Chicago Dairy Closes
At the second-to-last dairy in Chicago, there were never cows.
Jim and Ed Gignac owned a dairy the same way Willy Wonka owned a chocolate factory. Pipes for sugar, corn syrup and milk ran like the electric grid of a bustling metropolis to rooms filled with enormous steel blenders where they made ice creams, whipped creams and sour creams.
The original McDonald's milkshake was created by food scientists in their food lab.
The Gignacs' father used to tell them that Elgin Dairy Foods, 3707 West Harrison St., would be the last Chicago dairy.
They almost made it.
"The auction company is in there tagging stuff. You don't realize how much stuff you have until you start packing," said Ed Gignac, seated in an empty conference room, his brother standing nearby.
As recently as the 1950s, Chicago boasted 150 dairies within the city limits. Today, 42 dairies remain in the entire state, according to the Food and Drug Administration. Most of those are facilities used to transfer bulk milk from one place to the next and don't produce any products of their own. Companies like Elgin Dairy became an anachronism in a market that rewards large-scale operations and demands a lower price point.
"Jim and I stuck it out to the end," Ed Gignac said. "We've gotten to a point where it just doesn't make sense to carry on."
The Gignacs sold the business to Dean Foods Co., one of the major players taking on the role of dairy conglomerate. That broader consolidation trend has captured the attention of the Justice Department, which filed an antitrust lawsuit this month against Dean Foods, challenging the purchase of a Wisconsin dairy company.
The sale of Elgin Dairy isn't part of the lawsuit, but it is lamented by some who worry about the impact of consolidation.
"It's not a disaster yet, but will be soon," said Peter Carstensen, George H. Young-Bascom professor of law at University of Wisconsin Law School, of the impact of consolidation on smaller dairies. "In some places there's no way to resurrect a workably competitive market because you don't have the range of productive facilities and other components to make a workable infrastructure."
When the Gignacs sold, Dean Foods didn't need the facility or its equipment. Elgin's equipment will be sold at auction on Feb. 23; its buildings in East Garfield Park placed on the real estate market.
The brothers, after paying millions of dollars to the unionized workers' pension fund, left with just enough money to offer their employees a small severance.
That leaves the Instantwhip Foods dairy at 1535 N. Cicero Ave. to claim the title of last dairy in Chicago.
Like nearly all surviving dairies, Instantwhip is a larger operation, based in Ohio with 40 locations coast to coast and a manufacturing facility in Shanghai, China. James Ring, vice president and general manager of Instantwhip's Chicago dairy, said the operation dates to the 1930s, when its founder, a professor at the University of Illinois at Urbana-Champaign, invented and patented aerosol whipped cream.
The Instantwhip dairy in Chicago employs about 20 people, he said, and produces whipping cream and wedding cake frosting, real and imitation sour cream, coffee whitener and soft-serve ice cream for the food-service industry.
"We don't want to be the last dairy in the city," Ring said. "But it's better to be the last one than the last one to close."
The story goes that Elgin Dairy started in the 1890s as one man, a horse and his wagon, traveling to the train station to pick up milk fresh from the farms 45 miles away in Elgin to sell in Chicago. In an early form of marketing, the dairy's sole proprietor named his business "Elgin" to associate his business with the high-quality milk produced northwest of the city. The Gignacs know that at one point the dairy was located at 412-414 N. State St., today the site of a bar and convenience store, because the address is listed on the side of a milk cart in an old photograph.
Like many companies that hold fast to their roots, the dairy has had a collection of owners, each of whom worked at the dairy for years before purchasing the business from retiring owners. Jim and Ed Gignac's father, Kenneth Gignac, acquired Elgin this way in 1978 after 15 years at the company. Jim and Ed Gignac, whom workers knew as "Jimmy and Eddie" during their youth, bought out their father in 1999 when he retired, and became bosses to several of those same workers.
This fall, Ed and Jim Gignac gathered the company's 50 employees to tell them it was all over.
