Saputo has beefed up its scale through a swathe of acquisitions in recent years and the Canadian dairy company could seal a long-awaited deal to acquire Australia’s Warrnambool Cheese and Butter Factory. But ambitious Saputo seems unlikely to rest on its laurels. Katy Askew caught up with president and COO Kai Bockmann at this year’s Anuga to find out more about Saputo’s growth drive.
Saputo is a company that has been shaped by M&A. Recent deals have included the purchase of Morningstar from Dean Foods, a move that significantly expanded the Canadian dairy’s US business and contributed to a 26.5% jump in net profit in the company’s most recent fiscal year.
Speaking to just-food at industry trade show Anuga, Saputo president and COO Kai Bockmann emphasised the importance of the Morningstar acquisition to the evolution of the group.
“Morningstar allowed us to expand into new categories. It opened new doors, with new products and customers,” he observes.
The Morningstar deal follows a series of acquisitions in the US, including the 2011 purchase of DCI Cheese Co and the 2009 acquisition of F&A Dairy of California. As a result, the US is now the biggest market for Canada’s largest dairy processor, Bockmann confirms.
But Saputo’s presence extends well beyond North America and the company is eyeing expansion in high-growth dairy markets including Latin America, Russia, Asia and the Middle East. “Its a story you are familiar with. A growing middle class in these markets… [is resulting in] a growing appetite for dairy,” Bockmann says.
Perhaps unsurprisingly given Saputo’s acquisitive past, acquisitions will remain key to Saouto’s growth strategy as it looks to build scale in these emerging markets.
Bockmann says expanding through M&A provides Saputo with a number of advantages, not least local brands and an understanding of the local consumer.
“A lot of our growth has come through acquisitions so we leverage local brands. We are a global company but we think locally.”
Saputo announced earlier today (8 October) it plans to expand its business in Australia through a A$378m bid for Warrnambool Cheese and Butter Factory. The Canadian cheese maker has been eyeing expansion in Australia for around a decade and market rumour has repeatedly linked the firm to a potential deal with WCB. If Saputo secures shareholder approval, it seems likely this ambition could be realised before the end of the year.
However, Bockmann suggests that the deal is about more than beefing up Saputo’s “limited” Australian operations. It’s proximity to Asia – and China in particular – would provide Saputo will a gateway into markets that are set to fuel the growth of the global dairy sector.
“This opens doors for us. It is about the domestic Australian business, but it is also about Asia. The acquisition would provide us with an export platform for Asia.”
Bockmann is coy about the current scale of Saputo’s business in Asia. Nevertheless, it is clear that the company wants to expand rapidly in the region. “We’re big, but not big enough [in Asia],” he insists.
How this growth ambition will be fulfilled is less obvious. It would seem that the jury is still out on what form expansion will take and whether Saputo could look to set up local production to grow in markets such as China. In particular, Bookmann highlights problems with supply chain security in China that have resulted in a number of high-profile safety scares.
“We don’t know enough about China at this point,” Bockmann concedes. “The milk supply in China is a question mark for us. But there is opportunity. Chinese consumers are looking to multinationals because of food safety issues.”
While, in the near-term at least, Saputo’s Chinese expansion is likely to come primarily through exports, global M&A remains high on the agenda. “We are always on the lookout for M&A globally,” Bockmann reveals.
Targets could come in the form of “anything complementary” to Saputo’s core dairy business and the company is willing to look at various deal sizes, Bockmann adds.
“Obviouly we don’t want to buy something that is small in scale because you out as much work into a small business as you do a bigger one… But there is no rule of thumb. It depends on our strategic fit, whether it is a new market or category. We decide on a case by case basis.”