Bahlsen GmbH & Co. KG

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Bahlsen GmbH & Co. KG

Podbielski Strasse 11
D-30163 Hannover
Germany
Telephone: (49) (511) 960-0
Fax: (49) (511) 960-2749
Web site: http://www.bahlsen.com

Private Company
Incorporated: 1889 as Hannoversche Cakesfabrik H. Bahlsen
Employees: 3,872
Sales: DM 1.04 million ($501.2 million) (2000)
NAIC: 311821 Cookie and Cracker Manufacturing; 311812 Commercial Bakeries; 31134 Non-Chocolate Confectionery Manufacturing

Based in Hannover, Bahlsen GmbH & Co. KG is Germany’s leading manufacturer of cookies. The company also makes cakes and granola bars under three major brand-names—Bahlsen, Leibnitz and PiCK UP!—as well as national brands in other European countries such as Austria and France. Bahlsen products are manufactured at eight sites—five in Germany, two in France, and one in Poland. Roughly one third of the company’s revenues come from abroad, where Bahlsen maintains a distribution network that serves approximately 80 countries around the world, reaching from its core markets Austria, France, and Poland to the United States and the Middle and Far East. The company is owned and controlled by Werner M. Bahlsen, a grandson of the company founder.

German Keks: 1889-1919

Hermann Bahlsen was born in Hannover, Germany, in 1859 into a family of merchants, teachers, priests, and jewelers. After learning the trade of an export merchant, the young Bahlsen worked as an apprentice in Switzerland and England. In England he became involved in the sugar trade, and he saw how popular English biscuits and cakes were manufactured on an industrial scale. Mass-produced baked specialties were almost unknown in Germany at that time, and Bahlsen sensed a business opportunity: to produce these confections at a price every German could afford. To realize this ambition Bahlsen acquired Engl. Cakes and Biscuits, a small factory in Hannover’s Friesenstrasse, and renamed it Hannoversche Cakesfabrik H. Bahlsen. Three years later the company moved its operations to a new site in Celler Strasse which remained the company headquarters until the end of the twentieth century. From the very beginning Hermann Bahlsen emphasized making products of high quality which he would be able to sell under a brand name. At a time when brand-name marketing was still in its infancy, it was very common in Germany to name products after well-known personalities. For his first product, the company founder chose the most famous of Hannover’s citizens: the philosopher and mathematician Gottfried Wilhelm Leibnitz (1646-1716). Two years after the company’s founding, Bahlsen’s Leibnitz Cakes were launched throughout Germany. Within four years Bahlsen’s sweets were in such demand that the company’s number of employees grew from 10 to 100.

A gold medal at the World Exhibition in Chicago in 1893 brought Bahlsen its first international recognition. In 1900 the company expanded its product line to include salty snacks, starting with the company’s own version of the American cracker. In 1904 the company started packaging its cakes and cookies in a new dust- and-moisture-resistant package which they called TET. TET was a simplified version of an ancient Egypt symbol that meant “everlasting.” Suggested by Hans Bahlsen’s friend Friedrich Tewes, a museum director in Hannover, the symbol—a snake over three dots and a semicircle within an oval—as well as the TET signet, became an integral part of the company’s logo. Bahlsen also made use of modern production techniques. In 1905 the company was the first in Europe to implement the assembly line method.

With a solid means for mass production in place, Bahlsen’s business took off in the following decade. In 1911 Hermann Bahlsen decided to “translate” the English word “cakes” into German, coining the term “Keks,” which was pronounced much the same as its English cognate but had a more German appeal. One year after Leibnitz Cakes had become Leibnitz Keks, the company was renamed H. Bahlsens Keksfabrik (”H. Bahlsen’s Keks Factory”). The company founder had a passion for the fine arts and sponsored several artists who, for example, designed little stamps with picture stories for Bahlsen’s Leibnitz Keks. These commercial artifacts soon achieved the status of collector’s items. Later, many of the company’s packages, cookie tins, posters, and print ads were designed by various artists. Bahlsen also showed a personal concern for his workers, offering them a company health plan and health care personnel, spacious dining halls, a company library, music room, and roof-top garden. In addition, Bahlsen workers were allowed to take weekly baths during work hours in one of the company’s tubs, since most of them could not afford such luxuries in their homes. By 1914 the company had set up national distribution, owning warehouses in 26 German cities. The company employed 1,700 people and Bahlsen’s Keks and other sweets were shipped to 31 countries.

