A spokesman for the company that owns Thornloe Cheese says the equipment is so old it would cost $10 million to upgrade, and that doesn't make sense financially.
Thirty-five employees have lost their jobs.
Mike Langdon is a vice president of Gay Lea Foods Co-operative and he tells BayToday that the facility is decades old.
"This was a really, really difficult decision and we understand the importance of the the Thornloe brand in northern Ontario. The issue is that we've known since we purchased it in 2019 that there was a need for some long-term investment to make the plant viable for the long run."
Langdon says the company announced a production shutdown several weeks ago to assess the condition of the plant and its equipment.
"We brought in some of the best cheese makers in our network group from Manitoba to give it an independent assessment and their recommendation, after reviewing the facility was, we've actually got to close it as soon as possible, given the quality and safety risk associated with some of the equipment in the facility."
So the next question is, why not simply invest in the facility?
"You know we've really looked at this from every angle with the goal to avoid this outcome, but the investment to bring the facility up to acceptable standards is very significant. It's likely to cost about $10 million, and potentially considerably more. And unfortunately, the financial performance of it just doesn't justify that type of investment."
It has been reported that Thornloe actually doubled its revenue last year to $14 million, but Langdon says he's seen that number floating around and that it's "dramatically overstated." His description is an eye-opener.
"What I would tell you is, probably the best way to describe this site is, it's marginally profitable.
"We wanted to give ourselves some time to evaluate the facility and try to find every way possible to see if we could re-purpose it or keep it open in some way. Unfortunately given the investment required and its financial performance, it would take decades to pay back that investment. I know this is tough to hear, but it's just not justifiable."
There has already been talk about ways to save the Thornloe facility and Langdon says Gay Lea is very open to discussing with any prospective buyer the opportunity to purchase the plant.
"We would do what we can to make that possible. The one thing I would caution against is, that we see the plant in its current condition as a food safety risk and so we would need to make sure that any prospective buyer fully understood that and was in a position to invest capital in the plant to to bring it up to current acceptable standards."
The property won't be up for sale immediately as the company is going to leave the plant in its current condition with the mind to allow a prospective buyer the opportunity to come look at it.
It isn't a single expensive piece of equipment that caused the closure, but deficiencies throughout the plant that prompted their recommendation to close the facility immediately, based on food safety.
When he talks about food safety, it really comes down to aging equipment, like the cheese vats.
"That facility is decades old, and so over time as they wear and can develop pin holes and cracks. There's a risk of allowing contaminants into the cheese. But it's not just the vats and that's why the replacement number is so high and frankly it's why the facility has been on sort of a maintenance shutdown for six weeks. We've been scouring the facility and trying to determine a way to keep it open, keep it viable, and make the investments in a way that makes some financial. sense.
"Unfortunately we haven't been able to figure that out. We just don't see a path to investing $10 million in the facility and not seeing any reasonable return on that investment."
So while the cheese production has been cut, the grass-fed butter which is which is turned using northern Ontario milk will continue. The only good news is there will be absolutely no disruption to farmers' milk pickups.
"We are actually going to keep skimming milk at this facility. So again the milk skimming side of the facilities is in comparatively better condition. It is a much smaller part of the plant but it is in comparatively better condition so we are going to continue skimming grass-fed milk which produces the grass-fed butter at the facility for the foreseeable future, so there will be no disruption to grass-fed milk pickups and conventional milk has already been transitioned to other facilities during the assessment period and so there will be absolutely no disruption to any milk pickups for farmers."
Expectations were lofty when Gay Lea bought the facility in 2019 with the hope that new blood could improve the performance of the manufacturing operation by putting more effort into sales and marketing.
"Our employees have done a fabulous job and despite their best efforts we just haven't been able to create conditions where the performance of the facility is improved and that makes the decision to invest in it all the more difficult."