Piscines Desjoyaux S.A.

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Piscines Desjoyaux S.A.

BP 270, ZI du Bas Rollet
La Gouyonniere
La Fouillouse, F-42486 Cedex
France
Telephone: (33 04) 77 36 12 12
Fax: (33 04) 77 36 12 10
Web site: http://www.desjoyaux.com

Public Company
Incorporated: 1966
Employees: 5,000
Sales: EUR 90 million ($112 million) (2006)
Stock Exchanges: Euronext Paris
Ticker Symbol: 6160
NAIC: 238910 Other Specialty Trade Contractors

Piscines Desjoyaux S.A. is the leading manufacturer and distributor of in-ground swimming pools in France—the world's second largest pool market after the United States—and one of the sector's leaders in Europe. In France, Desjoyaux's market share tops 18 percent, more than double its closest competitors. Desjoyaux pioneered new patented casing techniques that permitted the rapid construction of concrete-based swimming pools; the company also invented a new type of all-in-one filtration that eliminated the costly and breakdown-prone pipe-based systems of the past. The result was a lower-cost, higher-quality swimming pool that reduced the need for steel reinforcement. The company remains committed to innovation, and files a number of new patents each year. In addition to its core product line, Desjoyaux has developed its own entry-level swimming pool design, the fixed-sized Click-it system, which enabled the company to enter the sub-EUR 5,000 pool market. Desjoyaux produces more than 15,000 pools per year at its 19,000-square-meter Lyon region factory. The company sells its swimming pools through a network of more than 160 exclusive distributors, including eight company-owned concessions, in France, and nearly 250 distributors outside of the country. In all, Desjoyaux's pools are sold in more than 70 countries.

Typically, the company is responsible for the fabrication of its pools, and its concessionaires are responsible for their installation. Desjoyaux is a leading supplier of swimming pools to the public sector and has diversified to target the upscale pool market as well. Desjoyaux also has entered the international market for large-scale pool contracts, for residential housing developments and vacation resorts, and the like. Although swimming pools account for 80 percent of the group's revenues, which topped EUR 90 million ($112 million) in 2006, the company also has developed a strong business in pool maintenance and renovation services, and in the sale of pool equipment and accessories. France remains the company's largest market at nearly 65 percent of sales (rising to nearly 72 percent including France's overseas possessions). Europe, including France, is the company's largest export market; the Asian region, including China, Thailand, and Vietnam, adds nearly 17 percent to sales. Listed on the Euronext Paris Stock Exchange since 1991, Desjoyaux remains controlled at 75 percent by the founding Desjoyaux family. Jean-Louis Desjoyaux, the founder's son, serves as company chairman.

SWIMMING POOL INNOVATOR IN 1966

Jean Desjoyaux worked as a mason in the 1960s when he decided to build a swimming pool for his family at his Lyon-region home. The swimming pool industry, however, did not yet exist in France. Indeed, private swimming pools remained a luxury item affordable only by the very wealthy. As a result, Desjoyaux was forced to build his pool from scratch, developing the infrastructure for the pool as well as its filtration system and other appointments.

Desjoyaux completed his first pool in 1966. Soon after a number of his friends and family members asked him to build swimming pools for them as well. In 1968, Desjoyaux founded his own company, Desjoyaux Batiments, providing general contracting services, tile laying, and the construction of swimming pools.

The construction of a swimming pool at the time remained a difficult and expensive process. In order to provide support for the swimming pool, builders were required to use reinforced concrete. Yet the use of steel reinforcement frames was expensive and the filling process was extremely time-consuming. At the same time, the reinforced concrete itself was highly prone to cracking due to temperature changes and terrain movements. The rust-prone steel, too, was less than permanent. These factors, coupled with highly cumbersome, pipe-based filtration systems—themselves invariably doomed to developing leaks or breaking down altogether—helped keep the costs of building a swimming pool high and the demand for new pools low.

Nonetheless, Desjoyaux's swimming pool business proved highly active into the 1970s. By the middle of the decade, with several hundred completed pools behind it, the company had come to specialize, in large part, in the construction of swimming pools. During the period, Desjoyaux also had been developing his own methods for constructing pools, and testing out new reinforcement materials, including wood and aluminum.

Desjoyaux's efforts resulted in a breakthrough that was to revolutionize the swimming pool market in France. By 1974, Desjoyaux had invented and patented a new method building pools using an active permanent casing system. Instead of being required to shape pool walls and floor at the site using steel as a frame, Desjoyaux's system used preshaped heavy-duty polypropylene casings. This permitted the pool's shape to be predefined, and vastly sped up the concrete filling process. As a result, the concrete could be poured quickly, eliminating the risk of cracking, while the rot-proof plastic casing provided permanent support for the pool walls.

Desjoyaux quickly realized that his method, called Desco Casing by the company, provided other significant advantages. For one, the casing components could be manufactured offsite and in high production volumes. In 1974, therefore, Desjoyaux created a second company, Forez Piscines, to develop the industrial production of swimming pool casings. Another important advantage of the Desco Casing system was that the company could develop a set series of standardized pool shapes and sizes. This enabled the company to take further advantage of high-volume production efficiencies, while also providing a more easily marketable product.

Desjoyaux's willingness to invest in its production capacity soon played another important part in the group's success. Over time, the company's factory grew into a massive facility with more than 19,000 square meters of production space, centered around a fleet of highly automated injection presses. The company later added its own polypropylene grinding unit, which enabled the company to develop its own basic materials through the recycling of plastic bottles, further reducing costs. By the middle of the first decade of the 2000s, the company's factory boasted a highly efficient, low-cost production system.

