MGMT 261 Research Project: Strategic Analysis of Saputo Inc.

This report provides a comprehensive analysis of Saputo Inc., a leading Canadian dairy firm. It begins with a brief description of the company, followed by a discussion of its resources, capabilities, and competitive advantages, emphasizing its strong business practices and acquisition strategy. The report then analyzes major factors in the company’s external environment using a PESTEL analysis, covering political, economic, social, technological, environmental, and legal factors. It also examines Porter’s Five Forces, including the bargaining power of suppliers and buyers, rivalry among competitors, the threat of substitution, and the threat of new entrants. The report concludes by evaluating Saputo's strategic approach, highlighting its acquisition strategy and global supply chain management, and suggests potential areas for growth, such as the Asian market.

Running Head: MGMT 261
Research Project
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Table of Contents
Research Report..........................................................................................................................................2
Introduction.............................................................................................................................................2
Brief Description of the Company............................................................................................................2
Discussion of the Company's Resources, Capabilities, and Competitive Advantage................................2
Analysis of the Major Factors in the Company’s External Environment..................................................3
Discussion of the Company’s Strategic Approach....................................................................................6
Conclusion...............................................................................................................................................7
References...............................................................................................................................................8
Annotated Bibliography.............................................................................................................................10
References.................................................................................................................................................12

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Research Report
Introduction
Saputo Inc. is a Canadian producer of products with a successful story. A family business which
began in Montreal in the early 1950s has developed over the last decades into a publicly-traded
multinational company. It has remained as one of the most successful producers of dairy
products all over the world. The report will provide a brief description of the company and
discuss its resources, capabilities and competitive advantage. It will also analyze the major
factors in the external environment of the company. It will also evaluate the strategic approach of
the company and conclude with the effectiveness of the company’s strategic approach.
Brief Description of the Company
Saputo Inc. is a dairy firm of Canada based in Montreal and was established by Saputo family in
the year 1954. The firm produces, sells and distributes a wide range of dairy products which
consists of cheese, milk, shelf-life milk and goods made from cream. It is one of the leading ten
dairy processors of the world and the largest Canadian dairy processor (Barkema et al., 2015). It
ranks third as a producer of cheese in the world. The firm currently uses more than 8 billion liters
of milk each year to produce various dairy products and sells in more than 40 nations. More than
50 plants are operated by the company. At present 15,000 employees work in the dairy firm.
Discussion of the Company's Resources, Capabilities, and Competitive Advantage
Resources and Capabilities - The success of Saputo over the years has been influenced by the
strong business practices as well as its clear vision to rapidly develop with the help of mergers
and acquisitions. The firm currently uses more than 8 billion liters of milk each year to produce
various dairy products and sells in more than 40 nations. More than 50 plants are operated by the
company in Canada, USA, and Argentina (Bauman, Barkema, Dubuc, Keefe & Kelton, 2016).
The dairy firm has strong production capabilities. The company operates mainly in three
segments, Canada, USA, and other international segments. Under its segment of USA, the dairy
firm has 24 production plants; all are owned by Saputo owned except two plants. The production
plants situated in the USA have 6% excess capacity (Faysse & Simon, 2015). Under the segment
of Canada, the dairy firm has 23 production plants are owned by Saputo except for one
production plant. All the production plants in Canada have 30% excess capacity.