Bahlsen’s Second Generation

World War I interrupted Bahlsen’s growth in 1914, since sweets were not among the goods requested by the German military. Raw materials became scarce, domestic consumers cut back on spending, and the company was cut off from its export markets. By 1918 only one of Bahlsen’s 25 ovens was still in operation. After Hermann Bahlsen’s death in 1919, three of his four sons entered the business. The first was his oldest son Hans, who had studied at Hannover’s Technical College and entered the company in 1919 at age 18. Three years later he was followed by his brother Werner who at the same age became the company’s new director while Hans took care of the technical side of the family business. Bahlsen managed to survive the economic turmoil of the 1920s, including hyper-inflation and worldwide economic depression starting at the end of the decade. In 1930 the company founder’s youngest son Klaus joined the company at age 22. During the following decade the three brothers struggled to bring Bahlsen back on track. The company’s old machines were replaced by modern ones, including the introduction of steel-belt ovens beginning in 1932. Bahlsen also introduced new products to the market. In 1933 the company launched the Express Dose, a one-pound box of wafers which sold for a very low price. The product become a popular item, with about four million boxes sold per year. Despite the very small profit per box, the Express Dose significantly contributed to a steady stream of revenue for the business during the early 1930s, a time of severe economic depression in Germany. Two years later Salzletten, a new salty snack, was launched. Production, marketing, and distribution processes were streamlined during this time. For example, in 1937 Bahlsen reorganized its logistics system. In 1939, the company’s 50th anniversary year, Bahlsen had about 2,000 people on its payroll. However, further progress was again interrupted as World War II started in the fall of that year.

During the war, food was rationed and Germans had to use their “bread stamps” for cookies. The company also had difficulties securing raw materials, and numerous employees were drafted into the military. Bahlsen ceased all research and development activities and cut its product range down to just eleven—including emergency food supplies for German soldiers. Between 1943 and 1945 the company employed about 200 forced laborers who were working under the same conditions as Bahlsen’s German workers and received the same wages and benefits. When Hannover became the target of bomb attacks in 1943, the company established a warehouse in Gera in the southern state of Thuringia. By the end of the war in spring 1945, Bahlsen’s production facilities were half destroyed, along with most of the company’s warehouses. In April 1945, Bahlsen started making bread for hospitals. Klaus Bahlsen was the driving force behind the company’s reconstruction efforts and behind the establishment of a number of new domestic production facilities. Like his father, he also focused his efforts on setting high quality standards. In 1950, Bahlsen established its own laboratories for monitoring product quality. By 1951, the company’s work force was back to about 2,200. Bahlsen’s second factory was opened in 1954 in Lindau. The third one followed in Barsinghausen in 1957. A fourth factory in Varel started operations in 1963, followed by the opening of a brand-new warehouse in Langenhagen in 1965. Finally, in 1967, Bahlsen’s fifth factory started operations.

Four Decades of Growth: 1950-90

After the reconstruction years, Werner Bahlsen was the driving force behind the company’s international expansion. Bahlsen was the first German manufacturer of sweets to be issued an export license after the war. In 1950, the first postwar export shipment with Bahlsen products went to Switzerland. Two years later the company began exporting to the United States. By 1956, Bahlsen products were shipped to 74 countries. After the European Common Market had been established, the company started setting up its own foreign sales offices, starting with France and Italy in 1960. During the 1960s and early 1970s, Bahlsen continued establishing subsidiaries in Western European countries, including Austria, Luxembourg, the Netherlands, Belgium, Denmark, Spain, and the United Kingdom. The company’s American sales office, Bahlsen of North America, was set up in 1967. In 1972, all Bahlsen subsidiaries abroad were organized under the umbrella of Bahlsen International Holding AG.

