Milnot Company

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Milnot Company

100 South Fourth Street, Suite 1010
St. Louis, Missouri 63102
Telephone: (314) 436-7667
Fax: (314) 436-7679
Web site:

Private Company
Employees: 65
Sales: $200 million (2000 est.)
NAIC: 311514 Dry, Condensed, and Evaporated Dairy Product Manufacturing; 311422 Specialty Canning

Milnot Company, headquartered in St. Louis, Missouri, produces canned milk goods, baby food under the Beech-Nut brand, canned chilli under the Chilli Man brand, and several private-label products. For most of the companys history, its signature product was its evaporated milk, but through diversification, starting in the mid 1970s, it expanded its line of products. It almost doubled in size when, in 1998, it purchased Beech-Nut. Three years later, the companys attempt to merge with the H.J. Heinz Company was blocked by the Federal Trade Commission. Milnot remains a private company and is owned by Madison Dearborn Partners, a Chicago-based capital investment firm.

191240: Milnot Begins as a Dairy

Martin Jensen founded Milnot Company as the Litchfield Creamery Company in 1912. It was located in Litchfield, Illinois, and was initially a dairy. In 1915, Jensen was joined in the enterprise by Charles Hauser, then somewhat later by William Hartke. These three men incorporated the company and, in 1916, built a new plant at what would remain the companys Litchfield milk-canning location for the rest of the century.

World War I helped the company develop because it produced an increased demand for processed dairy products. The United States, even before its entry into the war in 1917, was shipping these products and other goods to its future allies. In 1919, after the armistice, the Litchfield plant processed 23 million pounds of milk, most all of which it marketed as sweetened, condensed, and evaporated milk.

In the next decade, the company continued to grow, albeit slowly. Thereafter, despite the impact of the Great Depression, its growth accelerated. One reason for its growth was the introduction of Milnot in 1930, a new, canned-milk product. Although at first sales of Milnot were slow, they soon picked up, and in 1932, under Hausers leadership, Milnot production began a rapid expansion. In 1936, to accommodate the growing demand for Milnot, the company acquired an additional production plant located in Indiana. Three years later, in 1939, the product was renamed Milnot. By 1940, the company had grown to be about the same size as Pet, its major competitor.

194690: Milnot Grows and Diversifies

Although World War II curtailed Milnots production, the post-war boom years spurred the companys additional growth. It built a new plant in Warsaw, Indiana, in 1946. Production started there in 1947. Next, in 1948, after buying land on the Missouri-Oklahoma border, the company opened another plant in Seneca, Missouri, where, eventually, all of its canned milk production would be consolidated.

Over the next few decades, Milnot expanded and diversified. In 1975, it purchased rights to a proprietary chili recipe from Joe DeFrates, who had twice been named world champion in a chili cook-off competition. The company then began producing and marketing its Chilli Man canned chili, using the unique chilli spelling because it was an abbreviated rendering of DeFrates home state of Illinois. Eight years later, in 1983, Milnot also added a sweetened condensed milk to its line. Dubbed Dairy Sweet, it was made by adding sweeteners to its evaporated milk, the staple product in the companys early development.

Still, despite its new product lines, Milnots growth slowed. It remained profitable, but after it sold out to TW Services in the 1980s, its sales simply stagnated from a lack of adequate strategic planning and sufficient capital investment. In 1990, Michael Osborne, then working for TW Services, put together an investment group that, for $25 million, bought Milnot from the parent company, which was then selling off properties. The investment group consisted of Osborne; Ingles Capital Corp., headed by Greg Ingles of Dallas, Texas; and Eli Jacobs, owner of the Baltimore Orioles. At that time, Milnot had annual sales of around $35 million, and Osborne and the other investors knew that the company had a strong base and had an excellent opportunity to increase its line of brands and develop new markets.

199195: Milnot Further Diversifies and Its Sales Rapidly Climb

Osborne brought substantial experience to his new position as Milnots president and CEO. He had worked in Pets dairy division for several years, from about 1972 to 1983, when Pet sold that division. In his new job at Milnot, Osborne took that company in some of the same directions that Pet itself had gone.

