Kraft Jacobs Suchard AG

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Kraft Jacobs Suchard AG

Klausstrasse 4
CH-8008 Zurich
Switzerland
(01) 385-11 11
Fax: (01) 382-16 45

Wholly Owned Subsidiary of Kraft Foods International, Inc.
Incorporated: 1982 as Jacobs Suchard AG
Employees: 16,799
Sales: US$8.7 billion (1997)
SICs: 2022 Natural, Processed & Imitation Cheese; 2035 Pickled Fruits & Vegetables, Salad Dressings, Vegetable Sauces & Seasonings; 2064 Candy & Confectionery Products; 2066 Chocolate & Cocoa Products; 2095 Roasted Coffee; 2098 Macaroni, Spaghetti, Vermicelli & Noodles; 2099 Food Preparations, Not Elsewhere Classified

Kraft Jacobs Suchard AG—part of Philip Morris Companies Inc. by way of Kraft Foods, Inc.—is a leading European food company. Formed in 1993 through the combination of Jacobs Suchard AG and Kraft General Foods Europe, Kraft Jacobs Suchard (KJS) specializes in three food categories: coffee (42 percent of operating revenues), confectionery (30 percent), and cheese/grocery (28 percent). Key coffee brands include Carte Noire, Gevalia, Grand’ Mère, Hag, Jacobs, Jacques Vabre, Kenco, Saimaza, and Splendid. In confectionery, noteworthy brands include Callard & Bowser, Côte d’Or, Daim, Freia, Lacta, Marabou, Milka, Suchard, Terry’s, and Toblerone. Finally, well-known brands in cheese/grocery include Dairylea, El Caserío, Kraft, Miracle Whip, O’boy, Philadelphia, Sottilette, and Tang.

Of KJS’s immediate predecessor companies, Kraft General Foods Europe was formed in 1989 from the merger of Kraft Europe (founded in 1927 and purchased by Philip Morris in 1988) and General Foods Europe (founded in 1954 and bought by Philip Morris in 1985). Jacobs Suchard’s history dates back to 1825, having its origins in three spirited entrepreneurs: Philippe Suchard and Johann Jakob Tobler, confectioners; and Johann Jacobs, a coffee merchant. The Suchard and Tobler companies joined forces in 1970 to form Interfood, which Jacobs’ coffee company joined 12 years later to form Jacobs Suchard. Philip Morris acquired Jacobs Suchard in 1990.

Suchard Formation in 1825

Philippe Suchard opened his small confectionery shop in Neuchâtel, Switzerland, in 1825, and the following year expanded his business by opening a chocolate factory in Serrières. Suchard was an innovator. Before trying the candy business, he had taken part in founding a shipping company on the Rhine River, had attempted to raise silkworms to make silk scarves, and had tried to establish a Swiss colony in the United States, near Carthage, New York. Later he provided housing for people working in his Serrières factory at a time when they did not have a union to voice their needs and demands. Suchard soon had built his business into the leading Swiss chocolate maker. Four years before its founder’s death, the Suchard Company opened its first plant outside Switzerland, in Lörrach, Germany, in 1880, the first in a series of international expansion efforts. In 1901 Suchard established the Milka chocolate brand, one of Europe’s oldest and most popular brands of milk chocolate.

Suchard’s son-in-law, Carl Russ, led the business into other countries, opening another factory in 1888, in Bludenz, Austria, two factories in France in 1903, one in Spain in 1909, one in Italy in 1923, and one in Belgium in 1929. Although the chocolate industry fell on hard times during World War I, by 1931 Suchard had begun to move into sugar confectionery, under the Sugus brand. This venture helped the company weather the Great Depression. After World War II, Suchard’s chocolate business again flourished and the company enjoyed relatively stable success.

Tobler Established in 1867

The Tobler company, which merged with Suchard in 1970, began in 1867 when Jean Tobler, formally Johann Jakob Tobler, opened a small shop called Confiserie Spécial in Switzerland. A year later, he opened a confection factory in the capítol city of Bern. An avid traveler, Tobler was involved in various ventures while continuing to build his chocolate business, which prospered quickly. In 1908 Jean Tobler’s son, Theodor, put the Toblerone chocolate bar on the market. One of the most valuable additions to the Tobler line of chocolates, it became Tobler’s hallmark product.

In 1922 Tobler first expanded outside Switzerland, to Paris. It was not until 1951, however, 29 years after moving into France, that Tobler made its second international move, this time into Stuttgart, West Germany. In 1967 Tobler extended into Great Britain. Tobler and Suchard continued to develop their respective chocolates and businesses until 1970, when the companies merged to become Interfood.

The joint effort focused on internationalizing business operations and broadening product lines. In 1980 Interfood would acquire Andes Candies, based in the United States, and in 1982 it would purchase Callebaut, a well-known Belgian producer of candy coatings and other products.

