Charal S.A.

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Charal S.A.

BP 107, 1 Pl. des Prairies
Cholet, F-49301 Cedex
France
Telephone: (33 02) 41 49 51 51
Fax: (33 02) 41 49 51 68
Web site: http://www.charal.fr

Private Company
Incorporated: 1985 as Vital Sogeviandes; 1996 as Charal S.A.
Employees: 2,550
Sales: EUR 950 million ($1.3 billion) (2006 est.)
NAIC: 424470 Meat and Meat Product Merchant Wholesalers; 311611 Animal (Except Poultry) Slaughtering

Charal S.A. is France's leading brand of packaged meats and meat products. Inventor of the Hebdopack, a vacuum-based packaging system that provides meats and other foods with a shelf life of up to three weeks, Charal has also developed one of France's strongest foods brands, with a national recognition rate of more than 85 percent. Charal slaughters and packages beef and pork cuts, and also develops and markets a wide range of largely meat-based prepared foods, ready meals, and snack items.

The company's production is based entirely on French-raised beef, and operates nine processing facilities, including a fresh meat-processing unit at its Cholet-based headquarters. The company also operates a factory in Flers, in the Orne region, dedicated to its frozen foods business. Each year, Charal processes more than 300,000 tons of meat, including 200,000 tons of beef and 100,000 tons of pork. Charal supports its product development with a strong advertising component, including a series of highly successful radio and television campaigns created by the Leo Burnett agency. The company has positioned its food products in the high-end, high-quality segment. In this way, Charal has been able to survive successive crises in the meat and poultry sectors. Since 1997, Charal has been part of the Alliance Bigard Charal (ABC) group, and is held at 50 percent by Groupe Alliance and at 49 percent by Groupe Bigard. ABC is one of France's two leading meat processors, vying with rival Socopa for the top position in the domestic market. Charal represents the consumeroriented operations of ABC, which also processes meat for the institutional and industrial food sectors. In 2006, Charal generated more than EUR 950 million ($1.3 billion) of ABC's total turnover of EUR 2.13 billion ($2.8 billion).

PACKAGING REVOLUTION

Charal originated in 1986 when a major French meat-processing company, Sogeviandes, acquired rival Bocaviande, creating Vital Sogeviandes. By then, the beef and pork industry had found itself under mounting pressure. The spread of supermarkets and hypermarkets in the country during the 1970s, and the concurrent rising purchasing clout of the country's large-scale distribution groups, had caused the meat industry's margins to shrink rapidly. As consumer shopping habits turned more and more toward the one-stop shopping convenience offered by the country's supermarkets and hypermarkets, the country witnessed the disappearance of a large percentage of its independent butchers. The reduced size of the market left the country's meat processors even more at the mercy of the distributors.

Meanwhile, the supermarket sector, seeking to reduce its own costs, had begun to focus its shelf space especially on poultry sales. Poultry, and particularly the industrialization of the poultry sector, provided the distribution groups with still higher profit margins. Consumers, on the other hand, were attracted to poultry's lower per-kilo pricing. By the end of the decade, poultry sales had topped sales of beef for the first time in French history. Aiding this development were the increasing calls from the healthcare sector for consumers to reduce their red meat consumption in an effort to promote lower-fat diets.

Vital Sogeviandes turned to technology to counter the declining fortunes of the meat market. The company launched a research and development program in search of new packaging methods. By 1986, Vital Sogeviandes had perfected a new meat packaging system, called Hebdopack, which combined vacuum-packing technology with opaque aluminum-lined packages. The absence of light and air permitted meat to achieve far longer shelf life, of up to three weeks, as opposed to just four days for fresh cut meat. In order to promote its technology, Vital Sogeviandes created a new brand name—Charal—for its vacuum-packed meat products. The invention of a brand name, which marked the first time beef had ever been branded in France, provided a means for the company to overcome a major obstacle of the new packaging system: consumers were not able to see the meat they were buying.

Nevertheless, the Charal brand, backed by a strong advertising effort, quickly caught the attention of French consumers. The Hebdopack technology, unlike other methods of extending the shelf life of meat, did not use gasses or other additives. As a side benefit, the Hebdopack packaging also helped tenderize the meat, while preserving its flavor. Despite its higher pricing, the Charal-branded meat became a strong seller, and by the 1990s emerged as one of France's best-known food brands, with a national recognition level topping 85 percent into the next century.

The Charal brand also provided benefits for both Vital Sogeviandes and its supermarket group customers. The Hebdopack packaging, and the higher pricing of the product, allowed Vital Sogeviandes to claim profit margins on branded products in other food categories. The longer shelf life, and resulting reduction in spoilage, provided a strong selling point for the supermarket groups as well.

