Koninklijke Wessanen N.V.

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Koninklijke Wessanen N.V.

Prof EM Meijerslaan 2
Post Office Box 410
NL-1180 AK Amstelveen
The Netherlands
(31) 20 547 9 547

Public Company
Incorporated: 1913 as N.V. Verenigde Fabrieken Wessanen and Laan
Employees: 6,500
Sales: Dfl3.8 billion (US$1.89 billion)
Stock Index: Amsterdam London Basel Zurich Geneva Frankfurt, Dusseldorf

Koninklijke Wessanen NV (Royal Wessanen) is one of Europes largest food processors. Founded over two hundred years ago, the company has evolved from a local seed trader into a complex manufacturer of diverse consumer products, bulk specialties such as wheat and wheat derivatives, and semi-manufactured products (like refined oils) for industrial producers of foodstuffs.

Wessanen has broadened its arena of operations steadily over the past decade. The company now makes about 40% of its profits in the United States, where it focuses on the higher-margin edible consumer-products markets. It has also benefited from its many years of experience in both marketing and research. Wessanen was a leader in the development of many products, among them milk replacers for use as an animal feed, and custom semimanufactured products for food producers. This emphasis on geographic diversification and higher-margin products should strengthen Wessanen as Europes markets merge by 1992.

On March 22,1765, cheese merchant Adriaan Wessanen and his 20-year-old nephew Dirk Laan established Wessanen and Laan, with a capital of Dfl 12,000. The company originally traded in a variety of seeds and grains. In 1789, nearly 25 years after the company began, Adriaan Wessanen retired and Dirk Laan took control of the company. The company continued to prosper, eventually becoming active in the milling of various grains.

When Laan himself died in 1791, his son Remmert became head of the company. Remmert Laan faced new challenges. The French under Napoleon dominated the European continent by the early 1800s, and Holland was part of the French Empire, which was at war with the British, among others. Britains navy was a serious barrier to Dutch ships carrying raw materials to the Netherlands from its colonies and transporting finished goods back to them; as a result, many of Wessanens trading activities were restricted.

Political changes in Europe after 1814 enabled Wessanen to establish new trading affiliations throughout the continent in cities like Hamburg, Antwerp, and Ghent. Although seed trading remained one of the companys biggest businesses, Wessanen became increasingly active in the trade of wheat, oats, and barley. Before long, encouraged by the Netherlands Trading Company (a company set up in 1824 by King William I to facilitate colonial trade and also a forerunner of the modern-day Algemene Bank Nederland), Wessanen also began trade in milled rice, a staple in the Dutch East Indies. During these years Remmert Laans sons Jan and Adriaan took an increasing role in the operation of the family business.

In 1839, the company undertook factory-like processing on a major scale when it purchased a facility for the refining of vegetable oils. The purchase of the factory signaled a significant change in the character of the company and in the primary products in which the company dealt, from unprocessed grains and seeds to milled grains and processed oils. Wind was the primary source of power for Wessanens new plants for some time. By 1865, the year of the companys centennial, Wessanen and Laan was an active cheese broker and producer of flour, vegetable oil, milled rice, barley, and related products, and employed about 100 people.

In 1868 Jan Laan died, leaving his five sons to run the business. That same year the company opened a new steam-powered flour-milling plant, built with the most up-to-date technology to replace a facility that had burned down. Only the plants for milling rice and barley continued to use windmills.

Wessanen and Laan left the cheese, seed, and grain trades at the turn of the century and focused on processed products. The companys biggest commodity was milled rice, now produced in steam-powered factories. The company had been under the direction of the Laans for five generations. Taking into consideration the risks of modern enterprise, in 1913 the family changed the structure of the company to a corporation, with a paid-in-capital of Dfl 7 million. The name N.V. Verenigde Fabrieken Wessanen and Laan was adopted, but was changed in 1916 to Wessanens Koninklijke Fabrieken N.V. (Koninklijke is an honorary title bestowed upon distinguished corporations by the Dutch monarchy.)

