Five million dollars’ worth, to be exact.

by Jess McCuan . photos by Matt Rose

Kathy Milner is no Betty Crocker. Not exactly, anyway. The 51-year-old native New Yorker does like to cook, and she occasionally bakes. But Milner, who has a degree in chemistry and worked for the chemical giant DuPont, doesn’t see her sugar-free foods business, American Quality Foods, as a celebration of her domestic skills. In fact, it’s more like a chemistry experiment. A lucrative one. AQF, which occupies a 17,000-square-foot manufacturing facility in Mills River, ships product mixes to some 6,000 customers nationwide—places like nursing homes, hospitals and casinos—that cater to diabetic and weight-conscious clients. With revenues of $4.2 million last year and projected income of $5 million in 2010, Milner, the president, has turned sugar-free cake mixes into one of the fastest-growing private food companies in the country.

The company wasn’t always a roaring success. Milner and her husband Joe McKay bootstrapped the sugar-free foods part of the operation after buying it as a school lunch business 16 years ago in Newfane, Vermont. But their business savvy and persistence in an unusual niche—combined with Milner’s expertise in finding sugar replacements—has paid off.

Growing up, Milner thought she wanted to be a ballerina. Her parents were classical musicians, and she was drawn to the arts, but she discovered a structural problem in her right foot that made dancing The Nutcracker in Manhattan’s Lincoln Center less than pleasant. No matter. Once she got interested in math and science in high school, she dove into those subjects and never looked back.

After an undergrad degree in chemistry and graduate work in polymer chemistry, she took jobs at a string of semiconductor and electronics companies in Florida, California and Connecticut. Then the chemical company DuPont, which has invented everything from nylon and freon to moisture-proof cellophane, hired her as a research and engineering manager, overseeing projects at their factories around the globe.

Six years into her tenure at DuPont, Milner distinctly remembers getting tired of the corporate nonsense. One of her assignments around Christmastime in the early ‘90s was to create a “valuing people network.” “You had to speak the speak,” she says of her time at the company. After a brief stop at an electronics company, Photronics, she and her husband, then a consultant, took a leap. They bought a small Vermont business, American Quality Foods, that provided lunches to schools. In just a few months, Milner realized there was much more money to be made in one small corner of the food service business—sugar-free foods—than in food service itself.

It took her a year, running experiments in her Vermont kitchen the same way she might have in DuPont’s labs, to come up with just the right cake. “You can’t just take sugar out and put fat in,” she says. “Low sugar and low fat means you have to be much more creative.” She sweetened the first cake with Nutrasweet and hired her first salesperson.

Today, Milner spends a lot of time thinking about fruits and fibers. Can you put Jerusalem artichoke fiber in cream pie? Will stevia taste good in an apple spice muffin? She and her 35 employees crank out more than 100 different types of sugar-free dessert and drink mixes, from low-sugar lemon cookie and reduced-fat red velvet cake mixes to a sugar-free Caribbean punch powder. Rather than bake things up at the Mills River plant, AQF ships out Betty Crocker-style mixes in bags and boxes, ready to go once the dessert-maker adds ingredients like milk or water.

Balancing ingredients well is no cakewalk. When you remove sugar from fudge brownies, for example, you must replace it with a sugar alcohol like erythritol and a sugary starch derivative, maltodextrin, plus a few other sweeteners. Many AQF products are made with the artificial sweetener Splenda, though Milner and her staff have begun to experiment with natural sweeteners like monkfruit and stevia. A test kitchen inside the Mills River plant is lined with jars of fat replacers like Genugel (a seaweed extract) and Sanacreme (a shortening), which sound a bit like prescription drugs. “It’s all part of the voodoo that goes on when you try to find things that act like sugar,” says AQF’s product development manager Suel Anglin.

Can desserts really taste good without sugar? Milner admits that, despite decades of advances in food technology, low-fat, low-cal desserts simply don’t taste the same as those made with gobs of sugar and fat. But she also knows that, even as obesity and diabetes rates climb, Americans have a hard time abandoning traditional desserts. The success of products like Snackwells and diet soda show that, instead of eating apples and oranges, Americans still want snacks that look like snacks. And therein lies her market. “Nobody really is just going to eat lettuce,” she says. “People are still going to eat dessert.”

For more information about Kathy Milner’s company, American Quality Foods, go to www.americanqualityfoods.com.