The investment in new boilers at Campbeltown Creamery, home of Mull of Kintyre and Scottish Pride cheddars, is the first installment of a £416,000 food processing grant.
The government pledged the money as part of its action plan to help the sector struck by plummeting milk prices.
Scotland’s rural affairs secretary Richard Lochhead said the £311,000 funding will support the creamery’s vital role in Argyll’s dairy sector and Scotland’s rural economy.
“First Milk has faced some struggles of late, and it is clear that the company’s turnaround programme must begin to deliver soon,” Lochhead said.
Drastic turnaround plan
First Milk announced a drastic turnaround plan in May, including job cuts and an overhaul of pricing, after having struggled with cash flow problems.
“A secure future for Campbeltown safeguards important jobs in Kintyre and provides a crucial market for the local milk producers who supply it,” Lochhead said.
“We are in discussions with First Milk to help them progress with their wider recovery plan. It is vital that we do everything we can to help the industry through these difficult times.”
Graeme Kilpatrick, milk committee chairman at the National Farmers Union of Scotland (NFU Scotland), welcomed the funding as “extremely positive news” for milk producers.
Kilpatrick said: “The new boilers will provide savings and the onus now is on the company to deliver on behalf of its members.
“Farmers need to see success domestically and in export markets and the focus will understandably be on First Milk's turnaround plan going forward.”
Paul Flanagan, external relations director at First Milk, said: “We are very grateful to the Scottish government for this grant in relation to the whey investments we have made at the Campbeltown creamery over the last 18 months.”
Meanwhile, the National Farmers Union (NFU) has called on the UK government to provide dairy farmers with similar support and financial backing given by its French counterparts.
The calls came after dairy business Arla Foods was forced to cut its milk price following similar moves by First Milk, Dairy Crest and Müller UK and Ireland this year.
First Milk first announced plans to develop its Campbeltown creamery in 2009.