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Canada’s Outstanding CEO of the Year 2019: Lino Saputo Jr.

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Canada’s Outstanding CEO of the Year 2019: Lino Saputo Jr.

But there’s more to Saputo than just numbers. He’s a straight-forward, plain-speaking individual who occasionally blows off steam by tending net, the highest-pressure position in hockey. As he says, “the puck stops with me,” both on the ice and in the boardroom. When he’s not in those places, you might find Saputo at a hockey player agency he founded called Quartexx Management, whose clients include 42 former first-round picks, or perhaps at the Amelia and Lino Saputo Jr. Foundation, created in 2011 and presided over by his wife, or perhaps he’s checking out a luxury car to add to his collection, a passion he shares with his father.

“It is a busy life, but you need to stay busy,” he says. “You seem to find the time for the things that motivate you and keep you excited. My wife runs the foundation and that gets me excited as well. Giving money away actually gets me very excited. Mentoring the young kids in the agency gets me very excited and I get to do that with my wife as well. I guess I’m a fortunate man, because I’ve got great balance in my life.”

What follows is a condensed and edited interview with Saputo done on Sept. 10 just before he flew to Europe on yet another business trip.

Lino Saputo Jr.

Kagan McLeod for National Post

FPM: Congratulations on being named Canada’s Outstanding CEO of the Year. We always ask this, but why do you think you have earned this award?

Saputo: I’m now 31 years into this business on a full-time basis and in this role since 2004, but I’m not quite sure why they chose now to be the right time. I know our company has evolved a great deal over the course of the last 10-15 years, but I feel very fortunate that I started off with a foundation that was very, very solid, a culture that was very, very strong, and I just capitalized on what my father and my grandfather built, so perhaps this award should be going to my grandfather and my father and not to me.

FPM: Funny you say that because in 2016, your family did get an Ernst & Young Entrepreneur of the Year award. I remember thinking at the time, how is a third-generation, family-run enterprise considered entrepreneurs?

Saputo: Our industry itself is not static. The dairy industry in some cases has, in some jurisdictions, heavy regulation and others have low regulation. You need to navigate through the ups and downs of what’s going on in our industry and we need to remain entrepreneurial. It’s not going to be a carbon copy template that we need to be following. As things evolve, as things change, we need to adapt and that’s really the true entrepreneurship of what we stand for. Consumer tastes change, market dynamics change, emerging markets change, even trade agreements change. If you want to remain relevant to your consumers, to your customers and also to your talent pool, you need to evolve with the times. The things that we focus on today might be a little bit different than what my father and my grandfather focused on, things like the social aspect, the environment, the community. All of those things are as important today as profitability and sustainability.

FPM: You mentioned that the dairy industry isn’t that static, but a lot of people have a static image of it. What’s the dynamic that they don’t understand?

Saputo: If you look at the Canadian regulatory environment with the milk supply management system, perhaps it could be pretty static. There’s a lot more stability here than we would find in other markets, but if you go outside of Canada, whether it would be the United States, Argentina, Australia and now the U.K., there’s nothing static about the industry. Things evolve, even in terms of supply and demand, the amount of solids available for the market relative to the growth in the dairy industry needs to be properly managed and harnessed. When you think about open-market systems and then you think about the geopolitical issues that we need to contend with, whether it’s the U.S. selling to China or not selling to China, selling to Mexico, not selling to Mexico, think about the embargoes in Russia — and Russia is a big platform for us — we need to navigate extremely well. It’s a fine dance that you’ve got to dance every day, because nothing remains the same day after day.

Lino Saputo Jr. heads up a company that is one of the world’s 10 largest dairy processors.

Graham Hughes/The Canadian Press

FPM: Australia has been a big target market. What appealed to you about that market?

Saputo: Australia was very interesting. We’d been looking at Australia since the early 2000s, 2001, 2002, and we only materialized a deal in 2013 so we were very patient there. Why was Australia important for us? Australia has a large milk pool. They have dairy farmers that have been in the business generation to generation, so you think about dairy farmers that are in their fifth and sixth generation. That means that their infrastructure for high-quality dairy solids is there. But something very interesting about Australia is that 50% of their overall production was being exported and they got to the international markets ahead of anybody else. Even though we work competing against Australia in international markets from our platform in the U.S. and our platform in Argentina, we were always being compared to the Australian dairy product because they were there first. We knew that if we wanted to be a credible international player in dairy, we needed to have a platform in Australia, because, No. 1, we could offer those dairy goods to consumers who absolutely wanted product from Australia, and No. 2, it was the right platform because of the heritage and lineage that was there and it added more diversity to our abilities to engage with consumers around the world, especially the Pacific Rim.

FPM: Do people look at companies in Canada with that kind of acquisition appetite or is it just too regulated?

Saputo: The dairy space is way too regulated. Canada does not have the ability to export because of the high milk cost and I’m certainly not complaining about Canada because it is a great platform for us and offers us the ability to cater to the Canadian consumers, but Canada is not an international player at all, by any stretch of the imagination.

FPM: You don’t criticize Canada’s dairy supply chain at all, but you’re obviously a free trade champion.

Saputo: Absolutely.

FPM: How do you reconcile those two things?

Saputo: We’re not at the farm level, we’re not dairy producers. We’re dairy processors. Dairy producers understand what is most important for them to be viable. We’re not going to challenge them. In Canada, if the dairy producers believe that milk supply management system makes them stronger, who are we to argue with that? I’m not going

to criticize the Canadian system, but a company like Saputo that is looking for growth will find that growth in other geographies.

FPM: Saputo is often seen as a Canadian company that has global ambition, which often seems in short supply here.

