Royal Numico N.V.

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Royal Numico N.V.

P.O. Box 1
2700 MA Zoetermeer
The Netherlands
Telephone: +31-79-3539-000
Fax: +31-79-3539-620
Web site:

Public Company
1896 as N.V. Nutricia
Employees: 18,853
Sales: EUR 2.29 billion (US$2.31 billion) (1999)
Stock Exchanges: Euronext Amsterdam
Ticker Symbol: Numico
NAIC: 422490 Other Grocery and Related Products Wholesalers; 311422 Specialty Canning; 311230 Breakfast Cereal Manufacturing; 311514 Dry, Condensed, and Evaporated Dairy Product Manufacturing

Fast-growing Royal Numico N.V. (Koninklijke Numico N.V.), based in Zoetermeer, the Netherlands, has nearly tripled in size in the last five years to become one of the worlds leading companies devoted solely to the manufacture and distribution of nutritional products. Numico, best known for its Nutricia, Milupa, and Cow & Gate infant formulas in Europe, has become a North American nutritional heavyweight through its acquisitions of Rexall Sundown, General Nutrition Companies, and Enrich International, placing Numico at the top of the United States market for vitamins and other nutritional supplements. In addition to baby formulas, Numico is also a leading producer of medical nutrition products, including enteral (direct-to-stomach) clinical nutrition products, intravenous supplements, disease-specific nutrition programs, and other special-needs dietary products, such as for diabetes and other chronic health conditions. In its home Benelux base, Numico is also well known for its chocolate and other flavored-milk products, such as Chocomel and Fristi, and coffee milk substitute Nutroma, and for its infant foods products marketed under the Olivarit and other labels. Numico, which changed its name in 1998 from Nutricia to avoid confusing the corporate entity with its food label, is listed on the new Euronext Amsterdam stock exchange. In 1999, the company posted EUR 2.29 billion in sales.

Infant Formula Pioneer in the 1890s

As the 19th century neared its end, infant mortality rates remained shockingly highone in five children did not live to see its first birthday. Advances in medical research had, however, made it possible to identify causes for the high mortality rates, and by the end of the century lack of proper nutrition was widely recognized as a chief factor in infant death. Researchers began to seek means for producing nutritional supplements for children, especially supplements based on cows milk. Because cows milk placed too much stress on a childs system, methods were sought to produce more easily digestible formulas from milk. In 1896, Martinus van der Hagen, who had founded the Steam Dairy Factory in what later became known as Zegwaard, acquired the exclusive rights to develop formulas using the so-called Backhaus method.

Van der Hagen named his companys formula Nutricia, and then incorporated that operation under the N.V. Nutricia name. The company quickly expanded its focus beyond infant nutrition, as medical advances discovered key links between nutrition and certain illnesses. As such, the Nutricia company was among the first to develop special milks with low-sugar con-tents for diabetic patients and iodine-fortified milk for goiter sufferers. Nutricia by then had already distinguished itself for its close collaboration with the medical community and its commitment to food and nutrition research. The company was one of the first to adopt a new method of processing milk proteinsnormally indigestible by infantsdeveloped by Finkelstein in 1909.

By then, the Nutricia brand name already had begun to become known across Europe, and it quickly grew to become one of the worlds top-selling infant formulas. The companys expansion targeted especially the Flemish-speaking market in Belgium, before spreading through the rest of the later Benelux region. In 1924, Nutricia boosted its international presence with the purchase of a dairy production facility in Cuijk, Belgium.

While continuing to focus on dairy-based nutritional supplements and special medical products, Nutricias research and development department continued to search for new outlets for the company. In the 1930s, Nutricia stepped into the consumer products category with the introduction of Chocomel, a choco-late milk product with a long shelf lifeone of the first milk products to offer extended storage times. The company also began developing a new type of milk especially formulated for mixing with coffee. By the end of the 1940s, the company was able to launch its highly successful Nutroma coffee milk.

By then, Nutricia had decided to focus still further on its so-called scientific food products. As part of this new focus, the company built a new research laboratory in 1946, complete with prototype manufacturing capacity. Nutricias researchers worked closely with the medical and research communities at large. Although many of the companys products remained dairy-based, Nutricia began to expand into other food categories. In 1946, the company launched its own line of baby foods, under the Olivarit brand, featuring prepared vegetables. The Olivarit brand was to remain a top-seller for the company through the end of the century and see its range expanded to include a wide variety of food types and preparations.

