Bongrain SA

views updated

Bongrain SA

42 rue Rieussec
78223 Viroflay Cedex
France
(33) 1.01.34.58.63.00
Fax: (33) 1.01.30.24.03.83

Public Company
Incorporated: 1920 as Fromagerie d’llloud; 1970 as Bongrain-Gérard
Employees: 8,549
Sales: FFr 11.583 billion (US $1.99 billion) (1997)
Stock Exchanges: Paris
SICs: 5143 Dairy Products Except Dried or Canned; 2022 Cheese—Natural & Processed; 6719 Holding Companies, Not Elsewhere Classified

In France, cheese is spelled with a “B”—for Bongrain, Besnier, and Bel, the country’s top three cheese and dairy producers, together responsible for more than 50 percent of all cheeses sold in that country. Bongrain SA counts among the world leaders in cheese and dairy product sales, with an extensive international presence, including a strong position in the United States through its subsidiaries Zausner and Aita Dena and such brands as Real Fresh, which together provide some 16 percent of the company’s annual sales. In South America, Bongrain has built a leading presence in Brazil and Argentina, with production facilities in Chile and Uruguay as well. Bongrain also has maintained a continued presence in the developing Asian countries—for the day when these vast consumer markets adopt a taste for cheese.

Yet sales in Europe, and especially France, continue to account for more than 80 percent of Bongrain’s annual revenues, with France alone providing some 48 percent of revenues. Outside of France, Bongrain’s principal European markets include Germany, which provides some 13 percent of sales, with Italy, Spain, and Portugal figuring among Bongrain’s major European markets as well. In addition, the company has made strong moves into the emerging Eastern European markets, with a focus on Hungary, the Czech Republic, and Poland. With the mature French market—which counts more than 500 cheese specialties—providing limited opportunities for future growth, Bongrain has stepped up its international expansion in the 1990s.

Unlike rivals Besnier and Bel, which tend toward a centralized focus especially on single-brand sales (President and La Vache Qui Rit, respectively), Bongrain long has operated as a holding company for an extensive portfolio of subsidiaries and individual brand development—with some 40 brands, including the company’s flagship Caprice des Dieux brand, in France alone. Since the 1950s Bongrain has maintained an intensive research and development wing, providing for the regular introduction of new cheese brands, enabling the company to establish positions in nearly every market segment. The company also has exhibited a flair for marketing and packaging that has enabled it to reinforce its new product launches, producing an enviable record of successes. Among the company’s top-selling brands are Saint-Agur, P’tit Louis, Tartare, Fol Epi, Alouette (for the U.S. market), and Vieux Pané.

Decentralization is the key to the Bongrain organization. Built through acquisition, the company maintains an extensive list of subsidiaries, grouped principally under its European and International divisions. Many of the company’s subsidiaries long have been responsible for production of single brands or types of cheeses—important in a country where cheese production remains in large part a matter of regional specialties. A vast program of capital expenditures for the opening of new plants and the renovation of existing plants begun in the 1990s, however, has converted many, if not most, of the company’s production facilities into multi-type plants. In addition to the subsidiaries listed under parent Bongrain SA, the company’s 10.3 percent share (through Bongrain family shareholding arm Soparind) of Compagnie Laitière Européenne (CLE, the former Union Laitière Normande) gives it operating control of that producer of an extensive line of dairy products and raw materials. The struggling CLE, however, remains unconsolidated with the Bongrain group’s activities.

Bongrain continues to be led by founder Jean-Noël Bongrain. In late 1997, however, the 72-year-old Bongrain led a restructuring of the company, giving operating control of the company to long-time friend Bernard Lacan, while looking toward the family’s succession by placing sons Armand and Alex in directorship positions. Through the Bongrain shareholding company Soparind, the Bongrain family holds nearly 51 percent of the company. After a difficult period in the mid-1990s, Bongrain appears to be back on course, with 1997 revenues rising past FFr 11.5 billion (nearly US $2 billion), for net profits of more than FFr 313 million.

