In the heart of dairy country

You can divide the Canadian milk industry in two branches: fluid milk—your basic milk and cream—and industrial milk production—the milk used to produce dairy products, such as cheese, yogurt, ice cream, and butter. Dairytown works with the latter.

Created in the early 1980s, Dairytown Products Ltd. came as a result of the New Brunswick dairy producers’ desire to have industrial milk production remain in the province. Prior to 1982, industrial milk produced in New Brunswick was shipped to Québec and Ontario for processing, at the expense of the province’s dairy farmers. A number of dairy producers got together and decided to ensure the livelihood of industrial milk production in New Brunswick. Thus, Dairytown was born—an exclusive industrial milk processor, specializing in butter and skim milk powder.

Located in Sussex, NB, the Dairytown plant finds itself in a concentrated dairy farming community or, as they say, “in the heart of dairy country.” The location wasn’t an accident. George MacPhee, Vice President of Sales and Marketing, says when the plant was established, they wanted ready access to fresh milk. “The freshness helps in producing world-class products,” he beams. “We receive a steady milk supply at our plant seven days a week and 40 fulltime employees are engaged in production.”

MacPhee maintains that even though they only produces two products, “we try to do them better than anyone else.” And they are well on their way. The Dairytown business is divided three ways: retail, food service, and further processing.

In further processing, customers use Dairytown products in recipes. A nation-wide doughnut & coffee chain, for example, uses skim milk powder to prepare doughnuts, bagel and muffins. A leading Canadian frozen food processing company also uses their milk powder in pizza crusts and pie fillings. Alternatively, a bakery would purchase butter for their foods.

On the food service side, Dairytown sells their products to food service distributors in Canada who then supply them to restaurants, institutions and hospitals.
Retail is among the most significant parts of the Dairytown business. In fact, they provide all the instant skim milk powder sold in Canada. “We do all the private label brands for every major grocery retailer and mass merchandiser in Canada,” says MacPhee. “We also supply control label instant skim milk powder to other dairies. So, we sell it to them and they remarket and sell it under their brand. We also package national brands for large consumer packaged goods companies. We do have our own butter under the Dairytown brand, which is distributed throughout the Maritimes and other grocery retailers in Canada.”

What happens to the milk after it’s dropped off at the plant?
MacPhee, who admits his lack of technical expertise, explains it like this. “When the raw milk arrives, we separate the cream which is used in our butter production.  Butter is about eighty per cent butterfat.  What’s left is the solids non-fat which is channelled to other areas in our plant and used to produce skim milk powder.  Milk is about ninety per cent water and we’re primarily focused on the solids, i.e., the butterfat solids and solids non-fat in the milk for the production of our industrial dairy products.”

“Dairytown produces butter with a traditional albeit modern churning process. Once the butterfat is removed, we’re essentially left with skim milk. Through an evaporation process, Dairytown concentrates that skim milk and injects that liquid into a heated tower. The heat crystallizes the particulates and the result is milk powder. So now you’re an expert in dairy processing ,” MacPhee laughs.

World’s Best Butter
With access to an abundance of the freshest milk, Dairytown has a significant advantage over the competition. Full-stream dairy operators will process milk and cream first, then process cheese and yogurt. If there is any butterfat left—a couple of days after receiving it—then they might turn it into butter.
“In our case, we receive farm-fresh milk daily and we process it immediately into butter,” says MacPhee. “So, our butter is, by definition, better tasting. There’s no magic involved. If you look at the ingredients in butter, it’s just cream and maybe salt. We use extraordinarily fresh cream. That makes all the difference.”
How big of a difference can fresh dairy cream really make? A huge one, according to butter competition judges.  

For the last decade, the Dairytown brand of butter has been judged “The Best Butter in Canada” more times than any other brand available. “We had won for six or seven consecutive years,” explains MacPhee. “That streak was broken because we were installing some new equipment and couldn’t send the samples for judging!”

The company was feeling pretty good about what they had to offer, so in 2002, they decided to see how they stacked up against the butter makers of the world. “You have to understand there are some very notable countries that pride themselves in making beautiful butter products such France, Denmark, Belgium and New Zealand,” MacPhee goes on. “It wasn’t an easy feat. That year, we participated in the championship held in Wisconsin and we placed well. Out of 1,200 to 1,300 entries, we placed seventh.”

Not yet satisfied, Dairytown re-entered in 2004 and won first. Now, they can lay claim to the best butter in the world. “I don’t know if it gets us any more business,” says MacPhee, “but it speaks loudly to our focus. We’re trying to stay concentrated and specialised.”

The advantages of staying small
There’s a reason Dairytown focuses on private labels. As a small company, they don’t have the resources that are required to build a strong branded franchise. So, they let the retailers look after their own marketing efforts. It’s good strategy.

