GitHub Copilot, and Fonterra’s proprietary Co-op GPT.

These tools are leveraged for various tasks, from summarizing meetings and capturing action items to accelerating policy drafting. They also assist teams in asking the right questions to complete tasks efficiently, challenging existing biases and traditional methods. The benefits are multifaceted: not only does AI save time, but it also allows employees to focus more on judgment, collaboration, and decision-making, aligning more closely with the cooperative’s strategic goals.

AI Tools for Strategic Enhancement

Fonterra has also developed AI tools to support strategic decision-making. Using Microsoft Copilot Studio, the IT Delivery team, in partnership with EY, has created three production agents. The Idea Submission Coach helps employees craft strong investment proposals by testing ideas and providing feedback to improve submissions. This accelerates investment decisions by ensuring proposals are complete and ready for assessment.

The Architecture Assessment Agent aids the IT team in reviewing technical architecture, reducing the manual labor required to ensure solutions meet both governance and technical standards. Finally, the Technical Accounting Assessment Agent enhances consistency in financial assessments, ensuring everything is audit-ready, saving considerable time and effort in the process. These tools automate routine tasks, triage incidents, and create more consistent workflows, making operations more auditable.

Raising the Bar for New Zealand and Beyond

Despite these advancements, Fonterra's AI journey is only just beginning. Together with Microsoft, Fonterra has outlined an AI acceleration program that aims to expand its use across various areas of the cooperative, including foodservice, finance, people and culture, and corporate affairs. This program is underpinned by shared sustainability priorities, as Microsoft's commitment to renewable-powered New Zealand data centers aligns with Fonterra's environmental ambitions. This partnership underscores the potential for productivity, resilience, and sustainability to advance in unison.

Looking Forward

Fonterra’s use of AI exemplifies a practical approach to technological integration, focusing on real business needs rather than experimentation for its own sake. This strategic implementation of AI has not only optimized Fonterra's operations but also set a benchmark for other New Zealand enterprises and the global dairy industry. As AI continues to evolve, Fonterra's experience serves as a testament to the transformative power of technology in modern business operations.