Doux S.A.

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Doux S.A.

BP 22, Zone Industrielle de Lospars
Chateaulin, France
Telephone: (33) 02 98 86 69 00
Fax: (33) 02 98 86 69 69
Web site: http://www.doux.com

Private Company
Incorporated: 1955
Employees: 15,000
Sales: EUR 1.35 billion ($1.7 billion)(2005)
NAIC: 311615 Poultry Processing; 311611 Animal (Except Poultry) Slaughtering; 311612 Meat Processed From Carcasses

Doux S.A. is the world's leading producer of chickens and other poultry for the export market, and is also Europe's single largest producer of chicken, chicken products and other poultry and poultry products. Over all, the company is the fifth-largest poultry producer in the world, with a production of more than 1.1 billion tons per year, and annual sales of more than EUR 1.3 billion ($1.7 billion). The company, based in the small village of Chateaulin in France's Brittany region, operates a network of nearly 25 slaughtering and cutting facilities, chiefly in France and Brazil, but also in Germany, Spain and Switzerland. The company also operates 4 processing facilities, 14 hatcheries and 12 feed plants. The company exports its products to more than 130 countries. Doux's products are sold under a number of brand names, including global brand Doux, and local brands Père Dodu and La Janzé in France, Guts-Gold in Germany, Tio Cosme in France, and Le-Bon and Frangosul in Brazil. Founded in 1955, Doux remains a family-controlled company, with Charles Doux, son of the group's founder, as chairman. Guiding day-to-day operations, however, is managing director Guy Odri, who joined the company in 2003.

FOUNDING A POULTRY GIANT IN 1955

The Doux family's involvement in France's food industry began in the 1930s when Pierre Doux, an Armenian who fled to France, launched a butcher business in Nantes in 1933. In 1955, Doux traveled north, to the Finistère region, where he founded his own slaughterhouse in Port Launay. From the start, Doux focused on the poultry sector, and especially chickens and chicken products. Doux invested in freezing technology, becoming a primary supplier of frozen chickens to the French supermarket channel, which was just beginning to become commonplace in France in the 1950s. In the early 1960s, the company's continued investments enabled it to become one of the first to introduce automated processing techniques, allowing the company to step up its production capacity.

Doux's increased capacity situated the company to begin preparing its frozen chickens for the export market. This early involvement in the export market allowed it to position itself as a major player by the 1970s. An important part of the group's success came through its early decision to enter the Eastern European market, and especially the Soviet Union. At the same time, Doux became one of the first to target the Middle Eastern market, where the introduction of frozen chicken prepared according to Western methods and hygiene levels made the company a major player in the region.

Much of the group's expansion during this period was attributed to Pierre Doux's son Charles Doux. By the end of the 1980s, the younger Doux had steered the company to the top level of not only the French and European markets, but of the global poultry market as well. By 1990, the company claimed the number two position on the global export market, and the number three position, behind Tyson Foods and Conagra, of the poultry sector overall. The company had also begun to explore its own international development, starting with Spain. In 1989, the company acquired an 85 percent stake in that country's number two poultry group, Porta-Pygasa.

That year marked a new turning point for Doux. In October 1990, the company agreed to acquire majority control of Père Dodu, the poultry division owned by Guyomarc'h, a member of the Paribas group. The remaining share of Père Dodu was held by another Paribas holding, Soprat. The addition of Père Dodu brought Doux one of France's strongest poultry brands, as well as one of the sector's most innovative. Indeed, Père Dodu had helped pioneer the market for prepared and processed poultry parts and products. The company had been one of the first to market successfully a prepared Cordon Bleu; other innovations introduced by Père Dodu included turkey roasts and parts, and extended-life packaging materials. The addition of Père Dodu also placed Doux firmly at the lead of a buoyant French market that included such other poultry giants as Bourgouin and Lambert-Dodard-Chancereul. By 1992, Doux's sales had topped FRF 7 billion (approximately EUR 1.2 billion)—some 30 percent of which came from outside the European Union.

In the early 1990s, Doux extended its network again, acquiring Pic'Or, the leading poultry slaughterer and processor in France's Nord region. That purchase brought Doux two more facilities, not only boosting the company's broiler chicken capacity, but also its turkey slaughtering and processing sales. The Pic'Or purchase also positioned Doux closer to the Belgian and German borders, as well as to the United Kingdom, strengthening the company's export operations. Soon after, the company added its first foreign plants, buying up the Guts-Gold brand in order to establish its own slaughtering and processing facilities in Germany.

WEATHERING THE POULTRY CRISIS AT THE TURN OF THE CENTURY

By the mid#1990s, Doux's sales had topped FRF 8 billion. The company continued to seek expansion opportunities, targeting fresh growth in the French market. In 1995, Doux found a new target, that of Codivol, the fourth-largest poultry group in France. Codival, which also had a healthy export business with a focus on the northern European market, had been part of cooperative group Transagra, which acquired the business several years earlier. Yet losses in its poultry division in the early 1990s had forced Transagra to exit that business. The addition of Codivol to Doux gave the company seven new abattoirs, including two dedicated to the processing of turkey, as well as a feed production unit with a capacity of nearly 250,000 tons per year.

