Dairy and snack-cake king Saputo Inc. is biting into an acquisition of a Quebec cookie maker that broadens its reach across Canada and ends speculation that it wanted to get out of the bakery business altogether.
Faced with falling sales of its baked goods and a shift in consumer tastes away from junk food to healthier eating, Saputo said Friday it is committed to the category as it announced the acquisition of Boulangerie Rondeau Inc. of Laval, maker of fresh cookies under such brands as Big Daddy, Original and Authentic.
At the same time, Montreal-based Saputo is continuing apace with a program to reduce or eliminate trans fats in all of its bakery products and is increasingly turning to innovation and seasonality to boost sales, said spokeswoman Manon Goudreault.
The acquisition of Boulangerie Rondeau is small. The company has annual sales of about $14-million and employs 145 people at two plants in Laval and Quebec City. The purchase price was not disclosed.
Founded more than 50 years ago by chairman Lino Saputo Sr., Saputo has become one of the top 20 dairy processors in the world and is among the top 5 cheese makers in the United States.
It made its first foray outside the dairy business seven years ago when it acquired Quebec's Culinar Inc. and its famous Vachon snack cakes - including the Jos. Louis and May West brands.
The bakery division represents only a tiny part of the $4-billion Saputo dairy products empire and speculation grew over the years that the company was looking for an exit strategy.
"This [takeover]shows that they will continue with it," said Ron Ho, an equity analyst with Raymond James Ltd. in Vancouver.
"After Culinar, their core business has really taken off with a focus on specialty cheeses. Perhaps there has not been as much diversification as they had originally hoped," he said.
"Still, the [bakery]margins are pretty good. It's not a growth driver, it's something they can sit on and not be too aggressive with."
Ms. Goudreault said the Rondeau acquisition gives Saputo new distribution channels, such as vending machines, and new market segments, such as fresh, individually wrapped cookies.
Saputo now becomes the top player in the fresh-cookie market in Canada, in addition to its status as the largest snack-cake manufacturer in the country and a leader in Quebec's cereal-bar market, she said.
Sales in the bakery unit in fiscal 2006 slipped 11.5 per cent to $164.2-million, partly due to the first price increase on product offerings in eight years, according to the company.
Saputo has also been shifting over the past two years to trans-fat-reduced or trans-fat-free products, Ms. Goudreault said.
So far, about 75 per cent of the product portfolio has been converted, not without much hair-pulling by food technicians trying to replicate the same textures and tastes that consumers demand, she added.
Saputo is also aggressively marketing healthy-choice products such as its Hop&Go line of cereal bars.
In snack cakes in fiscal 2006, Saputo introduced 16 new products under the Vachon brand to counter what has become a generally sluggish category.
"We're on the right track," she said.
"Of course, dairy products is our first calling, but the bakery division is an attractive division that we want to continue to grow."