'Dairy is not dead': Saputo CEO on plant closures, industry growth

Thank you very much. It's great to be here.

That's a ball. At 13 years old I went to work with my dad and they had me pack the cheeses. Then over time I was able to get into the plant, into the facility, and back then with very little experience they had me wash the vats after production. Over time I learned how to make the cheese, and over time then I grew into different responsibilities with the organization.

Well, it's very simple. You know, I look at myself as a caretaker for the next generation. When I took over for my father in 2004, I didn't think it was going to be a revolution, it was going to be an evolution. We're very fortunate that we've got a very strong corporate culture, a culture and a dynamic that focuses first and foremost on people and operational excellence, so that wasn't going to change. Now, as we evolved, of course we got into different geographies, different parts of the world, but the fundamental base of our character really hasn't changed over 65 years. So I inherited a very good, strong organization. I didn't want to mess that up.

And that is so true. You know, back then when my father and my grandfather started the business, their primary focus was to survive. They needed to manufacture a product that a market wanted, sell the product, collect on the receivables, and then have funds to buy milk again the next day. As things evolved, of course, we need to understand that there's got to be some purpose to the profit. So this is my generation now, this is what we have to be concerned about as CEOs. We need to make sure that we're doing the right thing because it's the right thing to do. So we launched over the course of the last couple of years the Saputo Promise, and more recently our initiatives for our social responsibility with respect to environment. We're focusing on water, waste, and climate, and we're making some commitments. So there has to be an end game to just operating the business on a very effective basis.

Yeah, well I think you need to look at getting product to market, but there is a good, sustainable way to do that. Now, it's very possible we don't have all the answers today, but as long as we have the will to want to get to those answers and we're prepared to invest in them, then I think we can find the right solutions. For us, when we're thinking about manufacturing products, of course we need to use energy, there's water usage. How do we minimize the amount of energy? How do we minimize the amount of water? Again, maybe we may not have all the answers today, but if we are committed to the journey, then I think that we can find the right answers as we move along.

They are different. Part of the benefit of that too is expanding into different geographies where they're a little bit more advanced than we are. We just made an acquisition in the UK. Their environmental concerns are much more advanced than what we have here in North America, and so there they've been on this journey already for the last ten years. So there are certain things that we pick up through these acquisitions that we can apply to other platforms that are more historical for us, and just advance our progress that much quicker.

I think Canada could be more competitive, and I think Canada is very competitive. I mean, we generate and develop great entrepreneurs here in Canada. So I think yes, there's no reason why Canada should not be competitive. It's just a regulatory issue sometimes. Need to take a step back to allow the entrepreneurs to progress in their respective fields.

So the market dynamics, our industry continues to grow. We're growing at a rate of about two to two and a half percent per year, so we're in a growth mode. Dairy is not dead, and that's not the reason why we closed those facilities. But we need to be efficient, we need to be effective, and we need to be relevant to our consumers. So when you have CapEx allocations and very old plants that perhaps might even be redundant, then we have to think about where we're going to allocate those resources in order to be able to have bigger, stronger platforms that are more effective and more efficient. That's the reasoning for those plant closures. We have announced in the past other plant closures that make us more efficient and more effective. Very, very tough decisions for us to take, but it's for the sustainability and the viability of our business moving forward.

So milk is just one category of the dairy spectrum that we manufacture. On that side, yes, there are consumers that are looking for products other than cow's milk. We've gotten into goat dairy products and other forms of beverages. Our take on this is that we have the infrastructure, we have the expertise to be able to manufacture efficiently and effectively. Why not go pack for others who have brands? So we are going in that direction. But for other categories of dairy, in the cheese and the dairy powders and the infant formulas, there's no better solid in the world than dairy proteins. So we still believe in that, even though we can venture into where the trends are going.

Well, I like globalization. I like the fact that we're opening up ourselves to a global market. In the CETA deal specifically, we have assets in Europe and we could import, if we're granted those licenses, we could import value-added products that I think will be a benefit to consumers. So I don't want to shy away from these trade negotiations or opening up a market somewhere down the road. I think that there's a great opportunity as long as we continue to think about creating value in our space.

Well, you know, look, we have to think about the dairy farmers because they are the lifeblood of our industry. Without a happy or profitable dairy farmer, we don't have an industry. And the dairy farmers here in Canada, in the milk supply-managed system, we are not going to challenge that, we're not going to debate that. There are some positives to that, where you've got some stability in pricing, where you've got revenue streams for the dairy farmers that make their investment viable, and that's okay. The downside of course is that there's limited growth. A company like Saputo, if we want growth beyond the milk supply-managed system, then we'll look at different platforms. That's why we're in the United States, that's why we're in the UK, we're in Australia, and we're in Argentina as a dairy processor.

Well, that means at the end of the day, you've got to work as a team, just like a hockey team. You need the offensive guys to score, you need the defensive guys to help you take care of the rebounds, but at the end of the day, if the puck is in the net, that's on me. And I love that responsibility. So it's no different than being a CEO. You've got to work with the team, but at the end of the day, I've got to take those hard decisions to make sure that we are acting as a responsible organization.

Thank you very much, and I'll see you tonight.