Over the years the demand for butter in Canada has decreased resulting in a surplus of butter. In 1965 the per capita consumption of butter in Canada was 8.23 Kg which decreased by about 70% to 2.66 Kg in 1994. Previous research indicates that consumers are switching from butter to margarine due to concerns about heart disease and high cholesterol levels in butter. Therefore, a market study was conducted in Montreal to estimate the potential demand for a new product called "modified" butter which would create 50% less cholesterol in the body than regular butter. When the concept of "modified" butter was introduced, out of 157 respondents about 80% of the respondents indicated that they would buy "modified" butter. Also, the total quantity of margarine demanded in a month decreased by 47% and the regular butter demand decreased by 85%. The market share of "modified" butter comes to about 67%. The average of the price that the consumers are willing to pay for a kilogram of "modified" butter is $7.50. A detailed cost analysis shows that the production cost of ``modified'' butter at the experimental level is high, but the average costs show a decreasing trend when the scale of production is increased. If the economies of scale were to continue along the derived cost curves, 7 tons of "modified" butter would have to be produced to reach the break-even point of $7.50/Kg cost of production. This shows the industrial potential of producing large quantities of ``modified'' butter by taking advantage of the economies of scale. Furthermore, the overall sales of butter (regular butter plus ``modified'' butter) would increase by about 25 % which would boost the consumption of butter in Canada.

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