Company Perspectives:

Strong brands as a basis for long-term success. In times of saturated markets and excessive supply Bahlsen benefits from over a century of expertise in its field. Instead of trying to respond to changing trends, the company develops its own concepts to stimulate new markets. Bahlsen’s strategy is based on further developing and improving the company’s position as a leading supplier of brand-name cakes and cookies. In order to achieve this goal, the company trusts in three of its major brands —Bahlsen, Leibnitz, and Pick UP! —along with national brands in other countries. With the slogan, “We sweeten your life,” Bahlsen conveys the image of a company whose products and services are associated with spoiling oneself and enjoying life.

Besides growing internationally, Bahlsen expanded its salty snacks division during the 1960s, mainly by acquisitions. In 1963 the company acquired an interest in the Hamburg-based Wilhelm Liebelt company, a maker of nut snacks. In the following year, Bahlsen bought a majority share in potato-chip maker Flessner in Neu-Isenburg. Both of these companies later became fully owned Bahlsen subsidiaries. In 1966 Bahlsen ventured into the market for industrially baked cakes when the company acquired Oldenburg-based firm Brokat. In 1968 the company took over chocolate maker Gubor Schokoladenfabrik located in the Black Forest and expanded its product line again in 1970 to include pre-baked cake layers, which became very popular among German homemakers and working women. Bahlsen acquired additional production capacity outside Germany in 1965, starting with the takeover of Austrian snacks manufacturer Kelly. Nine years later Bahlsen opened its first production facility abroad in Noyon, France. In 1980, the company acquired the American Austin Quality Foods Inc. based in Cary, North Carolina, establishing a commercial foothold in the United States. In that year the number of Bahlsen employees reached an all-time high of 11,200. With the opening of Bahlsen’s second factory Nîmes-Grezan in France in 1981 and the start of operations at a state-of-the-art wafer factory in 1982, the company’s expansion of its production capacity also reached a high point.

When an economic recession set in around 1982, the company cut down production and reorganized operations to cut costs. Beginning in 1983, Bahlsen’s German factories received flour from only one supplier, the Hedwigsburger Oker-Mühle. In 1985 the company’s sales force was reorganized. Two years later production ceased at the company’s oldest factory and headquarters in Hannover. In 1988, a modern new plant started operations in North Carolina. Finally the company reorganized its distribution system, and beginning in 1988 Bahlsen products were distributed through wholesalers and central warehouses.

Bahlsen’s Third Generation

The 1990s started out with an unexpected growth opportunity when the former German Democratic Republic reunited with its West German counterpart. People in the five new eastern German states were eager to buy the West German brand products that had been unavailable to them for decades— including Bahlsen cookies. In addition, an almost untapped market was waiting to be exploited in Eastern Europe. Bahlsen acquired the Polish firm Unimarex in Poznan in 1992 and cookie maker Skawina near Krakow, with 1,100 employees, one year later. During the 1990s Poland emerged as one of Bahlsen’s new core markets from which the company also started venturing into the Czech Republic, Slovakia, Hungary, and Russia, where the company opened its “House of Bahlsen” in St. Petersburg in 1993. However, these triumphs were over-shadowed by a severe setback when the company had to recall a batch of potato snacks that turned out to contain spices polluted with salmonella. The so-called “paprika affair” cost the company almost DM 50 million and contributed to a first-time net loss. The acquisition in the following year of French cake and cookie manufacturer St. Michel-Grellier S.A.—a family business like Bahlsen itself, with roots going back to the beginning of the 20th century—became an important milestone on Bahlsen’s way to an international company: 1994 was the first year in which sales abroad exceeded domestic totals. In 1995, Bahlsen took over the cookie business division from Hagen-based competitor Brandt Zwieback-Biskuits GmbH, including cookie and wafer maker Gottena Keks und Waffelfabrik GmbH & Co. KG in Schneverdingen. As a result of this five-year period of expansion the company’s sales passed the DM 2 billion mark for the first time in its history.

