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the lunch

Lino Saputo Jr.

Lino Saputo Jr. is in his element patrolling the crease.

The 48-year-old delights in his position as goaltender, stopping pucks on a garage-league team at his family's luxury sports complex that rents the ice for $300 an hour in prime time. Not too far from the arena is the head office of Saputo Inc., the family controlled milk-and-cheese titan where the chief executive officer switches from defence to offence, orchestrating a strategy of growth by acquisition that has vaulted the company into the global big leagues.

The company's roots reach back 60 years to the days when grandfather Giuseppe, an immigrant cheese maker from Sicily, sold batches of bicycle-delivered mozzarella to customers in Montreal's Italian community. These days, it ranks as one of the world's top-10 dairy processors, with 12,700 employees and operations in four countries.

Mr. Saputo has been calling the shots at the family business for 10 years now. He greets me for lunch in December at the sleek second-floor eatery – Bistro 54 – overlooking the rink at Hockey Etcetera, on an industrial strip in the Montreal suburb of Mount Royal. It's a "hobby business" for Mr. Saputo, who helps his wife Amelia and 20-year-old son Emanuele run it.

His face beams as he talks about the joy of watching his two sons – Giordano, 18, is the other one – grow up. He exudes pride as he introduces me to Emanuele, who is lunching with a group of friends and co-workers at a nearby counter in the bistro.

"He's my ally," Mr. Saputo says, grinning in the direction of Emanuele, who plays defence on his team, the Quadriam. The executive and his boys play in Hockey Etcetera's house league at least twice a week. "Those of us who didn't make the NHL, we feel when we play in the league here that we're as close as we can get to it," says Mr. Saputo, fashionably dressed in a navy jacket with polka-dot kerchief, open-neck shirt and monogrammed cuffs.

Though his record as a goalie at the time of our meeting is six wins in seven games, he doesn't brag about his hockey prowess.

"Usually when I speak, I don't like to speak about myself," says the CEO, who rarely grants interviews. "I like to speak about the achievements that the company has had and how important it is for our employees to be in an environment where they feel like they can contribute to the success of the organization.

"There's something to be said for being understated," he adds later. "I think it's really about what you can achieve, and not so much about the ivory tower that you operate from."

Raised in the family business, one of Mr. Saputo's first jobs – part-time, at the age of 13 – was wrapping specialty cheeses in cellophane and parchment paper. He eventually graduated to cleaning out the giant stainless-steel vats, and later drove a truck delivering cheese to restaurants and other buyers in the food-service trade in Old Montreal, the downtown core and the boroughs of Verdun and LaSalle.

He studied political science at Concordia University, but says he got all his business smarts from his father and through hands-on work in operations.

"It is my character, but I think it also is the character of our company," Mr. Saputo says of his modest manner as we settle in for lunch. "We don't have people with a very big ego and this goes back to the days when my grandfather and my father [Lino Saputo Sr.] were involved in the start of the business. It was never about them. It was about doing the right thing for the right reason and surrounding yourself with the right people." (Lino Saputo Sr., who was CEO from 1998 to 2004, is now chairman of the company. Mr. Saputo's grandfather Giuseppe died in 1981.)

Mr. Saputo, who joined the family enterprise full time in 1988 at the age of 22, says he never had "the pretension to think that the CEO role" was owed to him. He would have been quite content to remain as head of U.S. operations, he says, where much of the action and deal-making at Saputo was taking place.

His first big challenge was managing dramatic cheese-price volatility in the United States in 2005 and 2006. "That was my baptism. It allowed me to take the right decisions and build the right platforms that would allow us to mitigate some of the future commodity-price fluctuations," he says, winking or proffering a quick wave to acquaintances strolling by in the bistro.

There was a steep learning curve when Saputo expanded into the U.S., he says. Compared with Canada, where the supply-management system means the price of milk typically changes once a year, south of the border it used to change once a week and now changes daily. "It's taught us quite a bit about being versatile and flexible."

Saputo has grown to become a dairy powerhouse, boasting annual sales of about $9-billion, thanks to a carefully plotted series of acquisitions since going public in 1997. Much of the takeover activity has been focused on the United States, but Mr. Saputo believes growth will now come from expansion outside North America's mature markets and into emerging regions, where dairy consumption has plenty of room to grow.

At home, however, the soaring popularity of pizza in North America has provided a major boost to the mozzarella-maker's sales.

"I think our shareholders are very happy," he says of his time in the corner office. "There is still quite a bit of work to achieve but the company is much larger, the balance sheet is clean and profitability is up."

Mr. Saputo's latest coup is the purchase of Australia's oldest dairy, 126-year-old Warrnambool Cheese & Butter Factory Co. Holdings Ltd., a $475-million (U.S.) deal clinched in January, 2014, after a dramatic, drawn-out, three-way bidding war. Australia is the ideal base from which to sell into Asian markets – notably China, Japan and South Korea – where demand for milk and milk products is surging.

"We've been talking about an Australian platform for the better part of 12 years," Mr. Saputo says over his Romaine salad with balsamic vinaigrette and chicken, no cheese.

The folks at Warrnambool got to know him over the course of his regular visits every two or three years since 2002, but they turned down his overtures, saying they weren't ready to do a deal. When a bidding war erupted last year, Mr. Saputo figured he had the inside track. "We had good strategic, detailed discussions about what our intentions were even before the merger," he says. "Finally, we had the opportunity to be a helpful ally in the process. We were thankfully the white knight in the process. I think what we brought to the table was our financial strength."