Scientific Foods in the 1950s

Nutricias new research focus enabled the company to introduce a number of new products in the 1950s. Among these were one of the first humanized milk products, that is, infant milk formula that more closely resembled the makeup of human breast milk. Nutricia also introduced its Almirige line of infant formulas for premature babies and babies with special feeding needs. At the same time, Nutricia increased its marketing focus, hiring dieticians to market its product specifically to doctors and nurses. Meanwhile, sales of the companys infant formulas boomed as the medical community encouraged women to abandon breast feeding and adopt formula-based feeding.

In the 1960s, the company enhanced its international position with the purchase of a new production facility in Bornem, Belgium. Nutricia also extended its nutritional array to the medical community, when it brought out a new range of intravenous and other nutritional products for use in a hospital environment. To support the companys research and development efforts, and its international expansion, Nutricia re-incorporated as Verenidge Bedrijven Nutricia, taking a listing on the Amsterdam stock exchange.

The companys medical research culminated in a new product, dubbed Nutri 2000, during the 1970s. Nutri 2000 represented a full feeding system for chronically ill patients, based on the newly developing enteral method, that is, direct-to-stomach feeding methods. The company also developed its Nutrison product line, for intravenous drip feeders.

The company continued to grow through the 1980s. Yet a growing number of mothers and fathers had begun to challenge the focus on infant formulas at the expense of breast feeding. As more and more people became convinced of the benefits of mothers milk over infant formula, the company also was tainted by a number of formula contamination scares among its own and other brands. Meanwhile, declining birth rates in the companys core European base was cutting deeply into infant formula sales.

The sagging formula market opened a new opportunity for Nutricia, when it bought Cow & Gate, a leading maker of infant formulas for the United Kingdom market. That acquisition helped the company gain a solid position as a leading European formula maker.

Nutritional Leader in the 21st Century

While birth rates and formula demand continued to decline in much of Western Europe throughout the 1980s and early 1990s, Nutricia recognized new growth opportunities in the newly opening Eastern European countries. During the early part of the 1990s, the company began making acquisitions and establishing distribution networks in the former Eastern Bloc countries. Other international markets for the company were found in Turkey, Indonesia (the company became market leader in the former Dutch colony), and South America. Attempts to enter the North American market, with the acquisition of the Loma Linda brand, among other moves, proved less than successful. In the early 1990s, the vast Asian market became a company priority, especially the huge market in China, which the company entered through a distribution agreement.

Meanwhile, the company was rocked by two food contamination scares. The first occurred in 1989, when cans of Cow & Gate formula were discovered to have been contaminated during ship-ping. The second scandal hit the companys Olivarit brand in 1993, when traces of a cleaning solvent were detected in some of the Olivarit baby jars. The company promptly recalled more than 14 million jars of baby food. Nonetheless, the rapid renewal of the companys marketevery two years, as a new population of women give birthenabled the company to come through these food scares (the company was hit again in 1997) without suffering too much damage to its reputation or sales.

Company Perspectives:

At Koninklijke Numico N. V. we are in the business of supporting health. Our vision is to be a profitable and growing worldwide leader in specialised nutrition. We want our products to help people lead healthy and rewarding lives. We accept and welcome the challenges and responsibilities that accompany our ambitions.

By 1995, the companys sales had topped NF11.5 billion. In that year, however, Nutricia doubled in size when it acquired struggling German formula rival Milupa for some $560 million. Milupa, which had gotten itself into trouble through an ill-timed expansion into the former eastern region of the newly reunified Germany, nevertheless allowed Nutricia to take the place of European leader in the infant formula market, with an average per-country share of some 35 percent. The Milupa acquisition also allowed the company to head off looming threats of a hostile takeover. Meanwhile, the companys medical side also was enjoying success, particularly with the launch of the companys Nutrison Pack drip-feeding system.

In 1997, the companys contribution to the Netherlands society was recognized by the granting of use of the royal title to the companys name. Now known as Koninklijke N.V. Verenigde Bedrijven Nutricia, the company was then faced with a new food contamination scare. The new scare led the company to change its name, to disassociate its individual brands from the corporate entity, and avoid allowing one labels food scare to contaminate the other Nutricia names. Using the beginnings of its three core brand names, the company became Royal Numico N.V. at the beginning of 1998.

