I consume a fair amount of cheese. Toasted cheese (made with cheddar) is a go-to lunch. I like throwing some mozzarella into a salad. I have parmigiano/reggiano in the fridge for pasta nights. And what would pizza – which I have on occasion – be without cheese?
My local pizza comes from Upper Crust. If I’m at my sister Kath’s, it’s from Otto. If I’m at Trish’s, we’re talking Mandee’s. No chains for us!
But if we were ordering up from a major national chain – which, blessedly, we have no need to – the cheese on the big pizza pie would be from Leprino Foods, which holds a near-monopoly on the cheese used by pizza chains. (And if you ever burned the roof of your mouth on a Hot Pocket, that was Leprino’s cheese scalding you.)
The company started out as a modest shop in Denver’s Little Italy. The shop was founded by an Italian immigrant, but the success of the business is due to the genius of one of Mike Leprino’s sons.
The shop was going along, selling the produce Mike grew on his farm, augmented by home made cheeses and ravioli, when:
James, the youngest of five children, noticed his classmates spending free time at neighborhood pizza joints. After graduating high school in 1956, he started working with his father full-time and shared a revelation: "Pizzerias in this part of the country were buying 5,000 pounds of cheese a week," he recalls. "I thought, This is a good market to go after, so I did." In 1958, after larger chain grocery stores had forced the Leprino market to close, the Leprino Foods cheese empire started with $615. (Source: Forbes)
Good timing! Pizza was just taking off as a “thing.” And what an empire Leprino’s turned into.
His laser focus on large pizza chains has allowed him to control as much as 85% of the market for pizza cheese and somehow sell simultaneously to a set of customers — Pizza Hut, Domino's, Papa John's and Little Caesars — that try to cut each others' throat in every way that doesn't involve where they buy their milk products. Dominating the market has its advantages: He's able to invest in technology that no run-of-the-mill dairy farmer ever could, resulting in more than 50 patents —and an estimated 7% net margin, which dwarfs the dairy-industry average.
Some may sneer. We’re talking “pizza cheese” here, not artisanal, handmade balls of fancy mozzarella from Maplewood Farm in North Bennington, VT. (Three guesses where the mozzarella in my fridge comes from…) But 85% market share; 7% industry-dwarfing net margin. Mamma Mia!
Jim Leprino had good luck with his timing, but he took scaling up his cheese business seriously. And got a bit lucky there, too.
Leprino realized he needed to learn the science behind making cheese on a mass scale. But with a young daughter at home and another baby on the way, he didn't have time for college. Instead, he hired Lester Kielsmeier, who had run a cheese factory in Wisconsin only to find out that it was sold during his stint in the Air Force during World War II, because his dad believed he'd been killed in action. "When Lester came, I went downtown to the junkyard and I bought a couple bigger cheese vats to make it look like we were really in the business," Leprino says.
So, if Lester Kielsmeier’s father hadn’t thought he was KIA…
Anyway, while Lester focused on scaling up and perfecting the cheese product, Leprino lasered in on the biz. He saw that they were dumping the whey they didn’t use in cheese, and found a market in Japan for it.
More than a half-century later, Leprino Foods remains the largest U.S. exporter of lactose, a by-product of sweet whey, and retains a large market share in Japan.
Leprino’s also developed a preservative mist that keeps the pizza cheese from crumbling when it’s thawed. (Thawed cheese? I’m betting the Maplewood Farm doesn’t use preservative mist on those tightly wrapped balls o’ cheese that have a sell-by date a week out…) Jim Leprino was also savvy enough to get some good deals going with the California dairy industry which in the 1970’s was growing and starting to rival those of Wisconsin and NY. So he ended up with a steady flow of milk, at a good price, into his vast pizza cheese vats.
There are plenty of other innovations along the way that turned Leprino’s into the monopoly it’s become – the entire story is a really interesting read. Not that those innovations make me sit up and say, “Man, I think I’ll order a Domino’s tonight.” I’m pretty fixated on that frozen cheese thing. But when it comes to monopolizing pizza chain cheese, this guy sure did it right. And Jimi Leprino didn’t give any of the store away either. Lester Kielsmeier, the man responsible for so many of the cheese breakthroughs, was never given any equity. I guess if you’ve survived getting killed in action, just having a job and a steady (and good) paycheck to look forward to was plenty enough. (Kielsmeier, by the way, lived to be 95 and worked up until his death.)
Jim Leprino is pretty shrewd, family-wise, too.
Leprino's succession plan is simple: He'll split ownership between his two daughters, Terry, 57, and Gina, 55, who have been on the board for years but won't take day-to-day roles. "I don't want them to be living a corporate life resentfully," Leprino says.
And that, my friends, is the truest indicator of Jim Leprino’s genius.
Jeez Louise, what a story.
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