During World War I Wessanen continued to trade much as usual, but the company lost a major export market for its finished products and a significant supplier of raw material when the Russian Revolution terminated trade between Russia and the West. Wessanen compensated for this loss by entering rolled-oat production and by starting to produce cocoa and cocoa butter.

During the 1920s, as a favorable trade climate prevailed throughout Europe and in the Americas, Wessanen regularly upgraded its production facilities. The company also sought to build factories abroad to increase productivity, but repeatedly faced stiff opposition from local governments. In 1927, however, the company did open a factory near Krakow, Poland as a joint venture with rival Dutch rice miller Van Schaardenburg. When the Polish rice market collapsed several years later, the venture was abandoned.

Wessanen survived the Great Depression relatively well; food producers are protected from drastic shrinkage of their markets since people must eat even in hard times, and the company had good product diversification. In 1938 Wessanen organized its animal feed unit as a separate division; although these products made up a minor proportion of the companys total sales, their volume was significant.

During World War II Wessanen operated at lower levels of production. Holland was invaded by the Nazis, while the Dutch East Indies were occupied by the Japanese. Raw materials could no longer be imported from, nor finished goods exported to, the colonies. The loss of this trade was a severe blow to Wessanen, and it was compounded by the growing inclination of rice-producing nations to mill their own rice rather than export it for processing. In 1951 Wessanen was forced to shut down its largest rice-milling factory in Holland, but it remained a large miller in the United States.

Throughout the 1950s, economic recovery encouraged Wessanen to enter new product areas. Research in the area of milk replacersproducts used to feed calves that are raised away from their mothersproved extremely profitable for Wessanen. At the end of 1958, the companys paid-in-capital was Dfl 68 million, up from Dfl 7 million in 1913, and in 1959 the Laan family decided to take the firm public.

The transition from private to public corporation was overseen by Wessanen President T. Verspyck and Raymond Laan. In 1962 the last Laan left the companys board of directors, marking the end of nearly two hundred years of direct family control of Wessanen. The Laan family remained its main stockholder for several years, however.

By Wessanens bicentennial in 1965, the company had about 2,100 employees. The late 1960s brought some unfavorable developments in the companys markets: cocoa-producing countries began refining their products at home, Europe experienced a flour glut, and competition in edible oils put pressure on Wessanens market share.

In 1971 Gerrit Hendrik van Driel became the managing director of Wessanen and began to formulate a plan to bring the company into new markets. Under van Driels leadership, the company acquired a number of meat and animal-fat processing facilities and in 1973 laid out a plan for global diversification. Van Driel emphasized decentralized management and conservative handling of the financial risks that accompany broad expansion plans. His strategy included a transition from bulk products to higher-margin consumer products. This led to the acquisition of a cheese factory, a cheese trading company, and a milk-powder factory. The company also looked to the United States as the prime area for geographic diversification and, in the Dutch tradition, planned to grow by relying on its own assets rather than through borrowing. When necessary the company raised capital through new equity issues.

In 1978, Wessanen began to execute its program when it purchased Marigold Foods Inc. of Minneapolis, Minnesota for $20 million. Marigold produced consumer dairy products like milk, yogurt, ice cream, and cottage cheese, as well as fruit juices and drinks. A year later, Wessanen augmented its Marigold acquisition with the purchase of the Clover Leaf Creamery in Minneapolis. The acquisition made Marigold the market leader in many products and increased its coverage throughout Minnesota.

In 1979, Wessanen withdrew from almost all of its milk-replacer activities and sold a 51% interest in Wessanen Cacao to British commodity trader S.&W. Berisford in 1980. A year later it got out of the raw cocoa trade entirely, focusing instead on cheaper cocoa oil substitutes. Wessanens Friwessa unit distributed these products and other vegetable oils, including palm oil, which was experiencing an increase in demand worldwide.