Inspired by the Gods in the 1950s

Bongrain was founded as a small family-run cheese-making farm in the 1920s in Illoud, a village in the Haute Marne (Ardennes-Champagne) region of eastern France. Jean-Noel Bongrain formed part of the second generation to operate the family business, together with his older brother. But after Bon-grain’s brother was killed as a member of the Resistance during the Second World War, the family company came entirely under the then 19-year-old Jean-Noël Bongrain’s leadership. Bongrain soon began to seek a new dimension for the small Fromagerie d’Illoud, one that would break the mold of the postwar French dairy industry, which was characterized chiefly by small or mid-sized independent companies, each concentrating on regional varieties. Among a single cheese variety, quality and other characteristics, such as flavor and texture, could vary widely, even when produced by the same company. The idea of “nationally” branded cheeses was still barely known—with Bel’s La Vache Qui Rit forming one of the few exceptions.

By the start of the 1950s Bongrain, too, began searching for his own unique cheese. Together with employees, Bongrain spent some five years in research and experimentation, perfecting a formula that would provide not only a unique taste, but also the consistency of quality needed to break out of the regional boundaries. By the mid-1950s Bongrain had found his cheese: a molded cheese, with a firm outer skin yet with a soft, fresh-tasting center. Wedding modern production methods with traditional French cheese-making craftsmanship, Bongrain was able to provide the quality consistency needed to win over the French consumer, while maintaining an appealing flavor and texture.

Inventing the cheese was only part of the company’s victory. Bongrain quickly proved himself an intuitive master of the art of marketing. Rather than package his new cheese in the common shape of the day (typically, round molds), Bongrain chose an oval form, instantly recognizable among the others. The cheese required a name, too: Bongrain chose Caprice des Dieux (“caprice of the gods”). The cheese’s label also was chosen carefully, although the original portrayal of Zeus and Poseidon would give way to a longer lasting “angel” motif in the 1960s, while maintaining a tri-color scheme (blue for freshness, white for purity, red for passion) emulating the French flag. The company proved equally adept at inventing marketing slogans to appeal to the French consumer, including the early “un amour de fromage.” Bongrain also made ready use of radio and television and other advertising venues. With such techniques—unusual for the French cheese industry of the time—Bongrain sought to build the brand beyond simply another cheese variety. Caprice des Dieux proved a quick success, launching Bongrain on a national scale.

Bongrain soon began to look over the French border. By the end of the 1950s Caprice des Dieux had begun to captivate German consumers as well. In the following decade the company moved into other European markets as well, including Switzerland, Austria, Italy, and Spain. The company also established subsidiaries in each country to provide for distribution. In the 1960s Bongrain began to look for further domestic expansion opportunities. Growing demand for Caprice des Dieux required the company to develop a more extensive supplier and production network. At the same time Bongrain sought to expand the company beyond its already famous single product. During the 1960s the company established a steady supply of milk with a regional network of dairy producers. The company also began buying other small cheese makers, for the time centered in the same region. The first wave of conglomeration in the food and dairy industries was already under way. Yet Bongrain resisted this trend, instead operating its acquisitions as small-sized, “human-scale” subsidiaries linked to the regional dairy network. Production of the new acquisitions, however, was converted toward products supporting the company’s plans to expand its portfolio of cheese varieties.

An early addition was Tartare, produced by the company’s Fromarsac subsidiary in 1964. The new brand again displayed the company’s care for packaging: Tartare became one of the first cheeses to be packaged in portions. In 1967 the company acquired Fromageries des Chaumes, launching the company into that cheese variety as well. This acquisition was followed the next year by that of the Compagnie Fromagère de la Vallée de T Anee. During the same period the company also had begun a similar policy in its foreign markets, acquiring a string of cheese producers in each country.

Building Scale in the 1970s and 1980s

The 1970s would see Bongrain’s company emerge as one of France’s premier national cheese producers. In 1970 three major acquisitions, of Laiterie Céntrale Krompholtz, Grand’Ouche, and especially Gérard, gave the company a new boost in size. In that year Fromagerie d’Illoud changed its name to Bongrain-Gérard. More French acquisitions followed, including those of the Laiterie de la Vallée du Dropt in 1971, Siclet in 1973, and Rambol in 1975, accompanied by the creation of another subsidiary, Société Savoyarde des Fromagers du Reblochon. Each acquisition would strengthen Bongrain’s line of cheese varieties.

