Parmalat, Italy's giant dairy foods producer, was founded in 1961 by Calisto Tanzi, a 22 year-old college dropout and Italian food industry heir
. The company was named for Parma (“the food valley” in Italian) and lat (an abbreviation of la tte, Italian for milk). Parmalat's major innovation allowed it to produce the first shelf-stable milk through an Ultra Heat Treatment (UHT) process developed in Sweden, enabling proc essors to produce milk that c ould be stored for long periods without refrigeration. The product was a hit, benef iting from its associations with and advertising through sports, including Formula One Racing an d Alpine Ski Championships. Parmalat was a
European pioneer in brand advertising. Sale s rapidly expanded throughout Europe, Latin
America and, in total, in over 30 countries. The firm rapidly grew into a family empire, the largest food company in Italy, the fourth la rgest food company in Europe, with over 36,000 employees in 139 plants and branching into a variety of industries including beverages, television, tourism, cookies and f ootball. In 1997, Parmalat initiat ed an aggressive campaign to acquire other firms, particularly in the Americas
. One of its large purchases in 1997 was Beatrice
Foods, a large U.S. producer. Many of these acqui sitions were huge money losers. Most of the acquisitions were financed with debt and the firm's debt ratings gradually deteriorated.
4
Nonetheless, Parmalat appeared to be a good ci tizen to many Italians, donating to Catholic causes and rebuilding a cathedral in
Parma. By 2002, the firm had grown to realize €13 billion in sales. On the surface, all seemed at least reasonably well with Parmalat thr ough 2002. In addition to many individual shareholders, Parmalat had a number of well-regarded institutional investors and creditors, a