Dairy Farmers respond to Chobani pullout

Tuesday, January 15, 2013

by SUSAN MANN

Dairy Farmers of Ontario wasn’t told in a November 2012 letter from Chobani why the company has indefinitely postponed building its Greek yogurt manufacturing plant in Kingston.

Peter Gould, the supply-managed organization’s general manager and CEO, told delegates at the DFO annual meeting last week in Toronto they received the letter about the postponement a week before the plant’s construction groundbreaking ceremony was to be held in Kingston. It had been scheduled for Nov. 16, 2012. Chobani was formerly called Agro-Farma Canada Inc.

Gould said DFO representatives have talked to Chobani officials since then and were told, “it wasn’t a final decision one way or another. The plans were on hold pending further decisions at the company level.”

New York-based Chobani obtained a supplementary import permit last year to bring its Greek yogurt, made in the United States, into 65 grocery stores in the Greater Toronto Area. The permit expires next month. The permit enables the company to avoid paying the 237.5 per cent duty on yogurt imports into Canada while it determines if there’s a market here for its yogurt. The company says on its Chobani website its yogurt is the number one selling yogurt in the United States.

Gould said in an interview at the meeting he doesn’t know what happens to Chobani’s sales in Canada once the supplementary import permit expires. “I think it’s reasonable to expect that getting an extension to their supplementary import permit would be conditional on a clear indication (from Chobani) that they would be building a plant.”

Asked what happens when the import permit expires next month, Chobani chief communications officer Nicki Briggs said by email the company continues to work closely with all levels of government. “We are not able to confirm any more details at this time but will share news and updates as soon as we are able.”

Briggs explained the company’s Canadian production plans are “still a work in progress and require a sizable amount of planning and logistics.” As the company works through those, the plant announcement has been postponed.

Gould said in the interview “they (Chobani) have given no indication that they are not going to continue or that they are going to continue.” Chobani is a “big business and they make their decisions. We’ll respect their plans whatever they do.”

As for DFO’s reaction to the postponement, Gould said, “I think everybody was hopeful that they would build a plant because it represents investment and opportunity in the Ontario economy.”

But whether the company plans to proceed with building the plant  “has nothing to do with the availability of milk,” Gould said.

There has been speculation in some major Canadian daily newspapers the company pulled out of Canada because the supply management system has hampered its efforts to get the ongoing milk supply it needs. But DFO officials said that’s not true.

On Nov. 30, 2011 DFO’s board made the decision to supply Chobani with milk and skim milk “of sufficient quantity that it would allow them to proceed with their plan to build a plant,” Gould told delegates.

DFO’s milk supply commitment to Chobani doesn’t expire, and if Chobani decides to build a plant the milk and skim milk would be available, he noted.

In a phone interview last May, assistant communications director Bill Mitchell said he couldn’t reveal how much milk DFO allocated to Chobani because information about individual processors is confidential.

Gould said in the interview he too couldn’t reveal the amount of milk Chobani has been allocated. Asked if Chobani got all the milk it requested, Gould said: “that’s a loaded question. They had multiple requests. What we provided certainly satisfied at least one of their requests.”

Gould noted from his knowledge of the industry it’s a “substantial quantity of milk and skim milk, enough to build a good-sized plant.”

Meanwhile, sales of Greek-style yogurt in Canada are booming. Gould told delegates at the meeting Greek-style yogurt has grown to more than 10 per cent of the yogurt market from one per cent during the past 15 months. “But there hasn’t been a noticeable change in the total growth in yogurt, which is roughly one to two per cent a year,” he said, noting Greek yogurt sales appear to be displacing other types of yogurt now.

In terms of the total market on a butterfat basis, yogurt uses about two per cent of the Canadian butterfat requirements, Gould said. BF