Spilled Milk? No Problem.

Dairy producer Parmalat Canada overcomes obstacles, thanks to a strong legal team

Tony Cugliari has made a name for himself at Parmalat, thanks to his legal prowess and experience.
Tony Cugliari has made a name for himself at Parmalat, thanks to his legal prowess and experience.

Dairy industry veteran Parmalat Canada has been serving customers for well over a century, hitting its fair share of bumps along the way. In order to survive and, even more important, flourish, the company has shown its resilience through a “don’t back down” attitude—something it would find in its strong legal team.

Tony Cugliari, vice president of legal affairs and general counsel for Parmalat Canada, has endured many legal squabbles since he joined the company in March 2004. Whether it’s an issue revolving trademarks, mergers and acquisitions, or even a financial scandal, he’s seen them all and, above all else, has persevered.

Not long after parent company Parmalat Italy finished its restructuring—which eventually led to Parmalat Canada selling non-core-business units like water and bakery piecemeal to purchasers, and then its parent being relisted on a public exchange—Cugliari was faced with a major threat to Parmalat Canada’s yogurt business. A US competitor was selling its yogurt beverage on Canadian soil on a duty-free basis, making the consumer price considerably lower than Parmalat Canada’s own yogurt beverage, due to the overwhelming price differences of milk in the US and Canada. Milk is one of the few products that is not part of the North American Free Trade Agreement. And at the time, the US price of industrial milk was significantly lower than the cost charged to processors in Canada. So Parmalat Canada took immediate action.

“We saw a key product being threatened, so we took aggressive legal action to intervene and used trade law to defend our investment in this product,” Cugliari says.

The unfavourable advantage of the US processor had already gained the attention of the Canadian Government and the Canadian International Trade Tribunal, which were seeking to impose a duty of 200 percent on the product. Parmalat Canada then sought leave, asking the tribunal for permission to participate in the proceeding to present the negative impact the sale of the US yogurt beverage had on its bottom line. “Once we obtained standing, we made a number of submissions to the government as to why [the company] should not be allowed to continue to import this product from the US, duty-free,” Cugliari explains. “We had to act extremely quickly.”

Parmalat by the Numbers

$5.8 b.
Annual revenue of Parmalat Group

120
Years in business in Canada

$2 b.+
Annual revenue (Parmalat Canada only)

2,900+
Employees in Canada

18
Facilities in Canada

15%
Spoonable yogurt market share (Canada only)

8%
Drinkable yogurt market share (Canada only)

36.5%
Snack cheese market share (Canada only)

On the eve of the tribunal hearing, in the face of mounting legal resistance, the US company worked a solution with the government, whereby they obtained a short-term special exemption to continue to import its product duty-free and was denied a permanent tariff classification.

Parmalat Canada armed itself with an expert lawyer who was able to research and draw on the appropriate resources. “The difficult part is that you have to present market evidence of harm,” Cugliari says. “The trade tribunal is not just going to take your word that this is going to cause you a competitive disadvantage. We were able to show that our product had a strong market share for yogurt drinks and that over a period of time, this competitor, with its lower price, was quickly gaining market share.”

The US company pursued alternative short-term strategies after Parmalat Canada introduced its concrete evidence to support its claim, and was eventually forced to produce its beverage in Canada, using Canadian milk and prices, at its existing Canadian processing facility.

“The key thing for us is that we didn’t want a competitor to be able to import the product duty-free,” says Cugliari. “Part of our argument was that if this was fine, then other processors would purchase American milk, have their product made in the US, and then imported into Canada.”

This was just one of the many successes for Parmalat Canada, whose strong legal team has no problem taking challenges head-on and overcoming them with poise and aplomb. Such a success speaks volumes of Cugliari and his team, as they have positioned Parmalat for future success.