ContiGroup Companies, Inc.

views updated

ContiGroup Companies, Inc.

277 Park Avenue
New York, New York 10172
Telephone: (212) 207-5100
Fax: (212) 207-2910
Web site:

Private Company
Employees: 13,500 (2000)
Sales: $15 billion (2000)
NAIC: 422510 Grain and Field Bean Wholesalers; 31111 Animal Food Manufacturing; 311611 Animal (Except Poultry) Slaughtering; 311615 Poultry Processing

Formerly Continental Grain, ContiGroup Companies, Inc. is a world leader in integrated pork and poultry production, cattle feeding, and agriculture. Founded in 1813 as a commodity trading business in Belgium, ContiGroup was the second largest grain exporter in the United States until it sold the commodity marketing side of its business to Gargillthe largest U.S. grain exporterin 1999. After the sale, the company changed its name from Continental Grain to ContiGroup and focused principally on meat proteins. Since the shift in focus, ContiGroup has become the second largest integrated pork producer in the United States. It operates 12 poultry plants in the southeastern U.S., runs one of the worlds largest cattle feeding operations, and operates one of the largest shrimp farms in Ecuador. The company also has interests in animal feed, flour milling, and aquaculture in China, Latin America, and the Caribbean. ContiGroup owns 78 percent of the publicly traded finance company ContiFinancial (which was under bankruptcy in 2001), and operates an investment business, Contilnvestments.

A Family Tradition

In 1994, Paul J. Fribourg was named president and chief operating officer of Continental Grain, representing the sixth generation of the Fribourg family to enter the companys highest echelon of management. Concurrent with Paul Fribourgs promotion, his father, Michel Fribourg, made room for his second-born son in Continentals executive management hierarchy by moving aside to become the companys chairman emeritus, a position he held until his death in 2001. Michel Fribourgs stepping-down marked the gradual transfer of power from one Fribourg to another in a chain of command that stretched back nearly two centuries. It was Michel Fribourgs great-greatgrandfather, Simon Fribourg, who founded the commodity trading business in his native Belgium in 1813. Fribourgs business was nearly two decades old when the industrial revolution commenced, forever changing the face of Europe and creating fertile ground for Simon Fribourgs commodity business.

European Origins

That Simon Fribourg founded his business before this monumental shift from an agrarian Europe to an industrial one was propitious. In the coming half century, Europe would experience unprecedented scientific progress and social change, engendering significant and wide-ranging developments in industry, commerce, and trade that brought vast new wealth to western European countries. Before the century was through, an extensive system of railways, under construction in Belgium by the 1850s, would not only significantly increase the speed of shipping goods, but it would also cut the cost of transportation in half. The methods by which these goods were produced changed as well, as small-scale craft industries and guilds gave way to the age of mechanization and full-fledged manufacturing plants. With the proliferation of these modern, heavy industries came large towns and cities and the emergence of a new class of citizens able to survive and prosper through the manipulation of capital rather than by owning land or tending to it.

As the effects of this industrial revolution spread, a society and marketplace for Fribourg and his business were made immeasurably stronger, buttressed by the advent of a middle class, the development of railroads, and the emergence of large urban and industrial centers. The effects of the forces that created this new Europe would enable Fribourg and his descendants to flourish in a world of commerce that, as the industrial revolution took firm root in Europe then spread elsewhere, witnessed the rise of merchants, manufacturers, bankers, and commodity traders like Fribourg.

Before Europe was transformed by the industrial revolution, Simon Fribourg operated exclusively in Belgium, maintaining his company as a domestic commodity trading business. Simon then gave control of the company to his son, Michel Fribourg. Under Michel Fribourgs watch, the family business would make a significant move beyond Belgiums borders, as the currents of the industrial revolution reverberated from their origin in Britain to reshape three continental countries in particular: Germany, France, and Belgium.

