09/04/2012 07:48 EDT | Updated 11/04/2012 05:12 EST

U.S. Yogurt Maker Making Push Into Canada

The 6-ounce containers of yogurt in various flavors are in display for sale at the Chobani yogurt bar in the Soho neighborhood of New York, Monday, July 23, 2012. Chobani, is opening up its first "yogurt bar" in New York City on Wednesday, July 25, 2012 as it looks to strengthen its position in a rapidly growing market. (AP Photo/Mary Altaffer)
A U.S. yogurt manufacturer's bid to enter the Canadian market has stirred up the local dairy industry and may even lead to changes to the way it deals with new entrants.

Agra-Farma Canada received import permits last year to market and sell in the Toronto area its Chobani brand of Greek-style yogurt, a popular seller in the United States.

The company worked out a deal with farmers to obtain a supply of milk and obtained import permits until they could get a plant in Kingston up and running.

It was one of three large foreign dairy processors to try to set up shop in the province: the makers of Dr. Oetker pizza are planning a processing plant in London, Ont., while a consortium of Chinese investors have proposed a baby formula factory in Scarborough.

To have three such companies coming into the province is a rarity, and one farmers encourage, said Ottawa dairy farmer Peter Ruiter.

"Any time we get someone wanting our milk, it's a great news story," said Ruiter. "Milk is a mature product, people generally don't drink more milk on a whim."

Processors fought new entrant

Agra-Farma's entry met with resistance, however, as the Ontario Dairy Council, which represents processors, took the case to a provincial agricultural tribunal.

Yogurt makers Danone Canada and Ultima Foods also filed a separate appeal to the federal court to quash the import permits, arguing Chobani yogurt was not a unique enough product to warrant entry into Canada.

Agra-Farma won both cases, and the dairy council dropped its appeal this summer in favour of working with the province and farmers.

The permits were necessary because Canada's dairy industry operates under the system of supply management, in which the amount of milk produced or imported is restricted, and milk prices for farmers are stable.

Supply management under fire

Critics who say supply management leads to higher prices for consumers saw the Chobani case as an example of why the system, which is also in place in the poultry and eggs sectors in Canada, needs to be replaced.

While industry insiders dispute supply management leads to higher prices, they concede the system has made it difficult to react to bigger changes.

"We don't have extra milk supply in the system, we run a very tight ship because of the nature of supply management and border controls that go with it, so we don't produce surplus," said Tom Kane, president of the Ontario Dairy Council.

Kane said the national supply management system means Ontario cannot exceed its percentage of the pool, so handling new entrants who want to access that pool of available milk can pose problems.

He hopes that's one of the issues that can be addressed when dairy producers from across the country — the P10 national pooling committee — meet in Toronto Wednesday.

"We're trying to introduce flexibility into the system and we're trying to get milk to the growing markets," said Kane.

Final window to appeal closing

Agra-Farma has just one more hurdle before it can set up shop, as the final window to appeal the federal court decision is later this month.

A company representative said she could not comment while the company faces "uncertainty" over possible appeals.

"We remain committed to Canada and bringing Chobani to Canadian consumers, but we are not in a position right now to comment on when we will be making local production announcements. We are hopeful that we can finalize our plans in a short period of time," the spokeswoman said in a statement.

Ruiter said he's hopeful the new entrants mean more customers for dairy producers.

"Anytime there's a new entrant into the market, maybe shakes things up a little bit, get the other processors saying, 'Hey wait, if their product is so much better, maybe I have to change,'" he said.

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