Gelita AG

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Gelita AG

Uferstrasse 7
69412 Eberbach
Germany
Telephone: +49 (0) 62 71/84-21 90
Fax: +49 (0) 62 71/84-27 18
Web site: http://www.gelita.com

Private Company
Incorporated: 1878 as F. Drescher & Co.
Employees: 2,500
Sales: $549.3 million (2004)
NAIC: 325414 Biological Product (Except Diagnostic) Manufacturing; 325998 All Other Miscellaneous Chemical Product Manufacturing

Gelita AG is the world leader in the production of gelatin products. In 2004 Gelita, known until 2005 as DGF Stoess & Co. GmbH, produced some 78,000 tons of gelatin, for a broad variety of products, including foodstuffs, photography, pharmaceutical uses, and human nutrition. Gelita has factories on five continents, in the United Kingdom, France, Sweden, The Netherlands, the United States, Brazil, Mexico, Australia, New Zealand, South Africa, and China, as well as in its native Germany. In addition to its wide-reaching business interests, Gelita is involved in a number of social and community-based projects.

Producing Gelatin in the 19th Century

Gelita AG has its roots in the mid-19th century when gelatin underwent a transformation from a byproduct, produced by individual tanners, furriers, and butchers in small quantities from leftover animal bones and skins, to a product produced in vast quantities using rationalized industrial methods. The Gelita concern began to emerge between 1875 up to 1888 from a number of pioneer firms in southwestern Germany. The first was founded in 1875 by Amalius Schmidt, the first gelatin-maker to introduce automation to the production of gelatin in his factory near Schweinfurt, Germany. The cost of expansion, however, brought Schmidt into financial straits. Three years later creditors took over the works and teamed up with another gelatin producer, F. Drescher, to form the firm, F. Drescher & Co. By the end of 1878, the Drescher factory was producing some 50 tons of gelatin annually. Over the coming years, Drescher continued to make improvements to his plant.

Drescher, however, was confronted with a knotty problem, one that had contributed to Schmidt's downfall—he had few distribution channels for his gelatin. Into the breach stepped Ch. W. Heinrichs, a gelatin distributor with such a broad base of customers that he could not find enough product to meet demand. Heinrichs first agreed to purchase Drescher's entire annual output, and then proposed becoming a partner in the company. Drescher rejected the offer at first but accepted when Heinrichs stopped purchasing Drescher's gelatin. Now a silent partner, Heinrichs brought his in-law, Heinrich Stoess, into Drescher & Co. Once inside Drescher with an effective sales force established, Stoess schemed to force Heinrichs out of the company. In the end, Stoess lost the power struggle and was himself forced to leave. Using the severance money he received from Drescher, however, Stoess set up his own gelatin company in Ziegelhausen, the Heidelberger Gelatine-Fabrik Stoess & Co., a company that by World War I would be one of the leading gelatin producers in Germany.

In May 1889, Drescher & Co. formally merged with Heinrichs's own gelatin factory in Hoechst, Germany to form Deutsche Gelatine-Fabriken (DGF) (German Gelatin Factories). DGF was established as a stock company. If a stockholder wanted to sell, however, other shareholders had to be given the right of first refusal, an arrangement that guaranteed control would remain in the hands of the owners and their families.

Both DGF and the Stoess firm produced edible gelatin for human consumption as well as photographic gelatin for the new medium that was just beginning to reach a broad public. In 1889–90 DGF produced 200 tons of gelatin, of which photographic gelatin constituted about 30 tons. By 1900 the company had established branches in London and Paris, and a sales office in New York, and was producing almost 350 tons of gelatin annually.

Meanwhile, in 1880, the brothers Paul and Werner Koepff had established a gelatin factory, Göppinger Gelatine and Leimfabrik, in Göppingen. The Koepff firm split its production almost evenly between edible and photographic gelatin. It was one of the first to rationalize the delivery of raw materials by laying rail lines directly up to the factory doors. By the dawn of the 20th century, DGF, one of the top two gelatin producers in the world, was buying some 15 percent of the Koepff firm's total output and in 1904 proposed a "financial cooperation" with its supplier. Although struggling with financial difficulties at the time, Koepff declined the offer, and a few months later declined another DGF offer to buy it outright. A brief upswing followed at the Koepff firm. After it expanded its factory, it found itself once again heavily indebted. When Paul Koepff (who by then was running the firm on his own) became seriously ill in 1911, he finally agreed to sell to DGF. The companies merged in 1911. Paul Koepff became the largest shareholder in DGF.