Being small has other rewards besides saving on marketing bills. Actually, it has allowed Dairytown the opportunity to do a lot of export work. “Because of our size, we’re more flexible to an end-user looking for a customized product,” says MacPhee. “Tailored products might represent a nuisance for a large processor. But for us, it’s a nice piece of business. Dairytown searches for those nuisance products and build them into our inventory as marketable items.”

The nuisance products MacPhee refers to are skim milk powders that are mixed with an ingredient chosen by consumers for their specific application. One example is skim milk powder with Whey Protein Concentrate (WPC). In a highly regulated industry, being able to export is a great opportunity. Luckily, skim milk powder blends such as those that might include other dairy ingredients such as WPC don’t qualify for many of these rigid controls, so Dairytown can export them in great volumes.

“Dairytown is among a handful of the best qualified processors in Canada,” smiles MacPhee. “The fact that we’re somewhat smaller than a few of the other dairy processors speaks to our strength—not our weakness. We’re small compared to the Goliaths, but it affords us the elasticity and flexibility they don’t have.”
“We know that we’re smaller than many of the other dairy processors in Québec and Ontario—not that there are that many,” he says. “Our access to industrial milk is considerably less than in those provinces. To put that into perspective, we have access to less than 2 per cent of the total, national industrial milk supply—about 56 million litres of milk. There are dairies in Quebec that process 1.9 billion litres of milk. It’s a small industry. You have three or four large dairies and a number of medium-sized players. We’re not a small player, but we’re not large. We look to exploit that. Smaller sometimes is better and that’s the approach we take to business. Dairytown serves to produce specialised products and we do two products better than anyone else.”

Dairytown is small enough to remain in the people business. In fact, they can refer to their customers by name not simply a customer number. Even though they are the largest dairy processor in New Brunswick and the largest industrial processor in Atlantic Canada, you can call the General Manager and CEO and easily reach him through the switchboard.

“Things like that aren’t possible at larger companies,” says MacPhee. “When customers call us, we’re there to provide solutions quickly. We happen to process dairy products across Canada with long-standing large clients, but when all is said and done, we’re still in the people business. We consider that one of our strongest assets.”

Keep on churning
When we talk about Dairytown’s future, we have to recognise the opportunities and challenges going forward. One of the big issues for Dairytown is on the retail side. Whether they like it or not, the grocery business in Canada is becoming more concentrated. Right now, the industry is dominated by only three or four major players. Making the industry tighter will be Wal-Mart, MacPhee explains. “Wal-Mart is the number-one grocery retailer in the U.S. and will eventually look to eliminate one or more players in Canada.”

“Five years from now, the number of grocery retailers will be even smaller,” he says. “And as a supplier to those customers, we have to look for ways to add value to everything we do. From the products to transportation to packaging, we need to separate ourselves from larger processors and offer a compelling reason to buy products from Dairytown . It’s an issue, but it’s also an opportunity for us to evolve.”

Another external influence on the business is the regulatory environment in Canada. In a supply-managed system, farmers and dairy processors are guaranteed the amount of milk they can produce and process through the quota system. As such, the pricing system is regulated and, many would argue, artificially high in comparison to other open market systems, such as the United States.

“There is a tremendous amount of pressure being out on our government right now to open the borders for free trade and eliminate some of the tariff rates on the imported dairy products,” says MacPhee. “The U.S. is 10 times larger than us and they would love to market and sell their dairy products in Canada. This is an issue that is top of mind to us and other processors in Canada.”

MacPhee doesn’t sound too concerned. He maintains Dairytown will have to look back to their strategic principle that smaller is better. “We will continue to add value, remain in the people business, and stay specialised,” he says. “We need these values to guide our efforts and will manage our growth very carefully.”

Industry leaders in food safety and quality
Dairytown Products Ltd. has been setting industry standards for food safety right from day one. We were the first food-processing plant in eastern Canada to receive official HACCP accreditation from the Canadian Food Inspection Agency. Dairytown has served as a pilot plant, providing food safety training to other food-processing companies.

Our track record of leadership in food safety has been profiled in several national publications, including Food in Canada. It’s a legacy we’re proud of, and one we’re working hard to maintain. It’s also our guarantee to you that, whatever your requirements, you can always trust Dairytown to deliver the highest quality dairy products in the world.

The Dairytown Difference
Dairytown supplies our products to leading retailers, wholesalers, foodservice organizations and food-processing companies around the world. Our success is based on a simple promise: we will consistently work to exceed your expectations. We are well known for our obsession with quality and relentless pursuit of customer satisfaction. It’s a passion that continues to set us apart from our competition. We call this the Dairytown difference.

Our Vision
Dairytown Products Ltd. believes in responsible processing of dairy products for our global clients, and is continuously reinvesting in the future to surpass even our demanding standards.