This One Guy Sells 85% Of The Cheese Used By The Fast-Food Pizza Industry
(This post originally appeared on Inc.)
Ever heard of Leprino Foods? I didn’t think so. How about the company’s owner, James Leprino? No? I’m not surprised. And yet if you’re like me, you eat his cheese all the time.
That’s because Leprino’s company, according to various reports cited in in Wikipedia, supplies 85 percent of the cheese used by Pizza Hut, Domino’s, Little Caesars and Papa John’s. You can also find their products in Hot Pockets, Stouffer’s, Smart Ones, Pillsbury Toaster Strudel and even some baby formulas. The company is the largest U.S. exporter of lactose, and they operate in New York, Michigan, Colorado, New Mexico, Singapore, California, Northern Ireland and Wales. Leprino Foods is a giant – the 151st biggest private company in the U.S. based on a 2016 Forbes study – and James Leprino, now 79 years old, is worth nearly $3 billion.
How did one guy build his business from a failed Denver grocery store started by his father in 1950 into a giant organization that effectively controls the pizza industry’s cheese market? Two words: innovation…and luck. And if you want your startup to succeed, you better have plenty of both.
For sure, Leprino was no dummy. He was smart enough to realize, back in 1958, how popular pizzerias were becoming and that there was a business opportunity to sell them cheese, says this report from Celebrity Net Worth. After landing a few contracts to sell cheese to Pizza Hut and Little Caesars (I’ll get back to that soon), he was smart enough to hire an expert cheese-maker and together they came up with a way for selling frozen, pre-sliced blocks of cheese.
This was a big innovation. The product allowed its largest customer, Pizza Hut, to better portion its ingredients that went into each pizza and therefore reduce its costs. A few years later, Leprino once again came up with an innovative preservative mist that solved a growing problem: it stopped the frozen cheese from crumbling when Pizza Hut franchisers failed to thaw it properly. Then Leprino figured out that the same mist could be infused with flavors, and sales continued to take off.
Pretty smart, right? You have to be innovative if you want your startup to be a success. You have to offer something a little different and a little better than the competition to win customers. You have to continuously evolve your offerings based on what the market is telling you. Sadly, that’s the easy part.
There’s something that’s as important for a startup to succeed yet much harder to achieve. It’s luck. For all of Leprino’s brains, his company would not have turned into a multi-billion-dollar enterprise without a good dose of fortune. What kind of fortune? Timing and location.
Remember how Leprino magically landed contracts to sell cheese to Pizza Hut and Little Caesar’s? Actually, there was a little magic involved. This was 1958, for goodness sakes. There was no “big data.” Leprino performed no market research. He just decided to sell cheese to make up for his failed grocery store and because he saw that local pizzerias needed it. Little did he realize that within just five years of launching his new business, Pizza Hut, Little Caesars and Domino’s would also take off and had a huge need for his product.
Now that’s timing! But operating at the beginning of the U.S. pizza boom wasn’t the only piece of fortune that helped. Leprino’s company just happened to be situated at the regional epicenter of the pizza world. His Colorado facility – chosen only because back in 1914 his dad was used to living at high altitudes – was located right between both Wisconsin’s and California’s growing dairy industries. The shorter shipping distances enabled him to negotiate amenable prices below national rates. Another big break came when an executive from Pizza Hut – which accounted for 90 percent of Leprino’s business at the time – left to go to work for Domino’s…and brought Leprino’s products along.
There’s no argument that Leprino is a shrewd businessman. Even today, his company manufactures cheeses for the pizza makers from different silos to maintain each company’s proprietary tastes and ingredients and works with them individually to improve their products. He’s managed to keep the lion’s share of a giant market and passes down the cost savings he gains from his size to his customers. According to the Celebrity Net Worth article, he’s a “modest guy” who is “more likely to fix things around his houses himself rather than call a repairman. He is also a very devout Catholic who donates money to charities anonymously.” That’s important. People like to do business with good people.
But the fact is this: innovation and hard work are not the only factors for success. I’ve met plenty of smart, innovative and hardworking people over the past twenty years who started up businesses that never seemed to get off the ground. You can always point to many different reasons. But to me, there’s always one. Call it luck, fortune or timing, your business isn’t going to truly succeed without it.