"We said, 'Look, we have some news, and this isn't the best for you.' It was important for me not to pull any punches, not to sugarcoat it,'" Ed Gignac said.
The brothers had crunched the numbers. No matter how they did the math, the company's profitability was trending toward a flat line. At the same time, their unfunded liability to the workers' pension plan from Teamsters Local 754 was trending upward by about $1 million per year.
"I said, 'Let's go out with the same class all the way down to the end,'" Ed Gignac said.
At its peak, in 2005, Elgin was processing 12 million gallons of milk per year, making about 180 products and doing about $50 million in sales.
Until the dairy stopped processing milk on Dec. 17, McDonald's remained one of the dairy's largest customers. The Gignacs said Elgin provided the equivalent of more than 100,000 milkshakes each day for 1,500 McDonald's restaurants in the Chicago area and beyond. In addition to inventing the formula for McDonald's milkshake, Elgin was also instrumental in the creation and production of the McFlurry.
"When we processed the last gallon, I just went up on Facebook and put up an update and said 'last gallon processed,'" Jim Gignac said.
A little while later, a friend posted a photo of himself with one of the last Elgin milkshakes. Jim Gignac said that within two to three days, the last Elgin milkshakes at McDonald's would have been gone. Those restaurants are now supplied by three Dean Foods processing plants. Elgin helped Dean land the account.
Of course, unless you happen to know someone at Elgin, you wouldn't know the difference between an Elgin milkshake and a Dean milkshake. Although Elgin supplied dairy products to everyone from the ice cream carts that roll down the streets of the city's Hispanic neighborhoods to Portillo's, Kraft Foods, White Castle and Nabisco, the company's impact was mostly invisible.
"I don't even think the city asked us to sponsor a cow back during 'Cows on Parade,'" Jim Gignac said with a laugh.
Andrew Novakovic, director of the Cornell Program on Dairy Markets and Policy, said most milk products don't have the brand loyalty that something like Coca-Cola would have.
"Milk is a homogeneous product," said Novakovic said. "It's hard to differentiate my milk from his milk from his milk."
When it comes to dairy products, the power lies with retailers, Novakovic said. Big-box stores like Wal-Mart choose suppliers that can get them the most product at the cheapest prices, he said, a phenomenon that has led to dairy company consolidations.
The Justice Department suit is challenging Dean Foods' 2009 acquisition of Foremost Farms's consumer-products division, saying the merger eliminates substantial competition between the two companies in the sale of milk to schools, grocery stores, convenience stores and other retailers in Illinois, Michigan and Wisconsin. Novakovic said Dean is simply at the end of long story.
"Retailers have consistently put pressure on suppliers to keep their costs reasonable, but nobody took it to the level Wal-Mart did, and now the other retailers have to keep up. What may seem like trivial amounts of money for a gallon of milk is the difference between a sale and no sale for these suppliers," Novakovic said.
According to the U.S. Department of Agriculture, in 2008 there were 319 milk bottling plants in the United States that produced fluid milk, compared with 8,195 in 1950. At the same time, those plants began producing milk in greater volume. In 1950, the average volume of milk processed per year was about 4.3 million pounds per plant. In 2008, that number was 194.4 million pounds.
The trend has been the same for U.S. dairy operations — where milk is processed into cheese, cream and other products — which have declined in number by 70 percent in the past 38 years.
At Elgin, the changes in the dairy industry meant continually reinvesting in new technology to keep up with competitive and regulatory changes. Equipment that took 30 minutes to heat-treat 400 gallons of milk was replaced with equipment that could process 3,000-4,000 gallons an hour.
Elgin was one of the first dairies to start using corrugated cardboard instead of reusable cans, a change that cut the time and costs it took to ship cans back to the facility to be reused. Wooden cabinets inside a "powder room" used to measure dry ingredients were replaced with stainless steel cabinets at significant cost. The Gignacs spaced out their expenses and kept up with dairies that were dealing on vastly larger scales.
"If you didn't reinvest," Jim Gignac said, "next thing you knew, you were out of the picture."