Jacobs Launched in 1895

The Jacobs coffee company, based in Bremen, Germany, can be traced to Johann Jacobs, born in 1869. This third industrious entrepreneur in Jacobs Suchard’s story opened a shop offering chocolates, tea, biscuits, and coffee in 1895. Jacobs opened a roasting plant of his own in 1906, and seven years later registered the Jacobs brand of coffee. In 1929 Johann Jacobs handed over the leadership of the company to his son Walther.

Much of Jacobs’ subsequent growth is attributed to a vital marketing decision made by Walther Jacobs: the company began delivering freshly roasted coffee directly to retail shops. After World War II, this system of direct delivery was stepped up, along with production and sales, until in the mid-1960s more than 1,000 vehicles delivered Jacobs’ fresh-roasted coffee to over 60,000 shops. In 1966 Jacobs began marketing different brand names of its coffee products, beginning with Krönung and growing to include Tradition, Privat, and Edel Mocca.

Klaus Jacobs, Walther’s son and the third Jacobs generation to lead the company, took over in 1970. Jacobs had expanded into Austria in 1961 and would expand into Switzerland in 1971. The company, under Klaus’s leadership, had plans to expand further into non-German-speaking countries and needed a home office to operate from. In 1973 a management and consulting subsidiary was established in Zürich. Subsequently, Jacobs moved into Denmark, France, and Canada during the 1970s by acquiring roasting and production companies in those countries. Jacobs acquired Jacques Vabre in 1973, and then again set its sights on France and bought Café Grand’ Mère, in 1982.

Jacobs Suchard Formed in 1982

By this time it seemed to Interfood and Jacobs leaders alike that a merger was in order. Both companies had ambitious goals for international expansion. Chocolate and coffee, though hardly the same business, offered some scope for cooperation, and a merger would bring both companies economies of scale. The merger, which created the public company Jacobs Suchard AG, was accomplished in 1982. Its head office was established in Zürich, since Interfood was determined to stay Swiss, and Klaus Jacobs (whose family controlled 55 percent of the company) was made chairman of the board, since Jacobs was by far the larger of the two companies. The new company’s logo featured the letters J and S placed closely together to also form a T, for Tobler.

Jacobs Suchard immediately began to cut costs; Jacobs eliminated most of the company’s middle management positions and used capital it raised by selling shares to acquire many established and successful businesses. One of the most prominent of them was the international Monheim Group, which Jacobs Suchard took over in July 1986. Included among Monheim’s subsidiaries was Van Houten, a West German company manufacturing consumer chocolate, cocoa, industrial cocoa butter, and cocoa powder. Another Monheim member was General Chocolate, in Belgium, which marketed specialty sweets under the Meurisse brand. Jacobs Suchard Belgium began handling Van Houten’s and General Chocolate’s consumer business; its industrial affairs were absorbed into Jacobs Suchard in Zurich.

By the end of 1986 Jacobs Suchard was operating quite successfully with its European additions. On the North American continent, however, save for Andes Candies, the company was doing very little business. So Jacobs Suchard set out to participate more aggressively in the lucrative American candy market.

Late 1980s Acquisitions

In December 1986 Jacobs Suchard completed a takeover of E.J. Brach for almost US$750 million. The American candy company, in existence more than 80 years, was the third largest candy company in the United States. Jacobs Suchard saw this acquisition as a profitable enterprise in itself and, perhaps more importantly, as a door through which to introduce its goods to the North American market.

Company Perspectives:

Our mission is to become the most successful branded food company in Europe. We will attain that goal through our high standard product range and through our consistent acquisition policy. Nevertheless, economic success is not everything. For this reason, we cultivate a corporate philosophy that, internally as well as externally, promotes a positive feeling of life: we whet our consumers’ appetites for culinary pleasures. We motivate our employees to perform and create. We are a reliable partner to our retailers. And we are committed to people in need, to the environment, and to culture.

In March 1987 the company took over the Belgian chocolate company Côte d’Or, a controversial deal since the Belgian company was the last of its kind still owned by Belgians. From the late 1960s into the 1980s Belgian candy companies had one by one been bought by foreign interests, including Callebaut’s 1982 purchase by Interfood. Nestlé had also bid for control of Côte d’Or, but the families who owned the Belgian “national icon” chose Jacobs Suchard. Jacobs Suchard, vowing to sustain the high quality of Côte d’Or’s chocolate, absorbed Côte d’Or into Jacobs Suchard’s Belgian operations. Jacobs Suchard also expanded its product market into Italy and Greece, in preparation for the integration of the European Economic Community in 1992.