Although many of the changes taking place during the century pointed toward industrial progress, rapid advances in agricultural methods occurred as well, leading to more abundant crops and occasional surpluses of food. Steam-plows and steam-threshers were becoming more and more common by the 1840s, replacing the tedious and millennia-old method of tilling and harvesting by hand. By the time these new agricultural implements were emerging in substantial numbers, investments by the Belgian aristocracy stimulated the growth of heavy industries in the valleys of the Meuse and Sambre.

Despite these early technological gains, the Irish potato disease of 1845 and 1846 had repercussive effects on the European mainland, leading to a grave shortage of wheat that doubled prices in western Europe in the late 1840s. Food riots erupted in Italy, France, Germany, and Belgium, and a financial crisis erupted after banks exhausted stocks of gold to pay for wheat. To exacerbate the situation, a severe drought crippled Belgian agriculture in 1848. In the midst of this tumult, Michel Fribourg made a fateful decision that forever changed the future course of his familys business. In 1848, Fribourg traded several trunks of gold for the as yet untapped market of Ukrainian wheat, which he in turn sold to his hungry fellow Belgians. This event signaled the beginning of the rise of the Fribourg family fortune.

In the coming years, the tides of change moved in a favorable direction for the Fribourg family, particularly as it began to perate as an import and export commodity trading business. Although industrial output had doubled in Europe in the 35 years spanning Simon Fribourgs founding of the business and the decision by his son to purchase Ukrainian wheat, free trade in the region continued to be stymied by a complicated web of tariffs and import restrictions. However, this web began to unravel slowly, just prior to Michel Fribourgs foray into Ukrainian wheat, making the second half of the 19th century a much more hospitable environment for the family business. As with the industrial revolution itself, Britain led the way toward the easing of tariffs and import restrictions, repealing the Corn Laws in 1846 and removing regulations which hampered wheat imports. Other European countries followed suit, enabling the Fribourg enterprise to expand and prosper; by the end of the century it had become a grain trading empire.

Nearly all of the changes that made the nineteenth century a signal era in modern history also made countries highly dependent on traded grain. As the twentieth century approached, the companys position as a premier commodity trader put the Fribourg empire at the crest of the remarkable period of commercial growth that would affect the entire world. The same industrial, social, and scientific advances that had swept through Europe were, by the turn of the century, raging in the United States, a country with tremendously vast agricultural potential. Accompanying this shift from east to west, particularly in terms of agricultural production, Russia, which had become Europes primary grain supplier in the nineteenth century, ceased to serve as such after World War I, creating a new market for the Fribourg family to broker their commodity services.

American Venture

To capitalize on this limitless new market, the Fribourg family business, at that time led by Jules and Rene Fribourg, established its first U.S. office in Chicago in 1921. That same year, the company was reorganized as Continental Grain Company. Continental Grain strengthened its U.S. presence in 1930, when it leased a Galveston terminal from Southern Pacific Railroad. Interestingly, the Great Depression served Continental Grain well, for it enabled the company to purchase existing U.S. grain facilities at bargain prices. During the decade-long financial slide, Continental Grain purchased U.S. grain elevators across the country, obtaining facilities in such key locations as Kansas City, Kansas; Nashville, Tennessee; and Toledo, Ohio. By the end of the decade and after less than 20 years in the United States, the company had established both a sophisticated grain network and a stable and growing business in North America.

The outbreak of World War II in 1939 not only signaled the coming of hostilities that would stretch across the globe, but it also portended flight from Belgium for the Fribourg family. When the Germans captured Belgium in 1940, the Fribourgs were forced to flee their homeland and emigrate to the United States, where they continued to run their successful agricultural commodities business. Among the family members in this abrupt emigration was Michel Fribourg, named after his greatgrandfather who had established the firm foundation for Continental Grains subsequent success.

Company Perspectives:

Drawing on nearly two centuries of innovation and achievement, ContiGroup Companies brings together some of the strongest, most experienced operations in international agribusiness, and ranks as a major supplier of nutritional protein to people around the world. CGC is one of the worlds largest cattle feeders; the sixth-largest integrated poultry producer in the United States; and, through its interest in Premium Standard Farms, the nations second-largest integrated pork producer. The company is also a leader in aquaculture and flour milling, and one of the largest animal feed and poultry producers in China.