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Under the international segment of Saputo, the dairy firm has production plants in Australia and
Argentina. Two production plants situated in Argentina are owned by Saputo with 23% excess
capacity. Two production plants situated in Australia are owned by Saputo with 28% excess
capacity (Forney & Häberli, 2016). Most of the production plants owned by Saputo flexibility to
the dairy firm for quick reaction to the market changes. It also allows Saputo to decrease the
risks connected with the outsourcing of products and loss of control over the resources.
Competitive Advantage - The dairy firm has a sustainable competitive advantage. They have
sold its products in several nations under renowned brand names, which provides them the
product loyalty and recognition which is required to stay in the competition. But in order to
sustain and develop its competitive advantage, the company have to stick to its strategic position
and continue to acquire companies all over the world. The market of Asia, particularly China,
can be a massive win for the dairy firm if they make an investment in the Chinese market. China
has a vastly growing population, who do not like their local products. Saputo could access the
Chinese market and provide them its dairy products to the Chinese people (Kariuki & Ochiri,
2017). The acquisition of a dairy company in Australia allows the company to move closer to the
market of Asia and Oceania. It has also moved Saputo closer to Groupe Lactalis, the giant of the
dairy industry.
The dairy firm does not have a monopoly of its dairy products, and so it is to imitate its products.
It has several competitors and imitators. But the organizational aspect of Saputo has given the
dairy firm a sustainable competitive advantage through its capability to maintain its position in
several markets with strong brand reputation and continued investments in research and
development to improve its overall effectiveness.
Analysis of the Major Factors in the Company’s External Environment
PESTEL Analysis
Political Factors - Saputo had always received the benefits of low taxation policies all through
the western nations. It has led the dairy firm to gain high profits and high investment in research
and development. Unlike in other nations, local governments have a significant role in making
policies and rules in Canada. Saputo follows the laws of the state the dairy firm has its presence
rather than formulating nation-wide laws in Canada (Lahrichi, Gabriel Crainic, Gendreau, Rei &
Rousseau, 2015). The present trends seem that the government in Canada might change in the

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next election. So, Saputo has to prepare for this possibility as a change in government will lead
to a change in priorities of the Consumer sector.
Economic Factors - Saputo’s performance in Canada is strictly associated with the performance
of the economy of Canada. The growth in the past two decades has been based on growing
globalization and using local resources to supply to the international markets. The level of skills
in human resources is moderate in Canada. Saputo uses it to not only for improving its business
in Canada but also influence the skilled workers to generate global opportunities. The unstable
rate of exchange of Canada affects not only the investment plans of Saputo in the short term but
also in the long term (Passetti, Eiras, Gomes, Santos & Prado, 2016). Since the last few years,
the government of Canada has made a massive investment in improving the infrastructure for
facilitating an improved business atmosphere. Saputo access these infrastructures for its growth
in the Food Processing Industry in Canada.
Social Factors - There is a high level of education in Canada particularly in the sector of Saputo.
The dairy firm uses it to expand its existence in Canada. Canadian society differs from the
domestic market of Saputo. It struggles to create a local team which can recognize the social
norms and attitudes in a better way to serve the clients of Canada. Canada is a country with a
young and growing population (Tian et al., 2016). Saputo utilizes this trend to supply to various
segments of the people. Both traditional and social media are developing quickly in Canada.
Saputo utilizes this trend for better marketing and positioning its dairy products.
Technological Factors - The life cycle of products has been shortened by technology and make
the suppliers quickly create new products. It has put pressure on the marketing department of
Saputo to make the suppliers satisfied by promoting the various range of dairy products. It has
also increased the operating costs of the dairy firm. Growth in the mobile technology has
changed the expectations of the customers in the Consumer sector. Saputo not only manages and
meets these expectations but also innovates to remain in the competition (Hawkins, Weersink,
Wagner-Riddle & Fox, 2015). The dairy firm always keeps an eye on the growth of technology
and improvement of user experiences with high access and speed. It has completely changed the
customer’s experiences in the industry of Food Processing.
Environmental Factors - The environmental standards are also changing the priorities of
innovative products. Several times Saputo has to produce its dairy products on the basis of

