Dairy processor taps global, domestic markets with new products

TORONTO — Canada’s supply-management system may make it challenging to operate in Canada but that doesn’t mean companies like Saputo Inc. haven’t been able to flourish.

According the president of the company’s Canadian dairy division, there have been plenty of opportunities abroad.

“Sixty percent of our revenue is generated outside of Canada. Three years ago, it was 30 percent,” Carlo Colizza said.

“Canada already consumes two times the world’s average consumption of dairy products. We’re only 10 percent behind our American neighbours and 20 percent behind Australia.”

Before taking the podium at the Canadian Food and Drink Summit in Toronto last fall, Colizza de-clined to express an opinion concerning Canada’s supply man-agement system.

“We manage our company according to whatever rules we have before it,” he said.

Still, the system is difficult to ignore when you’re based in Canada.

Saputo, which remains a family-operated business, was founded in 1954, prior to supply management being developed. Most of the company’s expansion came after the system of quotas and import tariffs was introduced in the 1960s.

Today, Saputo has 12,500 em-ployees and operates 53 plants, of which 24 are located in Canada, 25 in the United States and four split between Australia and Argentina. These manufacture a wide range of cheeses, cultured products, fluid milk and dairy ingredients. Annual revenues approach $11 billion.

While domestic growth opportunities are limited — three players control about 80 percent of Canada’s processing sector — Saputo has made two recent acquisitions. Woolwich Dairy in Ontario was bought in 2015, giving Saputo a presence in the goat milk sector, and Atlantic Canada’s Scotsburn Co-operative was acquired the previous year.

Operating in Canada is complicated with the rules and regulations surrounding supply management and could become more so with the impending implementation of the Comprehensive Economic and Trade Agreement between Canada and the European Union.

Colizza said the deal could result in as much as 18,500 tonnes of cheese moving from Europe to Canada, the equivalent of 185 million litres of milk.

“It’s about six percent of the total cheese consumed in Canada,.”

Additional dairy products will likely enter Canada if the Trans-Pacific Partnership is implemented, a development that could benefit Saputo’s international operations.

“We compete in some of those countries that are part of the TPP,” he said.

Colizza said raw milk pricing in Canada represents a barrier to processing interests, as does the supply-management system.

Supply management has also provided Canadian dairy farmers with a stable pricing regime.

Ron Bonnet, president of the Canadian Federation of Agriculture, asked Colizza to comment on the current round of low world prices threatening dairy producers in Ireland, Australia and New Zealand, despite their lower production costs.

Colizza said the industry had been ramping up production in anticipation of increased demand from countries like China and Russian but this failed to materialize.

“It’s still a vulnerable market,” he said.

“At some point, we’ll see these markets recover. Whether that’s a year from now or later … we’ll see them recover.”

Regardless of the price of raw milk in Canada, Colizza said there are opportunities to move the industry forward. He said Saputo is working with Dairy Farmers of Canada to develop new products.

This include such products as highly fortified dairy beverages and beverages containing both milk and juice.

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