The news media played up Warrnambool as a big deal for Saputo – indeed some analysts thought the company overpaid – but it isn't the largest transaction in the company's history of 23 acquisitions worth $4.7-billion (Canadian). That honour goes to its 1997 takeover of U.S.-based Stella Foods Inc.

Saputo's annual sales of $450-million were about half of Stella's $800-million (U.S.) in 1997. "It was quite a challenge, quite a bite for us. That was a big, big risk for us at the time," Mr. Saputo recalls. In comparison, Warrnambool revenue, before the takeover, was in the $460-million range.

The energy-and-time-sapping Stella acquisition was a turning point in the way Mr. Saputo and his small mergers-and-acquisitions team handled takeovers. They realized they needed a more formal structure.

"Although we were proud to be mean and lean as a management team, we felt we needed to take on more resources in the planning and execution and integration," he says. Management developed a new framework called the ambassador system, identifying people within the company "that ultimately could be the ambassadors and the integrators of the business."

After the 2003 acquisition of Argentina's Molfino Hermanos SA, for example, Saputo identified a half-dozen key new positions needed to successfully fold in the company, and told employees they could apply.

"We had 120 applicants for six positions," Mr. Saputo marvels. The winning candidates went over to Argentina for two years to spread the Saputo culture, values and business approach, as well as select promising Molfino staff who would continue as full-time ambassadors of "the Saputo way" once the visitors left.

"My father's always been talking about ambassadors," he says, explaining that a team approach that truly engages employees at all levels is in the company's DNA. "The employees we have, we always say they are an extension of our family members. My father always said that as we move along, the older folks become ambassadors to the younger folks coming in the system."

Saputo is now a pure-play dairy producer after the recent sale of the company's Vachon snack-cake division to Mexico's Grupo Bimbo SAB for $120-million. Fifteen years ago, Saputo was hailed as the saviour of legendary Vachon and its iconic Jos. Louis and May West sugar-laced cakes when it outbid a U.S. bakery giant, keeping it in Quebec hands. But the unit has struggled with dwindling sales amid a more health-conscious consumer climate, one with which Mr. Saputo is personally familiar.

"More often than not, I'm eating salad at lunch," he says. "People say I'm extremely disciplined in my eating habits." That means no desserts during the week and maybe the occasional sharing of a slice of cake with his wife at a weekend outing to a restaurant. He loves cheese but avoids bread and crackers.

Besides hockey, Mr. Saputo performs a strenuous 45-minute workout every day: cardio, treadmill, spin bike. When he's on the road, he uses something called the "Insanity Program," maximum interval training that involves going full out in three- to five-minute bursts; he wears running shoes and trains in his underwear in his hotel room.

For relaxation, working on his car collection – he has "several" vehicles – does the trick.

"When my water's boiling too much at the company, I'll tell my assistant, 'You know what, I'm going to go play with the cars for a couple of hours. I'll be back.' And it kind of decompresses all of a sudden." He caught the auto bug from his father, a long-time collector of vintage Cadillacs and other models. Limited-edition 1980s Porsches are among his favourites. "I'm always looking for a good deal. I'm very patient and I wait for the good opportunity to buy a vehicle," he says. "The hunt, I'd say, is part of the hobby."

Indeed, for Saputo, there are more acquisitions to come. But it's not about size, Mr. Saputo insists. Cracking the top five – in the select company of dairy leaders Nestlé SA, Groupe Danone and others – isn't the goal, he says. (The company is now ranked eighth or ninth.)

"Being in the top five is not as important as being best in class," he says. "We never want to be the biggest. We certainly want to be the best."

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Lino Saputo Jr.

Personal

Youth: Grew up in Montreal, the middle child in a family of five. Older brother Joey runs the family's sports interests, including Major League Soccer's Montreal Impact team and the Stade Saputo where they play.

The brass ring: Became CEO of Saputo in 2004. He is also president and vice-chairman.

Favourite cheese: Fresh ricotta. He loves to spread it on toast and top it with cocoa powder.

On cars: "Just hunting them is part of the fun of being a car guy."

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Saputo and the milk market

On trying to boost sales in a declining North American consumer market for milk:
One approach is to take an acquired product and improve on it. For example, the Dairyland unit's Milk2Go line was extended with a variety of more exotic flavours like orange and banana in single-serving round bottles that fit into auto cup holders; there is a sports protein-drink knockoff as well.

A key advantage of buying assets in Oceania:
Milk prices – which account for 85 per cent of Saputo's raw material costs – are set at low international levels, unlike the higher prices for fluid milk in Canada under the supply-management system. The closed structure is opening up a crack as the new trade treaty with Europe allows for an additional 18,500 tonnes of cheese to be exported into Canada.

On Canada's protectionist milk supply management:
It's not ideal, he says, but believes there's no point in trying to fight it. "We work within it."

On whether he thinks the decades-old system dampened the development of a more entrepreneurial mindset among Canadian processors:
"I think the protectionist system, just by the way it is set up, perhaps could allow people to be less entrepreneurial because there's less volatility" in prices. The flip side, though, is that such stability "has given us an incredible platform to be able to consider getting into more volatile markets. It's served us well, I have to say."