Overcoming Adversity in the Early 1900s

The German gelatin industry was hit hard by the start of World War I. It was abruptly cut off from foreign markets in Europe in 1914 and from the lucrative American market beginning in 1917. Raw materials were difficult to obtain. The workforce declined drastically because of conscription. Demand for gelatin in Germany plummeted. To bolster demand, DGF launched an aggressive campaign positioning gelatin as a nutritional supplement. Advertising was aimed directly at consumers; gelatin cookbooks were published and distributed. The strategy had little effect, however. After producing 720 tons in 1916–17, DGF production plunged to only 281 tons in 1919.

Both DGF and Stoess survived the war, and by 1920 DGF had resumed export relations, despite continuing shortages. A factor that contributed greatly to the upturn for both companies was an increased demand for high-quality, uniformly produced photographic gelatin. In the early 1920s both DGF and Stoess established exclusive supply deals with major film manufacturers, DGF with the German firm AGFA and Stoess with Eastman Kodak of Rochester, New York.

Heinrich Stoess had begun dealing with Eastman Kodak in 1893 and after the war ended they resumed their relationship, forging the first post-World War I German-American joint venture with the construction of the so-called Odin-Werke. A state-of-the-art factory for photographic gelatin in Eberbach, Germany completed in 1922, the Odin-Werke was a classic company town that included houses for workers, stores, company-organized social clubs, and such. Business with Eastman Kodak was a boon to Stoess at the peak of the German postwar hyperinflation, when German currency was so rapidly devalued that within a year and a half the price of gelatin rocketed from 20 Marks per kilogram to 85,000 Marks per kilogram. The American dollars Eastman Kodak paid were stable currency that did not lose value overnight. With the same stroke of the pen, however, Stoess competitor DGF was forced to give up its Eastman Kodak business, and its valuable foreign income. By 1927 the market had changed again. Both AGFA and Eastman Kodak cut their photographic gelatin purchases from DGF and Stoess. To concentrate its resources, DGF relocated its headquarters to Schweinfurt and turned to Eastman Kodak subsidiaries elsewhere in the world for business.

Economic, Political, and Personal Challenges in the 1930s

Disaster struck in 1929. The Great Depression was a blow to the entire German gelatin industry. Stoess was hit with another tragedy as well. After completing the construction of a new factory in Eberbach, Heinrich Stoess made a trip to India. Shortly after his return, he suffered a major stroke that left him mute, paralyzed, and unable to lead the company. His son Walter took over the company reins. For the next ten years, the elder Stoess's condition was a closely held company secret, and in public statements it continued to attribute important company decisions to him. When he finally died in 1938, his obituary made no mention at all of his long illness and only then did his son officially take over the firm leadership.

With the Great Depression came a precipitous drop in demand for gelatin and DGF's undisputed German market leadership with 51 percent share of gelatin production meant little. Stoess was hit hard by the economic downturn. Its major plant, the Odin-Werke, was operating at greatly reduced capacity, and the firm had to cut its staff by more than 50 percent from that of the 1920s. The firm also shut its factory in Ziegelhausen down completely.

Company Perspectives:

As gelatine experts and professionals, our primary focus is our core business gelatine with all its numerous fields of application (edible, photographic, pharmaceutical and special gelatine), including alternative raw materials. We are at the leading edge of the gelatine market and are fully customer-oriented. Our management is lean; we are flexible, fast and present throughout the world. We have a clear vision of the future and we are successful. We fully support the Mission & Values GELITA stands for and regard the GELITA brand as a very important company asset.

Later in the 1930s, however, both firms bounced back, and before long made Germany the world's leading producer of photographic and leaf gelatin. In 1934 DGF introduced the Gelita name as the umbrella brand for all of its gelatin products. The later 1930s were not without problems. The Nazis, who had come to power in 1933, had introduced strict laws governing the economic sphere. In 1937 DGF was charged with violations of foreign trade regulations. As a result, a number of company officials were arrested and spent time—sometimes weeks—in jail. Stoess was immune from such harassment for two reasons. It had resumed its relationship with Eastman Kodak in the United States and was bringing large amounts of badly needed foreign currency into Nazi Germany. Furthermore, Wilhelm Keppler, a member of the Stoess family, a leading executive at the firm, and a dedicated Nazi, was Hitler's leading economic advisor. Unfortunately for Stoess, Eastman Kodak and Keppler did not mix well. The American company objected to the close ties its partner firm apparently had with Hitler and demanded that Keppler leave if the partnership were to continue. Shortly afterward Keppler resigned and divested himself of all Stoess shares. By 1939, when World War II began, Stoess had doubled its 1932 production levels from 20 to 40 tons monthly.