Key Dates:

1889:: Hermann Bahlsen takes over a cakes and cookies factory in the German city of Hannover.
1891:: The company launches Leibnitz Cakes, which will eventually become its flagship product.
1919:: The company founder dies.
1930:: Hermann Bahlsen’s son Hans assumes management of the company and is soon after joined by his brother Werner.
1933:: The Express Dose, a one-pound box of wafers, becomes a top-selling product for the company.
1952:: Bahlsen begins exporting to the United States.
1956:: Hans Bahlsen’s son Herman enters the family-owned business.
1960:: Bahlsen establishes sales offices in France and Italy.
1975:: Werner Bahlsen’s son Lorenz enters the family business.
1979:: Werner Bahlsen’s son Werner Michael joins the company.
1980:: American Austin Quality Foods Company is acquired.
1988:: Bahlsen products are distributed nationally through wholesalers and central warehouses.
1994:: Takeover of French cake and cookie manufacturer St. Michel.
1995:: Bahlsen takes over the cookie business of its competitor Brandt.
1996:: Hermann Bahlsen withdraws from top management position and takes over subsidiary Austin Quality Foods.
1999:: Bahlsen launches PiCK UP! bars.
1999:: The company is divided into three independent firms with Bahlsen focusing on sweets.

Alongside the acquisitions and expansions that Bahlsen had made as the 1990s unfolded, the company also faced formidable challenges, including a stagnating German market and the growth of international competition. To complicate matters, tensions between the family members who had so far successfully steered the company surfaced in 1992. The three Bahlsen brothers who managed the company after the war—Hans, Werner, and Klaus—got along well, all of them belonging to the same generation. However, after Hans Bahlsen’s early death in 1959, his son Hermann, who had entered the business in 1956, became the junior partner of his uncle Werner while his cousins Lorenz and Werner Michael were just ten and 12 years old. The two sons of Werner Bahlsen entered the family business in the second half of the 1970s when Hermann Bahlsen was already a managing director. Their father Werner Bahlsen died in 1985 and three years later Klaus Bahlsen retired as managing director. By that time, Hermann Bahlsen was established as not only the leading company figure but also as a leader in the industry. When his cousins—20 years his junior—demanded leadership positions, conflict arose.

In 1992 the conflict erupted publicly when Hermann Bahlsen, backed by a prominent advisory board, demanded to bring an experienced manager from outside into the company to lead a business concern which by that time had roughly 10,000 employees. In opposition to this plan, Lorenz and Werner Michael Bahlsen wanted to preserve family control over the business and believed that they were capable of taking over the leadership of the company. In the end, Lorenz and Werner Michael Bahlsen won the battle. Hermann Bahlsen retired from all management responsibilities at Bahlsen and in return took control of the group’s American subsidiary, Austin Quality Foods Inc., the maker of Zoo Animal Crackers, which he sold to Keebler Foods Company in early 2000 for an estimated $250 million. The remaining Bahlsen shareholders were Lorenz and Werner M. Bahlsen and their sister Andrea von Nordeck.

In 1993 the company started restructuring its operations: the sweets and snacks divisions were split, first operationally and later legally. In 1995 Bahlsen was renamed Bahlsen KG, which became the holding company for ten domestic subsidiaries. Bahlsen’s international firms were organized under the umbrella of Bahlsen International Holding AG. With markets stagnating and competitive pressure rising, the company turned up a loss again in 1997. Finally, in 1999 the family decided to completely spin off the snacks business under the leadership of Lorenz Bahlsen. Brother-in-law Gisbert von Nordeck was handed over control of Bahlsen’s Swiss and Austrian subsidiaries. Werner Michael assumed control of Bahlsen, which kept all the brand-name rights and focused on sweets. After the successful launch of Bahlsen’s PiCK UP! bars in 1999, the company focused on product innovation in the premium segment and market penetration in Germany and Eastern Europe, as well as fine-tuning its management and sales organization to compete effectively in a consolidating market.

Principal Subsidiaries

Gottena Keks-und Waffelfabrik GmbH & Co. KG; Bahlsen St. Michel SARL (France); Bahlsen Sweet Sp. z o.o. (Poland); Deleben S.A. (Spain); Bahlsen GmbH (Luxembourg); Bahlsen s.r.l. (Italy); Bahlsen Ltd. (United Kingdom); Bahlsen A/S (Denmark); Bahlsen N.V./S.A. (Belgium).