[email protected]
Jim and Ed Gignac owned a dairy the same way Willy Wonka owned a chocolate factory. Pipes for sugar, corn syrup and milk ran like the electric grid of a bustling metropolis to rooms filled with enormous steel blenders where they made ice creams, whipped creams and sour creams.
The original McDonald's milkshake was created by food scientists in their food lab.
The Gignacs' father used to tell them that Elgin Dairy Foods, 3707 West Harrison St., would be the last Chicago dairy.
They almost made it.
"The auction company is in there tagging stuff. You don't realize how much stuff you have until you start packing," said Ed Gignac, seated in an empty conference room, his brother standing nearby.
As recently as the 1950s, Chicago boasted 150 dairies within the city limits. Today, 42 dairies remain in the entire state, according to the Food and Drug Administration. Most of those are facilities used to transfer bulk milk from one place to the next and don't produce any products of their own. Companies like Elgin Dairy became an anachronism in a market that rewards large-scale operations and demands a lower price point.
"Jim and I stuck it out to the end," Ed Gignac said. "We've gotten to a point where it just doesn't make sense to carry on."
The Gignacs sold the business to Dean Foods Co., one of the major players taking on the role of dairy conglomerate. That broader consolidation trend has captured the attention of the Justice Department, which filed an antitrust lawsuit this month against Dean Foods, challenging the purchase of a Wisconsin dairy company.
The sale of Elgin Dairy isn't part of the lawsuit, but it is lamented by some who worry about the impact of consolidation.
"It's not a disaster yet, but will be soon," said Peter Carstensen, George H. Young-Bascom professor of law at University of Wisconsin Law School, of the impact of consolidation on smaller dairies. "In some places there's no way to resurrect a workably competitive market because you don't have the range of productive facilities and other components to make a workable infrastructure."
When the Gignacs sold, Dean Foods didn't need the facility or its equipment. Elgin's equipment will be sold at auction on Feb. 23; its buildings in East Garfield Park placed on the real estate market.
The brothers, after paying millions of dollars to the unionized workers' pension fund, left with just enough money to offer their employees a small severance.
That leaves the Instantwhip Foods dairy at 1535 N. Cicero Ave. to claim the title of last dairy in Chicago.
Like nearly all surviving dairies, Instantwhip is a larger operation, based in Ohio with 40 locations coast to coast and a manufacturing facility in Shanghai, China. James Ring, vice president and general manager of Instantwhip's Chicago dairy, said the operation dates to the 1930s, when its founder, a professor at the University of Illinois at Urbana-Champaign, invented and patented aerosol whipped cream.
The Instantwhip dairy in Chicago employs about 20 people, he said, and produces whipping cream and wedding cake frosting, real and imitation sour cream, coffee whitener and soft-serve ice cream for the food-service industry.
"We don't want to be the last dairy in the city," Ring said. "But it's better to be the last one than the last one to close."
The story goes that Elgin Dairy started in the 1890s as one man, a horse and his wagon, traveling to the train station to pick up milk fresh from the farms 45 miles away in Elgin to sell in Chicago. In an early form of marketing, the dairy's sole proprietor named his business "Elgin" to associate his business with the high-quality milk produced northwest of the city. The Gignacs know that at one point the dairy was located at 412-414 N. State St., today the site of a bar and convenience store, because the address is listed on the side of a milk cart in an old photograph.
Like many companies that hold fast to their roots, the dairy has had a collection of owners, each of whom worked at the dairy for years before purchasing the business from retiring owners. Jim and Ed Gignac's father, Kenneth Gignac, acquired Elgin this way in 1978 after 15 years at the company. Jim and Ed Gignac, whom workers knew as "Jimmy and Eddie" during their youth, bought out their father in 1999 when he retired, and became bosses to several of those same workers.
This fall, Ed and Jim Gignac gathered the company's 50 employees to tell them it was all over.
"We said, 'Look, we have some news, and this isn't the best for you.' It was important for me not to pull any punches, not to sugarcoat it,'" Ed Gignac said.
