Continental Bakeries in France Best in France Case Study September 2006 - December 2006 By: Szilard Buksa, Jacques de Sonis, Jordi Guitart Clermont, Heather Hurst and Diana Lupusor Agenda 1. Company overview 2. First Phase 1. Why it came to France? 2. Constraints in France 3. Adaptation to France 3. Second Phase 4. Benefits of direct investment 5. Essential advice 1. Company overview 2. First Phase 3. Second Phase Company overview • Leading producer and distributor of private label biscuits in Western Europe European Leader • 6 European countries: Netherlands, Germany, Belgium, Austria, Hungary, France • Top three positions in all of the segments it operates in. • 1999 – have been acquired by IK funds, private equity Nordic company with a portfolio encompassing 24 companies • Sales went up 40% from €126 million in 1998 to €175 million in 2005 Products Operating in the European food industry, the company is focused on the following specific segments: pastry products, biscuits and bread substitutes: A comprehensive range of international and regional products The Company designs, produces and distributes: • sweetened (sandwich biscuits, wafers, honey cake and cookies) • unsweetened (toast, rusk and rice cakes) • savory biscuits (puff pastry) Brands The Company owns a limited number of strong international brands including Haust. The major brands in the Haust portfolio are Haust, Bussink, Barkhuis, Brink, Van Kooten and Pirou. In addition, Haust also produces private label articles within the group and for fellow manufacturers. Wafer rolls to accompany a Toast, savory biscuits, rusk and breadcrumbs cup of coffee or an ice- cream dessert Deventer gingerbread and honey cake Puff pastry, savoury biscuits, rusk, cake products, sandwich Cookies, spiced biscuits, biscuits, butter biscuits, butter biscuits, wafers and shortcake biscuits and rice wafers ladyfingers Groningen gingerbread and Wafers, ice wafers and deluxe cake loaves chocolate covered wafers Kokoskuppel. Head Office The Continental Bakeries (Haust) is headquartered in Dordrecht, the Netherlands employs approximately 800 FTEs in 11 locations. The Head Office accommodates the following corporate departments: - Automation - Board of Directors and Secretariat - Finance and Accounts - Purchasing and Logistics, including order handling and sales planning - Human Resources - Production and Technology, including quality assurance - Project Management - Marketing and Sales, including packaging development and export - Central Warehouse and Dispatch Department French subsidiary 1996 - entrance in the French market as an importer •Transportable products(even if partaining to food industry) •Feasible transportation from single location •Advantages of scale economies 2001 - establishment of the Sales Subsidiary Number of employees: 3 with mainly commercial responsabilities 60 commercial agents Top ten sales in France French clients Company values • Adaptation to every single client • Focused on Innovation Proactiveness Leadership Internationalization 1. Company overview 2. First Phase 3. Second Phase Why it came to France Why did they enter the French market? Company’s goal: “to be number 1 in Europe” France is the biggest market in Europe (1,35 B euro) Why did they establish a French subsidiary? Better convenience for clients (administrative procedures and taxes) Necessity for local differentiation of products Specificity of sheltered French market: easier to compete with local producers Avoidance of duplication of facilities Constraints in France • Foreseen Constraints Protectionism France is already well known for its bread products Must modify product to French tastes • Discovered Constraints Diverse and varied taxes and paperwork TVA system: end distributor must add the TVA (TVA Law art. 283.1 since 1st September 2006) “Shop Culture” Distributors from same group (ex. Leclerc) not well connected Cost of transport Key Constraint Costs • Communication Difficult to find many experienced bilingual talents in France • Taxes Wide array of taxes leads to costs in figuring out how to pay them and who should pay them • Transportation Adaptation to France • Recruitment/Selection: only French and distribution agents to deal with “shop culture” • Innovative products but still low prices • 20 years experience - Anticipating clients’ needs • Administrative procedures • Communication policies BUT… … further adaptation needed 1. Company overview 2. First Phase 3. Second Phase Benefits of direct investment Their perception about the benefits of an investment in France: Cheaper labor force compared to Netherlands Current high transportation costs Increased coordination and control Distributors prefer local producers (because of logistic and TVA issues) Easier to find labor force The possibility of monopsonycal situation on local labor markets Essential Advice • Buy an existing French company • Hire French employees • Favor “royalties” We thank • Antoine CONSTANS French and Belgian Regional Director 19 rue Steffen - 92600 Asnières sur Seine Haust.firstname.lastname@example.org 01.41.11.03.66 • Professor Michael SEGALLA Our Team • Szilard BUKSA Buksaszilard@gmail.com • Jacques DE SONIS Jacques.email@example.com • Jordi GUITART CLERMONT Guitartclermont@gmail.com • Heather HURST Heather.firstname.lastname@example.org • Diana LUPUSOR Dianalupusor@yahoo.com Thank you for your attention Any question?