Nearly 100 people are set to lose their jobs as dairy company Fonterra closes its western Victorian factory.

The New Zealand-based processor said its plant based in Dennington, which employs 98 people, is no longer viable and is to close later this year.

Fonterra boss Miles Hurrell said the drought has decreased supply in Australia which means there is excess manufacturing capacity in the dairy industry but it is the company’s goal to ensure the workers are supported at this time.