All the Right Ingredients
November 1, 2004
All the Right Ingredients
Who wouldn’t enjoy their job in a place like this, surrounded by freshly baked pizzas at every turn?
And while it’s true that a huge number of the pizzas sold in the United States are covered with mozzarella perfected in the labs at Denver-based Leprino Foods Co., the company — which spends about $10 million annually on research and technical development — means much more to the dairy industry. Leprino continues to explore the functional potential of cheese as well as the rapidly growing arena for whey products.
It’s obvious that Leprino — with the world’s largest mozzarella factory and annual sales in excess of $2 billion — is doing something right. And the credit for getting it right, according to the company’s senior management, goes to the collective workforce of Leprino Foods.
“We want people in this organization who are excited to come to work — excited about the opportunity, excited about the job they do, excited about the contribution they can make, energized and passionate about doing the right things right the first time,” says president Larry Jensen. “By and large, that’s the kind of people we have, that’s the kind of people who are successful here, and that’s the kind of energy that propels our success.”
Those are the kind of people Jensen and his management team say should be most honored by Leprino’s selection as Dairy Field’s 2004 Processor of the Year.
The company believes in a results-oriented culture fostered by principled leadership, strong management disciplines, superior technology and passionate commitment to the concept of Leprino Quality. It’s a multifaceted corporate ethos that preaches continuous improvement and doing things right in the areas of product quality, customer service, innovation, people, ethics and citizenship.
“I’ve worked for Leprino for 30 years, and if you don’t have the quality, the R&D doesn’t matter,” says Richard Barz, senior vice president of quality assurance, research and development. “We start and end every day with where we stand on satisfying quality.”
And there’s little doubt Leprino’s food scientists are laboring tirelessly, in test kitchens at the plant level as well as the main corporate R&D facility, to deliver customers exactly what they need.
“The end result of our success is, for the customer’s finished product — whether it’s pizza or a nutrition bar — how our product performs and what value does it bring to that finished product,” Barz says. “It’s really necessary for us to have a close relationship with customers to allow us to work with their final food product. We’re evaluating a specific need they may have and doing it under their cooking conditions. You have to have a close relationship with a customer to do that.”
Part of that relationship is truly listening to customers, which include many national foodservice venues including the top pizzeria chains, along with other major food companies. “We understand what our customers are telling us about the unique challenges they have. We try to be very proactive when it comes to understanding product application in our customer’s environment,” Jensen says. “It’s a very important part of our success — filling our customers’ needs and going beyond their expectations.”
That relentless pursuit of perfection gives Leprino a great edge in a highly competitive marketplace against peers like Land O’Lakes, Foremost, Saputo and Alto. “Certainly at the point-of-sale level, we think our products are of the highest quality,” says Bob Boynton, senior vice president of marketing and sales. “Our products are engineered to address unique functionalities of the end user.”
To that end, the R&D folks seek to enhance an end user’s understanding of how all the ingredients work together to create the finished product that possesses the attributes they seek, Barz says. “We work very hard to broaden the perspective that a product development effort is more than sending out a sample to be evaluated,” he says. “You can’t look at the individual components by themselves. Once we get over that hurdle, then it becomes a technical challenge. But a good R&D guy will say there’s nothing you can’t solve.”
Furthermore, the great strides Leprino has made in technology and plant efficiency have led to advantageous economies of scale that allow competitive pricing, Boynton says. “In the longer-term sense, we are going to be bringing forth the new, better, more innovative cheese products over the years to a much greater extent than our competitors,” he says. “Part of that is because of our singular focus on Italian cheese and whey and looking for all the niches where those products can perform. Our emphasis on research and development, continuous improvement in our factories and offering customers new generations of products that are more functional than their predecessors — often at lower cost than their predecessors — is why customers ought to buy from us and stay with us in the long term.”
In sum, it’s a simple yet time-tested strategy for expanding market share: work closely with customers to quickly develop and deliver products that meet unique requirements at the best value.
Visit the research lab and test kitchens at Leprino almost any day of the week and you’ll be surrounded by an array of pizzas and other cheese-laden food, prepared for the express purpose of making sure Leprino’s ingredients are everything its customers need them to be. Stick around long enough and you might be asked your opinion about how the blistering looks on the cheese of this pizza, or how well it stretches on that one, or which sample tastes most like a grilled-cheese sandwich.
“I would say 60 to 75 percent of what we do is a customer coming to us saying, ‘We’re looking at promoting this type of pizza product or protein bar, and already have defined the need. We just need you to come back and supply the ingredient,’” Barz says. “About 25 percent of the work we do is new ideas.”