The brothers had crunched the numbers. No matter how they did the math, the company's profitability was trending toward a flat line. At the same time, their unfunded liability to the workers' pension plan from Teamsters Local 754 was trending upward by about $1 million per year.
"I said, 'Let's go out with the same class all the way down to the end,'" Ed Gignac said.
At its peak, in 2005, Elgin was processing 12 million gallons of milk per year, making about 180 products and doing about $50 million in sales.
Until the dairy stopped processing milk on Dec. 17, McDonald's remained one of the dairy's largest customers. The Gignacs said Elgin provided the equivalent of more than 100,000 milkshakes each day for 1,500 McDonald's restaurants in the Chicago area and beyond. In addition to inventing the formula for McDonald's milkshake, Elgin was also instrumental in the creation and production of the McFlurry.
"When we processed the last gallon, I just went up on Facebook and put up an update and said 'last gallon processed,'" Jim Gignac said.
A little while later, a friend posted a photo of himself with one of the last Elgin milkshakes. Jim Gignac said that within two to three days, the last Elgin milkshakes at McDonald's would have been gone. Those restaurants are now supplied by three Dean Foods processing plants. Elgin helped Dean land the account.
Of course, unless you happen to know someone at Elgin, you wouldn't know the difference between an Elgin milkshake and a Dean milkshake. Although Elgin supplied dairy products to everyone from the ice cream carts that roll down the streets of the city's Hispanic neighborhoods to Portillo's, Kraft Foods, White Castle and Nabisco, the company's impact was mostly invisible.
"I don't even think the city asked us to sponsor a cow back during 'Cows on Parade,'" Jim Gignac said with a laugh.
Andrew Novakovic, director of the Cornell Program on Dairy Markets and Policy, said most milk products don't have the brand loyalty that something like Coca-Cola would have.
"Milk is a homogeneous product," said Novakovic said. "It's hard to differentiate my milk from his milk from his milk."
When it comes to dairy products, the power lies with retailers, Novakovic said. Big-box stores like Wal-Mart choose suppliers that can get them the most product at the cheapest prices, he said, a phenomenon that has led to dairy company consolidations.
The Justice Department suit is challenging Dean Foods' 2009 acquisition of Foremost Farms's consumer-products division, saying the merger eliminates substantial competition between the two companies in the sale of milk to schools, grocery stores, convenience stores and other retailers in Illinois, Michigan and Wisconsin. Novakovic said Dean is simply at the end of long story.
"Retailers have consistently put pressure on suppliers to keep their costs reasonable, but nobody took it to the level Wal-Mart did, and now the other retailers have to keep up. What may seem like trivial amounts of money for a gallon of milk is the difference between a sale and no sale for these suppliers," Novakovic said.
According to the U.S. Department of Agriculture, in 2008 there were 319 milk bottling plants in the United States that produced fluid milk, compared with 8,195 in 1950. At the same time, those plants began producing milk in greater volume. In 1950, the average volume of milk processed per year was about 4.3 million pounds per plant. In 2008, that number was 194.4 million pounds.
The trend has been the same for U.S. dairy operations — where milk is processed into cheese, cream and other products — which have declined in number by 70 percent in the past 38 years.
At Elgin, the changes in the dairy industry meant continually reinvesting in new technology to keep up with competitive and regulatory changes. Equipment that took 30 minutes to heat-treat 400 gallons of milk was replaced with equipment that could process 3,000-4,000 gallons an hour.
Elgin was one of the first dairies to start using corrugated cardboard instead of reusable cans, a change that cut the time and costs it took to ship cans back to the facility to be reused. Wooden cabinets inside a "powder room" used to measure dry ingredients were replaced with stainless steel cabinets at significant cost. The Gignacs spaced out their expenses and kept up with dairies that were dealing on vastly larger scales.
"If you didn't reinvest," Jim Gignac said, "next thing you knew, you were out of the picture."
[email protected]
