Suprema Specialties, Inc.
Suprema Specialties, Inc.
P.O. Box 280
Paterson, New Jersey 07543-0280
Fax: (201) 684-8680
Web site: http://www.supremachez.com
Sales: $108.1 (1998)
Stock Exchanges: NASDAQ
Ticker Symbol: CHEZ
SICs: 2022 Natural Processed & Imitation Cheese; 5143 Dairy Products, Except Dried or Canned
Suprema Specialties, Inc. manufactures, processes, and markets a variety of premium, gourmet, natural cheese products, using both imported and domestic cheeses. It principally markets its product line under the Suprema Di Avellino brand name. The company’s cheese products contain no preservatives, additives, sweeteners, dehydrated fillers, or artificial flavorings. Retail customers include supermarkets, grocery stores, delicatessens, and gourmet shops. The company also sells its products to food manufacturers and to distributors who market the products to restaurants, hotels, and caterers.
Private Company: 1983-91
Suprema Specialties was founded in 1983 by Mark Cocchiola and his brother-in-law, Paul Lauriero. It began as a small family business distributing imported gourmet Italian cheeses—specifically, pecorino romano and parmesan—in the New York City metropolitan area, grating and shredding them, and selling them in cups under a proprietary name. Prior to founding Suprema, Cocchiola and Lauriero had been co-owners of Long Island Diary Distributors, Inc. since 1975, even though Cocchiola was only 19 at the time and Lauriero only five years older.
By fiscal 1988 (the year ended July 31, 1988), Suprema Specialties had annual net sales of $9.25 million. The company lost $46,000 that year. In fiscal 1989 (the year ended June 30, 1989), net sales rose to $10.4 million, and the company had net earnings of $72,000. These figures rose to $12.5 million and $296,000, respectively, in fiscal 1990. For the following year they were $15.4 million for net sales and $143,000 for net earnings. Suprema made its initial public offering in April 1991, selling one million shares of common stock at $3.50 a share. Following this sale, Cocchiola retained 37 percent of the common stock and Lauriero kept 17 percent.
Suprema Specialties was, in mid-1991, processing and marketing the same cheeses, but from Argentina as well as Italy, and it had introduced additional lines of mozzarella and ricotta cheese products, including “lite” versions of these products containing less fat and fewer calories. Provolone was added the following year. The company had relocated in late 1989 to Paterson, New Jersey, which was now the site for its grating, shredding, and packaging operations. A significant portion of its products was now being packaged in bags and shakers as well as cups. Certain products were packaged in shrink-wrapped plastic and plastic pillow packs, ranging in size from one to ten pounds, or in customized sizes, for food service distributors and food manufacturers.
During the 1980s Suprema Specialties expanded its customer base from the New York metropolitan area to New England and Pennsylvania. By mid-1991 it had expanded its marketing efforts to include the Chicago and Baltimore/Washington metropolitan areas, as well as Florida and California. Retail customers, including several regional supermarket chains, accounted for 71 percent of the company’s sales in fiscal 1991. Food service industry distributors, who, in large part, bought in bulk, accounted for most of the remainder. About half of Suprema’s bulk cheese requirements were manufactured by foreign producers in fiscal 1991.
Adding Manufacturing Operations: 1991-97
The proceeds from Suprema Specialties’ initial public sale of stock allowed it to begin manufacturing cheese from raw milk at a leased plant in Manteca, California, the assets of which were purchased from A&J Foods Inc. in November 1991 for $480,000. The company chose California because milk prices were about ten percent lower there and it was one of two states that did not follow industry pricing and standards. Suprema began production with ricotta and mozzarella for the food service industry and parmesan and romano shipped to Paterson for processing and sale. The plant began producing provolone for shipment to Paterson the following fiscal year.
In 1992 Suprema Specialties became the first cheese company to pursue national distribution of Lite Parmesan and Lite Romano cheeses to the delicatessen departments of grocery stores. These freshly grated products, which came in resealable cups, contained 50 percent less fat, one third fewer calories, and at least 25 percent less cholesterol than regular parmesan and romano cheese. (A “lite” version of provolone was added in fiscal 1995.)
Suprema Specialties, by mid-1993, was marketing its product line principally under the Suprema Di Avellino brand name. The company had stepped up its sales to food service distributors and food manufacturers, so that retail customers accounted for only 47 percent of net sales in fiscal 1993. This proportion was to fall further, to 31 percent in fiscal 1994 and 19 percent in fiscal 1995. By contrast, sales to food service companies accounted for about 69 percent of total sales in fiscal 1995 and sales to food manufacturers accounted for another 12 percent. Net sales rose from $23.5 million in fiscal 1992 to $27.4 million in 1993, $32 million in 1994, and $52.1 million in 1995. Net earnings were $335,000, $621,000, $429,000, and $912,000, respectively.
Suprema Specialties’ customers in 1994 included supermarket chains such as Pathmark, Foodtown, and Stop & Shop. Its customers also included pizzamakers. The company’s Paterson headquarters was a processing center where workers trimmed wheels of cheese to remove mold, then placed the wheels into machines that grated, packaged, and labeled them. The Manteca plant was expanded in size during 1994-95.
