Winning in the cheese business requires the constant churning of ideas and innovation

The cheese business is a complex one. During the past few years, it’s seen consolidation, with the number of top cheese-makers dwindling each year. “Cheese production in the U.S. has also been increasing every year, and we’ve seen a movement to be either very small or very large as a company,” observes Adam Mueller, Vice President at Minerva Cheese Factory in Minerva, Ohio. “Our challenge is to maintain diversity and service niche markets like a small company, but be large enough to supply products by the truckload.”

The company thrived as a commercial supplier, hitting its stride in 1959, when Kraft Foods became its sole customer. In 1976, fourth-generation family member Phil Mueller and his wife Polly Cox Mueller took over the business following the untimely death of Phil’s father, Delbert Mueller. In 1978, the Muellers made a decision that would forever change the direction and fortunes of Minerva Cheese. When Kraft asked the company to begin producing commodity barrel cheeses, used to make process cheese, Minerva balked, choosing to break the agreement rather than make a product not up to its standards.

Just two years after taking the business over, Minerva Cheese had effectively lost 95% of its business. “That was a defining point in Phil’s career,” Mueller says. “To survive, he had to take the company from a sole contract plant to one that sold to local distributors. He had to get visibility and establish connections we’d never had before.”

Fortunately, the relationship between the two firms was solid enough to allow a gradual dissolution of the partnership. Within two years, Minerva Cheese had built the distribution network needed to once again be profitable.

Thus began a series of changes that would build the company into a real, private-label cheese player. Today, Minerva Cheese has 55 employees working in its 60,000-square-foot plant. A $20 million-a-year-plus company with more than 150 clients in total, the business has seen an 80% increase in revenues during the past five years.

On the product side, the company produces a wide range, including Swiss, cheddar, natural, “engineered” cheeses for frozen applications, butter, whey products and more. Nearly 98% of Minerva’s offerings are sold business-to-business, but you can find them at Wal-Mart, Giant Eagle and other well-known grocers under a private label, and they’re sold directly on Amazon—the online giant approached the company and charges it nothing to appear on its site—and on the Minerva Cheese site (www.minervacheese.com).

Following its break with Kraft, Minerva’s story is one of consistent preparation for growth whether it concerned infrastructure, market penetration or innovation. In 1980, it undertook major reconstruction of its milk-receiving bay and installation of a new pasteurizer, which is still considered state-of-the-art equipment today. Eight years later, Minerva purchased entirely new cheese-manufacturing equipment. In 1997, it invested in a highly advanced waste-water pretreatment plant. And, at the turn of the new millennium, it networked all of its administrative and production functions.

On the innovation side, it’s all about efficiency and producing higher-quality goods faster. In 2000, for example, “cheese towers” were incorporated into production. The equipment produces a block of cheese more efficiently, within a fraction of a pound of the target weight. Two years later, Mueller was awarded a patent for a proprietary cheese-packing process. “It allows us to streamline our long horn [a six-inch diameter, 14-inch long piece of cheese] and deli horn [a piece four inches in diameter designed to fit perfectly on a hamburger] cheese production,” he explains. “The technique helped us streamline that side of the industry, taking the process from two days to one. It gave us a five-month return on investment, which is pretty good.”

The driving force behind all that change is growth. And the key lynchpin has been diversity. Minerva Cheese continues to distinguish itself by consistently forging paths into new market segments. “It’s all about niches,” Mueller says. “We’ve worked hard to find new markets. In the kosher market, for example, there are only a few players that make products and there are only two other competitors we’re aware of on the cheese side. It’s a very limited marketplace.”

Minerva entered the kosher market in 1993. At the time, it was selling to distributors that were having trouble getting quality product, so the company decided to step in. It was a difficult, but ultimately rewarding, process. Mueller notes kosher cheese buyers are different; the character of the organization is as important as quality. Sales started out small but now comprise 15% of the business overall.

The company recognizes the benefit of serving local and ethnic communities. In 2002, Minerva capitalized on its proximity to Amish country by introducing the Amish Gourmet brand. Accounting for about 5% of Minerva’s revenues, the products, made with Amish-supplied milk, sell well in Amish communities throughout the country. The factory also produces Lappi cheese—a Russian product—and butter with Russian labels, which is sold through a distribution network focused primarily in New York City.

Mueller adds that Minerva is also quick to take advantage of market opportunities as they arise. “Last year, we saw an explosion in pricing in the whey industry, so we changed our processes to take advantage of the situation,” he says. Based on the change, the business was able to enter a variety of new markets, processing whey for animal feed, baby formula and even the pharmaceutical industry. “It was a strategic, diversity-based innovation,” Mueller continues. “And our whey sales have improved about 1,000% since November 2006.”