Destruction, Reconstruction, and New Products in the 1940s–50s

World War II brought further hard times to the German gelatin industry. By 1942 its export business had ceased entirely. DGF revenues dropped by 65 percent. Stoess was forced to close the Odin-Werke. With their workforces ravaged by conscription, both firms turned to slave labor—POWs, Jews from occupied countries, and others—to work their factories. By 1944 almost 20 percent of DGF's workforce consisted of forced labor. In the course of the war DGF suffered near total destruction of its most important factories from air raids. Stoess, on the other hand, came through virtually unhurt in spite of heavy bombing in the area of its Eberbach headquarters.

In 1942, for unknown reasons, Walter Stoess made overtures to DGF to buy his firm. Three years later the two companies merged. When the war ended just months later, however, American authorities declared the merger to be in violation of antitrust regulations and invalidated it. They also interred Walter Stoess as a Nazi war criminal and seized his company. It was not returned to him until 1948.

The reversal of the merger was difficult for both companies. In 1946 DGF had no production facilities to speak of, while Stoess had been seized and shut down by the American occupiers. Of the two, DGF was in far worse shape. Aside from having no factories, its raw material and sales channels were nonexistent. In its first year of business after the war, it sold only one ton of leaf gelatin, less than one five-hundredth its 1932 sales. To bolster its position, the firm investigated new "special" gelatin applications, such as gelatin sponges for surgery, zinc glue, lime feed for livestock, food additives, aspic powder, and baking powder. These carried DGF through the first diffi-cult postwar years when it manufactured 284.6 tons of special products—three times as much as gelatin products. The German currency reform in 1948 solved one serious problem. The new currency, the Deutsche Mark, was fixed at a more equitable exchange rate, and with it German firms could once again buy their raw materials on the world market. Gelatin production increased substantially. In the first half of 1948, before the reform, DGF produced 64 tons of gelatin; in the six months after the June reform it produced 242 tons. As production grew, gelatin products once again provided a larger and larger proportion of DGF sales.

In 1948 Walter Stoess was cleared of war crimes and his company was returned to him. Once back at his desk he made a decision that contributed greatly to the later merger of DGF and Stoess—he hired Paul Koepff's grandson Heinrich Koepff, who was a leading shareholder and ranking executive of DGF, as the co-manager of Stoess & Co. While serving at Stoess, Koepff retained his position at DGF—including full power of attorney at the firm. There was apparently minimal conflict of interest—at the time DGF produced primarily edible gelatin, while Stoess specialized in photographic and pharmaceutical gelatin.

In the early 1950s world demand for edible and photographic gelatins dropped again. The recent development of important new gelatin capsule technologies for medicine, however, seemed to point a way out of the downturn. Heinrich Koepff visited R.P. Scherer Co., a firm in Detroit, Michigan that was at the forefront of the field. Koepff persuaded the at first skeptical company to work with him, a project that became the first postwar German-American joint venture. The two firms built a new plant in Eberbach that incorporated the gelatin capsule advances pioneered by Scherer. The American company held a 51 percent share in the company called R.P. Scherer GmbH; Stoess and DGF shared a 49 percent interest. It was DGF and Stoess's first foothold in an area that would become the third great gelatin application—pharmaceutical gelatin. Pharmaceutical products enabled DGF to increase its annual revenues from DEM 30,000 in 1950 to DEM 2.34 million in 1954.

Key Dates:

1875:: Amalius Schmitt starts producing gelatin on an industrial basis in Schweinfurt.
1878:: F. Drescher takes over Schmitt's gelatin factory.
1880:: Göppinger Gelatine and Leimfabrik is founded by Paul and Heinrich Koepff, in Göppingen.
1888:: Heinrich Stoess founds the Heidelberg Gelatine-Fabrik Stoess & Co. Ziegelhausen.
1908:: The Koepff brothers link their Göppingen firm directly to the railway system.
1921:: Stoess and Eastman Kodak jointly build Odin-Werke in Eberbach.
1934:: Gelita is introduced as a brand name by DGF.
1945:: American occupation authorities block the attempted merger of Stoess and DGF; Stoess is placed under "property control" by the occupation authorities.
1948:: Heinrich Koepff of DGF is named co-manager of Stoess & Co. by Walter Stoess.
1950:: R.P. Scherer GmbH is founded jointly by DGF, Stoess, and the American firm R.P. Scherer.
1972:: DGF and Chemische Werke Stoess merge to form DGF Stoess & Co. GmbH.
1977:: DGF Stoess Inc. is founded in Morris Plains, New York.
1977:: Rohage GmbH is founded.
1992:: Kind & Knox Gelatin Inc. of Sioux City, Iowa, is acquired.
2000:: DGF Stoess celebrates its 125th anniversary.
2002:: DGF Stoess moves into new headquarters in Eberbach.
2005:: DGF Stoess changes its name to Gelita AG.

Expansion and Merger in the 1960s

In the remainder of the 1950s both Stoess and DGF concentrated on expanding and modernizing their production facilities. By 1960 Stoess was a considerably healthier company than DGF. The Eberbach firm was more effective, more profitable, and was situated in a better location than DGF. Heinrich Koepff, with a hand in both companies, launched efforts early in the 1960s toward a merger that would enable the two firms to solve various manufacturing and organizational problems, to rationalize production, and to phase out obsolete facilities. Certain members of the DGF board had long been hostile to Koepff's proposals, but by 1964 they had retired. Koepff in the meantime had consolidated his control of DGF, quietly buying up shares from the heirs of its original founders. In 1965 he made his move. Stoess purchased DGF outright. Immediately afterward, the most ineffective factories were shut down; production of the former competitors was consolidated and divided among the remaining plants. The merger was further consecrated one year later when Heinrich Koepff, the son of one of DGF's cofounders, married Gerda Stoess, the granddaughter of Stoess's founder. DGF remained a subsidiary of Stoess & Co. until 1972 when the two formally merged into DGF Stoess & Co. GmbH.

Expansion and Acquisitions in the 1970s

The 1970s saw the new firm grow. In 1968–69 it spun off its mineral feed division into a new firm, the Gesellschaft für Tierernährung (GfT) (the Society for Animal Nutrition). GfT produced feed for domestic livestock and premixes for industrial livestock production. After the spin-off GfT built a second feed factory, and by 2002 it had grown to one of the leading animal feed companies in Germany. In 1973 DGF Stoess acquired an interest in Scheidemandel AG, a glue maker much larger than DGF Stoess but that was going through a financial crisis. After the acquisition DGF Stoess provided capital for modernization of Scheidemandel plants. In 1979 DGF Stoess acquired an 80 percent share in the firm and by 2000 Scheidemandel existed only as an administrative unit (its factories had all been integrated into DGF Stoess). In 1978 Rohage GmbH was established. Using expertise acquired from Scheidemandel, Rohage was a raw materials trading company established to make DGF Stoess independent of individual suppliers by supplying the raw materials needed for gelatin manufacture. By 2000 Rohage had eight subsidiaries of its own together with an affiliate.

The firm expanded its activities in the United States in the late 1970s. In 1977 DGF Stoess Inc., a sales and marketing firm, was established in Morris Plains, New York. Around the same time the German company entered a joint venture with Davis Gelatine Ltd. of Australia to buy and modernize a gelatin factory in Calumet City, Illinois, which then operated as DynaGel Inc. When work on the 6,500-square-meter plant was completed in May 1981, it was the most modern gelatin factory in the United States.

Focusing on the Future in the 1980s

At the start of the 1980s DGF Stoess set out to define explicit goals and to establish effective strategies for achieving them. The principle goal was to increase the company's share in the German market by 34 percentage points and in the European market by ten percentage points by 1985. The following three areas were cited as critical to success: Special stress was placed on providing the best customer service; a secure self-financing capability was to be established to ensure uninterrupted growth potential; and new product development had to be accelerated, toward which a new R&D department was formed. Gelatin hydrolysate was seen as the most promising area for new product research. During the 1980s numerous applications for the material were found in food processing, pharmaceuticals, nutritional supplements, cosmetics, and perhaps most important, as a treatment for bone and joint problems.

In 1986 firm head Heinrich Koepff passed away. For the next couple of years the firm was run by a board of managers. In 1988 Jörg Siebert was appointed the chairman of the DGF Stoess board. Siebert would lead the company into the new millennium.