Profits began to improve for Wessanen after two unsatisfactory years in the late 1970s. By 1982 more than 60% of Wessanens sales were generated from markets other than the Netherlands. In 1983, Wessanen acquired Crowley Foods, Inc. of Binghamton, New York, for about $16 million. Crowley, like Marigold, was primarily a dairy concern. The acquisition helped Wessanen post record earnings: profits had tripled in the five years since 1979, from Dfl 13 million to Dfl 39 million in fiscal 1983.

The mid-1980s brought Wessanen continued success. Profits increased markedly, as 30% of the companys total turnover came from the higher-margin consumer goods division in the United States. At the end of 1986 Wessanen bought the health food distributor Tree of Life Inc. in St. Augustine, Florida, now a major part of Wessanens U.S. operations, and announced a joint venture with a cheese factory in Ireland. In 1987 the company purchased Cheshire Wholefoods, a granóla producer in the United Kingdom for about £14 million. And in 1988 Wessanen acquired Gourmet Foods of St. Paul, Minnesota, and Award Foods of Dallas, Texas, for an undisclosed amount. Those two companies added about $60 million in sales to Wessanens sales. Later that year Wessanen also bought Weeks Dairy of Concord, New Hampshire and the Ohio Pure Foods group (now American Beverage Corporation) of Verona, Pennsylvania.

Wessanens acquisitions in the United States were organized under a holding company called Wessanen USA, and benefited from each others research and product development. For example, the Marigold unit in Minnesota brought a hard-pack frozen yogurt to market in 1987 and its success helped Crowley Foods and Axelrod Foods (another recent East Coast acquisition) to market a similar product in their own markets.

By the end of the 1980s Wessanen was a significantly different company than it had been just 15 years before. In 1989, Gerrit Hendrik van Driel, the architect of the restructuring and now chairman of the managing board, divided Wessanens operations into three main areas: consumer products, semi-manufactured products, and bulk specialties. Consumer products included the American dairy-related and fruit-juice operations as well as health foods, processed meats, cheeses, mueslis, and chocolate products in Europe; altogether they accounted for more than 64% of group sales by the end of the 1980s. Bulk specialties like wheat, rye, cereal by-products, and animal feeds, once the mainstay of the company, amounted to only about 20% of sales, and semi-manufactures like refined oils and fats, milk powders, and starches (sold primarily to industrial bakers and chocolate manufacturers) made up 16% of revenues at the end of the decade. In late 1989 Wessanen suddenly withdrew completely from the animal-feeds sector by selling its three remaining compound feeds factories in the Netherlands and its last milk-replacers unit in the United States. The decision to withdraw from the animal-feeds sector was made because those operations were no longer aligned with Wessanens core activities.

Wessanen intends to continue its trend toward greater diversification both in product lines and geography. The companys impressive performance during the 1980s is a tribute to innovative management, a strength that will undoubtedly be an asset when Europes trade barriers come down after 1992. Wessanen is not only older than its competition, it is actually older than many of the countries in which it operates. Well into its third century in the food industry, Wessanen has proven its ability not only to adapt to industry changes, but also to propel them.

Principal Subsidiaries

Wessanen Nederland BV; Friwessa BV; Delicia BV; Wessanen Deutschland GmbH (West Germany); Baars Kaas BV; Van Heels Gecondenseerde Melk Maatschappij BV; BV Leeuwarder IJs-en Melk-produktenfabriek; Zuivelonderneming De Vijfheerenlanden BV; Zuivelfabriek Salland BV; De Graaf Bakkerijen BV; Fresco International BV; Latenstein Zetmeel BV; Wessanen Meel BV; Gelerlaender Fleisch-warenges mbH; Wessanen USA Inc.; Crowley Foods Inc.; A.M. Axelrod & Son Inc.; Heluva Good Cheese Inc.; Marigold Foods Inc.; Friwessa Inc.; Tree of Life Inc. (U.S.A.); American Beverage Corp. Inc. (U.S.A.).

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