Dairy cows at Ferme Isabelle, a member of Agropur in Coteau-du-Lac. The dairy co-operative has rebounded in recent years and is looking to expand outside Canada.Andrej Ivanov/The Globe and Mail
Five years ago, Canadian dairy co-operative Agropur was in dire straits.
The 2,700-member dairy giant was over-leveraged, shackled with unproductive assets and drowning in debt.
And then the pandemic hit, which only made things worse. Agropur sells large amounts of dairy products to restaurants across the country, especially pizza chains.
It is a moment chief executive officer Émile Cordeau, who had taken the reins in 2019, will never forget. At first, it seemed like a disaster. And then it became an opportunity.
“Call it a crossroads,” he said. “It gave us the opportunity to reset our strategic vision and completely review.”
Today, Agropur is making cheddar, literally and figuratively.
Its debt is equal to two times EBITDA (earnings before interest, taxes, depreciation and amortization), down from eight times EBITDA five years ago. Sales are strong and the co-operative is now focusing on growth. But to do this, the Quebec-based dairy giant needs to go beyond the Canadian market.
Agropur CEO Émile Cordeau says the company's transformation began by selling non-core assets to focus on what it does best: dairy.Andrej Ivanov/The Globe and Mail
Canada is a mature market and growth is constrained by a number of factors, not least the supply-management system that sets a national price for milk, a national production quota and limits international trade.
Despite U.S. President Donald Trump’s objections to the system – including a Truth Social post on Friday where he complained about supply management and called Canada “a very difficult country to trade with” – it is also unlikely to go anywhere. In fact, a bill limiting the federal government from making concessions on supply-managed sectors in trade negotiations sailed through the House of Commons and the Senate in June. It awaits royal assent.
This works to Agropur’s advantage, Mr. Cordeau said.
An employee works at Agropur's milk packaging plant in Montreal.Andrej Ivanov/The Globe and Mail
Limited as the Canadian protected market might be, it is safe and profitable, and from this position Agropur can expand market access in the United States and beyond.
“We’re going to protect supply management and we’re going to make sure it remains intact. That is key for us to be able to invest in our assets, in our innovation, in our growth road map.”
Agropur – started during the Great Depression by a collection of farmers in Granby, Que. – sold $8.8-billion worth of dairy products in 2024. It has 29 plants – 22 in Canada and seven in the U.S. – and employs 7,000 people. Every year, the co-operative processes 6.8 billion litres of milk, enough to fill 2,720 Olympic swimming pools.
But in April, 2020, the company was carrying too many unproductive assets, Mr. Cordeau said. These included a yogurt business, fluid milk transport activities and a packaging company.
As part of the strategic plan, Mr. Cordeau began selling non-core assets to focus on what the co-operative does best: dairy. It cut its debt to $1.1-billion.
“We started our transformation by focusing on our core,” he said.
In the Canadian market, the co-operative focused on fresh products, such as milk, and cheese – which make up 77 per cent of its Canadian sales.
The milk market’s primary driver was value-added, such as lactose-free and protein plus. These new products offset the two-decade gradual slump in demand for traditional milk. (Canadians just don’t consume two-litre jugs of standard 2 per cent like they used to.)
The co-operative now hopes to modernize plants and bring in extra efficiencies. However, this can only go so far, given the limited prospects for growth in Canada.
A worker milks the dairy cows in the milking area at Ferme Isabelle, a member of Agropur, in Coteau-du-Lac.Andrej Ivanov/The Globe and Mail
Under Canada’s supply-management system, the industry cannot produce beyond a national quota set by the Canadian Dairy Commission. This quota is intended to reflect Canadian demand and, in so doing, limits production and keeps prices high for farmers. This makes it hard to scale production, Mr. Cordeau said.
Supply management also limits Agropur’s Canadian exports.
The U.S. is therefore the cornerstone of Agropur’s growth strategy, Mr. Cordeau said.
This has been the case for a while. Sixty-four per cent of Agropur’s milk is processed in plants across the U.S. This milk is sourced from U.S. farmers. The end product is cheddar and mozzarella for food-service companies (for example, frozen pizza brands) and whey protein for the international market.
The American market is more volatile – the price of cheese fluctuated from US$1.42 a pound to US$2.29 across 2024 – but it offers space for growth. Sales from U.S. operations, including U.S. and international sales, climbed 10.1 per cent between 2023 and 2024, while Canadian sales grew just 3.9 per cent.
The supply-management system has some downsides for dairy businesses, said Gumataw Abebe, an associate professor of agribusiness management at Dalhousie University. A protected and closed market with set prices means industry is not encouraged to innovate to the same degree as it would be in open markets, such as the U.S.
Milk cartons, dairy product packages and, awards are seen at Agropur's facility in Saint-Hubert.Andrej Ivanov/The Globe and Mail
Expanding into the U.S. gives dairy processors access to export markets, but it also incentivizes the businesses to modernize, scale and expand into new products, and this can be brought back to Canada. The strategy has played out well for Agropur, Prof. Abebe said. By building a business in Canada and competing in the U.S., “they have the flexibility to balance risk with reward,” he said.
One of its major competitors, Saputo Inc., has used a similar strategy. The Montreal-based dairy processor has a presence in Australia, Argentina, Britain and the U.S., and it has made some hefty investments in the latter market in the past five years.
While Agropur processes more milk in the U.S. than it does in Canada, its sales revenues are higher here. Despite accounting for 36 per cent of total milk processed by Agropur, Canadian sales in 2024 were worth $4.6-billion, compared with $4.2-billion in the U.S.
Building a base in Canada and continuing to explore global markets through the U.S. allow the dairy giant to benefit from the stability of a closed, supply-managed market, and grow in a more volatile but competitive and open market, Mr. Cordeau said.
“The road map is there,” he said. “We know what we have to do.”