Chr. Hansen Group A/S

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Chr. Hansen Group A/S

Boge Alle 10
Horsholm
DK-2970
Denmark
Telephone: ( +45) 45 74 74 74
Fax: ( +45) 45 74 88 88
Web site: http://www.chr-hansen.com

Wholly Owned Subsidiary of Chr. Hansen Holding A/S
Incorporated: 1870
Employees: 3,681
Sales: DKK 3.42 billion ($596 million) (2004)
Stock Exchanges: Copenhagen
Ticker Symbol: HHDB
NAIC: 325414 Biological Product (Except Diagnostic) Manufacturing

Chr. Hansen Group A/S is one of the world's top food ingredients companies, ranking in the top 15 over all. Chr. Hansen specializes in producing enzymes, bacterial cultures, and related ingredients for the production of cheese and yogurt, as well as for wine and meat. The company also produces natural food colorings, a rising market segment for foods and beverages as manufacturers turn away from artificial colorings. Hansen also develops seasonings, natural flavorings, and organic sweeteners. The company is also an active player in the fast-growing "neutriceuticals" market, helping manufacturers produce foods with proven health benefits. For this market, for example, Hansen develops probiotic cultures designed to boost intestinal health and immunity. The company has also developed BioPlus2B, a natural feed additive meant to replace antibiotic growth enhancers. Hansen supports its global reach with research facilities in Denmark, France, and the United States, as well as a globally active subsidiary network. Chr. Hansen Group is part of Chr. Hansen Holding, which also includes allergy preparation and vaccine specialist Alk Abello. Chr. Hansen Holding has announced its intention to split off Chr. Hansen Group into a separate, independent company at the request of its majority shareholder, the Lundbeck Foundation. The breakup is expected to occur in 2005.

Origins

Chr. Hansen Group was founded in 1870 by pharmacist Christian Ditlev Ammentorp Hansen of Denmark. At the age of 22, Hansen began working at the University of Copenhagen, assisting Professor Julius Thomsen, a noted researcher of the time, in his efforts to extract pepsin from cow stomachs. Hansen himself began developing a method for extracting a different substance, the rennet enyzme, an important ingredient in cheese production. Up to that time, rennet remained inconsistent in quality and purity, and the lack of a standardized rennet made it difficult for cheese producers to enter the industrial age. In 1870, however, Hansen succeeded in extracting pure rennet from the stomachs of calves.

Hansen's procedure was to revolutionize the world dairy industry, making it possible to produce cheese in large quantities and of consistent quality. The resulting cheese was also safer for consumers to eat. Recognizing the opportunity to go into business, Hansen formed a company and opened a factory in Copenhagen for producing rennet in 1874.

Hansen next had to convince the dairy industry to adopt his product. While cheese producers in Denmark were relatively quick to adopt the new, standardized rennet, a move that helped the country emerge as a major global cheese producer, other countries proved more reluctant. Hansen began traveling to promote his rennet, even famously drinking a glass of rennet in order to convince observers of the safety of his product.

Any resistance to adopting the new form of rennet vanished soon enough, and in order to meet the growing demand Hansen began establishing a network of international sales offices. Before the end of the 1870s, the company had already opened offices in France, Germany, and the United Kingdom. Hansen also recognized the United States as an important market for his products, and by 1876 the company had already opened its first office there. The long shipping times between Denmark and the United States encouraged Hansen to establish its first production facility there just two years later. In the meantime, Hansen had also begun to branch out from rennet production, adding the development and production of natural colors, used for cheese and butter.

Demand for Hansen's product soon outstripped its supply, and in 1890 the company bought an island on New York's Mohawk River and built a long-scale facility there. That island later became known as Hansen Island. Back in Denmark, the company had begun working with cultures for the production of yogurt and similar dairy products, launching its first cultures in 1893.

Over the next several decades, Hansen added to its string of production facilities. In 1916, the company built a factory in England, followed by a new site in Toronto, Canada, in 1917. The company's U.S. subsidiary moved its production center to Milwaukee in 1930. In 1936, the company had added production facilities in Germany and Italy as well. Hansen later went public.

Diversification and Expansion in the 1970s and 1980s

Hansen's expansion continued following World War II with the opening of a production site in Adelaide, Australia, in 1951, and a new factory for producing rennet in France, another of the world's great cheese capitals, in 1955. By the 1960s, Hansen had begun its expansion into South America, launching a subsidiary in Argentina and building a plant in Quilmes. The company later boosted its South American presence with an entry into Brazil in 1977, as well as establishing operations in Peru.