Into the 1990s, Vital Sogeviandes operated as a subsidiary of Société Centrale d'Investissment (SCI), part of Belgian financial empire Compagnie Nationale de Portefeuille. SCI's backing enabled Vital Sogeviandes to expand its network of processing facilities beyond its main facility in Cholet. By 1995, the company operated four more fresh meat-processing plants, in Strasbourg, La Chataignerie, Metz, and Avignon, allowing the company to produce and distribute its products on a national level. By the mid-1990s, too, Vital Sogeviandes had expanded the Charal brand name to include a line of frozen foods, backed by the construction of a dedicated frozen food plant in Fleas-Lisieux Egleton. Vital Sogeviandes itself was headquartered at Rungis, site of France's main wholesale food market. In the early 1990s, too, the company extended the Charal brand into the fast-growing snack and fast-food categories. By 1993, the company already offered a line of frozen microwavable hamburgers and hot dogs, as well as more traditional French fast-food items, such as the ham-and-grilled cheese sandwich known as the "Croque Monsieur."

KEY DATES

1986:: Sogeviandes acquires rival Bocaviandes and creates Vital Sogeviandes; Hebdopack vacuum-packaging method is perfected; Charal brand name is created.
1996:: Vital Sogeviandes changes name to Charal SA.
1997:: Two major French meat processors, Alliance and Bigard, partner to acquire Charal, creating Alliance Bigard Charal.
2003:: Charal introduces new frozen food products and invests in expanding its dedicated frozen foods factory in Flers.
2007:: Charal is accused of supplying spoiled meat for canned corned beef distributed throughout Europe.

FRENCH MEAT ALLIANCE FOR THE NEW CENTURY

By the mid-1990s, the Charal brand had become nationally known and the clear driver of Vital Sogeviandes' business, which also included operations supplying the other food channels, such as the institutional and industrial food sectors. In recognition of the strength of its core brand, Vital Sogeviandes changed its name to Charal S.A. in 1996. The Sogeviandes slaughtering and processing business, which included a network of some 15 slaughterhouses and 30 meat-processing centers in France, remained an important component of Charal, however, and took over the company's international marketing effort. In this segment, Sogeviandes became one of France's leading suppliers of beef and pork products to markets including Africa, Eastern Europe, and parts of Asia.

Charal's name change came amid the mad cow disease crisis in the French and European beef industry, which brought to light such dubious practices as feeding animal-based proteins to cattle. While most of the French beef industry suffered a severe drop in sales, the Charal brand's quality image enabled it to emerge from the crisis relatively unscathed. The crisis nonetheless encouraged parent company SCI's desire to exit the French food sector (the company also owned the Barry chocolate group). By 1997, SCI had found a buyer for Charal, in the form of a partnership between two other major French meat processors, Alliance and Bigard. Following the acquisition, the two companies formed the Alliance Bigard Charal. Alliance owned 50 percent of Charal, while Bigard took a 49 percent stake. Charal represented the largest part of the new group, accounting for approximately half of total revenues.

The move came as part of the overall consolidation of the European meat industry, which saw the emergence of a limited number of dominant companies in most of the various national markets. In France, Charal claimed the market leadership, ahead of major rival Socopa. Alliance Bigard Charal continued to seek new growth opportunities. In 1999, the group increased its leadership of the market through the acquisition of the SABIM slaughtering and processing operations of hypermarket group Casino. That purchase added two new slaughterhouses, in Saint Maixent L'École and Sablé, to the group's operations. In 2001, Charal, which had launched a new line of ready-made meals, supported that extension with the addition of a new facility in Nozay, acquired from Charcuterie de Don.

The next few years presented the company with new difficulties, however. New scandals in the pork industry, as well as a reemergence of the mad cow disease crisis and other food scandals, combined to frighten consumers away from beef products. In 2000 alone, Charal's sales dropped by as much as 50 percent. In response, the company temporarily pulled its advertisements, in order to redevelop its communication strategy. This resulted in the launch of the successful 2002 campaign based on the tagline, "Don't be afraid any more to say I love meat."

Charal also continued to seek out new products and recipes to woo back consumers. In 2003, for example, the company launched a line of frozen stuffed vegetables. Also that year, the company brought out a range of packaged and chilled sauces. Charal also invested in extending its frozen foods operations in 2003, spending EUR 3 million to expand its dedicated frozen foods factory in Flers. In 2005, the company continued its tradition of packaging innovation when it presented a new line of hamburgers—including the bun—that could be cooked in a microwave while still in their packaging.

A new food industry crisis, this time focused on the poultry sector and fears of Asian bird flu, brought new perspectives for the beef and pork industry. Alliance Bigard Charal moved to build up its processing capacity, acquiring three new facilities in the Arcadie Center East region of France in 2006. Also in that year, the company announced its intention to invest EUR 20 million in the construction of a new slaughtering facility in Feignies, in the north of France.

The 2007 year started off badly for Charal, however. In January of that year, the company was accused, along with fellow beef processor Soviba and distributor Covi, of knowingly supplying spoiled meat unfit for human consumption for Covi's canned corned beef. The accusation prompted the recall of more than 1.2 million cans of corned beef that had been shipped across Europe. The recall underscored the growing problems with ensuring the safety of the food supply. Nonetheless, Charal continued to enjoy the benefits of being one of France's most-recognized brand names.

M. L. Cohen