Within three years after Osborne took over the helm at Milnot, the companys sales nearly tripled, reaching about $110 million, including revenues generated by its Mexican food division. About half its sales came from it nationally distributed, private label products, including it signature evaporated milk, which was competing in the same market as Osbornes old employers product, Pet evaporated milk. In St. Louis, where Osborne moved Milnots headquarters in 1990, the companys strong selling, regional brands-Chilli Man Chilli and Dairy Sweet-competed, respectively, with Armours canned chili and Bordens Eagle Brand condensed milk.

Under Osbornes leadership, Milnot, using its size to advantage, succeeded in attracting executives from larger, competitive companies like Kraft, Con Agra, and Anheuser-Busch, which made Eagle Snacks. It was also able to compete with such larger companies through its strong and efficient regional distribution, primarily in the Northwest, Southwest, and Southeast, but it also was able to maintain a good national distribution volume of its private label products.

Osborne also spearheaded the growth of Milnots Mexican food line through acquisitions. In Fort Worth, Teaxs, the company bought the strong-selling Jimenez brand from Quality Foods. It also acquired Fiesta, a Mexican food company in Dallas. It then combined two plants in the Dallas-Fort Worth area to give the company a full line of Mexican foods and put it in direct competition with Pets Old El Paso line.

By the mid-1990s, Milnots most familiar products were still its signature evaporated milk and strong regional food brands, chief among which were Chilli Man Chilli and Dairy Sweet, the sweetened condensed milk which continued to compete for a larger market share against Bordens market-leading Eagle Brand. The company still had one of its six operations in its home base of Litchfield. The corporate hub was in St. Louis, however, where most of the managerial staff was headquartered, though some of the major owners were in Dallas.

199698: Change in Ownership Leads to Major Acquisition

In December 1995, Osborne had a fatal heart attack. Under the leadership of interim president James Tappan, Milnot began searching for a suitable replacement for Osborne. The companys board named Robert Pizzuti to the CEO and president posts in the spring of 1996. Before his appointment, Pizzuti was serving as president of RJP Associates, a Greenwich, Connecticut-based management consulting firm. He also brought food industry experience to his new job, having previously served as president of Whitman Chocolates from 1991 to 1994, and, prior to that, as a vice-president of Maxwell House Coffee Co. What he came to was a company that had only about 125 employees, some 25 of whom were at the company headquarters in St. Louis and another 30 at its Litchfield plant 60 miles to the northeast. The rest worked at the companys facilities in Joplin, Missouri, and Denver, Colorado.

When Pizzuti took charge, he began looking to acquire other product lines, even outside the canned milk and canned meat industries. He was also interested in developing new markets. The problem he faced was an industry stagnation that had lasted for several years. Sales of evaporated milk, Milnots chief staple, had suffered industry-wide declines. In 1995, for example, they had dropped by 10 percent over 1994, not a promising trend for a company that had built its reputation in the canned milk business. There were also mounting problems, including the rising cost of milk, itself driven up by the rising cost of cattle feed. Also, as a result of varying taste preferences across the nation, the canned chili industry was highly fragmented, making it difficult for Milnot to move into new markets for its Chilli Man line. The companys annual revenues had stagnated in a range between $70 million and $80 million, and Pizzuti knew that his challenge was to spur them up, if need be by diversifying the companys product line. That, however would require new capital.

Company Perspectives:

We at The Milnot Company are proud of the products that have supported our long history and the users who have (and continue to) build the foundation of our heritage. We will continue the tradition of providing quality, innovative products for our consumers to share with their friends and families.

Fortunately, Milnot was bought out by Chicago-based Madison Dearborn Partners, an investment firm that had been formed by John Canning, Jr., in 1992. Madison Dearborn specialized in management buyout transactions as well as a wide range of private refinancing and recapitalization investments. The acquisition by Madison Dearborn was significant because it assured Milnot of adequate capitalization for continued growth. Significantly, it allowed Milnot to make a major acquisition in 1998 when it purchased Beech-Nut Nutrition Corp., the branded baby food subsidiary of Ralcorp Holdings, Inc., a St. Louis, Missouri-based maker of private-label ready-to-eat cereals, crackers, cookies, and snack nuts. The $68 million investment more than doubled Milnots revenue base, which jumped from about $90 million to $230 million. Beech-Nut, which dated back to the 1930s, had been passed around from one parent company to another over the previous four decades before its purchase by Milnot. Besides Ralcorp, its owners included Nestlé, Ralston-Purina, and Bristol-Myers (which later became Bristol-Myers Squibb). With the acquisition of Beach-Nut, Milnot entered an entirely new market.

