Canadian king of the cheese: how an Italian immigrant created a business for $14 billion

Canadian dairy group Saputo Inc. now is the tenth world’s largest producer of dairy products by volume of production. The company is run by the third generation of a family of Saputo, a half century ago emigrated from Italy. The head of the family — Emanuele (Lino) Saputo, holds the position of Chairman of the Board of Directors of the company, and his son, Lino Saputo Jr., President and CEO of the company. According to the latest global ranking of billionaires Forbes, state of Saputo Sr. was $4.8 billion (by mid-February of 2016 it was estimated at $4.5 billion). The Saputo family owns more than 58% of the company’s shares.

The history of the company Saputo Inc. started with home made mozzarella with an initial investment of $500. 60 years after starting the business to Saputo, the company’s capitalization of $14.8 billion and employs 12 thousand people, the company’s products (cheese, cream, butter, milk, etc.) is present in 40 countries with annual revenue of more than $7 billion to the company’s Success ensured a successful start of business and a sound policy on acquisition of assets.

The way Italian-emigrant

Lino Saputo was born in 1937 in Sicily, in the small town of Montelepre. Lino was 13 years old when his father, a cheese maker, Giuseppe, emigrated to Canada, taking with him his eldest son, in a New Light that began to call Frank. The path to North America in the 1940s — early 1950s did many Italians, particularly those with roots submerged in an economic crisis in the South. In the early years Giuseppe had to work in Canada as a laborer. Two years later, in 1952, followed by Giuseppe and all the rest in Italy relatives — his wife and six children. The Saputo family has settled in Montreal.

By 1954, 17-year-old Lino convinces his father to start his own business — producing and selling cheese. Subsequently, Saputo told that he always believed that his father deserved more. “I knew he can do much more for themselves,” said Saputo.

Family start-up capital of the company became $500 Lino earned on a meat farm. With this money, the family rented a room on one of the cheese factories of Montreal, bought the equipment for production of mozzarella and a Bicycle to deliver goods to customers. The company got its name from the family — Saputo Inc. Quite quickly the company’s products became popular among the Italian Diaspora in Montreal.

Family prepared initially, not more than 10 kg of mozzarella a day, the cheese on his bike for the first time after running the business himself transported Lino. Things went well — after a few months the family has bought a truck for delivery, and three years after the Foundation of the business of Saputo opened the first cheese factory in a large two-story building in the Montreal suburb of St-Michel.

Start at the right time

The rapid success of Lino Saputo and his family owe much started in Canada in the late 1950s, the boom of Italian pizza. At the same time in the country are the first ovens to bake pizza, and in the next decade in the country come large American chains such as Pizza Hut, and local, such as Pizza Pizza, pizza served in restaurants. With the growing popularity of folk dishes grew and the demand made by the company Saputo Inc. mozzarella.

At the peak of this wave Lino in 1969 at the age of 32 replaces father as head of the company’s and the early 1970’s begins expansion. In the highly competitive market of dairy products the company’s strategy was to purchase companies competing in Quebec. Later, in order to ensure the presence of its products across the country, Saputo acquires several plants in different regions of Canada. By the end of the decade Saputo Inc. has become a major supplier of mozzarella for the canadian food industry, it accounted for over a third of the market.

The cheese and the mafia

The acquisition of a cheese production and companies working in related segments of the food industry, the family firm continued in the future. During the existence of Saputo Inc. concluded over 20 transactions involving the acquisition of companies totaling about $3.4 billion

Becoming a major player in the cheese market in Canada, Saputo Inc. for a long time could not enter the market in the United States. One episode in business history company for many years has become for competitors and critics Lino Saputo reason to accuse him of links with the mafia. In 1964, one of the bosses of the new York mafia Joseph Bonanno in order to avoid prosecution in the United States and to obtain canadian citizenship, acquires a share in the family business, Saputo. Later, the family members explained that he did not know what Bonanno, and canceled the deal immediately after he learned about his mob ties. However, the incident badly damaged the reputation of Saputo. “I can say that I worked honestly all my life,” was compelled to underscore in an interview a half-century later, Saputo.

