Inside A Secretive $3.5B Cheese Empire

GM! It's Friday, April 7th - Today, we're covering the man that controls 85% of the mozzarella cheese market 🧀. We'll unpack how strategic choices transformed him from an ordinary producer to the mastermind behind a near-monopoly.

Let's dig in!

- Callum

FEATURE

Inside A Secretive $3.5B Cheese Empire

Do you know which Forbes list billionaire makes $3.5B in sales every year and controls 85% of the mozzarella cheese market?

You probably don’t– his name is James Leprino. Photos of this 85 year old billionaire only surfaced online last December due to courtroom battles with his two nieces who demanded a larger stake in the cheese empire.

His business Leprino Foods doesn’t like to bring attention to itself either, preferring to quietly execute industry innovations and stay ten steps ahead of the competition.

Let’s figure out how Leprino created a mozzarella cheese monopoly.

So, What’s the Business?

While his old country Italian competitors were focused on making fresh mozzarella balls, in the 1950s Leprino created a business that mass-produced cheese for chain restaurants and distributors.

With such an early start, Leprino secured over 50 patents on cheese production which allowed him to hit 7% net margins, unheard of for other dairy producers.

The bulk of his company’s revenue comes from supplying Pizza Hut, Domino’s, Papa Johns, and Little Caesars with all their cheese needs. Despite the fierce competition between these pizza chains, none of them can find a distributor with a better product or with lower prices.

How They Win

1) Prepare to profit off trends before they hit

In 1958, James Leprino noticed that young people were spending a lot of time in pizzerias and learned that the local pizza shops in his region were buying 5,000 pounds of cheese a week. So, he turned his family market into a cheese manufacturing company.

This tactical move couldn’t have come at a better time– that same year the first Pizza Hut opened, then a Little Caesars opened, and not long after Domino’s began delivering pizza.

Leprino was wise to take up a new business model off a cultural trend he saw forming. This allowed him to dominate the niche of cheese production right before chain restaurants hopped on the cultural wave and increased the demand for his product.

2) Continual innovation

Some industry experts refer to Leprino Foods as a biotech company wrapped inside a food business– and they aren’t wrong. Cheese accounts for 35-40% of the cost of making a pizza, and no one could bring the price of cheese down like Leprino.

Here are just some of Leprino’s industry disruptors that drove down costs:

• A preservative mist that can double as a flavor additive

• Quality Locked Cheese, frozen and shredded portions of mozzarella made easy for franchises to open and use

• A manufacturing innovation that cut down mozzarella’s aging period from 14 days to just 4 hours

3) Nothing goes to waste

Producing cheese results in a milk protein byproduct known as whey. Leprino Foods used to dump all its whey into the river until 1964 when they realized that they could instead sell the byproduct to the producers of protein bars and powders.

Now, Leprino Foods' only direct-to-consumer product is their whey protein powder, Ascent.

4) Cornering the market

In the 1970s, Leprino Foods was located in Denver, Colorado and had access to the nation’s largest milk producers in Wisconsin and New York. However, Leprino noticed that California’s dairy industry was growing quickly.

He locked California dairy farmers into multi-decade long contracts for rates that were above-market locally and below-market nationally.

Why Does This Matter?

Mass-producing mozzarella cheese for pizza chains may not be the most glamorous business, but it is profitable.

But the biggest lever here was going after whales 🐋 instead of mice 🐭.

1 busy pizza shop may buy 100,000lbs of cheese per year. Do

Do you know how much Pizza Hut alone buys?

300,000,000lbs (~3000x the avg pizza shop).

By cornering this highly leveraged market, Leprino gave his business a global scale.

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• The tech CEO also allegedly purchased real data on 4.25m college students that she tried to pass off as her user data.