There’s rarely a break in the flow of new ideas here. “To be successful, we need to continue to show customers what we’re capable of, even if they don’t necessarily have an application for that capability at the moment,” Boynton says. “You don’t limit it to the kind of products they’re already buying from you. It doesn’t always happen that day, but maybe a month later or a year later they’ll call you up and say, ‘We saw a product at your place that did this …’ You have to seed that capability in the minds of the people who ultimately will develop those products. And you have to redo it. If we’re doing our job right, we’ve got more capabilities this year than we had last year.”
That philosophy, long applied to Leprino’s cheese business, is starting to emerge on the whey side as well, moving beyond a commodity mindset. The company has significantly ramped up its new product development staff in the whey area.
“There’s been a lot of new capacity developed on the whey side of the business over the last several years,” Boynton says. “In the last 18 months, we have embarked on a new aggressive strategy, particularly in the whey protein area, by applying our considerable research and development skills to bringing functionality to whey protein in much the same way we’ve brought functionality to cheese.”
Already a key supplier of whey proteins for processed cheese, yogurt, infant formula and other food products, Leprino aims to tap the growth of sports drinks, nutrition bars and other such applications for whey protein. With particular emphasis on high-protein products, Leprino has designed special products for the burgeoning ready-to-drink performance beverage market, along with heat-stable applications for power bars, egg-replacing emulsifiers, and binding agents and fat barriers for food coatings.
“We’re looking at applications, whether it’s replacing starches or soy products,” Barz says. “There are a lot of people hanging their hopes on the potential health claims of the whey business, and if those come true, they will carry weight throughout the dairy industry. But we’re not waiting. We’ve spent a lot of time bringing in potential customers who may have never heard of whey protein in their life and talking to them about using it in their foods as an alternative ingredient.”
And with an increased emphasis on protein in the American diet, the whey market stands as a new frontier. “We really feel that’s where the future is for us, to approach whey proteins in much the same way we have the cheese side, identify certain functional needs that users have, then bring a line of whey protein products that meet those needs,” Boynton says.
“I think we’re doing a better job of demonstrating our capabilities across the whole range of products we offer,” he continues. “It’s no longer enough just to send out a salesperson. You need a team approach. You need the R&D person, someone from the product management group, the corporate traffic group. These customers are looking for a partner who can optimize their whole business package. Our customers in general are so big and so fast, and move on such a broad playing field, that it takes an equally comprehensive approach to serving them.”
Leprino continues to upgrade its production technology, investing $600 million over the past four years on plant expansions and technology improvements. The company’s nine U.S. plants contain some of the most technologically advanced manufacturing equipment in the industry, much of it Leprino’s own invention. The company’s plant in Roswell, N.M., built in 1993, was the world’s largest mozzarella plant for a decade, until Leprino’s new Lemoore West facility south of Fresno, Calif., came on line last year.
From brining to dicing, Leprino holds some 50 patents on equipment and processes for making cheese better, faster and in greater quantity, while retaining the quality and functional characteristics customers expect.
“The pizza industry has gotten competitive. They all are looking at their own products and are trying to come up with unique properties, whether it’s flavor, structure of the cheese and so forth,” Barz says. “On a benchtop, we can certainly design that, but we have to figure out a way to put that into a factory that complements our existing processes. We have to be very cost-sensitive — we need to come up with products that can be efficiently produced.”
To ensure success, new processes are perfected at the pilot plant in Denver before they’re introduced system-wide.
It all seems to come back to the Leprino culture of success, whether in processing, marketing or product development. It’s about “not being bound up by traditional boundaries,” Jensen says, “thinking outside the box, not accepting ‘no’ as a roadblock. It certainly was a benefit to not be bound by tradition, to have new and innovative ways to think about the dairy business. That’s been a hallmark of the company almost from the beginning.”
With the completion of Lemoore West, Leprino has no immediate plans for additional domestic plants. But investment will continue in existing facilities to expand production capability for the company’s Ribbon and Wrapped Ribbon cheese products, plus additional capacity to produced functionally enhanced block and pre-shredded, non-frozen (gas-flushed) cheese. Furthermore, Leprino expects to broaden its offerings of string cheese and expand technology to further exploit functional applications for cheese and whey products.
