Saputo Inc. is eyeing takeover opportunities it feels may arise amid the current market conditions as it sees demand shift away from restaurants and other food service to retailers such as supermarkets.
"We're really seeing a shift, moving away from food service more into retail," said CEO Lino Saputo Thursday during a call with analysts to provide an update on the company's operations through the novel coronavirus outbreak.
"Our retail plants are running hard," he said.
In a Canadian Press story, Saputo says that "there will be, coming out of this, increased opportunity for M&A. I think the great fortune we have is that we can pick and choose the ones we think will fit our strategy for development the best.”
As governments in Canada and elsewhere tighten restrictions on social gatherings and mandate the closing of restaurant dining rooms, demand patterns have changed as people load up on groceries to cook at home.
For Saputo, the result has been a “massive shift” in production away from serving industrial clients, like salad dressing manufacturers and meal service customers, toward grocers and other similar retailers. Saputo factories serving retailers are “running hard,” in some cases at more than full capacity, the company said.
The shifting demand, though, is leaving Saputo with excess inventory that it might need to write down. The company is trying to figure out how to repurpose its dairy products so they don’t go to waste, Mr. Saputo said. That could mean trying to convince supermarkets to accept new product packaging or formats, or giving what can’t be sold to food banks instead of dumping it, he said.
“This is going to cost us money,” said Saputo. “But that is secondary in our thought process. We can afford to do the right thing.”
The situation is changing rapidly, noted Kai Bockmann, chief operating officer, and much of the recent demand could boil down to consumers stockpiling food amid instructions to limit social contact."We're going to have to wait a couple of weeks to figure out what the normal buying patterns are going to look like," he said.
In Canada, the Montreal-based company has seen a boost in retail fluid milk and cheese sales, in part because consumers can no longer cross the border to access cheaper gas and groceries.
People also seem to be craving snacks and comfort food, he said, as evidenced by strong sales in string cheese along with ricotta, which Bockmann speculated comes down to many folks cooking lasagnas at home.
Food service, on the other hand, is almost halted, said Saputo, aside from quick-service restaurant outlets that continue to serve meals for takeout.
"Orders are being cancelled," he said.
Some demand remains from industrial clients, such as frozen meal manufacturers, but those that service restaurants, including salad-dressing makers, have shut down.
The company is looking to see if it can repurpose the inventory it has for scrapped orders by checking if retailers will accept products of a certain size, format or that are otherwise different from the norm.