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The Parmalat Collapse


Code : GOV0001

Year :

Industry : Food, Diary and Agriculture Products

Region : USA Europe

Teaching Note:Not Available

Structured Assignment :Not Available

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Introduction: In 1961, an innovative young entrepreneur, Calisto Tanzi (Tanzi) dropped out of university to concentrate on turning around his family’s salami and cured meat business in the village of Collechio outside Parma, Italy. After the death of his father,Melchiorre, 22-year old Tanzi took over the business and decided to produce new range of products that would achieve excellence through a strongly distinctive brand. He started with dairy products and opened a small dairy plant near Collechio to supply milk to the city of Parma and surrounding areas. He named the company Parmalat, after the city Parma, adding the word “latte” (the Italian for milk). Parmalat was created with the idea that milk could be transformed from a local farm commodity into a big international business.

In 1963, a Swedish company developed a new technology called Ultra Heat Treatment (UHT) that allowed dairy processors to producemilk with longer shelf life than any othermilk in themarket.When Tanzi noted this new technology, he decided to bring this idea to Italy, where most of the milk was home delivered in glass bottles.

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Unlike the bottled milk, the cartonmilk allowed Parmalat to put the company’s name on the product. The name Parmalat was given to the milk produced, and its tetrahedron shaped paper packaging was known, as Tetra Pak. Parmalat became the country’s first producer of branded milk, and later went on to become the world’s largest producer of UHT milk. Parmalat’s ‘Milk Box’ became an instant success and rapidly attained a prominent place on store shelves around the world. From the beginning, Tanzi’s approach was swift and aggressive. He used door-to-door advertisement, displayed company ads on vans that supplied milk, and developed new products from time to time.


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