COMPANY PERSPECTIVES

The key to our development has been the sound relationship between: the high quality of our products that convinced our partners in France and throughout the world to market our brand, and a manufacturing technique that opened the way to a larger market for inground pools by breaking through the cost barrier of a major investment and coming within the budget of members of the public.

The low-cost of production in turn allowed the group to post high margins on its pool sales at its own growing network of sales offices. Initially, the company controlled its sales network directly, through a subsidiary, Sofoba, which among other things kept the company in close contact with its customer base. By incorporating customer needs into its pool designs, the company helped solidify its competitive advantage.

SOLVING THE FILTRATION PROBLEM IN 1984

Meanwhile, the group's high margins helped it attract and retain a growing group of independent, yet exclusive, distributors for its swimming pools. By offering sales representatives margins as high as 10 percent or more on their sales, the company succeeded in creating strong loyalty among its concession holders. The creation of this sales network, particularly from 1984, gradually shifted the company's focus from contracting to production. While the company focused its operations on the production of pool casings, its concession holders took responsibility for the installation of the pools themselves.

Even as its sales were building, Desjoyaux remained confronted with problems surrounding the available filtration systems. As noted, existing systems were generally based on a network of pipes and hoses leading from the pool to the different components of external filtration systems and back again. Yet these systems, apart from being quite expensive, were also delicate and prone to breaking down. Worse, the pipes and hoses used were almost invariably prone to developing leaks. Since a typical pool system often featured hundreds of meters of pipes and/or hoses, and these were usually buried underground and encased in concrete, they were impossible to repair.

In 1984, however, Desjoyaux hit upon an idea for an entirely new type of filtration system. Instead of an external system featuring multiple components, the company created a single filtration block that was attached to the interior of the pool itself. The new system completely eliminated the need for pipes or hoses, and was easily repairable or replaceable. Desjoyaux's filtration system was also far less costly to produce, further reducing the costs of its pools.

As a result, Desjoyaux not only captured the leading share in the French market, but also helped stimulate the growth of the market itself. Before long, France had become the largest swimming pool market in Europe—and even grew to become the second largest pool market in the world, behind only the United States.

Desjoyaux's pool systems soon began to attract attention from outside of France. The company took advantage of the rising demand and in 1988 launched its first international exports. As part of this effort, the company created a number of partly or wholly owned overseas subsidiaries, including in Spain, Germany, and Italy, and, in 1993, in Canada as well. Also in 1993, the company received its first large-scale order, for 86 swimming pools in mainland China. Nonetheless, the company continued to reduce its directly owned sales operations, and by 1996 the company had folded its Sofoba sales network. Desjoyaux still maintained a small group of eight direct sales offices.

NEW CENTURY SALES TARGETS

By then, Desjoyaux had become a public company, listing 25 percent of its stock on the Paris Stock Exchange in 1991. The public offering enabled the company to step up its investment in its production capacity, and in 1991 the company moved its production to its large-scale, state-of-the-art facility. The new factory, which remained the subject of continued investment by the company, enabled Desjoyaux to ramp up its annual production levels. By the beginning of the 2000s, the company was capable of producing 10,000 swimming pools per year. At mid-decade, that level topped 15,000 annually.

Jean Desjoyaux stepped down from active leadership of the company, turning over the direction of the business to his son, Jean-Louis Desjoyaux. Under the new generation, the company continued to develop its international growth. By the dawn of the 21st century, foreign sales accounted for some 30 percent of the company's sales.

KEY DATES

1966:: Jean Desjoyaux builds his first swimming pool at his own home near Lyon, France.
1968:: Desjoyaux founds a general building and swimming pool contracting company.
1974:: Desjoyaux develops a "Permanent Casing" system and founds Piscines Forez to produce prefabricated pool systems.
1984:: "Filtration Block," a breakthrough all-in-one pool filtration system, is developed.
1988:: Export sales are launched.
1991:: Desjoyaux goes public on the Paris Stock Exchange.
1996:: Jean-Louis Desjoyaux takes over as head of the company.
2004:: Desjoyaux introduces the new entry-level "Click-it" swimming pool.
2006:: The company announces plans to boost its share of international sales past 50 percent of total company revenues.

Desjoyaux had long claimed the French market leadership. Yet in the late 1990s and especially into the 2000s, the company found itself confronted with a growing number of competitors, and especially competitive pool systems. New types of in-ground pools being developed at the time, and especially the creation of single-piece molded pool liners, not only placed Desjoyaux under pressure, but also created a new market for pools costing as little as EUR 5,000.

In order not to be shut out of this fast-rising market, Desjoyaux was forced to react. In 2004, the company introduced its own entry-level, prefabricated pool system, called Click-it. Although still designed to be installed by professionals, the new system helped the company break the EUR 5,000 barrier.

Meanwhile, Desjoyaux also had been expanding into a number of other pool markets. The company began developing upscale pools, in order to position at the high end of the pool market as well. Meanwhile, Desjoyaux had been targeting the public sector, winning a growing number of contracts to develop and build municipal and other public swimming pools. Another promising category for the company was the growing market for large-scale orders from developers of residential communities and resort estates.

Not every market proved receptive to Desjoyaux, however. The company found it difficult to penetrate the highly competitive U.S. market, and into the early 2000s that market accounted for less than half of 1 percent of the group's total sales. As such, in 2005, the company announced its decision to shut down its U.S. sales subsidiary. Nevertheless, Desjoyaux's overall operations continued their dynamic growth, aided by a series of hot summers in France and the rest of Europe, and concerns over the effects of global warming. Desjoyaux, which sold its 150,000th pool in 2006, was able to fix new growth objectives, expecting to increase the share of exports to more than 50 percent of its sales in the near future.

M. L. Cohen