In the mid-1970s the company also began to look beyond Europe. In 1975 Bongrain entered South America, with the purchase of Polenghi, in Brazil, the first of a series of Brazilian acquisitions that would establish Bongrain as that country’s leading specialty cheese producer. The following year Bongrain made a move into the U.S. market with the takeover of Colombo. Bongrain was quick to adapt its technical and marketing strengths to the new market—and the taste buds of Americans—launching a line of successful products, including frozen yogurt, before branching out into other food products, including sauces.

By 1979 the company had firmly established itself as one of France’s top cheese producers, as well as a leading specialty cheese maker worldwide. In that year the company reorganized, before going public the following year and adopting the new name, Bongrain. The company’s plans for the 1980s continued its ambitious expansion. In 1980 the company set up new production facilities in Australia and New Zealand, complementing this development the following year with the acquisition of Australia’s Lactos. These moves were made with an eye on positioning itself to enter the rapidly developing Asian markets—for the day when consumers in those countries might adopt more Western eating habits, including the consumption of cheese products.

Bongrain marked the 1980s with a long series of acquisitions, including Martinus in the Netherlands; Johnston, Kolb-Lena, and Real Fresh in the United States; Skandia and Campo Lindo in Brazil, and Horizons Laitiers in France. In 1989 alone, the company acquired nine companies, adding Italy’s Ludovico and Faprena; the United States’ Alta-Dena; Hirz, of Switzerland; Millway Foods, of Great Britain; Aiuruoca, of Brazil; and three French concerns, La Cloche d’Or, La Fromagerie du Velay, and Fauquet. Among the products launched by Bongrain were the successful P’tit Louis and Fol Epi cheeses. By then, the company’s annual sales neared FFr 6 billion.

During the same period the company also attempted to diversify, principally through the Bongrain family shareholding group, Soparind, through a separate company, IFM, which established a strong position in the prepared meat products market. The company met with more limited success as it attempted to enter the confectionery market; in the early 1990s the company would sell off these activities to the foods giant BSN, later known as Danone. Together, these activities, which remained private and separate from Bongrain SA, were estimated to contribute an additional FFr 6 billion in yearly sales.

Squeezed in the 1990s

Bongrain started the 1990s with several new strategic moves, including the 1990 acquisition of Fromagerie Paul Renard and an alliance with the Union des Coopératives Bressor, which added that company’s popular Bresse-Blue and Grièges brands. In 1992 rivals Bongrain and Besnier—itself continuing a long acquisition spree, including the acquisition of dairy producer Bridel, which had placed it as the country’s leading dairy and cheese producer—went head to head for the control of the Union Laitière Normande (ULN). Bongrain won, taking a ten percent share and operating control of the subsidiary, renamed Compagnie Laitière Européenne (CLE). CLE, however, would enter a difficult period, posting losses into the late 1990s.

Meanwhile, Bongrain was entering a new market: Eastern Europe. As these countries were opening up to foreign invest-ment and establishing free markets with the end of Soviet dominance, Bongrain established positions in Hungary, with the acquisition of Veszpremtej, and in the Czech Republic, with the acquisition of Pribina, while also adding production facilities in Poland. The company also expanded its South American presence by moving into Chile and Uruguay in the mid-1990s. During this time the company embarked on an intensive capital investment program, designed to modernize its French production plants, including the building of new plants and the renovation of existing plants. The company’s subsidiaries now were converted from single-product facilities to being capable of producing multiple cheese varieties.

The cost of these investments, coupled with a continuing recession, losses from the ULN, and pressure from elevated French milk prices, combined to put the squeeze on Bongrain. Revenues, which had risen to FFr 9.7 billion in 1992, fell to FFr 9.6 billion in 1993. Although the company’s revenues would climb again in the mid-1990s, topping FFr 10.4 billion in 1996, its profitability was faltering, with net earnings dropping from FFr 366 million in 1994 to just FFr 300 million in 1996. In response—and as well as to ensure the company’s succession, as Jean-Noel Bongrain turned 72 years old—the company restructured its organization in September 1997. While sons Armand and Alex Bongrain took directorships in the company, actual operating leadership of the company fell to long-time family friend Bernard Lacan, former CEO for Nestle subsidiary Findus.

In 1998 Bongrain’s difficulties appeared to be in the past as the company posted its results for the 1997 fiscal year. Sales had risen strongly to more than FFr 11 billion, and net earnings regained slightly to FFr 313 million. While certain of the company’s markets remained under pressure, Bongrain was poised to continue its thrust to become an international cheese leader.