The rising popularity of yogurt in the west led Hansen to add a new facility for developing and producing cultures in France. The company also became interested in developing cultures for the wine industry, notably in creating new cultures and coagulants used for removing sediment from wine.

A major feature of Hansen's development was its longstanding commitment to the development of natural ingredients for the food and feed industries. Into the mid-1970s, the company began attacking a growing problem within the chicken and meat industries, particularly in the United States, which had turned to the use of antibiotics and growth hormones. In 1975, Hansen launched a research effort into the creation of natural alternatives to these products and for developing bacterial strains to produce more healthful meat.

Hansen also continued to innovate with its dairy cultures. By 1976, the company's research had resulted in the successful launch of its DVS (for Direct Vat Set) procedure. That product was launched in the United States that same year. Hansen had also become interested in the nascent "neutriceuticals" market, that is, developing food products with clinically proven health benefits. By 1987, the company had succeeded in bringing its first probiotic diary supplement, Trevis, to clinical trial.

Toward the end of the 1970s, Hansen opened a number of new production facilities, including a rennet factory in Graasten, Denmark, in 1976 and a plant for producing cultures in Roskilde, Denmark, in 1978. Hansen also expanded its sales and marketing network, launching subsidiaries in Australia and Ireland in 1983 and 1984, respectively. In the meantime, Hansen had diversified into an entirely new sector, buying allergy control and treatment specialist Alk Abello in 1979.

In the mid-1980s, Hansen launched a new expansion strategy based on acquisitions. In 1986, for example, the company bought France's SOCHAL, a specialist in developing ripening cultures and coagulants for the wine industry. That purchase was followed by the acquisition of Extract Oil, a Spanish company which specialized in paprika extracts, in 1990. Also in that year, Hansen added a sales and marketing subsidiary in Spain, buying up its former distributor there. Similarly, the company acquired its Greek and Turkish distributors, then opened sales subsidiaries in the Netherlands, Japan, and Austria that year.

Independence in the New Century?

Hansen's acquisition program continued into the 1990s with the 1991 purchase of Rudolf Muller, based in Germany, which specialized in the development of meat cultures. In that year, Hansen also returned to the United States, acquiring Diversitech, which produced both meat cultures and liquid seasonings. Diversitech was later merged into the company's U.S. subsidiary.

The company made its next acquisition in 1995, buying up Gastronomisk Institut A/S in Denmark. The company then changed its new subsidiary's name to Gourmet Food Ingredients. Also that year, Hansen moved into India, setting up a joint venture, AKAY Flavours and Aromatics.

In 1996, Hansen added another French company, SEFCAL, which focused on the extraction of polyphenols and anthocyanin, and Xantoflor, based in Spain, which specialized in the extraction of carmine, a natural coloring agent. More acquisitions followed through the end of the decade, including the purchase of a fermentation plant in Germany, as well as that country's Stefan Wolf, which focused on meat and poultry seasonings and related products, both in 1997.

The following year, the company went back to the United States to purchase Ingredient Technology Corporation, its largest acquisition to date. Next, Hansen established a manufacturing base in Ireland with the purchase of Quest Natural Color Business, also in 1998. In 1999, Hansen added facilities in Italy through its acquisition of Italiana Ingredienti and Enocanossa.

Company Perspectives:

Our Focus: Chr. Hansen develops natural ingredient solutions for the food, pharmaceutical, nutritional and agricultural industries in close cooperation with our customers and partners. Our customers profit from our specialist strategy by gaining quick access to high level specialist knowledge, excellent support and customized solutions.

Our vision: Our fundamental aim is to improve the quality of food and people's health—and to do so using natural ingredients and processes. At Chr. Hansen, we feel this is a vision worth pursuing, and as a company we have the necessary knowledge and skills.

Hansen had also been building up its marketing network, establishing subsidiaries in Poland, the Czech Republic, Mexico, and Russia in the 1990s. The company moved into Malaysia in 2000 with the launch of a subsidiary in Kuala Lumpur.

Meanwhile, Hansen's new product development had resulted in a number of significant successes. In 1991, the company launched its first chymosin fabricated through fermentation. The following year, Hansen debuted a direct inoculation malolactic culture for the wine industry. The company acquired a global manufacturing and distribution agreement for a promising new probiotic culture, Lactobacillus casei CRL-431 in 1995. Then, in 2000, the company achieved a breakthrough when it received European Union approval for the launch of its probiotic feed additive, BioPlus2B, meant to take the place of artificial antibiotic-based growth stimulants. In that year, also, the company received FOSHU (Food for Specified Health Use) approval for the use of its probiotic culture BB-12 in fermented milk in Japan.