One of the biggest challenges Leprino says it faces is a heightened expectation for food safety, particularly in the aftermath of 9/11. “Attention to security, attention to food safety — all of those things which have always been important have become increasingly so,” Jensen says. “We work extremely hard to ensure that we have the best plants in the world when in comes to sanitation and food safety. I think it’s a real challenge for the industry to rise to that level of expectation because I think any problem with food safety in the industry reflects poorly on all of us. As an industry, we have to be very vigilant.”
Of course, price volatility continues to be a significant challenge. “We’ve seen extreme highs and extreme lows in the cheese market in the last two years. At the extreme lows, we know the dairymen can’t survive, and at the extreme highs we know you can’t sell cheese,” Jensen says. “We have to be supportive of government programs that perpetuate a healthy dairy industry. We’ve been fortunate in the United States that we’ve allowed our dairy industry to continue to grow and prosper, and a lot of efficiencies have been brought to that industry. But when you see government programs that artificially stimulate the market or artificially retain production when it shouldn’t be retained, and don’t allow natural efficiencies to grow, that’s not healthy for us as an overall industry.”
Boynton explains further. “In late spring and early summer, we saw drops in our sales associated with cheese prices being over $2 that were really unprecedented and very dramatic. We saw the effect very quickly and it persisted for an extended period of time. For the most part, however, we were gratified that demand did seem to recover to a substantial degree,” he says. “If price volatility were to cause customers to reduce cheese usage or reformulate with imitation cheese, that could result in permanent demand loss to the U.S. dairy industry.”
The area of product nutrition also presents a challenge. “The dairy industry in general faces a significant level of competition from a well-heeled soy market,” says Mike Reidy, senior vice president for procurement, logistics and business development, noting how industry groups are striving to deliver the message of dairy’s exceptional nutritional profile. “With the pending release of new federal nutrition guidelines, Leprino is also working with IDFA to promulgate the message that cheese products are extremely effective in delivering the dairy nutritional content targeted in the new guidelines.”
Leprino sees the nutrition challenge as a significant opportunity, especially as the obesity debate gains momentum. “For a long time, consumers have held the belief that healthy cheese tastes bad,” Boynton says. “Leprino’s cheese product technology, however, has allowed us to address those concerns. We stand ready with great-tasting, nutritionally enhanced products whenever the consumer market is ready.”
The company’s technological acumen also presents vast opportunities for growth, including its Ribbon cheese line and higher-protein whey products.
“Our line of products is richer and fuller than it has ever been before,” Boynton says, noting the addition of block products to Leprino’s stalwart individually quick-frozen (IQF) shreds line. “We’re offering block products that we think bring a lot more functionality than the traditional block products made by other manufacturers. Another new product line that’s very exciting for us is our Wrapped Ribbon product that utilizes a lot of what we learned from our IQF products, to bring that consistency and convenience to restaurants. We’ve been very gratified by the acceptance of that product in the marketplace; sales have grown dramatically, and we’ve got no reason to think they’re going to slow down for the next several years.”
A line of pre-shredded gas-flushed products and bulk Ribbon also present great opportunities for growth in the private-label retail and foodservice segments as well as the manufacturing market.
It’s unlikely, however, that Leprino will enter the retail arena with its own brand. “We do an awful lot of business with people who have a retail presence and we support them in that regard,” Jensen explains. “The majority of our business is in manufacturing and foodservice. We’re an ingredient supplier. We want to be the best ingredient supplier in the world when it comes to our types of products. We look for constant ways to expand the avenues and horizons under which we can develop those products. From a retail standpoint, we are more focused on how we support those who are significant in the retail business than we are about developing our own retail brand.”
Besides, adds outgoing company president Wes Allen, “we want to support our customers, not compete against them.”
Beyond that, Leprino is looking to adapt its mozzarella for uses not traditionally identified with Italian cheese. “We view our niche as the producers of functional cheese for a variety of cooking applications,” Boynton says. “There’s no reason a mozzarella–based cheese can’t be adapted to perform under a variety of food applications that previously have used other varieties of cheese. We can bring unique functionalities — we can match the color, match the flavor of those other varieties. So that opens up a whole other set of markets to us, both on the foodservice and industrial sides.”
With a 49 percent stake in England’s Glanbia Cheese Ltd., a 2001 joint venture, Leprino continues to eye foreign markets as a route for expansion. The Glanbia gambit has proven successful in growing Leprino’s IQF business abroad, with efforts now focusing on Ribbon products.
Elsewhere, news surfaced more than a year ago that Leprino was planning to construct a manufacturing facility in China. Jensen calls those reports premature. “We are still in discussions and optimistic about developing that opportunity,” he says.
