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In a blender, combine ⅔ cup white sugar and 1 cup dry milk powder. Pulse briefly to mix.
In a microwave-safe jug or bowl, combine the 1 teaspoon vanilla extract, 3 tablespoons butter and ⅓ cup water and heat until it boils.
Pour the vanilla & butter mixture into the blender and pulse it for a few minutes, until thickened.
Pour into a storage container or jar and allow to cool to room temperature before using.
Store in the fridge and use as regular condensed milk.