How Reykjavik Creamery, an Icelandic yogurt venture in Pennsylvania, nearly went sour

NEWVILLE, Pa. -- Gunnar Birgisson came to the United States a few years ago, backed by investors who saw an opportunity to make Icelandic-style yogurt called skyr from organic Pennsylvania milk. He never anticipated the legal adventure his journey was about to take.

“If you get into business in the U.S., the first person you want to hire is a good lawyer,” said Birgisson, 54. “And probably more than one.”

Birgisson, a former soft-drink executive in Iceland, was aggressively courted by Pennsylvania officials who believed that production of thick Icelandic skyr could become as popular as Greek yogurt and revive the state’s dairy industry. “These kind of projects throw a lifeline to local dairies and we wanted to do everything possible to make that happen,” said David Briel, the state’s executive director of international investment.

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The Icelander formed a partnership in 2018 with the Trickling Springs Creamery, a Chambersburg business whose close connections to Mennonite farmers impressed Birgisson. Trickling Springs had a vacant plant near Newville in Cumberland County with access to milk from grass-fed cows. Birgisson thought it was the perfect site for the $1.1 million ultrafiltration system he bought from a U.S. manufacturer, which can strain conventional yogurt to make skyr.

But in early 2019, Birgisson discovered that the leaders of Trickling Springs Creamery were under investigation for running a Ponzi scheme targeting Mennonite and Amish investors.

Appalled, Birgisson rallied the Icelandic investors to buy out the sullied Pennsylvania partners, and it took months to sort out the partnership’s tangled finances. Trickling Springs later declared bankruptcy, and its leader, Philip Riehl, pleaded guilty to federal fraud charges last year and was sentenced to 10 years in prison.

More challenges followed for Birgisson’s company, Reykjavik Creamery, named after the capital of Iceland. A disgruntled customer of the ill-fated Trickling Springs yogurt partnership sued, which cost Birgisson $100,000 in legal fees to defend. Then there was the coronavirus pandemic, which halted the nascent business in its tracks in 2020.

Now Birgisson faces a new obstacle: After investing $6 million in the business, his application for a U.S. work permit was rejected in August. He has appealed, but Birgisson can only visit the business he founded to hold meetings and check on his investment. He’s the creamery’s chief executive. But he can’t work or draw a salary, at risk of deportation.

“This whole thing is kind of ridiculous, when someone is willing to invest and build something in a small community where there is a need for new opportunities,” he said.

On a tour of the 30,000-square-foot plant 12 miles west of Carlisle, about a dozen workers packed fresh skyr into plastic cups under contract for Norr Organic, a New York company. Donald R. Everett, a dairy-industry veteran who is Reykjavik Creamery’s chief operating officer, said he is mystified about Birgisson’s unsettled immigration status.

“What’s so shocking to me was I just always assumed that the U.S. welcomed people from many countries who really bring tremendous value here,” said Everett, a certified public accountant. “I mean this seems like a no-brainer.”

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But the U.S. immigration system is a maze. Though Iceland has close relations with Washington and Europe and operates a NATO military base, the small nation does not maintain a “treaty of commerce and navigation” with the United States. If it did, Birgisson would be eligible for what is called an E-2 investor’s visa, given routinely to businesspeople from treaty countries.

Birgisson’s immigration lawyer, Jane W. Goldblum of Philadelphia, recommended instead he apply for a national interest waiver, which allows the United States to grant a green card to applicants who demonstrate “exceptional ability” and whose employment would greatly benefit the nation.

Goldblum submitted a 310-page application in 2019 to the U.S. Citizenship and Immigration Services, which included glowing endorsements from Briel and Pennsylvania Agriculture Department officials. The petition included financial projections, the creamery’s business plan and contracts with small-batch sellers who had hired Reykjavik Creamery to produce their yogurt, skyr and quark, a strained dairy product.

“I felt that Gunnar’s National Interest Petition was a ‘slam dunk’ -- one of the most meritorious and readily approvable petitions my firm has ever submitted, and we submit lots,” said Goldblum, whose firm represents corporate and institutional clients, including the University of Pennsylvania.

Immigration officials were unconvinced. They said the Reykjavik Creamery was a small operation -- it now employs about 15 people, and its projected capacity in 2022 is 5.2 million gallons of milk a year. Pennsylvania dairy farmers produced about 1.2 billion gallons of milk last year. USCIS also said Birgisson lacked previous dairy experience.

“The petitioner’s claim does not establish that his proposed endeavor will convey substantial positive economic effects for the United States beyond the benefits that will accrue to the petitioner and his company,” wrote Kirt Thompson, the director of the USCIS Texas Service Center in an Aug. 10 denial of Birgisson’s petition.

“The petitioner has not established that the proposed endeavor is of national importance.”

Goldblum was outraged and a wrote a letter directly to Homeland Security Secretary Alejandro Mayorkas asking him to reverse the decision. She hasn’t heard back.

