Gay Lea Foods said Monday it has completed a deal to buy Thornloe Cheese from its current owner, Guelph-based dairy genetics firm EastGen, for an undisclosed sum.

Thornloe Cheese on its website says the business takes in over three million litres of milk per year to make cheese, curds and butter and “remains an outlet for local dairy producers who wish to ship to a northern Ontario location.”

The cheese business was founded in 1940 by producer Rene Laframboise at Thornloe, a small northeastern Ontario community about 175 km north of North Bay, and has changed hands several times since then.

It was picked up in 1978 by Balderson Cheese, which in 1982 became part of Ault Foods, which in 1997 was bought up by Parmalat, which went on to make plans to shut down the Thornloe business. Dairy A.I. co-operative Gencor stepped in to buy Thornloe in 2007.

The cheesemaker came to EastGen in 2011, when the genetics company was formed through a merger of Gencor with Eastern Breeders of Kemptville, Ont.

Thornloe now employs about 30 people, serving wholesale customers including retail and foodservice buyers in northern Ontario and Quebec. It also operates its own central retail store in its home community.

The cheese company, Gay Lea said, is “celebrated for its specialty cheeses,” among which are the first to be made with milk sourced from Dairy Farmers of Ontario’s (DFO) Verified Grass Fed program.

More recently, Thornloe noted, it began developing new cheeses for ethnic markets as well as for the “emerging functional food market.”

“Thornloe Cheese has a long and storied history in northern Ontario and holds a special place in the hearts of northern dairy farmers and consumers alike,” Gay Lea Foods chair Rob Goodwill said in Monday’s release.

“We are pleased to keep Thornloe Cheese in the hands of a wholly Canadian dairy farmer-owned co-operative and help keep northeastern Ontario’s rich agricultural legacy alive.”

The Mississauga-based Gay Lea dairy farmers’ co-op has been in both acquisition and expansion modes in recent years. It stretched its membership to Manitoba in 2017 when it partnered with Vitalus Nutrition to set up a milk processing operation in Winnipeg.

Gay Lea in September this year also bought North York, Ont.-based Western Creamery from General Mills. Other recent acquisitions include Alberta Cheese Co. in 2017 and Stirling Creamery and Black River Cheese in 2016.

The co-operative in 2016 also announced plans to set up a nutraceutical-grade dairy ingredients hub and research and development facility in its home province. — Glacier FarmMedia Network

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Gay Lea announced Monday it has bought the family-owned processor, effective Friday (Oct. 13), for an undisclosed sum.

Set up in 1976 by cheesemaker Frank Talarico, Alberta Cheese makes “traditional” Italian cheeses for sale under the Franco’s and Sorrento brands, and imports and distributes cheeses and other foods from other countries.

Gay Lea Foods said its deal adds the Franco’s and Sorrento brands to its own roster of Ontario cheeses and will “further increase the production capacity of the co-operative.”

The co-op said it also expects the deal to help expand its relationships with Alberta foodservice providers, retailers and consumers.

Gay Lea said it also plans to “maintain full operations” at the Alberta Cheese plant and preserve relationships with existing customers, suppliers and employees. The plant currently has a staff of 28.

Talarico started his career in cheese at a facility his father owned in Ontario, where he worked until the mid-1970s.

“My family leveraged our heritage, passion and expertise to launch Alberta Cheese, and we are immensely proud to see it become part of a successful and growing co-operative like Gay Lea Foods,” Talarico said in the co-op’s release.

Gay Lea, Ontario’s biggest dairy co-op with over 1,300 member dairy farms and 950 staff, has been on a growth-by-acquisition track in recent years in its home province, buying butter maker Stirling Creamery and cheesemaker Black River last year, as well as goat dairy Hewitt’s Dairy and Hamilton-based Salerno Dairy in 2014.

In all, the Mississauga-based co-op so far has 12 production facilities and distribution centres across Ontario and Quebec.

The co-op last year also budgeted $140 million to set up an nutrition and nutraceutical-grade dairy ingredients hub through upgrades and expansions at its Ontario facilities, plus a new research and development centre in Hamilton.

Its moves into Western Canada also include plans announced last year for a dairy ingredient and butter plant in Winnipeg, in a joint venture with processor Vitalus Nutrition. — AGCanada.com Network

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There are almost certainly more quota increases to come, in order to increase milk production to displace significant volumes of butter now being imported.

“It’s an absolutely great time to be a dairy farmer,” Ralph Dietrich, chair of Dairy Farmers of Ontario (DFO), told the organization during its annual meeting held Wednesday and Thursday in Toronto. “We’re lucky to be in an industry like this at this point in time.”