1999 and Beyond: Plans New Growth Strategies

Towards the end of the 1990s, Milnot made repeated efforts to buy Pet Milk from The Pillsbury Company, Pets corporate parent. Scott Meader, who had replaced Pizzuti as Milnots CEO, was actively seeking to double the companys annual revenue to $500 million through another major acquisition. Its last bid on Pet came six moths after it had completed its purchase of Beech-Nut, As before, the companys efforts were frustrated by what Meader and his colleagues saw as an overvalued price tag on Pet. In any case, after Pet Milk sales took a nosedive, and Pillsbury took Pet off the auction block, at least temporarily. Although Milnot was the logical buyer for Pet, no deal could be struck, leaving Milnot to look for other options.

In 2000, it thought it found one: a merger deal with H.J. Heinz Co. In the baby-food market, Heinz ranked second and Milnots Beach-Nut brand third, but they were far behind the industrys frontrunner, Gerber Products, which commanded a 73 percent share of the market and had annual revenues closing in on $600 million. Some analysts saw the proposed buyout of Milnot by Heinz as an effort by the two companies to gang up on the leader, and, in fact, executives at Milnot said as much, claiming that, combined, Heinz and Milnot could give Gerber a better market place battle. In any case, the merger attempt was eventually blocked by the Federal Trade Commission, which saw in the deal a monopolistic threat to the baby-food market. The merger collapse occurred in 2001 and left Milnot to devise new strategies for expansion or another buy out alternative.

Principal Subsidiaries

Fiesta-Jimenez Co.

Principal Competitors

Dairy Farmers of America; H.J. Heinz Company; Nestlé S.A.; Novartis AG.

Key Dates:

The company is founded as Litchfield Creamery Company.
Charles Hauser and William Hartke incorporate Litchfield and build new plant.
The company begins manufacturing MILNUT.
Litchfield buys another plant in Indiana.
Creamery changes its name to Milnot.
Milton builds a new plant in Warsaw, Indiana, beginning production the next year.
Company opens another facility at Seneca, Missouri, right on the Missouri-Oklahoma state line.
Milnot purchases a proprietary chili recipe from Joe DeFrates, two-time chili cook-off champion.
The company introduces Dairy Sweet sweetened condensed milk.
Michael Osborne heads investment group that buys Milnot from TW Services; company moves from Litchfield into MCI Building in St. Louis.
Osborne dies and is succeeded by interim president James Tappan.
Robert Pizzuti is named company CEO and president.
Milnot acquires Beach-Nut from Ralcorp.
Heinz efforts to purchase company thwarted on anti-trust grounds.

Further Reading

Anderson, Tom, Milnot Will Fight FTCs Attempt to Block Merger, St. Louis Business Journal, July 17, 2000, p. 9.

Beech-Nut Is Acquired by Milnot, Supermarket News, August 10, 1998, p. 51.

Conrad, Lee, Milnot Looks Outside As Canned Milk Market Sours; New President Faces Challenge of Rising Costs of Products, St. Louis Business Journal, May 13, 1996, p. 7A.

Desloge, Rick, Milnot Co. Finds Its Niche in the Land of Giants, St. Louis Business Journal, April 13, 1992, p. 8A.

, Milnot Wants to Buy Pet, St. Louis Business Journal, March 29, 1999, p. 1.

Lee, Thomas, St. Louis-Based Firm Frustrated with Failed H.J. Heinz Merger, Knight-Ridder/Tribune Business News, May 19, 2001.

Murray, Barbara, Milnot, Heinz Abandon Baby Food Merger Bid, Supermarket News, May 7, 2001, p. 119.

John W. Fiero