In 1988 Jacobs Suchard bid for control of Rowntree, one of the United Kingdom’s largest candy companies. In April of that year Jacobs Suchard began buying the largest percentage of shares, 29.9 percent, allowed by British law without placing a bid for the whole company. Nestlé was on the scene again, eager to bid, but Rowntree was not eager to be bought by either company. Nestlé finally bought the company for about US$4.5 billion, topping Jacobs Suchard’s offer by US$400 million; Jacobs Suchard decided to stop bidding after a two-month battle and sold its Rowntree holdings to Nestlé for US$285 million.

Jacobs Suchard bought a Panamanian bank, Banco Aleman-Panameao, in 1985, and acquired the majority interest in West Germany’s Ibero-Amerika Bank in July 1986. Both had close ties to Latin America’s green-coffee business, upon which the company heavily depended. Direct participation in the banks was intended to provide Jacobs Suchard with greater knowledge about the green-coffee business.

During the first few years following the 1982 merger that created Jacobs Suchard, the company saw three phases in its development. In the beginning only key areas, such as personnel and finance management, were integrated, in an effort to bring Interfood and Jacobs together while disturbing their individual operations as little as possible. In 1983 the company reevaluated techniques for marketing its chocolate and coffee products in light of one another, and of the various countries in which they were sold, and made plans to capitalize on its popular brands and the changing desires of consumers. With consolidation taking a firm hold in management and marketing, in 1986 Jacobs Suchard redefined its business structure to include three business units: core business, finance and trading, and diversification, focused mainly on North America.

After spending approximately US$1 billion in acquisitions in 1987 and 1988 alone, Klaus Jacobs made four more purchases in 1989, including Italian maker of canned meat Sim-menthal and Spanish coffee producer Saimaza. By the end of 1990 Jacobs had concentrated the company’s European production in just six manufacturing centers (down from 22 in 1989); streamlined its European product line; and improved European sales by strengthening its less expensive brands, such as Milka. Jacobs Suchard also moved to capture a healthy portion of the growing Asian chocolate market. In 1989 the company hired 100 salesmen to push Milka chocolate in the Tokyo area alone.

Philip Morris Acquires Jacobs Suchard in 1990

Philip Morris Companies began a major push into the food industry in 1985 when it purchased General Foods Corp. Three years later Kraft, Inc. was acquired in a second huge acquisition. In 1989 Philip Morris combined the two companies into Kraft General Foods. Both of the acquired companies had longstanding European food units. Kraft Europe had been founded in 1927, while General Foods Europe debuted in 1954. With the creation of Kraft General Foods also came the creation of Kraft General Foods Europe.

Only one year after Kraft General Foods Europe was formed, Philip Morris acquired Jacobs Suchard. In August 1990 Philip Morris completed the SFr 5.4 billion (US$3.8 billion) purchase, the largest foreign acquisition of a Swiss firm to that date. The addition of Jacobs Suchard made Philip Morris the second largest food company in the world, trailing only Nestlé, and the third largest in Europe, trailing Nestlé and Unilever.

Philip Morris placed Raymond Viault in charge of Jacobs Suchard as CEO. Viault had previously engineered a turnaround of Maxwell House Coffee Co., a subsidiary of Kraft General Foods. Initially, Jacobs Suchard became a unit of Kraft General Foods International and operated separately from Kraft General Foods Europe. There was, however, a shuffling of assets. Several Jacobs Suchard businesses not of interest to Philip Morris—including E.J. Brach, Nabob Foods of Canada, the Dutch group Van Houten, and various real estate properties—were sold back to Klaus Jacobs. Non-European Jacobs Suchard operations in Hong Kong, Japan, Australia, Argentina, and Brazil were transferred to other subsidiaries of Kraft General Foods International. At the same time, several Kraft General Foods businesses in Europe were handed over to Jacobs Suchard, including German decaffeinated-coffee company Café Hag, the Onko brand of coffee, Swedish coffee roaster Gevalia, and French chewing gum manufacturer Hollywood. The future of Jacobs Suchard was clearly European.

Soon after joining the Philip Morris family, Jacobs Suchard went on a spending spree, scooping up more than a dozen companies in 1992 and 1993 alone. The most significant of these was the US$1.5 billion 1993 purchase of leading Scandinavian confectionery maker Freia Marabou, which had been created only two years earlier through the merger of Freia of Norway and Marabou of Sweden. Most of the other acquisitions were in the areas of coffee and confectionery: coffee makers Splendid of Italy and Fiesta of Greece, as well as confectionery makers in Czechoslovakia, Spain, Hungary, the United Kingdom, Poland, Lithuania, and Bulgaria. Moreover, Jacobs Suchard’s acquisition activity ranged beyond its two core food groups, picking up Maarud Cheese of Norway, Scandinavian snack maker Estella, and a Spanish maker of cheese. The company also established two joint ventures in 1993: in Turkey, Marsa, which produced margarine and edible oils; and in Poland, Mazowsze Chorzele, a maker of cheese.