The American market remained for Saputo Inc. closed for nearly all of the 1980s, and this was a tidbit. According to statistics of the Ministry of agriculture of the USA, the consumption by Americans of Italian cheeses from 1982 to 1987 demonstrated a twofold increase, from 2 to 4 kg per year per capita. Only in 1988, Saputo Inc., finally, enters the U.S. market by buying two cheese factory in Richmond (Vermont) and Jefferson (Maryland).

For a long time the company remained quite conservative — from the 1950s until the mid-1990s, the main product that is produced Saputo, was mozzarella. Only forty years after the beginning of the business of Lino Saputo is on the scale until the expansion, diversifying assets and expanding the distribution network of the company.

For almost the entire time that the Saputo family managed company, it has consistently positioned itself as a manufacturer of low-end products. But in 1996 with the acquisition of the canadian company Fromage Caron, importer of expensive cheeses from Europe (in particular, French Camembert and brie), Saputo Inc. comes out on the premium segment of the cheese market. A year later, Saputo is already coming to market milk production by buying a canadian company Crémerie des Trois-Rivières. In 1999 the company came to the market and grocery by purchasing a canadian manufacturer of snacks Culinar Inc.

The first and most important deal when Lino was the purchase in 1997 of the Chicago milk producer Stella Foods, then the company could occupy about 9% of the U.S. market. The amount of the transaction amounted to more than $400 million and in order to find funds in the same year the company conducts an IPO, issuing shares at $4,25 per share (the price of one share of Saputo Inc. $27,32). After the transaction was completed, the production capacity of Saputo has increased threefold, in addition, the company was a number of recognizable in the U.S. market brands of cheese (Stella, Frigo, Dragone). Lino Saputo also entered the list of the richest people of Canada.

Sicilian family business in numbers:

Capitalization Of Saputo Inc. on the Toronto stock exchange: $14.8 billion

The company: 11700 people

The company’s net profit for 9 months of 2015: $149,7 million

The company’s products are present on markets of 40 countries

Revenue for 2014 amounted to $10.6 billion

The company has 55 manufacturing plants of dairy products in Canada, USA, Australia, Germany, UK and Argentina

Saputo produces 32% cheese and 35% of milk in Canada

The Saputo family owns 58% stake in the company

Saputo produces products under more than 650 brands

Strategy and tactics

As the demand for dairy products remains stable in economically developed countries and growing rapidly in emerging economies, Saputo back in the early 2000s made a bid for more large-scale expansion of exports. In 2003 she gained third by share of the market in Argentina cheese producer Molfino Hermanos.

By purchasing an all-new production, Lino Saputo was guided by a single strategy. The first thing the canadian giant has focused on those assets that, in the opinion of management of the company, was managed effectively. In addition, those products that made the acquired company should be complementary to the product line Saputo Inc. Ideally, the new acquisitions should give Saputo Inc. new platforms for export.

In addition, describe the company’s policy the researchers of the Canadian agri-food policy Institute (*.pdf), staff management of Saputo Inc. examine the current state of Affairs in preparing for the acquisition of production, trying to answer the question: “What are we in Saputo doing differently and what effect this could have?”

Way to young

In 2004, Lino Saputo is inferior to the posts of President and CEO to his son, 38-year-old Lino Saputo Jr. The new CEO continued the line of the father on expansion abroad: in 2014, Saputo gained control of Australia’s oldest manufacturer of cheese and butter, the Warrnambool company, the transaction amount totaled $475 million, Australia is considered by the company as a platform for the export of cheese to the markets of China, Japan and South Korea. In addition, the company acquired manufacturing facilities in Germany and Wales.

In addition to the main business of Saputo Sr. now owns shares in TransForce company engaged in cargo transportation. As a non-core investment 78-year-old Saputo invests in real estate, hotels and courses on the game of Golf.

In 2007, Saputo has committed more than $5 million for the construction in Montreal of a new stadium for the local football team Montreal Impact. The founder and owner of the team is the youngest son Lino Joey.

Lino continues to monitor what is happening in the company. Almost every day at lunch in the headquarters of the company in Montreal, Saputo tastes produced by his factories mozzarella, noting that he is a “big critic” of the company’s products. “For the time in business, I realized that the mozzarella should never be rubber taste, especially pizza,” he says.