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environmental norms and expectations instead of the traditional process. Extreme weather is also
increasing the operation costs of Saputo as it has to invest in making a flexible supply chain.
Paris Climate Agreement has made the government of Canada to stick to its current
environmental norms (Tse, Barkema, DeVries, Rushen & Pajor, 2017). It has led Saputo to
better scrutinize the environmental standards in Canada. Regular scrutiny by environmental
organizations is also increasing the operation costs of Saputo. Higher awareness among the
clients has made environmental factors the central point of Saputo’s strategy.
Legal Factors - Some nations follow international laws but the time for providing resolution to
any legal cases often runs for several years. Saputo has to sensibly consider the average time of
any claims before accessing the global market. Over decade protection of information has not
only emerged as privacy concerns but also issues of intellectual property rights. Saputo has
considered a reliable mechanism in Canada to protect its data. Employment laws of Canada also
impact the business model of Saputo (Parashar, Jin, Mason, Chae & Bressler, 2016). These
conditions can be applied in the international market. The business laws of Canada are
dependable with international organizations likes the World Trade Organization and the
European Union. Saputo has legal protection over its patents and copyrights in Canada.
Porter’s Five Forces
Bargaining Power of Suppliers - The bargaining power of the suppliers in low in the dairy
market of Saputo. It is because in the dairy industry of Canada the prices of milk and dairy
products are set by the government (Nemati, Madhoshi & Ghadikolaei, 2017). So for Saputo,
there is no difference in purchasing from one farmer or another which eventually reduces the
power of the suppliers.
Bargaining Power of Buyers - The bargaining power of the customers is low in the dairy
market of Saputo. It is because Saputo can sell only a small proportion of large customers as the
75% of the total market of the dairy industry is dominated by the supermarkets.
Rivalry among Competitors - The main competitors of Saputo are Nestle, Unilever, Agropur
Cooperative and Danone. Saputo has a highly competitive dairy market in Canada. Even though
the dairy firm faces high competition, they are able to operate effectively with its better dairy
products and low transport costs.

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Threat of Substitution - The threat of substituting the dairy product is high for Saputo as its
products are not rare in the market. The dairy firm does not have a monopoly of its dairy
products, and so it is to imitate its products. Most of the dairy products of Saputo are easily and
commonly available in the market (Psomas & Kafetzopoulos, 2015).
Threat of New Entrants - The threat of new entrants in also high for Saputo as the dairy
products are highly used products in the households. The industry also provides the highest
production channels in Canada and other global markets and is one of the most profitable
business in the world.
Discussion of the Company’s Strategic Approach
From the time Saputo has started its first public offering in the year 1997, the dairy firm has
become one of the significant processors of dairy products in the world and aims to follow its
strategic development. To achieve this, Saputo is implementing an acquisition strategy on the
basis of the global supply of milk and vital factors of success which consists of a well-organized
approach, strategic fit, and family-oriented business culture (Sippel, Lawrence & Burch, 2017).
Currently, Saputo manufactures, sells, and distributes a various range of dairy products of best
quality. With production plants in Canada, USA, Australia, and Argentina, Saputo is well-
positioned to continue expanding its business.
The acquisition strategy of Saputo is the key factor in its success in the Food Processing
Industry. It has managed to reach the top positions among its competitors within the global
market. The dairy firm has expanded its business and continuing it through acquisitions of
several international markets with similar dairy products with the aim of providing cheap and
high quality of products. The dairy company has acquired the markets in the USA, domestic
companies and Argentina. One of its most significant acquisitions was the cheese factory of
Australia, Warrnambool where the dairy firm won 88% of the shares (Levison et al., 2016). It
proved to be advantageous for the dairy company as it gave them the opportunity to enter new
Asian and Australian markets in where it was 50% profitable of the cheese factory sales.