Saputo: It does, but the regulatory environment forces us to think about life outside Canada. We’ve gotten there with very, very small steps. In the U.S., we took a baby step before we made a large acquisition. We acquired a plant in Vermont in 1988 and then another plant in Maryland in 1989. We had a lot of experience in the U.S. so that by the time Stella Foods came along, a company that was three times our size in 1997, we had the confidence that we knew how to navigate through the U.S. dairy landscape. We’re good listeners and we’re good learners. We’re not overly ambitious on the first bite, but once we gain our confidence, then we go for bigger bites after that.

FPM: Stepping back a little bit, a lot of people who grow up in family businesses don’t want to have anything to do with it. You’ve pretty much been at Saputo your entire life. Why didn’t you look for something else?

Saputo: I started working in our plants when I was 13 years old. I remember my first jobs were just packing cheeses, then they had me sweep the floors and then clean the vats, and then I graduated to making cheeses. This happened through a lot of part-time jobs in the summer, on weekends, from when I was 13 all the way until about 19 or 20 years old. I never had the pretension to be CEO, but I always had the desire to be part of this organization because, No. 1, I love the industry, and No. 2, I love the people who are in this organization. I love the culture, I love the  values, that this was an extension of my own personality. The way that I was brought up at home was the way that our company was run, so I knew that the fit was perfect for me. That’s the reason why I wanted to be in this business.

FPM: How has the business changed?

Saputo: In the early days, I have to say that things were a little complicated, because we were a family-owned business. My father and our family were the major owners of the business with over 60% of the shares, but we also had other owners that were my aunts and uncles and cousins and so things were complicated up until 1997. Up until 1997, our board of directors was made up of exclusively family members and, as you might appreciate with a family business, not all decisions are based on common sense and logic. There’s a lot of emotion. In 1997, the IPO really was to provide us the governing structure that made sure that this company would go beyond generation one and generation two, and go into generation three and beyond. It was at that point in time that everybody became accountable — everyone. But we are very fortunate that the family spirit that drove every single one of our decisions in 1954 still does exist.

FPM: How does that lineage show up in the business today?

Saputo: It’s the culture that defines it. Its character, who we are, how we treat people first and foremost. A lot of companies say that, but we live it every single day. Every single one of our employees is an extended member of our family and we treat them that way. We don’t have a problem speaking frankly and honestly and openly with our employees. There are certain things that we can do and other things that we cannot do, but we take the time to explain why there are certain things we can do and why there are certain things we can’t do. This culture, these values, the way we like to speak about it internally at Saputo, are non-negotiable. This is who we are and, if the fit is right, people can look to us not just to provide them a job but to give them a career. But if the fit is not right, people will sense it right away and they’ll look for a career some place else. We’re very open and honest about that and we’re very candid about our expectations from a cultural standpoint.

FPM: Instead of having family squabbles, though, you’ve got investors now to worry about, like when your stock fell in June after the Q4 results. What don’t investors get when they’re reading the news?

Saputo: That’s exactly why you’ve got volatility in any stock, because you do have some investors that are thinking about the short term. I feel very, very good about where we sit. Our balance sheet is very clean, and our ability to integrate is very good. There are, from time to time, headwinds in the industry and we’ve gone through a period now of about 24 months where there were plenty of headwinds in our industry. We’re coming out of that phase, but those headwinds provided us opportunity to make acquisitions. That’s because our industry was in turmoil and our balance sheet was clean and we were able to take advantage of that. But to weather the storm and come out of it in a better situation, the future is much brighter. Not all investors are that patient.

FPM: Did you have any worries about being the third generation of a family business?

Saputo: You always have to think about that. You know the adage, “Rags to riches to rags in three generations,” and I don’t want to be the third generation that brings in that factor. I’m mindful of that every single day so I don’t take anything for granted at all. It forces me to work a little harder.

Lino Saputo Sr. took Saputo public in 1997.

Dave Sidaway /The Gazette

FPM: How would you describe your leadership style?

Saputo: I would have to say that I like to be extremely thorough without paralyzing myself with analysis. I like to be in the markets, I like to meet our employees and understand what’s going on in the field. I like to meet our customers and understand what’s relevant to them. I like to meet with the different dairy industry players to see where their heads are at and how the industry is evolving, so I’m thorough that way. But once I’ve got the information that I need, I don’t mind pulling the trigger to make decisions effectively and efficiently. If we make a mistake, whether it’s myself or my management team, there’s no issue there as long as we turn around quick enough to correct the mistake and try not to repeat the same mistake twice. I’m also not afraid to make changes if we need that as well.

FPM: You’ve mentioned culture a few times and I know that you’re a hockey player and a goalie, specifically. Not a whole lot of people want to be a goalie when they’re 53. You are and I am, but is there anything about being a goalie that helps you in being a leader?

Saputo: Absolutely, and you probably connect with this as well: the puck stops with you. No matter how many mistakes the people in front of you make, if the puck’s in the net, it’s on you. I love that pressure and I love that responsibility. Yes, it’s also a lonely position, just like sometimes when you’re a CEO it is a lonely position. Although you’re well supported with people around you, at the end of the day, you’re responsible for the success and the failure of the organization. Just like when you’re on the ice, you’re responsible for the success and the failure of the team. I thrive on that.

FPM: How did you get to become a goalie? I’m always interested in goalie origin stories.

Saputo: When I was about six years old, I was playing for a team in my municipality, which was Dollard-des-Ormeaux, and in those days you didn’t have a designated goalie. The equipment was owned by the municipality and every day the coach would come in and say, “Okay, who wants to be in net today?” Sure enough, when it was my turn to be in net, I had a great game. I got a shutout on my first outing and I never left the position.

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