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The biggest cheese in family business

Lino Saputo Jr has big plans for the Australian dairy industry, with the $134 million acquisition last month of Victoria’s Lion Dairy group -- the maker of Coon, Cracker Barrel and other well-known local cheese brands -- likely to be just another small step in his family’s overall growth strategy.
Lino Saputo Jr

Lino Saputo Jr has big plans for the Australian dairy industry, with the $134 million acquisition last month of Victoria’s Lion Dairy group -- the maker of Coon, Cracker Barrel and other well-known local cheese brands -- likely to be just another small step in his family’s overall growth strategy.

At 47, he is already one of the principal players in the Australian dairy industry, and certainly the biggest in family business terms. But just over a year ago, few in Australia had even heard of this high-powered chief executive or his prominent family.

That was until Saputo Inc., the company which bears his family’s name, made a spectacular entrance onto Australian soil in 2013 by joining a three-way takeover tussle for control of the listed Warrnambool Cheese & Butter business.

Warrnambool Cheese was one of the prize assets in the Australian dairy sector, and Saputo’s battle against local contenders Bega Cheese and the Murray Goulburn Co-operative was long and hard. But the Saputos eventually won out in convincing fashion, outbidding their rivals by outlaying around $519 million on the sharemarket to snatch up just short of 90 per cent of Warrnambool’s shares.

It was a sweet victory for the Saputos, who back in their home town of Montreal, Canada, are regarded as business royalty. With an estimated $5 billion fortune, through Saputo Inc. they own dairy assets across Canada, the United States and other countries, ranking the company as the tenth-largest dairy processor in the world.

And the business is certainly a far cry from when the family empire began just over 60 years ago, when master cheese-maker Giuseppe Saputo and Frank, his eldest son, left their small village near Palermo, Sicily, in 1950 and migrated to Canada in search of a better life following the Second World War. Two years later, Giuseppe’s wife Maria followed with their sons Lino and Luigi, and daughters Rosalia, Elina, Maria and Antonina.

It was tough in the early days but the Saputos were not afraid of hard work, and in 1954 Lino Sr convinced his father to use his experience to start his own cheese-making business. The Saputos set up a small shop, using $500 to buy some basic equipment and a bicycle for deliveries, but within a few years their business began to take off as Americans developed a love for pizzas and mozzarella cheese. They grew the business further through the 1960s, with Lino Sr taking over as chairman and president in 1969, and in the 1970s set up a national distribution network, acquiring several manufacturing plants along the way.

The Saputos made further acquisitions through the 1990s and in 1997, under the stewardship of Lino Sr, the family made the decision to take the business public. With extra capital the company went on a new acquisition spree, buying another major cheese-making group and a large milk processing operation within a matter of months.

Lino Jr, a graduate of Concordia University with a BA in political science, has been in the family business for around 17 years. He joined Saputo in 1988 as an administrative assistant, and in 1993 was named vice-president, operations and engineering. A decade later he became executive vice president, operations, and then president and chief operating officer of the US cheese division. Then, in 2004 Lino Jr took over as chief executive from his father, representing the third generation of the family to run the Saputo business. Lino Sr (now in his 70s) remains on the company’s board as chairman.

Since Lino Jr has taken the reins, Saputo has continued to grow aggressively, buying dairy processing operations in the US, South America, continental Europe, and the United Kingdom. Today the Saputo business turns over more than $9bn a year, processes around 8 billion litres of milk, and employs close to 13,000.

And, from their new regional launching pad in Australia, the Saputos are eyeing off other prize dairy assets in both Australia and New Zealand using the combined financial muscle of Warrnambool Cheese and Saputo Inc.

“If WCB needs funds invested to produce value-added products we are prepared to invest,” Lino Jr says. “The orientation of WCB does not change with us on board, and our experience, but with our funds we can enable it to achieve things a lot quicker.”

Supply quotas that limit growth in Canada are partly driving Saputo to invest offshore and particularly in Australia, and its likely acquisitions will come from Victoria and South Australia due to the location of the company’s processing sites near Warrnambool.

Saputo’s big local competitors in Australia remain Bega Cheese and the Murray Goulburn Co-operative, and multinationals including Parmalat, Fonterra, and Hong Kong’s United Dairy Power.

But the Saputos are used to stiff competition. After all, they’ve been in one of the most competitive markets sectors for more than 60 years. Stiff cheddar to those who get in their way.

“Our intent to accelerate growth in Australia remains and we are working on several initiatives to that effect,” Lino Jr says. “We are active in a number of files in Australia and we are hoping that we can bring some of those files to fruition, which will be to the benefit of WCB [Warrnambool Cheese]. We have an appetite for growth. We want to grow.”

This article was originally published in Business Spectator, and is reproduced with permission.


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