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Conclusion
The acquisition strategy of Saputo has proved to be effective as it has managed to reach the top
rankings among its competitors within the global market. Saputo has started its acquisitions
since its starting in the year 1954 for more development of its business. In the 1970s and 1980s,
the company purchased a production plant in Canada and 1988 it acquired two cheese plants in
the USA. In the 2000s, Saputo acquired two plants in Argentina, several production plants in
Europe and in 2014 they expanded to Australia by acquiring Warrnambool Cheese Factory.
Their latest acquisition has been in Feb 2019 where they purchased Dairy Crest, a UK-based
dairy firm in $1.3 billion.
It will be safe to say that Saputo Inc. the largest processor of dairy products in Canada has
developed due its acquisitions and mergers with other firms which possess strategic values in
international markets. It has provided until the date and aims to expand more of its market shares
with its high-quality products. Saputo was able to increase its revenue by 42% by observing the
potential of growth and development in markets, particularly in China due to the size of its
market.

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References
Barkema, H. W., Von Keyserlingk, M. A. G., Kastelic, J. P., Lam, T. J. G. M., Luby, C., Roy, J.
P., ... & Kelton, D. F. (2015). Invited review: Changes in the dairy industry affecting
dairy cattle health and welfare. Journal of Dairy Science, 98(11), 7426-7445.
Bauman, C. A., Barkema, H. W., Dubuc, J., Keefe, G. P., & Kelton, D. F. (2016). Identifying
management and disease priorities of Canadian dairy industry stakeholders. Journal of
dairy science, 99(12), 10194-10203.
Faysse, N., & Simon, C. (2015). Holding all the cards? Quality management by cooperatives in a
Moroccan dairy value chain. The European Journal of Development Research, 27(1),
140-155.
Forney, J., & Häberli, I. (2016). Introducing ‘seeds of change’into the food system? Localization
strategies in the Swiss dairy industry. Sociologia rural, 56(2), 135-156.
Hawkins, J., Weersink, A., Wagner-Riddle, C., & Fox, G. (2015). Optimizing ration formulation
as a strategy for greenhouse gas mitigation in intensive dairy production
systems. Agricultural Systems, 137, 1-11.
Kariuki, S. N., & Ochiri, G. (2017). Strategic succession planning strategies on organizational
productivity: A case of Githunguri Dairy Cooperative Society. International Academic
Journal of Human Resource and Business Administration, 2(3), 179-200.
Lahrichi, N., Gabriel Crainic, T., Gendreau, M., Rei, W., & Rousseau, L. M. (2015). Strategic
analysis of the dairy transportation problem. Journal of the Operational Research
Society, 66(1), 44-56.
Levison, L. J., Miller-Cushon, E. K., Tucker, A. L., Bergeron, R., Leslie, K. E., Barkema, H. W.,
& DeVries, T. J. (2016). The incidence rate of pathogen-specific clinical mastitis on
conventional and organic Canadian dairy farms. Journal of dairy science, 99(2), 1341-
1350.
Nemati, Y., Madhoshi, M., & Ghadikolaei, A. S. (2017). The effect of Sales and Operations
Planning (S&OP) on supply chain’s total performance: A case study in an Iranian dairy
company. Computers & Chemical Engineering, 104, 323-338.

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Parashar, A., Jin, Y., Mason, B., Chae, M., & Bressler, D. C. (2016). Incorporation of whey
permeates a dairy effluent, in ethanol fermentation to provide a zero waste solution for
the dairy industry. Journal of dairy science, 99(3), 1859-1867.
Passetti, R. A. C., Eiras, C. E., Gomes, L. C., Santos, J. F. D., & Prado, I. N. D. (2016). Intensive
dairy farming systems from Holland and Brazil: SWOT analyze comparison. Acta
Scientiarum. Animal Sciences, 38(4), 439-446.
Psomas, E. L., & Kafetzopoulos, D. P. (2015). HACCP effectiveness between ISO 22000
certified and non-certified dairy companies. Food Control, 53, 134-139.
Sippel, S. R., Lawrence, G., & Burch, D. (2017). The Financialization of Farming: The Hancock
Company of Canada and its Embedding in Rural Australia. In Transforming the Rural:
Global Processes and Local Futures (pp. 3-23)
Tian, H., Wang, J., Zhang, Y., Li, S., Jiang, J., Tao, D., & Zheng, N. (2016). Quantitative multi-
residue analysis of antibiotics in milk and milk powder by ultra-performance liquid
chromatography coupled to tandem quadrupole mass spectrometry. Journal of
Chromatography B, 1033, 172-179.
Tse, C., Barkema, H. W., DeVries, T. J., Rushen, J., & Pajor, E. A. (2017). Effect of
transitioning to automatic milking systems on producers' perceptions of farm
management and cow health in the Canadian dairy industry. Journal of dairy
science, 100(3), 2404-2414.