That’s despite a perception of doom and gloom in supply-managed sectors over impending trade agreements such as the Canada-European Union Comprehensive Economic and Trade Agreement (CETA), which DFO general manager Peter Gould put in perspective at the meeting.

The erosion of tariff rate quotas (TRQs) under the CETA agreement will mean about 17,000 tonnes of EU cheese will be allowed into Canada over five years. That’s equivalent to about two per cent of national quota.

Supplemental import permits for butter for 2017 alone are expected to be about 12,000 tonnes — about three per cent of national quota. That butter should all eventually be covered by quota increases and produced in Canada.

The optimistic tone at the meeting comes from a storm of decision-making and renewed consumer confidence in dairy products over the past year, unlike any seen in the history of supply management — and Ontario was in the middle of it.

Ingredient strategy a game-changer

Specifically, the past year saw a strategy developed that reduced the price of milk used to make dairy ingredients in Ontario, in response to a growing mountain of non-fat solids (SNF) with few markets other than giveaway-grade animal feed.

At the same time, ironically, more highly-processed, inexpensive milk protein isolates were being imported.

Without a competitive Canadian supply of milk to use in ingredients, processors have had little impetus to invest in Canada’s aging dryer facilities, which process skim milk powder into a form that can be used to create milk protein isolates.

Dairy farmers had been working since at least 2006 to develop a national ingredients strategy, but that “just didn’t get done,” said Gould, who criticized the number of people involved in trying to negotiate the strategy — about 40 — as “too many.”

Ontario decided in late 2015 to go ahead with its own ingredients strategy, implemented in April 2016. Ontario’s board of directors was criticized from across the country, but stood firm.

By late spring, Manitoba also came on board with an ingredients strategy. The province was in a crisis with a lack of processing capacity. Quota was being reduced to farms and milk was being transported to British Columbia and Quebec.

SaskMilk also came on board, and together the groups forced national negotiations to come to a fairly quick agreement on a national ingredients strategy in July — something many people had said was impossible.

The national strategy has seen several delays in implementation since then, missing August and November deadlines. It is expected to be implemented next month, Gould said.

The ingredients strategy has resulted in a drop in the blend price  — what farmers are paid for certain classes of milk, meaning less income to farmers — although that price improved in late 2016.

The strategy has also secured three significant investments by Canadian processors. Those include a Vitalus-Gay Lea joint venture to make milk ingredients and butter in Winnipeg; an investment by Parmalat in its Winchester, Ont. plant; and a $140 million investment by Gay Lea in processing in Ontario — including a dryer at its Teeswater, Ont. plant.

Both Gould and Dietrich called the ingredients strategy the most significant change for supply management since its creation.

A renewal of demand for dairy products has also helped, stemming from research that showed higher-fat products didn’t have the detrimental health effects previously identified in now-debunked studies.

DFO received support from the Ontario Farm Products Marketing Commission (which regulates marketing boards), provincial Agriculture Minister Jeff Leal and the Dairy Processors Association of Canada. Gould said.

The processors’ association, he added, has given its new CEO Jacques Lefebvre a new and helpful mandate.

Ontario producers, Gould said, were expected in other provinces to rebel against the ingredients strategy — but they did not and in fact were generally supportive of the DFO board.

“There has been a significant measure of conflict, which is not necessarily a bad thing when you end up with a result like the national ingredients strategy, which is an amazing outcome.

“What we’ve done is significant. We brought a commercial solution to an otherwise intransigent problem.”

The ingredients strategy could still face trade action from the U.S., where politicians, particularly in New York state, are already agitating against it.

Challenges with growth

The transition from a legacy industry to one with new investment and momentum will also create new challenges, said Gould, who retires from DFO this year after 36 years with the organization.

The largest such challenge will be how to move the dairy industry from a culture of scrambling to maintain scale, resulting in farm size stagnation, to one where there is the opportunity of growth, and indeed, under supply management, the obligation to supply the market.

That will mean significant choices for farmers, especially those in Ontario and Quebec, where older barns — mostly tie stalls, with limited ability for growth — will be challenged to fill new quota.

The sector does not want to have unfilled market demand, as farmers without the ability to fill new quota sit on 15 or 20 per cent unfilled quota that could be used by other farmers.

“The No. 1 challenge is how to keep up on the production side,” said Gould. “There are literally thousands of dairy farms facing big decisions about whether to expand, rebuild or not.”