Suprema Specialties leased a 72,000-square-foot plant in 1996 in Ogdensburg, New York, to process whey and produce mozzarella and provolone cheeses. “Acquiring this East Coast plant,” said Cocchiola, “will now complement our West Coast operations and should strengthen our competitive position.” Also in 1996, Suprema purchased its leased facility in Paterson, which had been expanded to include a refrigerated/freezer storage facility in addition to the company’s executive offices and its production and shipping facilities.
These acquisitions were financed by a secondary public offering in June 1996 of one million shares of common stock issued by the company, in addition to 500,000 shares offered by selling stockholders, at a purchase price of $5.50 per share. The net proceeds to the company came to about $4.5 million. When the underwriter exercised his option shortly after to purchase 225,000 shares at the same price, it brought the company additional net proceeds of about $1 million. Cocchiola held 16.3 percent of the common stock and Lauriero held 9.6 percent in October 1997.
Suprema Specialties, in October 1997, took an extraordinary charge of about $1 million for prepayment penalties and associated fees pertaining to the prepayment of subordinated debt. It also repurchased warrants to purchase 354,990 shares of common stock. Company debt was retired by means of a $10 million bridge loan replaced in March 1998 by a $10.5 million subordinate loan from Albion Alliance Mezzanine Fund, L.P. and the Equitable Life Assurance Society of the United States. At the same time, the senior lender, Fleet Bank, N.A., increased its revolving credit line to the company to $25 million.
Suprema Specialties in 1998
Suprema Specialties’ net sales rose from $65.1 million in fiscal 1996 to $88.3 million in fiscal 1997 and $108.1 million in fiscal 1998. Net income, $1.4 million in 1996, fell to $120,781 in 1997, which the company attributed primarily to a $944,000 write-off of its marketing service agreements, but increased to $2.4 million in 1998, despite an extraordinary charge of $1,011,000 for prepayment penalties related to the early extinguishment of the subordinated debt and related fees. The long-term debt at the end of fiscal 1998 was $35.5 million.
At the end of fiscal 1998 Suprema Specialties was manufacturing bulk cheeses at its Manteca and Ogdensburg facilities and purchasing bulk cheeses from foreign sources—primarily from Europe and, to a lesser extent, South America—and from domestic sources. Bulk cheese was being repackaged and sold to food service distributors and food manufacturers under the Suprema Di Avellino name or on a private-label basis, or it was being grated or shredded and packaged by Suprema and sold to retail customers under the Suprema Di Avellino name in clear plastic cups, bags, and shakers. The company also was selling certain of its products in shrink-wrapped plastic packaging and plastic pillow packs ranging in size from one to ten pounds or in customized sizes for food service distributors and food manufacturers.
Our mission is to become the preeminent manufacturer and processor of high quality imported and domestic natural cheeses for the retail and food service industries, while building a respected national brand identity, providing a rewarding and challenging environment for our people and maximizing shareholder value.
Suprema’s product line, which it marketed, for the most part, under the Suprema Di Avellino brand name, primarily consisted of grated and shredded imported and domestic parmesan and romano cheeses, imported pecorino (sheep’s milk) romano cheese (including “lite” versions of these products with less fat and fewer calories), bulk mozzarella, ricotta, and provolone cheese. Sales of mozzarella, ricotta, and provolone cheese products manufactured at Suprema’s Manteca and Ogdensburg facilities accounted for 71.8 percent of the company’s revenues in fiscal 1998. The Manteca plant was manufacturing mozzarella, parmesan, provolone, ricotta, romano, lite parmesan, and lite romano. The Ogdensburg plant was manufacturing mozzarella and provolone. Both facilities also were converting whey into WPC, a sweet, high-protein food substance.
Suprema Specialties received gold, silver, and bronze medals at several prestigious cheese contests in 1998 for outstanding quality and taste of its mozzarella and provolone cheeses. The company also announced that it was installing a whey-drying operation to allow it to process whey from the concentrated state into a powdered form, thereby increasing its value when sold. Whey by-products were a vital and growing segment of the cheese industry and were being distributed both nationally and internationally to industries such as pharmaceutical, confectionery, dairy foods, and bakeries.
Sales of bulk cheese products to food service industry distributors and food manufacturers under the Suprema Di Avellino name or on a private-label basis accounted for 41 percent of the company’s revenues in fiscal 1998. Supermarket customers included King Kullen, Shop-Rite, BJ’s, Foodtown, Stop’N Shop, D’Agostino’s, Super Valu, and Giant. Sales to food service companies accounted for about 88 percent of the company’s revenues in fiscal 1998, food manufacturers accounted for about six percent, and retailers accounted for about six percent. A&J Cheese Co. was the leading single customer in fiscal 1998, accounting for 18 percent of the company’s revenues. A milk cooperative was Suprema’s leading provider in the fiscal year, accounting for almost 25 percent of its supplies.
Suprema Northeast, Inc.; Suprema Specialties West, Inc.
Coleman-Lochner, Lauren, “The Big Cheeses: Companies Carving Paths to Success,” Bergen (New Jersey) Record, October 21,1994, p. D7.
Flower, Michael A., and Douglas Jones, “Suprema Specialties Acquires Assets of California Cheese-Making Facilities of A&J Foods,” Business Wire, November 8, 1991.
_____, “Suprema Specialties Announces New Lite Grated Cheeses,” Business Wire, March 18, 1992.
“Suprema Specialties’ New Plant Opens,” Dairy Foods, October 1996, p. 12.