By then, however, Doux had begun to feel the effects of the GATT agreement, which imposed quotas and threatened to end export subsidies for the European poultry industry. At the same time, a wave of consolidation within the global poultry industry had begun to threaten Doux's dominance in Europe. In order to avoid the loss of income and business that the end of subsidies would bring, while remaining competitive on the world market, Doux made the bold move of expanding into South America. Brazil was by then already the world's fastest growing poultry producer. In 1998, Doux acquired that country's leading poultry processing company, Francosul.

COMPANY PERSPECTIVES

An expert in poultry and innovation since its creation in 1955, the Doux Group and its subsidiaries are present in all of the poultry market segments (chicken, turkey, duck, guinea fowl, etc.) to include fresh and frozen products, whole or cut-up poultry and processed products (breaded products, ready-made meals, poultry deli products). A major player in retail sales, the agri-food industry and foodservice, the Doux Group sells its products in more than 130 countries on the five continents, with a driving desire: bringing everything into play to offer responses that are in line with client and consumer needs throughout the world. This quest for innovation, quality and flavour are represented in a portfolio of internationally recognised brands: Doux, Frangosul, Lebon, Père Dodu, Supreme, Le Janzé, Tio Cosme and Guts-Gold.

Closer to home, Doux acquired full control of Père Dodu in 1998, when it bought its shareholder partner Soprat. The purchase, in addition to the Père Dodu stake, also gave a boost to Doux's efforts to increase its share of the fast-growing prepared foods market. Doux also acquired the Le Janzé brand, which specialized in the production of "Label Rouge" poultry—that is, poultry certified to meet a number of quality criteria.

The collapse of chief French poultry rival Bourgoin in 2000 helped raise Doux's profile in France and elsewhere. The company also benefited from the series of scandals that rocked the beef and pork industries at the turn of the century. In the meantime, Doux invested heavily in its Brazilian operations, launching a $30 million spending program to increase capacity at its four existing facilities, as well as constructing a fifth plant, for the production of processed foods. The investment program helped shift the balance of Doux's operations, and by 2002, its Brazilian operations accounted for half of the company's total production.

Yet the company's fortunes were set to take a turn for the worse as it approached mid-decade. The global poultry market had entered into a phase of over-production, causing prices to fall sharply. Worse for the industry was the outbreak of bird flu in Asia, and warnings of a pandemic expected to sweep through much of the world over the next several years. The bird flu threat caused consumers to flee the poultry section in supermarkets, and demand went into a freefall.

In response, Doux was forced to tighten the belt of its operation. In 2003, the company launched a restructuring program, which included the closing of four factories by 2004, with other plant closures, particularly those involving non-core operations, anticipated by the middle of the decade. The effort paid off, helping the company return to profits by the end of that year.

Doux's efforts to expand its range of prepared foods also helped the company through the worst of the bird flu crisis. The company launched a successful line of breaded foods, called Mordicus, for the children's market. The company also launched the Fraicheur+ packaging system that was able to extend the shelf life of poultry parts to as much as 12 days. In 2004, the company launched a range of more than 50 Père Dodu products using the new packaging system, with plans to roll out a line of extended-life products for its Le Janzé brand.

Despite these successes, the company remained at the mercy of the continuing bird flu crisis. With new cases being reported around the world—including the first case in France in early 2006—consumer poultry purchases plummeted. The situation only grew worse in March 2006, when the French government ordered that the country's poultry population be quarantined indoors. The drop in sales that followed forced Doux to cut back its production at nearly all of the company's facilities, laying off a significant proportion of its workers.

Doux responded by launching a communication campaign in order to allay consumer fears about poultry products. The poultry sector's spirits were raised somewhat at the end of May 2006, when the government decided to lift the restrictions that had been placed on the market. Nonetheless, with the memory of the beef and pork scandals still fresh in consumer minds, Doux appeared to have its work cut out in order to restore its growth to its former steady pace.

KEY DATES

1933:: Pierre Doux establishes a butcher business in Nantes.
1955:: Doux moves to Finistere, opens his own slaughtering facility, and begins frozen poultry processing.
1990:: Doux acquires majority control of the Père Dodu brand from Guyomarc'h.
1993:: The company acquires Pic'Or, the leader in France's northern regions, and also acquires the Guts-Gold brand in Germany.
1995:: Doux acquires Codivol, the fourth largest poultry processor in France.
1998:: Doux acquires Francosul, the leading poultry slaughterer and processor in Brazil and acquires full control of Père Dodu.
2000:: The company launches a $30 million investment drive in Brazil.
2002:: Brazil accounts for 50 percent of group production.
2003:: Doux shuts down four plants.
2004:: Doux launches an extended range of products in its Fraicheur+ packaging.
2006:: Amid the bird flu crisis, Doux is forced to cut back production.

PRINCIPAL SUBSIDIARIES

Doux Gefügel GmbH (Germany); Doux Frangosul (Brazil); Doux Iberica (Spain); Doux Poultry Ltd. (United Kingdom); Avicola de Galicia S.A. (Spain); MILSA (Spain); Doux Piensons S.A. (Spain); SODEDIS (Switzerland).

PRINCIPAL COMPETITORS

Cargill Inc.; Tyson Foods Inc.; Irvine's Day Old Chicks Private Ltd.; ROMSILVA; ConAgra Foods Inc; Smith-field Foods Inc.; Agricola Super Ltda.; Proagro C.A.; Sa-dia S.A; Lambert-Dodard-Chancereul.