That will require “serious dialogue,” Gould said, but questioned whether there’s a venue for such dialogue to take place.

— John Greig is a field editor for Glacier FarmMedia based at Ailsa Craig, Ont. Follow him at @jgreig on Twitter.

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The announcement last week in Teeswater, Ont., is the result of several years of work to bring revitalized ingredients processing to the province and to stem the flow of milk protein ingredients coming across the border in greater volumes.

Dairy ingredients have been a challenge for Canada’s supply management system as they are inexpensive and have been able to enter Canada duty-free.

The creation of a national strategy, approved this summer, has created a lower-cost class of milk for use in dairy ingredients. The aim is to have the national strategy implemented by February 2017.

Dairy Farmers of Ontario forced the implementation of that strategy with the unilateral creation earlier this year of what is now called Class 6, for milk destined for lower-priced ingredients, such as milk protein concentrates and milk protein isolates.

“This means an extra level of security for the future,” said Ralph Dietrich, chair of Dairy Farmers of Ontario. “This is the reason we implemented Class 6 pricing. We want to create the environment so processors make the investment in Ontario. This is a direct result of the ingredient strategy, so we are very pleased with it.”

At one point, Ontario had most of the other provinces and Dairy Farmers of Canada against its ingredients strategy, but Dietrich said there had been two earlier attempts to create an ingredients strategy over the past 12 years, and with greater amounts of dairy ingredients being imported into the country free of tariffs like there was “no tomorrow.”

“We always felt it was the right thing to do. We felt so strongly about it and the urgency of the timing. We did receive the wrath of the country for that and we don’t blame them.”

The price of Class 6 ingredients will be closer to world price, designed to give processors the option of buying Ontario and eventually Canadian ingredients versus imports.

Tying more of Canadian dairy production to world price will mean more variation in the price paid to dairy farmers.

Dietrich said the DFO has no control over what products can be imported legally, but it can find a way for Canadian products to compete.

Ontario regularly has too much skim milk and sells much of it into the feed market, which is at a lower price than the world price for milk, so having markets for skim milk and greater drying capacity in the province should create more stability for the lower value dairy ingredients. Last fall some skim milk was discarded because there was no market for it.

This year, Dietrich said the demand is better balanced and there isn’t as much of a skim milk surplus.

Dietrich also said that the ingredients strategy will make smaller processors more competitive, as many of them have been loyal to Canadian milk, but that has made them less competitive versus processors importing ingredients.

In the first phase, $60 million will be spent in expanding processing capacity in Teeswater, where Gay Lea has a plant. The Teeswater plant has been part of Gay Lea since 1981.

The first phase will also fund a new research and development centre for dairy ingredients in Hamilton. Dietrich pointed to opportunities in pharmaceuticals derived from dairy products as an important area of potential future use for dairy ingredients.

The first phase will also result in some improvements to current plants.

Gay Lea Foods CEO Michael Barrett could not be reached for comment before publication.

Gay Lea is in a significant expansion mode, recently announcing a joint venture with Vitalus Nutrition to build a new dairy ingredients and butter processing facility in Winnipeg. It has also purchased Stirling Creamery and Black River Cheese, along with a minority interest in Mariposa Dairy Ltd., in 2016. It also is a major player in Ontario dairy goat milk processing, with the purchase of Hewitt’s Dairy in 2014.

— John Greig is a field editor for Glacier FarmMedia based at Ailsa Craig, Ont. Follow him at @jgreig on Twitter.

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Gay Lea Foods Co-operative on Wednesday announced a budget of $140 million over four years to set up what it describes as an “innovative nutrition and nutraceutical-grade dairy ingredients hub in Canada.”

First on the list is a $60 million expansion for the Mississauga-based co-operative’s creamery at Teeswater, about 100 km northwest of Guelph.

The dairy processing operation that later became known as Teeswater Creamery was established in the area in 1875 and became part of Gay Lea in 1981.

The Teeswater plant saw upgrades and expansions in 2011, backed in part by almost $1 million in provincial funding, to boost its production of milk products and milk protein concentrates for use in products such as infant formula, protein bars and protein drinks, and to serve as an exclusive ingredient supplier for Chapman’s Ice Cream.

The $60 million expansion pledged for the Teeswater plant, to begin early next year, is part of the co-op’s first phase in its multi-year plan, which Gay Lea said will also include upgrades and expansion at its Toronto-area food manufacturing facilities.

The Toronto expansions, the company said, are meant to “increase our capabilities and competitiveness, improving cost efficiencies, while working to reduce our environmental footprint.”