One of Siebert's first moves was an attempt to acquire erstwhile partner capsule manufacturer R.P. Scherer. After the Tylenol scandal in 1985, which led to the loss of hundreds of thousands of dollars of orders for capsules, and a series of internal leadership intrigues had plunged the Detroit company into financial difficulties, it was put up for sale. To raise the funds necessary for a purchase, DGF Stoess converted its corporate form from a GmbH, a corporation with limited liability, to an Aktiengesellschaft (AG), or stock corporation, in 1989. Scherer's board rejected DGF Stoess's first offer, valued at about $341 million, but it invited DGF Stoess to submit a revised bid. Scherer responded to the new $377 million offer with a request for one dollar more per share. The additional expense, DGF Stoess felt, was too high. It broke off negotiations. The failed acquisition nonetheless had three positive results for DGF Stoess: It was transformed into a stock company, it secured financing sources for future expansion, and it laid the foundation for the company's future internationalization of its core gelatin business.

Further Expansion in the 1990s

Expansion into foreign markets was not long in coming. In 1992 DGF Stoess acquired Kind & Knox Gelatin Inc., a Sioux City, Iowa firm that had been producing gelatin products since 1890. The Kind & Knox main factory was completely renovated. In 1998 it was the most modern gelatin facility in North America. By the end of the 1990s, Kind & Knox was directly controlled and fully owned by DGF Stoess. Later the firm bought out Davis Gelatine's share in DynaGel and strengthened even further its presence in the world market; the move made DGF Stoess the world's largest producer of gelatin. During the 1990s subsidiaries for edible gelatin also were established in Great Britain and a firm was acquired in Sweden. In Germany in 1990 a new subsidiary, ATRO Protein Diät GmbH, was founded to produce dietary supplements capitalizing on the nutritional benefits of gelatin. In January 1998 UNIMELT GmbH was formed from the merger of two firms that processed animal fats. The subsidiary would the next year evolve into Gelita's animal fat group.

The decade was not characterized entirely by forward momentum, however. A drop in adhesives sales led the firm to shut down a factory in Wiesbaden in the early 1990s. The decline in the market led DGF Stoess to sell the Scheidemandel adhesives division altogether. In 1992 serious internal disagreements over the company's structure split the firm's upper ranks. One faction thought the company should be a privately run family business as it had always been, the other thought it should remain an AG. The conflict was so bitter that rumors circulated that the company would be sold. By the latter half of the decade, most opponents had left the company.

A New Identity in the 2000s

Going into the new century, the company restructured its operations once again to make them as efficient as possible. An important goal was to establish uniform, recognizable, and respected brand names by 2005. To that end in 1999 it concentrated all of its gelatin activities under a single corporate umbrella, the Gelita Group. The Gelita name, which was seen as representing quality and world leadership, was henceforth to be used on all gelatin products produced by the group. In addition, the Gelita Group, the UNIMELT Group for animal fats, and another group for all remaining business were placed under the administration of the operating unit, DGF Stoess. Meanwhile DGF Stoess AG was restructured into a holding company. Separate, easily distinguishable logos were developed for both DGF Stoess incarnations. On the occasion of its 125th anniversary in 2000, the company announced the construction of a new headquarters building in Eberbach. The building on the Neckar River was completed in 2002.

In 2005 stockholders voted to change Deutsche Gelatine-Fabriken Stoess AG to Gelita AG. That year also saw a 3.3 percent increase in sales over the previous year. In all revenues declined to DEM 454 million, a drop of DEM 18 million. Profits dropped in 2005 as well, from DEM 43 million to DEM 35 million.

Principal Subsidiaries

Gelita France SARL; Gelita Sweden AB; Gelita UK Ltd.; Gelita Deutschland GmbH; Gelita Nederland B.V.; Gelita USA Inc.; Gelita Mexico S. de R.L. de C.V.; Gelita DO BRAZIL Ltda.; Gelita Australia Pty. Ltd.; Gelita NZ. Ltd.; Gelita South Africa Pty. Ltd.; Gelita Tianjin International Trading Co. Ltd.

Principal Competitors

Atlantic Gelatin/Kraft Foods Global Inc.; Nitta Gelatin Canada, Inc.; PB Leiner; Geltech Co. Ltd.; Nitta Gelatin Inc.; Rousselot (Guangdong) Gelatin Co. Ltd.; Ewald Gelatine GmbH; Lapi Gelatine S.p.A.; Gelatines Weishardt S.A.