Postwar Leadership

After his fathers death in 1944, Michel Fribourg, then 31 years old, assumed control of what had become a $300-million family enterprise. Ultimately, Michel would prove to be one of the companys most capable leaders, preparing Continental Grain for a modern global economy most notably through the diversification of the companys business network into the production of beef, pork, and poultry products and the broadening of their business scope to include feed and flour milling and financial services. Michel Fribourg also achieved considerable success in geographically increasing the scope of Continental Grains operations by expanding them into more than 50 countries, which served customers in more than 100 countries.

The strides achieved by Michel Fribourg during the postwar period were momentous, particularly through two of his most noteworthy achievements, one of which bore a striking resemblance to the greatest achievement recorded by his great-grandfather and namesake. Through the negotiating efforts of Michel Fribourg in the 1960s, Continental Grain hammered out a historic grain trade agreement with the former Soviet Union, becoming the first company to export American grain to the United States cold war adversary. This lucrative trade agreement was followed a decade later by a similar deal with China, and Continental Grain became the first company to export American grain to that country.

Against the backdrop of these two significant trade agreements, Continental Grain embarked on an aggressive acquisition program during the 1960s and 1970s, purchasing Allied Mills, Inc., a feed mill concern, in 1965, and absorbing numerous agricultural and transport businesses. These acquisitions, part of Michel Fribourgs diversification drive, brought together several notable properties under Continental Grains corporate umbrella, including feedlots in Texas, an English soybean producer, a bakery, and the agricultural products unit of Quaker Oats.

Entering the 1980s, Continental Grain narrowed the scope of its operations, divesting itself of its banking units and its commodities. The agricultural bust of the 1980s, however, resulted in the companys once again diversifying its operations by forming a number of financial units, most notably ContiFinancial. By the middle of the decade, the company was generating an estimated $14 billion in annual sales, up from roughly $5 billion a decade earlier, a prodigious sales volume recorded as the company underwent managerial changes of an unprecedented nature. One of the architects of the companys success during this period was Donald Staheli, who had joined the Allied Mills unit in 1969 and who eventually became president of Continental Grain in 1984. Four years later, when Michel Fribourg relinquished his chief executive post, Staheli became Continental Grains chief executive, the first non-Fribourg to hold such a position in the companys 175-year history.

However, this historic shift in power only lasted a few years before a new Fribourg embraced the family legacy. Paul Fribourg, son of Michel, had spent his entire career at Continental Grain after his graduation from Amherst College in 1976. He joined the companys Chicago office in the mid-1970s, beginning as a grain merchandiser and then climbing up the corporate ladder as so many Fribourgs had done before him. By the late 1980s, Paul Fribourg was exercising his own influence on the company, realigning its international grain and oilseeds operations to create Continental Grains World Grain and Oilseeds Processing Group, a division that he headed. Paul assumed his place in the Fribourg family legacy in 1994 when he was named president of Continental Grain. Fribourg ultimately succeeded Staheli as chairman and CEO in 1997.

Growth in the 1990s

As it had for decades, Continental Grain operated during the 1990s as the second largest grain and related commodities company in the world. Although sales were essentially flat during the first half of the decade, remaining static at an estimated $15 billion, the company maintained its firm economic foundation and continued to grow. In 1991, the company entered a grain-selling venture with the agricultural giant Scoular. ContiFinancial, the companys mortgage and home equity unit, had grown vigorously through the 80s and 90s, and in 1996 Continental Grain offered 16% of ContiFinancial shares to the public. The company formed Contilnvestments in 1997, an investment unit focused on securities, real estate, and private equity. Also in 1997, the company purchased the Campbell Soup poultry processing business, and in 1998 it bought a 51 percent share of Premium Standard Farms, a pork producer and processor.