The first phase, Gay Lea said, also commits $3 million to build a new research and development centre of excellence in Hamilton.

The centre, Gay Lea said, will be a “working laboratory and innovation incubator” and “the nexus between R+D and commercialization throughout Gay Lea Foods’ operations, and also service our partners in the dairy, food and health sectors.”

Gay Lea, whose production facilities across Ontario employ about 950 people, has been expanding through acquisitions in recent years, buying Ontario processors Stirling Creamery last month and Black River Cheese in May.

The co-operative last month also announced plans for a new dairy ingredient and butter processing facility in Winnipeg, in a joint venture with Vitalus Nutrition. The venture would also see Gay Lea offer Manitoba dairy farmers the opportunity to join the co-op as member owners.

Gay Lea also recently bought a minority stake in goat’s milk and sheep’s milk processor Mariposa Dairy and expanded its membership to include Ontario dairy goat producers.

Dairy farmer and Gay Lea chairman Steve Dolson said the co-op’s new plan is “driving growth through innovation and the development of new markets that will increase demand for milk from Canadian dairy farms.” — AGCanada.com Network

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Michigan-based butter producer Butterball Farms has agreed to sell Stirling Creamery, based at Stirling, Ont., north of Belleville, to Gay Lea effective Nov. 1.

Financial terms of the deal weren’t disclosed, though Gay Lea said it will maintain “full operations” at the Stirling plant and “preserve all relationships” with Stirling’s customers, suppliers and employees.

Stirling Creamery, which was set up by the West family in 1925, today has about 25 employees, mainly in Stirling, with some Toronto-area sales staff.

Stirling makes natural and flavoured butters, including Churn 84 European-style butters, whey butter, the Stirling Premium Balls brand and various types of medallions and spreads for foodservice uses.

In Canada, the company’s products are sold in Ontario, Quebec, British Columbia and Alberta.

Gay Lea said its deal for Stirling will add its butter collections to the Gay Lea product mix, “further increase our production capacity, and support our co-operative’s core principle concern for investment in rural communities.”

The deal also allows Gay Lea “added flexibility to meet customer needs in the current high-demand market for butter,” the co-op said in a release Tuesday.

Gay Lea’s acquisitions in recent years have included Black River Cheese, Hewitt’s Dairy, Salerno Dairy, Ivanhoe Cheese and a stake in goat’s milk processor Mariposa Dairy.

“With this acquisition, we continue the tradition of supporting family farms in Ontario while further strengthening Gay Lea Foods’ presence in the Canadian dairy industry,” Gay Lea chair Steve Dolson said in Tuesday’s release.

Butterball Farms, which bought Stirling Creamery in 2006, has operated since 1951 and also began producing Butterball brand turkeys in 1954.

The company kept the Butterball brand for its butter business when founder Leo Peters sold off the turkey brand and patents in the late 1960s. — AGCanada.com Network

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Gay Lea Foods, billed as Ontario’s biggest and Canada’s second-biggest dairy co-operative, announced a deal Wednesday to buy Black River Cheese Co. effective June 1 for an undisclosed sum.

Based in Prince Edward County at Milford, about 45 km southeast of Belleville, Black River was set up by area farmers in 1901 and rebuilt its operations for handcrafting cheese after its factory was destroyed by fire in 2001.

Today it markets its cheddar, mozzarella, brick, fresh curd and flavoured mozzarella through “natural” health food stores and specialty sections of supermarkets. The company in 2010 got $264,000 in provincial funding to upgrade its wastewater treatment system.

Gay Lea, in its release, pledged that the Black River store would remain open “as part of the continued commitment to the local community and thriving agri-food sector in Prince Edward County.”

Black River’s retail and food service customers will also continue to be served from the Black River plant, Gay Lea said.

Gay Lea includes 1,240 dairy farmer owners and over 3,800 members, and has been expanding its cheese lines through acquisitions in recent years. The Milford plant, Gay Lea said, will build on its own cheese operations at Hamilton and Madoc, Ont.

The co-op recently bought a stake in goats’-milk cheesemaker Mariposa Dairy at Lindsay, Ont. and also recently broadened its membership to include licenced dairy goat producers.

Gay Lea, whose product lines include butter, sour cream, cottage cheese and whipped cream, makes cheeses for the retail and foodservice sectors under established Ontario brands including Salerno, which it bought in 2014, and Ivanhoe, which it bought in 2008.

The co-op also bought family-owned dairy processor Hewitt’s Dairy of Hagersville, Ont. in 2014. — AGCanada.com Network

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