In late 1993 Philip Morris decided to merge its two main European food units, in a move designed to improve productivity, cut costs, streamline management, and unify marketing. Viault was named president and chief executive of the new group, dubbed Kraft Jacobs Suchard AG, which was headquartered in Zürich, Switzerland. KJS, which inherited the mantle of third largest food maker in Europe, had three core areas of concentration: coffee, confectionery, and cheese, with several other minor “grocery” areas. At first, KJS was a subsidiary of Kraft General Foods Europe, but in 1995 Kraft General Foods was reorganized into a new entity known as Kraft Foods, Inc., with KJS becoming a unit of Kraft Foods International, Inc., itself a unit of Kraft Foods, Inc.

The creation of Kraft Jacobs Suchard did nothing to slow down the company’s acquisitiveness, which was particularly acute in eastern Europe. In 1994 KJS took control of the largest chocolate producer in Romania, Poiana-Produse Zaharoase. The following year brought confectioners in the Ukraine (Ukraina) and Russia (Petroconf) into the KJS fold. In 1994 the company also purchased the Lyon’s instant coffee brand from Allied-Lyons of the United Kingdom, and KF Co-Op Cirkel of Sweden, maker of coffee and spices. In 1996 and 1997 KJS also made several divestitures of noncore businesses, including Mal-aco candy in Scandinavia, Hayat mineral water in Turkey, Fiesta croissants in Greece, and the Spanish confectionery company acquired in 1992.

Future KJS growth was also expected to come from its Middle East and Africa unit, headquartered in London. By 1998 this unit was marketing KJS products in more than 70 countries. Saudi Arabia and Kuwait were two of KJS’s strongest markets. In each, the company held the number one market position in cream cheese and the number two position in coffee. The rapidly growing Kraft Jacobs Suchard appeared well positioned to compete with the Nestlés and Unilevers of its world.

Principal Subsidiaries

Kraft Jacobs Suchard Management & Consulting AG; Kraft Jacobs Suchard (Schweiz) AG; Kraft Jacobs Suchard Service AG (Switzerland); Taloca AG; Kraft Jacobs Suchard Oester-reich Gesellschaft MBH (Austria); Suchard Schokolade Ges. mbH Bludenz (Austria); KJS Namur S.A. (Belgium); Kraft Jacobs Suchard S.A. (Belgium); Kraft Jacobs Suchard Bulgaria AD; Kraft Jacobs Suchard spol. s r.o. (Czech Republic); Kraft Freia Marabou ApS (Denmark); Kraft Freia Marabou Danmark A/S (Denmark); Oy Estrella AB (Finland); Oy Kraft Freia Marabou Finland AB; Café Grand’ Mère S.A. (France); Café Hag S.A. (France); Kraft Jacobs Suchard France; Grundstucks-gemeinschaft Kraft Jacobs Suchard GbR (Germany); Kraft Jacobs Suchard Erzeugnisse GmbH & Co. KG (Germany); Kraft Jacobs Suchard Manufacturing GmbH & Co. KG (Germany); Kraft Jacobs Suchard Produktion GmbH (Germany); Mirabell Salzburger Confiserie-und Bisquit GmbH (Germany); Jacobs Suchard Pavlides S.A. (Greece); Kraft Jacobs Suchard Hungária Kft. (Hungary); Kraft Jacobs Suchard Ireland Ltd.; Krema Limited (Ireland); Côte d’Or Italia S.p.A. (Italy); Kraft Jacobs Suchard S.p.A. (Italy); AB Kraft Jacobs Suchard Lietuva (Lithuania); Kraft Jacobs Suchard BV (Netherlands); Kraft Jacobs Suchard Central & Eastern Europe Service BV (Netherlands); A/S Freia (Norway); A/S Maarud (Norway); Kraft Freia Marabou Norden A/S (Norway); Kraft Jacobs Suchard Polska Sp. z o.o. (Poland); Kraft Jacobs Suchard Portugal Productos Alimentares Lda. (Portugal); Kraft Jacobs Suchard Romania S.A.; Jacobs Suchard Figaro, a.s. (Slovak Republic); Kraft Jacobs Suchard Iberia, S.A. (Spain); AB Estrella (Sweden); Kraft Freia Marabou AB (Sweden); Marsa Kraft Jacobs Suchard Sabanci Gida Sanayi ve Ticaret A.S. (Turkey); Kraft Jacobs Suchard Ukraina Open Joint Stock Company (Ukraine); The Kenco Coffee Company Limited (U.K.); Kraft Jacobs Suchard (Holdings) Limited (United Kingdom); Kraft Jacobs Suchard Limited (U.K.); Suchard Limited (U.K.).