Goldblum said Sen. Pat Toomey stepped in last year to help Birgisson get a temporary one-year work permit, which expired earlier this year. But she expressed disappointment with Sen. Bob Casey’s office, despite repeated pleas for help. “He did nothing,” she said.

The senator’s office disputed that characterization. “Sen. Casey’s office has been in communication with Ms. Goldblum for over a year, attempting to assist her and her client to navigate USCIS,” a Casey aide said.

Birgisson has now enlisted yet another law firm to file a new application to USCIS for an O-1 nonimmigrant visa, which the government can give to individuals who “possess extraordinary ability in the sciences, arts, education, business, or athletics.” The visa, often given to entertainers and sports figures, has a three-year limit.

Birgisson’s supporters liken his venture to Chobani, the Greek-style yogurt founded in 2005 in Upstate New York by a Turkish immigrant. Chobani pumped new life into the domestic dairy industry, whose fortunes have declined as younger consumers switch away from fluid milk and embrace plant-based beverages, such as oat milk.

Yogurt is made by adding bacterial cultures to heated milk and allowing the mix to ferment. Strained products like Greek yogurts are made by filtering the yogurt in a centrifuge to separate the liquids from the solids. Skyr achieves an even higher degree of concentration by undergoing ultrafiltration through a very fine membrane. It takes three to four cups of milk to product one cup of Icelandic yogurt, which contains more protein and less sugar than other types of yogurt.

Skyr has been produced for hundreds of years in Iceland, traditionally using nonfat milk. Birgisson said his relatives have made skyr as far back as 10 generations.

Birgisson, who has a master’s degree in business and was previously the chief financial officer of Iceland’s Coca-Cola bottler, believes that Icelandic-style yogurt could be North America’s next Chobani. Skyr has already been making inroads into the U.S. market, led by Siggi’s, a New England producer now owned by the French international dairy giant Lactalis Group. Birgisson believes there is room for more producers.

After studying dairy production in Iceland and Denmark, Birgisson hooked up with a large California dairy cooperative to learn more about making yogurt in America. But he said existing creameries were too large to take on a small-batch producer of skyr, or too small to meet the rigorous standards of the Safe Quality Food Institute, whose SQF certification is essential for getting large retailers to put a product on their shelves.

That’s how he ended up getting introduced to Trickling Springs Creamery in Pennsylvania, which had a vacant plant near Newville, built originally for cheese production. Birgisson sank $1.8 million in cash into the venture, TSC Emerald Valley LLC. And the Icelander also installed the $1.1 million ultrafiltration system his group had acquired.

But Birgisson began to see red flags near the end of 2018. Trickling Springs failed to fulfill its obligation to install the piping and machinery to pasteurize and handle the milk. “Why isn’t there anything going on here as was promised?” he wondered.

The Ponzi scheme underlying Trickling Spring was unravelling. Trickling Springs disclosed to Birgisson that it was under investigation by the state Department of Banking and Securities. Birgisson found a state filing outlining its charges and realized the allegations were far more serious than the Trickling Springs officials had described them.

Rather than abandoning the project, the Icelandic investors offered to take over the creamery and to cut ties with Trickling Springs. Birgisson modified his business plans to launch his own brand of skyr, and focused on operating the creamery as a midsize co-packing facility that would produce milk products under contract for other labels.

Birgisson can’t disclose the identities of some brands he produces. One line Reykjavik Creamery just began to produce is called Thor’s Skyr, whose brand ambassador, Hafthor “Thor” Bjornsson, is an Icelandic strongman and actor who appeared in Game of Thrones. Birgisson said Thor’s Brand is well-financed and has distribution agreements with several grocery store chains.

The creamery has also partnered with a new brand with a very different image from Thor’s Skyr: A women-owned start-up called Painterland Sisters, run by two sisters who are selling skyr from whole milk produced at their family’s organic farm in northern Pennsylvania.

Stephanie Painter, 27, said she and her sister Hayley, 25, immediately hit it off with Birgisson and his executive team when the farming family visited the Reykjavik Creamery to explore a deal.

“Our whole family visited the facility --it’s just pristine and unlike any other in the United States,” said Painter. “We’re a Pennsylvania farm and we hope to build our brand around that. That this processing location is also in Pennsylvania just feels like it’s meant to be.”

Reykjavik Creamery recently ran a trial run using the Painterland recipe and the family’s milk. Full production will launch in early 2022, said Painter.

Birgisson, meanwhile, is wrestling with his uncertain immigration status. He says his partnership has delayed making $3 million in additional investments on new equipment. “I’m not able to manage the business on a day-to-day basis anymore since the green card application was denied,” he said.

Goldblum, his lawyer, says if Birgisson is unable to obtain a work permit, his best option may be to sell the operation.

“If there’s a suspicion that what he’s doing constitutes work, they’ll just put him on a plane and ban him from returning to the U.S.,” she said. “His current situation is intolerable.”