Key Dates:

Company founded in Belgium by Simon Fribourg.
Company reorganized as Continental Grain, opens first U.S. operation in Chicago.
Fribourg family flees Belgium for U.S.
Michel Fribourg becomes head of company.
Company purchases Allied Mills, Inc.
Donald Staheli becomes company president.
Michel Fribourg steps down as CEO, Donald Staheli assumes the post.
Company enters grain venture with Scoular.
Paul Fribourg becomes company president.
Company takes ContiFinancial public; company forms Contilnvestments.
Paul Fribourg becomes CEO.
Company buys 51 percent stake in Premium Standard Farms.
Company sells commodity marketing business, changes name to ContiGroup.
ContiFinancial declares bankruptcy.
Michel Fribourg dies.

Turn-of-the-Century Change

Continental Grains increased interest in meat processing, as evidenced by its Campbell Soup and Premium Standard acquisitions, marked a significant change in focus for the company. In late 1998, Continental sought to sell its commodity marketing group to Cargill, Inc., the worlds largest grain handler. Until that point, Cargill had been the companys principal competitor. The deal was held up for over eight months while the U.S. Department of Justice (DOJ) investigated the transaction for possible anti-competitive practices. In July 1999, the DOJ approved a modified version of the sale in which certain grain facilities had to be divested, and the transaction was completed quickly. The company changed its name to ContiGroup Companies, Inc., and focused its subsequent operations on its financial and animal protein units.

In 2000, ContiFinancial succumbed to a variety of unfavorable economic factorsAsian and Russian economic crises, unstable capital marketsthat had plagued it since 1998. After unsuccessfully seeking a buyer, ContiFinancial filed for chapter 11 bankruptcy. Despite this setback, ContiGroup thrived under its new focus. In 2000, the company sold its U.S. Animal Nutrition Division to Ridely, Inc. for $37 million, and an acquisition of the Lundy Packing Company doubled the processing capacity of its Premium Standard division. The company reached sales of $10 billion in 2000. This optimistic start to the twenty-first century was tempered with sadness at the death of Michel Fribourg on April 10, 2001. The chairman emeritus was 87 years old.

Principal Subsidiaries

ContiBeef LLC; Premium Standard; ContiLatin; Asian Industries; ContiChemLPG; Contilnvestments.

Principal Competitors

Cactus Feeders; Smithfield Foods; Tyson Foods.

Further Reading

3 Million-Share Offer Set for Contifinancial, American Banker, August 29, 1997, p. 5.

Byrne, Harlan S., Land of Plenty, Wall Street Journal, October 18, 1973, p. 1.

Cocheo, Steve, Tractors, Combines, Feed ... And Credit, ABA Banking Journal, New York, November, 1995, p. 56.

Commodity Concern to Sell Marine Assets to CSX Unit, The Wall Street Journal September 18, 1995, p. C16.

Continental Grain Co., The Wall Street Journal, July 17, 1997, p. B5.

Continental Grain Co., The Wall Street Journal, March 21, 1997, p. B12.

Continental Grain Company Loads Historic Corn Shipment, Milling & Baking News, May 18, 1993, p. 29.

Continental Grain Lumbers through Market, Bank Loan Report, September 14, 1992.

Continental Grain Makes Announcement, Business Wire, October 8, 1998, p. 1078.

Continental Grain May Buy Georgia Poultry Operations, The Wall Street Journal, March 4, 1997, p. B4.

Continental Grain Sets Venture, The Wall Street Journal, February 23, 1995, p. A6.

Continental Grain to Settle Iraq Fraud Case, The New York Times, November 26, 1996, v146 p. C6.

Continentals Coup, Newsweek, February 3, 1964, p. 65. Cornfeld, Richard S., Case Serves as Good Example of Shifting Legal Landscape, Feedstuffs, August 9, 1999, pp. 8-9.