A dip in profits at the beginning of the 2000s encouraged Hansen to restructure its operations, and the company shut down seven plants in order to boost its operating efficiency. Hansen also stepped up its research commitment, opening a research, development, and testing facility in 2001 at a cost of DKK 100 million.

By 2003, Hansen was once again in an expansive mood. In that year, the company moved into the Chinese market for the first time, setting up a subsidiary in Hong Kong. The following year, the company set up new production subsidiaries in India and Ukraine.

Hansen had come under the majority control of the Lundbeck Foundation, which also owned H/S Lundbeck, in 1991. Hansen was then restructured as a holding company, Chr. Hansen Holding, with Alk Abello and Chr. Hansen Group as its two main subsidiaries. At the end of 2004, Lundbeck decided that it preferred to focus its investment interests solely on the scientific research and pharmaceuticals sectors. As such, the Chr. Hansen Group no longer fit within Lundbeck's investment objectives, and the holding company announced its intention to split off Chr. Hansen Group into a separate, independent company before the end of 2005. With a history spanning 135 years, Chr. Hansen was nonetheless expected to remain a leading name in the global food ingredients sector.

Principal Subsidiaries

AKAY Flavours & Aromatics Ltd. (India; 50%); Chr. Hansen A/S (Norway); Chr. Hansen Argentina S.A.I.C.; Chr. Hansen Centroamérica S.A. (Panama); Chr. Hansen Czech Republic, s.r.o.; Chr. Hansen de Mexico S.A. de C.V. (Mexico); Chr. Hansen France S.A; Chr. Hansen GmbH; Chr. Hansen GmbH (Austria); Chr. Hansen Ind. e Com. Ltda. (Brazil); Chr. Hansen Ireland Limited; Chr. Hansen Limited (Canada); Chr. Hansen LLC (Russia); Chr. Hansen Ltd. (United Kingdom); Chr. Hansen Poland Sp. z.o.o.; Chr. Hansen Pty Ltd (Australia); Chr. Hansen S.A. (Peru); Chr. Hansen S.p.A. (Italy); Chr. Hansen, Inc. (United States); Chr. Hansen, S.A. (Spain); Czech Republic; Hansen Hellas ABEE (Greece); Peyma Chr. Hansen's A.S. (Turkey).

Principal Competitors

Danisco A/S; Degussa AG; Kerry Group plc.

Key Dates:

1870:: Christian D.A. Hansen develops a method for extracting pure, consistent-quality rennet from calves stomachs.
1874:: The company sets up its first rennet production plant in Copenhagen, then adds natural coloring agents for cheese and butter.
1876:: Subsidiaries are established in the United States, France, and Germany.
1878:: Production in the United States begins.
1893:: The company begins producing cultures for yogurt and other dairy products.
1916:: Production in the United Kingdom is launched.
1918:: The company opens a factory in Canada.
1930:: A new main production site in Milwaukee, Wisconsin, is opened.
1936:: Production subsidiaries in Germany and Italy are established.
1951:: The company enters Australia with a production subsidiary.
1955:: A rennet production plant in France is opened.
1964:: The company enters South America with a plant in Argentina.
1976:: DVS dairy culture system is launched.
1979:: The company acquires Alk Abello in Denmark, adding pharmaceuticals to its business portfolio.
1986:: SOCHAL, in France, is acquired.
1990:: Extract Oil, in Spain, is acquired.
1991:: Lundbeck Foundation acquires a majority control of Hansen, which is reformed as Chr. Hansen Holding with two core businesses, Chr. Hansen Group and Alk Abello.
1995:: AKAY joint venture in India is launched; the company acquires Gastronomisk Institut in Denmark.
1996:: SEFCAL, in France, and Xantoflor, in Spain, are acquired.
1998:: Ingredient Technology Corporation, in the United States, is acquired.
1999:: The company enters Russia and acquires Italiana Ingredienti in Italy.
2000:: BioPlus2B receives European Union approval.
2001:: A new DKK 100 million facility opens in Denmark for research, development, and testing.
2003:: Chr. Hansen enters China with a subsidiary in Hong Kong.
2004:: Chr. Hansen Holding announces its plan to split off Chr. Hansen Group as a separate company in 2005.