Analysis: Saputo sets four-year $2.13bn EBITDA target amid pledge to lead in dairy-alternative market
Key points from the dairy giant’s four-year strategic plan to build out its ecommerce platform and continue its M&A spree
Dairy behemoth Saputo outlined its four-year strategic plan this week, setting itself an EBITDA target of $2.13 billion in the four years to fiscal year 2025 (ending 31 March).
The forecast reflects an average year on year increase of 75% on its fiscal year 2021 EBITDA of $302.8 million.
Company executives, including founder and chief executive Lino Sapulto, outlined key strategic measures for the business including increasing operational efficiency and establishing synergies through consolidating parts of the business.
Saputo also stressed a continued focus on innovation and expansion both organically and via M&A.
Here are some of the key points made during the presentation of the company’s four-year strategic plan:
Top of the (plant-based) food chain
In order to meet shifting consumer demands, Saputo is pledging to become a market leader in the dairy-alternative space via its recent acquisition of UK vegan cheese manufacturer Bute Island Foods.
President and chief operating officer for the international business Kai Bockmann said the company was seeking to “more than triple the capacity” of Bute Island’s current product portfolio to help accelerate the development of the market segment in both the US and UK.
“Our ambition is to become a market leader by the end of this strategy plan. We have the knowhow, the R&D, the customers, we have the sales infrastructure and we’ve got an expansive network that we can leverage,” Bockmann told analysts.
“This is a category that market intel is telling us is about $ 1billion in size, hopefully showing tremendous growth at around 12-15% annually.
“We feel that growth can be accelerated when the right product with the right attributes is introduced in the marketplace,” he added.
President and chief operating officer for the group’s North American business Carl Colizza said Saputo was already producing a non-dairy mozzarella-style cheese in the US and Canada and it had made significant progress in securing listings with major foodservice distributors and medium-sized regional pizza chains.
In H2 2021 Saputo will launch a selection of Bute Island Foods’-produced non-dairy cheeses under its Vitalite brand in the US, with Canada to follow in early 2022.
M&A remains a priority
M&A remains a key priority for the group as Saputo said it was eyeing “two, three or four” files that would continue to create value for the company.
Any bolt-on acquisitions made in the next four years would not contribute to the four-year EBITDA target of $2.13 billion.
“We still have a very strong appetite to look at businesses that make us bigger, better and stronger. Whether that be bolt-on acquisitions through our current platforms or new ones,” Saputo said during the presentation.
He said additional acquisitions would either add to existing divisions within the company or add new platforms or product segments.
Future M&A will reflect the company’s shift from commoditised ingredients to value chain ones.
Saputo acknowledged that multiples being paid for businesses today were higher than they used to be in 2005 and 2006.
The company has made 34 acquisitions since its inception in 1954.
Lessons from the pandemic
Saputo’s lessons from the Covid-19 pandemic also played into its plan, particularly as it seeks to speed up the development of an in-house ecommerce platform that was launched in beta last year.
The platform supports the group’s commercialisation plans within the B2B2C and D2C (direct to consumer) channels and is currently offering D2C activity in Montreal, Quebec and Ontario in Canada.
Colizza said the company had learned a lot about the ecosystem of ecommerce during the pandemic.
“It’s making us a lot more confident in our next steps” he said.
“Ecommerce capabilities will be enhanced, ready for some exciting new developments on the D2C interface.”
A second platform for the sale of premium cheese is expected to launch in H2 2021.
Elsewhere, Saputo pledged to increase the recyclability of its packaging in certain markets to 100%.
In the UK its packaging is currently around 75% recyclable. The initiative aims to meet growing consumer concerns over packaging and waste.
Beyond Covid-19, the company is looking to penetrate the Northern and Western Europe markets where it is not currently operating.
It will also look to move into New Zealand by leveraging its successful Australian business.
Saputo said there was still a great deal of opportunity in the US and in Europe (outside the UK), and some opportunity left in Latin America.
