The company began producing lactoferrin, an ingredient in infant formula, a year ago.

A $3 million investment will increase the capacity of its existing lactoferrin plant.

A further $10 million, to be spent later this year, will buy a new plant which can extract the protein directly from skim milk, instead of from whey produced during the cheese-making process.

Chief financial officer Darren Flew said the higher lactoferrin content in milk would allow Beston to dramatically increase its production.

"The upgrade will allow us to produce about four times as much as we can at the current plant," he said.

"That's a pretty significant value-generator for us ... it's a valuable product and it's in high demand."

The upgrade will take nine to 12 months.

Beston expects to pay off its investment within two years.

While the project is unlikely to create more than one or two new jobs, it would make Beston a bigger player in the milk market, Mr Flew said.

That was important, he said, as the impact of the drought and recent bushfires was likely to reduce supply over the next couple of years.

Beston will raise up to $3 million of funds for the project through the sale of extra shares to existing shareholders.

A share purchase offer opened on Monday and will close on January 31.