Home delivery food business Aussie Farmers Direct is partnering with Organic Dairy Farmers of Australia in a $1.2 million butter manufacturing joint venture.

Organic Dairy Farmers of Australia is a farmer owned cooperative made up of 22 dairy farmers that has been operating for 10 years.

The investment includes raw material handling, equipment and butter making machinery to produce both traditional and organic butter some of Australia’s highest quality butter.

Aussie Farmers Direct and Organic Dairy Farmers of Australia will create a new butter processing facility as part of an upgrade to the existing Aussie Farmers Dairy, located in Camperdown, Western Victoria.

Aussie Farmers Direct branded butter packs will be produced along with the Organic Dairy Farmers of Australia’s butter, branded under its own banner and as “True Organic”.

Butter production is expected to start by end June 2013 or earlier and in its first full year of production, the new butter making facility is expected to produce between 1-2 million packs of butter each year, with the capacity to produce double this quantity as and when required.

Braeden Lord, chief executive of Aussie Farmers Direct, told SmartCompany the joint venture would provide products for his 130,000 customers across six states and was prompted by a need for more Australian butter.

“It’s a tremendous business built off the back of organic dairy farming, it’s like a farming cooperative and they have 20 farms around Victoria and they have been searching for a way to produce butter which is becoming a rare manufactured product in Australia.

“The manufacturing of butter within Australia is certainly something that has gone from about 25 to 30 manufacturers down to a handful and that is it,” says Lord.

“Our ability to be able to secure 100% Australian butter produced by Australian companies, the opportunities were diminished, we needed to find a solution from a scarcity of supply point of view.”

Lord says Organic Dairy Farmers of Australia are aligned with Aussie Farmers Direct’s values and vision which clinched the deal.

“We have been talking to them for close on two years about opportunities and we finally found some common ground, the plant will produce conventional butter as well as organic butter,” he says.

Lord says the joint venture will look at producing more products in the future.

“We will and we are even considering the opportunity to look at spreadable butter out of the same plant, we will certainly consider other opportunities, we use less than 15% of the Camperdown manufacturing facility so there is a large plant which over time can bring about a bit of a rebirth of the dairy facilities,” he says.

“The relationship we have with dairy farmers is very collaborative and what we like to term a sustainable relationship so the more we can produce which requires their input the more opportunities there are, and another alternative to sell their premium product.”

Bruce Symons, chief executive of Organic Dairy Farmers of Australia, told SmartCompany that until now, it has been virtually impossible to source commercial quantities of a locally produced organic butter so this joint venture represents a big step forward for both the cooperative and its customers.

This is the second direct investment in manufacturing by the organic dairy co-operative in the last six months, following its joint venture with the high-end French cheese maker, L’Artisan Cheese.

According to Symons, it is part of a strategy to develop highly distinctive it is part of a strategy to develop highly distinctive dairy products from what he terms “remarkable milk”.