Cullen, Jennifer Felser and Denise Lopez, New York Areas Top Privately Held Companies, Crains New York Business, November 25, 1996, p. 23.

DuPont-Continental Grain Link, The Wall Street Journal, March 18, 1996, p. C22.

Einhorn, Cheryl Strauss, Commodities Corner: Double Trouble? Barrons, November 16, 1998, p. MW14.

Feed Maker is Expanding, The New York Times, February 29, 2000, p. C25.

Fluke, Cecily J., and Robert J. Sherwood, Private Ways, Forbes, New York, November 30, 1998, pp. 197, 274.

Good Neighbors Can Still Get Sued, Successful Farming, September 2000, p. 16.

Hayenga, Marvin, and Robert Wisner, Study Evaluates Cargills Purchase of Continental Grains Grain Business, Feedstuffs, February 8, 1999, pp. 5-11.

Kafka, Peter, The Big Five, Forbes, November 30, 1998, p. 200.

Kichen, Steve, and Tina Russo McCarthy, Private Business, Forbes, New York, December 4, 1995, p. 170.

Kilman, Scott, and Joseph B. Cahill, Cargill to Buy Grain Assets from Its Rival, The Wall Street Journal, November 11, 1998, p. A10.

Kilman, Scott, and Steven Lipin, Cargill in Talks to Buy Rivals Grain Assets, Continental Grain Co. Deal Could Raise Concerns of Antitrust Regulators, The Wall Street Journal November 10, 1998, p. A3.

Kilman, Scott, Continental Grain Co. No Longer Lives by Bread Alone: New CEO Fribourg Deals with Loans, Chicken, and Need to Share Power, The Wall Street Journal, May 21, 1997, p. B6.

Kilman, Scott, Continental Grain Enters the Business of Meatpacking, The Wall Street Journal, January 7, 1998, p.A10.

Kilman, Scott, Continental Grain to Give CEOs Post to Paul Fribourg of Owning Family, The Wall Street Journal, April 1, 1997, p. B9.

Krebs, Candace, Is Marital Bliss Leading to Public Discord? Agri Marketing, March 2001, pp. 38-40.

Lavinia, Robert J., Continental GrainTosco Joint Venture Launched, PR Newswire, October 30, 1992, p. 1.

Michel Fribourg (Obituary), Feedstuffs, April 23, 2001, p. 17.

Michel Fribourg, Forbes, October 26, 1987, p. 154.

Muirhead, Sarah, ContiGroup to Sell Animal Nutrition Business,Feedstuffs, October 11, 1999, p. 1.

Muirhead, Sarah, DOJ Approves Cargill-Continental Deal,Feedstuffs, July 12, 1999, pp. 1-2.

Myerson, Allen R., Cargill Set to Buy Main Unit of Continental Grain, Its Chief Rival, The New York Times, November 11, 1998, p. C1.

Rising Complaints Over Cargill/Continental Deal, Agra Europe, November 20, 1998, p. M/4.

Schwartz, John, Michel Fribourg, 87, Trader Who Opened Soviet Market, The New York Times, April 12, 2001, p. C17.

Shh. .. Hedging Going On!, Forbes, November 1, 1976, p. 47. U.S. Gives Approval to Cargill Acquisition, The New York Times, July 9, 1999, p. C8.

Vail, Bruce, Continental Grain Realigns Shipping Units, American Shipper September 1994, p. 23.

Wilke, John R., U.S. Demands Cargill Sell-Offs for Continental Buyout Approval, The Wall Street Journal, June 9, 1999, p. A4.

Zimmerman of Salomon to Join Continental Grain, The Wall Street Journal, April 12, 1996, pB2.

Zuckerman, Laurence, Executive-Suite Shifts at Continental Grain, New York Times, July 1, 1994, p. D3.

Zwerdling, Daniel, Down on the Farm, the Seeds of Bad Policy Yield a Crop of Failure, The Progressive, September, 1983, pp. 18-23.

Jeffrey L. Covell

update: Lisa Whipple