Fonterra has signed a five-year deal to market and sell two infant formula ingredients made by British-based Dairy Crest.
The products, a prebiotic called galacto-oligosaccharide (GOS) and demineralised whey, are both used in the manufacture of infant formulas.
Fonterra will be the exclusive sales channel for the infant formula ingredients produced and will receive a commission on the sales.
Dairy Crest is entering into a newly-formed joint venture with British-based Fayrefield Foods to produce the GOS. These factories are expected to begin production next year.
Fonterra chief executive Theo Spierings said the agreement was a win-win for all the companies and each would bring their expertise to the partnership.
He said the deal aligned with Fonterra's strategy to develop a leading position in the global infant-formula market.
"Infant formula is the fastest-growing dairy category in the world," he said.
"Demand is particularly strong in Asia, where China is the leading global infant-formula market."
Fonterra was the centre of a botulism scare last year that sparked a mass recall of whey products before testing revealed it was a false alarm.
The dairy co-operative still faces legal action from French food giant Danone, which has said it lost €350 million (NZ$544m) as a result of the recall.