By then, Royal Numico, which had built up its European leadership to capture some 40 percent of the total European infant formula market, as well as leadership status in its hospital nutrition products market, sought to build on its research and development expertise to expand into a new and fast-growing market, that of vitamins and nutritional supplements. For this, the company turned to the United States, by then the worlds largest market for this product category.

In 1999, Royal Numico entered the United States with a bangin July of that year, the company reached agreement to acquire General Nutrition Companies, well known for its 4,200-strong chain of GNC and other retail stores, and one of the worlds leading makers and distributors of vitamins and nutritional supplements. Worth some US$2.5 billion, the acquisition gave Royal Numico a nearly 13 percent share of the estimated US$9 billion market. At the same time, Royal Numico gained access for its products to GNCs manufacturing and distribution network, including its vast retail empire, while GNCs own development efforts were strengthened by its new parent companys research expertise.

With sales now boosted to nearly EUR 2.3 billion, Royal Numico returned to its newfound growth drive in 2000. After buying up multilevel vitamin supplement marketer Enrich International, Royal Numico solidified its newfound position as the worlds leading vitamin maker when it paid US$1.8 billion for Boca Raton-based Rexall Sundown. The Rexall Sundown purchase, which added that companys catalog of more than 1,300 products, also gave Royal Numico access to a number of Rexall Sundowns major customers, including the Wal-Mart and Publix retail chains.

The Rexall Sundown acquisition gave Royal Numico a commanding 21 percent of the fast-growing U.S. vitamins and supplements market, which was expected to top US$16 billion in the year 2000. Royal Numicos own sales were expected to top EUR 4.5 billion for the year. The companys future appeared vitamin-enriched indeed.

Principal Subsidiaries

Çarmosan A.S. (Turkey); Efamol Ltd. (United Kingdom); En-rich International Inc. (United States); General Nutrition Companies, Inc. (United States); Hindustani Lever (India); Kasdorf S.A. (Argentina); Larkhall (United Kingdom); Milupa S.A. (Switzerland); Mococa (Brazil); Northfield Laboratories Pty Ltd. (Australia); Nutricia Australasia Ltd. (New Zealand); Nutricia Nederland B.V.; N.V. Galenco (Belgium); Ovita Nutricia Sp. z.o.o. (Poland); Pack-o-Med Medical Supply Systems B.V. (Netherlands); PT Sari Husada Tbk (Indonesia); Qihe Dairy Corporation Ltd of Heilongjiang (China); Rexall Sundown, Inc. (United States); Scientific Hospital Supplies Ltd. (United Kingdom); Szabolcstej (Hungary); Vitamex AB (Sweden).

Principal Competitors

Bristol-Myers Squibb Company; NBTY, Inc.; Danone; Nestle S.A.; Heinz; Novartis; Leiner Health Products; Perrigo Company; Milnot Company; Sunrider Corporation; Natures Sun-shine Products, Inc.; Twinlab Corporation.

Key Dates:

Martinus van der Hagen acquires exclusive rights to Backhaus formula production method; incorporates formula production operations as N.V. Nutricia.
Production of diabetic milk products and iodine-enriched milks begins.
Company begins production of protein milks using Finkelstein method.
N.V. Nutricia acquires dairy product production facility in Cuijk, Belgium.
Chocomel chocolate milk is introduced.
Nutroma coffee milk is introduced.
Company hires dietitians to market products to doctors and nurses.
Reincorporation as Verinigde Bedrijven Nutricia and listing on Amsterdam stock exchange.
Nutricia launches Nutri 2000.
Company acquires the Cow & Gate formula manufacturer of the United Kingdom.
Company is granted Royal title, becoming Koninklijke N.V. Verenigde Bedrijven Nutricia.
Companys name is changed to Koninklijke Numico N.V., or Royal Numico N.V.
General Nutrition Companies, of the United States, is acquired.
Enrich International and Rexall Sundown (both of the United States) are purchased.

Further Reading

Jonas, Ilaina, Royal Numico Buys GNC, Reuters, July 5, 1999.

Murawski, John, Dutch Company to Buy Rexall for $1.8 Billion, Palm Beach Post, May 2, 2000, p. 1a.

Newman, Anna, Booster Shot for a Vitamin Maker, Business Week, May 15, 2000, p. 56.

Onstad, Eric, Numicos Rexall Buy Cements US Position, Reuters Business Report, May 1, 2000.

Smit, Barbara, Nutricia Growing Fast and Hungry for More, European, October 5, 1995, p. 19.

M.L. Cohen

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Royal Numico N.V.

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