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Annotated Bibliography
Saputo | Dairy Products and Cheese. (2019). Retrieved from http://www.saputo.com/en
The firm produces, sells and distributes a wide range of dairy products which consist s of cheese,
milk, shelf-life milk and products of cream. It is one of the leading ten dairy processors of the
world and largest Canadian dairy processor. It ranks third as a producer of cheese in the world.
The firm currently uses more than 8 billion liters of milk each year to produce various dairy
products and sells in more than 40 nations. More than 50 plants are operated by the company. Its
products are sold under the brand names like Alexis de Portneuf, Dairy Star, Dairyland, Stella
and many more.
Trust Saputo— the Cheese Experts. (2019). Retrieved from
http://saputousafoodservice.com/
The kitchen of food service across the food and processing industry trust the high-quality
products of Saputo for its performance. The modern approach of Saputo to artistry, commitment
to its tradition and renowned customer support are all unmatched. Saputo is proud to deliver a
strong collection of best quality cheeses from some of the famous brands of the dairy industry.
One of its signature cheese is Premium Gold Mozzarella Cheese. Saputo is proud for each of its
brand’s features, traditionally hand-made with various product lines which consist of Stella,
Salemville, Great Midwest and many other products. It maintains and supports its products by its
huge resources and safety measures.
SAPUTO Cheeses from Canada. (2019). Retrieved from http://www.saputo.ca/
In the year 1954, the family of Saputo has carried the tradition of cheese making process of Italy
in Canada. In the initial years, young Lino Saputo used to deliver the hand-crafted cheese on his
cycle. The dairy company still uses the Italian tradition of making cheese in a modern way.
Every batch of cheese is tasted approved and signed before it is sold. The brand name of Saputo
is its reputation, and its signature is Saputo's guarantee. If it is not signed, then it will not be a
Saputo's product. One of the most featured products of Saputo is Smoked Caciocavallo.

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Saputo reports a $342M third-quarter profit, revenue boosted by acquisitions. (2019).
Retrieved from https://www.thestar.com/business/2019/02/07/saputo-reports-342m-third-
quarter-profit-revenue-boosted-by-acquisitions.html
The newspaper article was published on 7th February 2019 that a 3rd quarter profit and higher
revenue has been reported by Saputo Inc. in spite of several industrial challenges. But the
company have face high warehousing and logistic expenses, weak cheese and dairy markets and
high competition. Saputo is continuing its initiatives to reduce headwinds. Lino Saputo Jr. has
told that he has observed a decline in milk market not only in Canada but in every developed
market. It is facing competition from proteins which are made from plants and several other
products.
Dunlap, D., McDonough III, E. F., Mudambi, R., & Swift, T. (2016). Making up is hard to
do: knowledge acquisition strategies and the nature of new product innovation. Journal of
Product Innovation Management, 33(4), 472-491.
This article has evaluated the usage of external information developed from mergers and
acquisitions (M&As) which influence the innovative capability in the international
pharmaceutical industry. The authors have followed its market success by recording the several
new product innovation and then sanctioned and sold the products. A huge data covering a
period of 15-years has been used to study that the companies were capable of makeup the lack of
innovative skills with the help of M&As. It has been found that developing external information
through acquisition strategies helps to solve the internal issues or else might lead the companies
to exaggerate corruption over exploration and vice-versa and is connected with reduced product
innovation.