Though in its infancy, the dairy industry in China could be huge if officials there decide to develop it, Allen says. “It’s hard to even envision the full ramifications of a growing China,” he says. “I don’t think they have any idea how successful they could be because they really haven’t concentrated on [dairy]. I think they view dairy as something that would be a good solution to improve the livelihood of people in rural areas.”
A strong producer infrastructure would be a must to ensure a constant supply of quality milk to feed a venture on the scale Leprino envisions.
“We see our relationship there growing in phases, starting with a sales relationship and ultimately growing into some specific investments,” Jensen says. “We have to have our eye on the long term. We have to realize that as years go by, we are increasingly in a global market and we have to be well positioned to compete on a worldwide basis.”
Facing the Future
Continued growth is certainly anticipated at Leprino. Its newest plant was designed to allow expansion to double its current capacity. The company’s corporate headquarters feature vast areas of open space to be filled as administrative needs demand it, and a construction project currently under way will bring the building’s final wing with space for additional offices, expanded research facilities and an employee fitness center.
Considering Leprino’s management philosophy and its attitudes about team work, it’s no surprise that Jensen names people development among factors key to the company’s continued growth.
“Continuing to keep that passion and spirit alive, developing more leaders as the company gets bigger. You have to permeate your leadership even more broadly through your organization,” he says. “I think that’s an important initiative for us — further challenging and developing our leadership core, all the way down to the shop floor. That development of leadership and the accountability that goes with leadership is extremely important to our future. You can only perpetuate yourself as far as your people will take you. For us to achieve the things we dream about, that we believe in, that we know we can make happen, we have to commit ourselves to continuing to develop our leadership base.”
This commitment to a group effort naturally leads to what Jensen views as the company’s most unique aspect. “The passion of our people,” he says, “an unrelenting commitment, desire to always be better tomorrow than you were today. Never being satisfied. The energy that gets generated by that feeling permeates the organization, feeds on itself. It allows us to achieve things in ways that sometimes surprise us.”
The company’s management structure also has contributed to its success, chairman Jim Leprino explains. “We’ve been successful with our philosophy of running a business because we basically have two people that answer to me: the president of the company, who’s in charge of the financial results and the day-to-day business, and the research department, which is the future of the business,” he says.
“We keep the two departments separate so when a customer comes to us with a requirement, it doesn’t take a long time to respond to their needs. To me, the most rewarding thing about the company is that the management has developed to the point that the philosophy of the company is being carried out on a daily basis. We’ve got the quality of people that carry out the philosophy of the company, and they do it with passion and a commitment to doing their job every day and doing it right. It makes my life a lot easier, and after 48 years, it’s a real pleasure to be in the position I’m in.”
With more than a half century behind them, where do Leprino’s leaders see the company going in the next five years?
“We expect to have grown our sales base by at least 50 percent,” Jensen says. “We expect to expand the market potential for mozzarella cheese and whey products beyond traditional boundaries known today. We expect to have expanded our international presence beyond Europe.”
Additionally, the company expects to unveil further technological breakthroughs that will allow it to continue to improve the price-value relationship of its products. Leprino also expects to have ample resources — financial and human — to support its growth.
Finally, management has resolved to keep Leprino privately held. “We believe our ability to remain a private company has contributed substantially to our success,” Reidy says. “We have been able to maintain a long-term perspective when making investment decisions that has proven extremely beneficial in terms of positioning our factories and developing milk supplies. This retention of a long-term business development horizon, coupled with disciplined reinvestment in the business, has facilitated a healthy level of financial independence.”
Leprino has come a long way since its humble beginnings, and while most of the current management team has been in place for many years, no one has witnessed more change than Jim Leprino himself.
“The difference between what we’re doing today and what we did 48 years ago is night and day,” he says. “It takes a lot of hard work, a lot of dedication, a lot of hard-working people developing the ability to produce the same product minute after minute — not day after day, because we’re producing so much of it that you’re concerned about every minute of the production.
“In the old days, you could have a variation of quality that ranged from one to 10. Today, it had better be half of one percent difference from one end of the day to the other. I think we’ve achieved that goal in our success. Our technology has brought us to the point that we produce the same product from the time we start the factory to the minute we close it. That’s the biggest thing I’ve seen — the consistency of quality that we’ve been able to achieve.”
Constant improvement is the name of the game. “If you’re going to stay in your job, you’ve got to learn something every day,” Leprino says. “If not, you get in trouble in a hell of a hurry.”$OMN_arttitle="All the Right Ingredients";?>