Americans don't drink milk like they used to, which has put the squeeze on new revenue streams for the milk industry.

But the buyer of Crystal Cream & Butter Co. thinks it's found an answer in Sacramento.

HP Hood LLC, the Boston-area milk processor that bought 106-year-old Crystal in May, recently announced it has sold off most everything recognizable as Crystal – its trucks, its brand and its contracts with regular milk customers.

Now, Hood is overhauling Crystal's Sacramento bottling facility into a next-generation plant designed to capitalize on one of the milk industry's bright spots – so-called "extended shelf-life" products.

Pasteurized for 2 seconds at 280 degrees Fahrenheit instead of the standard 162, these milks can keep for 70 days or more in refrigerated warehouses and grocery dairy cases, vs. 14 to 21 days for conventional milk.

That insurance against spoilage has, to a degree, freed dairy processors from the constraints of time and distance that historically kept the milk industry an intensely regional business. And it has helped launch the first truly national milk brands, such as Hood's Lactaid brand.

These newer products – including organic milk and the single-serving bottles sold in vending machines and convenience stores – are often low-volume compared with standard grocery-store gallon jugs. But they tend to command higher margins.

In addition, a long shelf-life product can be delivered cheaply to huge warehouses instead of store to store, resulting in efficient distribution.

That combination of efficiency and high profit margins has enabled these new products to boost milk industry revenues.

In the milk business, growth has been hard to come by: U.S. milk sales have remained flat for a quarter-century, even as the population has grown 30 percent.

"Firms are looking for how to get into higher-margin products," said Bill Schiek, an economist at the Dairy Institute of California, a processors' trade group.

Organic milk has been particularly hot. Sales grew 140 percent between 2002 and 2006, to more than $1.3 billion last year, according to the Organic Trade Association.

The new pasteurization methods enabled the growth of the organic milk business, said Eric Newman, vice president of sales for Organic Valley Family of Farms, a leading organic dairy brand.

Roughly a decade ago, when Organic Valley first started moving into mainstream grocery stores, Newman said, its milk often had to be shipped great distances because the dairy cooperative had few processing plants and it didn't move quickly off store shelves.

"Thirty percent of the milk was spoiling before consumers could get it in their fridges," he said.

That problem was largely solved, Newman said, when the cooperative moved to long-shelf-life processing.

Hood's purchase of the Crystal plant is aimed at establishing a West Coast presence for extended-life milk processing.

Though Hood's core business remains its conventional milk labels in New England, the company is known as an experienced, efficient operator in the extended shelf-life niche, said Jerry Dryer, an industry expert and editor of the Dairy and Food Market Analyst newsletter.

"They've been out front in that business," he said.

Hood had $2.3 billion in total sales last year, compared with $10.1 billion for national milk processing leader Dean Foods Co. of Dallas. Despite the disparity in size, Dryer said, the two companies are neck-and-neck in the extended shelf-life sector.

Hood has the exclusive national franchise for Lactaid, which is formulated for lactose-intolerant consumers. The company also plans to use the former Crystal plant near Power Inn Road for the West Coast launch of its Stonyfield Farm organic milk label, spokeswoman Lynne Bohan said.

Ultrapasteurized milk costs more to produce than the conventional variety. Newman said a standard pasteurization line starts at roughly $4 million, while the ultra-type runs $20 million and up. Ultrapasteurized milk must be packaged in containers that are more airtight than standard cartons and plastic jugs, which adds 10 cents or more to the cost of each half-gallon.

But much, if not all, of that extra cost can be made up by distribution savings. Ultrapasteurization allows a dairy processor to ship full tractor-trailer loads of milk to central grocery warehouses, rather than delivering store to store. That switch can cut transportation costs as much as fivefold, Newman said.

In addition, ultrapasteurized, single-serving containers allow milk to go head-to-head with juices and soft drinks in convenience stores, where profit margins tend to be higher than in grocery stores.

Crystal wasn't blind to the opportunities in the extended shelf-life market. The Crystal plant has some ultrapasteurization equipment and was a contract bottler for several years for both the Organic Valley label as well as Hood's Lactaid. But its core business remained the Crystal brand of conventional milk.

Hood, it's now clear, had no interest in the Crystal name, which for decades was one of Sacramento's iconic home-grown brands. The way that Hood disposed of Crystal – buying the company and then selling off virtually everything but the physical plant – was an unusual move, Dryer said.

"These kinds of acquisitions have historically been made to get the (conventional milk) label," he said. "There's local loyalty to that brand name."

But in this case, "They weren't looking for the business. They were looking for a physical plant," Dryer said.