The food and beverage processing industry, the largest manufacturing industry in Canada, is an important industry to the Canadian economy. In fact, Canada not only has a great deal of natural resources, including abundant water and most incomparable rich soil, but also possesses two accumulated advantages, involving long history and experience with food and beverage processing industry and reasonable infrastructures. Therefore, these natural and accumulated advantages strongly support the food and beverage processing industry.
NAICS Industry Profile
It is commonly recognized that Canada is one of the largest agricultural producers and exporters in the world. According to the report, the Canadian food and beverage processing industry exports a mass of processed products worth of about $21 billion to 180 countries each year; also, this industry occupies 17% of the total value of manufacturing shipments and 2% of national Gross Domestic Product. In addition, the industry is the largest manufacturing employer. A study indicates that the food and beverage processing industry employs approximately 290,000 Canadians. Furthermore, the sales of processing goods were valued at $92.9 billion in 2011.
Current Issues in the Industry PESTEL
In this paper, I will use Saputo Inc. as a model to analyze the dimensions of PESTEL that consists of six factors: political; economic; sociocultural; technological; environmental; and legal.
Overview of Saputo Inc.
Saputo Inc. was found by an Italian immigrant Giuseppe Saputo in 1954 as a small cheese store. Today, Saputo Inc. is the biggest food and beverage processor in Canada and the world’s twelfth largest dairy producing company and it produces a wide array of products, including cheese, baked goods, fluid milk, yogurt, and dairy ingredients. Saputo’s home hailed from the region of Quebec and it’s headquarter is located in Montreal. The stability of the political environment is essential for the development of international trade. Canada is a free-trade country. To illustrate, Canada is involved in many trading agreements, including the European Union (EU), the Association of Southeast Asian Nations (ASEAN), and North American Free Trade Agreement (NAFTA). Importantly, NAFTA is very crucial for Canada since it is the world’s largest free trade area, which has three country members: Canada, USA, and Mexico.
In fact, Saputo mainly operates in five areas, including Canada, Germany, Wales (United Kingdom), Argentina, and the United States and its international trade accounts for a big portion of its total sales. For example, one third of Saputo’s revenues come from the company’s operations in the United State. Therefore, a steady political environment and progressive trade-policy greatly improve and promote Saputo’s development. Also, Canada is one of the world’s wealthiest nations and its economy has steadily grown in the last decade. In 2011, the Canadian Gross Domestic Product (GDP) is worth of 1736.05 billion. During the years from 2002 to 2012, Canadian GDP reaches its peak at 1736.05 billion dollars in December of 2012.
Under the influence of the Canadian prosperous economy and openness of trade policies, Saputo has been increasingly growing in these years and its total sales are 6,930 million this year. There are several graphs below about financial information.
Saputo, a fifty-eight year old company, also has an outstanding company culture that offers its employees training opportunities to exploit their individual potential, which is a way to let the company become bigger, better, and stronger in order to meet the needs of today’s market. Thus, all employees’ attitudes intend to be passionate, devoted, and attentive to details, and they are proud of their products continuing to be desired and valued by consumers. Saputo Inc. is one of the leading dairy processors in the world, not only because of its high-technology processing equipment, but also its commitment to maintaining the high and safe quality of foods.
In order to achieve this objective, all employees must adhere to Hazard Analysis and Critical Control Point (“HACCP”) throughout all processes and practices, and follow Global Food Safety Initiative (GFSI). Historically, Saputo also introduced new technologies and regulatory policies, invested in laboratory and testing equipment, trained employees, maintained facilities, and enhanced IT. Therefore, these collective efforts are the key to success in today’s turbulent market. Significantly, Saputo has a good brand image on account of its environmental practices.
In recent years, Saputo is devoted to minimizing the environmental impacts of its activities to achieve the company’s sustainable development in the future. Saputo Inc. implements many policies to reduce environmental pollution, like integrating their 47 plants to set a goal that relates to increasing efficiency and decreasing operational costs in refrigeration systems, water consumption, and emissions. In 2012, the company succeeded in reducing its energy use by 3%. Finally, Saputo’s environmental policy helps it reduce operation costs and attracts more investors as well as retaining an unshakeable position in the global food and beverage processing industry.
Competitive Forces of Saputo Inc.
As we mentioned previously, Saputo Inc is the largest food and beverage processor in Canada. In 2012, Saputo Inc. employs in total 10,100 people and owns 650 trade-marks registered in Canada, such as Saputo, Dairyland, Dragone, Frigo, Black Greek, and Neilson. According to the latest survey of the top 100 food and beverage companies in the world, Saputo’s rank rose from 21th place to 13th based on its sales and product satisfaction. Undeniably, Brand diversity is the key for Saputo to be successful in this field.
Saputo Inc. is a Montreal-based Canadian dairy company. After growing its home region of Quebec, the company started to expand by strategic acquisitions and mergers, which maintained the company’s development rapidly in last decades. From 1996 to 2011, Saputo firstly started to build its dairy empire by purchasing many Québec-based companies, such as Fromage Caron Inc, Boulangerie Rondeau inc. and Biscuits Rondeau inc. and it continued to expand through the acquisition of Treasure Cave, Nauvoo, Stella Foods, and Dairyworld Foods.
Next, dairy products are the main competitive advantage of Saputo Inc, which include cheese, fluid milk, yogurt, dairy ingredients and snack-cakes. It is undeniable that its products today accounts for a big portion of Canadian market. Therefore, Saputo’s core competitiveness and strategy is to focus on producing high quality and safe dairy products in order to satisfy the different needs of customers. In Canada, Saputo also has several competitors, such as Parmalat and Danone. However, Saputo’s leading position has never changed. Actually, compared to Danone’s total sales of $ 500 million, Saputo’s total company sale is 6,930 million. Also, Parmalat only has five plants in Quebec and employs almost 1,000 people; however, Saputo today has 10,100 employees and totals 46 plants, including 26 in Canada, and serves customers in over 50 countries. These two diagrams depict Saputo’s market direction and customer distributions.
Moreover, Saputo has such a good reputation and brand image in the world not only because of its high quality and safe products, but also its participation in sponsorship and charity. For example, Saputo has been proud to support the Canadian Olympic Team as the official supplier and sponsored athletes to inspire and motivate their healthy and active lifestyle. In addition, Saputo employees are proud to support the local rugby team by sponsoring new uniforms and equipment in the UK.
Each year, Canada exports its high standard processed food worth $21 billion to over 180 countries in order to meet the needs from different customers all over the world. From 2003 to 2011, there were about 100 foreign companies establishing Greenfield projects in Canada’s food and beverage sector on account of Canada’s natural, health, and safe products. It is safe to say that the Saputo company, the largest food and beverage processor in Canada, should continue to acquire and merge with other companies possessing strategic values in foreign markets and aim at expanding market shares with its high quality products based on its competitive advantages, including unique natural resources, advanced processing systems, brand diversity, and a reputable brand image.