Stollwerck AG

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Stollwerck AG

Stollwerckstrasse 27-31
D-51149 Cologne
Germany
Telephone: (49) (2203) 43-0
Fax: (49) (2203) 43-319
Web site: http://www.stollwerck.de

Public Company
Incorporated: 1839 as Franz Stollwerck
Employees: 4,776
Sales: EUR 750.6 million ($737.2 million) (2001)
Ticker Symbol: G.STL
NAIC: 31132 Chocolate and Confectionery Manufacturing from Cacao Beans; 311821 Cookie and Cracker Manufacturing

Stollwerck AG is one of Germany’s largest chocolate manufacturers. Stollwerck sells brand name chocolate under many different brand names, including the most well-known brands “Sarotti,” “Sprengel,” “Gubor,” “Alpia,” and “Stollwerck.” The company also makes chocolate products for others under private labels—including that of Germany’s number one food discounter, Aldi—and produces and markets a range of cookies. Based in Cologne, Stollwerck runs eight production plants in Germany, Belgium and Switzerland and maintains sales offices in France, Spain, and Italy. About 70 percent of Stollwerck’s sales are generated in Germany, the world’s second-largest market for chocolate, in which the company has a market share of about 13.5 percent. The Swiss cocoa empire Barry Callebaut AG owns almost all of Stollwerck’s share capital and is planning to delist Stollwerck shares from public trading.

Origins in the 19th Century

Company founder Franz Stollwerck started out as a baker. The son of a wool spinner, he learned the baker’s craft in his hometown of Cologne. As was common among craftspeople in early 19th century Europe, Stollwerck sought to expand his knowledge of his trade by traveling outside his native region. His trip led him to southern Germany, Switzerland, and France. After he had returned to Cologne, the 24-year-old got married in 1839 and rented a small bakery in the southern part of the city. Right from the beginning, Stollwerck offered his customers a broad range of baked goods, including sweet delicacies from other countries, sophisticated fruit cakes, marzipan, and chocolate.

Stollwerck prospered as a maker of pastries and candies. One of his products, Kõlner Brustbonbon, was a candy that served as a remedy for cold symptoms and breathing problems. This item soon turned into a bestseller. Although he was not the only one selling cough drops and other “medicines” as a side business, Stollwerck’s commercial success drew the attention of Cologne’s pharmacists. In 1845, they asked the local authorities to forbid the non-pharmacist from selling medicinal products. Stollwerck brought the case to the Prussian government, which issued a decree allowing bakers to sell various home remedies that did not require a doctor’s prescription. On top of that, Prince Friedrich von PreuBen, who resided in Dusseldorf, made Stollwerck a supplier to his court.

In the following decades, Stollwerck’s business continued to grow as he expanded the distribution network for his Brustbonbons. By 1864, about 900 representatives sold his “healthy candies” in Germany. The business also began to extend beyond Germany’s borders. Stollwerck founded sales offices in most European countries as well as in New York. A master marketer, he introduced “picture chocolates” that featured images of a variety of things, including flowers, butterflies, and Cologne’s cathedral.

Stollwerck was not only involved in baking and candy manufacturing, but also in hospitality and culture. In the 1840s, he opened a café in his house where people could also enjoy a glass of wine or liquor until late at night. This establishment was frequented by Cologne’s bohemians. In 1847, Stollwerck opened a second café in the same street. Named at first “Café Royal,” it was renamed Deutsches Kaffeehaus — “German coffee house”—two years later and became a popular hangout for Cologne’s intellectuals and politicians. A few years later, Stollwerck turned the coffee house into a vaudeville-type theater, and he subsequently invested in a brand-new hall in the southern part of Cologne’s old-town. The Kõnigshalle — “King’s Hall”—seated 2,400 people and could be used for theater performances, concerts, or balls. However, the new venue was not widely accepted, and Stollwerck closed it down in the 1860s, remodeling it into a factory for producing candies, chocolate, liquor, and even Cologne’s famous perfume, Eau de Cologne or Kõlnisch Wasser.

Innovations in Production, Marketing, and Distribution after 1870

Stollwerck successfully reigned over his enterprise for twenty years. Then, one by one, beginning in 1860, his five sons (Albert Nicolaus, Peter Joseph, Heinrich, Ludwig, and Carl) entered the business, which was renamed Franz Stollwerck & Sohne in 1869. However, conflicts arose between the strong-willed company founder and his sons, who founded their own company, Gebriider Stollwerck, in November 1871. Two years later, the Emperor of Austria made Gebriider Stollwerck a vendor to his court. When Franz Stollwerck died in 1876, the two companies were merged. By that time, Stollwerck was an established manufacturer with a wide range of products. The demand for chocolate had exploded in the preceding decades, replacing candies as the company’s mainstay. Stollwerck now made 375 different chocolate products. Besides chocolate, the company offered about 150 varieties of candies and 80 varieties of cookies. Stollwerck also manufactured fruit preserves and jellies as well as crystallized and caramelized fruits. In addition, the company sold tea and imported items from Japan and China.

In the second half of the 19th century, Stollwerck mechanized its production facilities. In 1865, the company moved to another location, where chocolate manufacturing was modernized. The people passing by the factory were even able to watch how the chocolate was made. Of all the Stollwerck brothers, Heinrich Stollwerck was the one who most pushed the company’s mechanization forward. He was a talented inventor who devised steam-powered machines to produce chocolate products that had formerly been made by hand. Heinrich Stollwerck also built his own equipment, including a giant furnace and a machine with five rolls for flattening masses of chocolate.

The advent of vending machines in the 1880s revolutionized the distribution of chocolate and candies, and Ludwig Stollwerck pursued this means of purveying the company’s products. The company established over 10,000 such machines throughout Germany. By 1893, the number had reached 15,000 throughout Europe. Another 4,000 Stollwerck vending machines were installed in New York. As with many commercial innovations, the automated selling of sweets was not embraced by everyone, and Stollwerck was accused of unfair competition, disturbing the day of the Lord, and facilitating over-indulgence in candy on the part of children. These objections notwithstanding, Stollwerck’s “steel salesmen” were a highly successful means of distributing the company’s products. To prevent people from using slugs in order to get the candy of their choice, Stollwerck developed its own device for coin-verification.

Vending machines were not the only means of promoting Stollwerck’s chocolate. Ludwig Stollwerck introduced a “miniature picture series” and paid well-known artists of the time, among them Max Liebermann and Adolph von Menzel, for creating these images. Between 1896 and 1899, Stollwerck sold over 50 million such collectors items. On top of that, the company sold about 100,000 collector’s albums per year. In 1903, Stollwerck even hired Thomas Edison to help promote their chocolate. The “speaking audio records” Edison developed for the company were made from pure chocolate and became a bestseller. Music lovers with a sweet tooth were able to choose from 300 different melodies sung by popular artists. After listening to their favorite tune, they could simply eat the record.

Two World Wars Interrupt International Expansion

The first decade of the 20th century was a particularly prosperous one for the chocolate maker. In 1902, Stollwerck was transformed into a public company. In the years thereafter, Stollwerck evolved as an international enterprise with sales offices in many parts of the world and production plants in London, Vienna, and the United States. Stollwerck’s American subsidiary, Stollwerck Brothers Inc., became America’s second largest chocolate manufacturer. In 1908, Stollwerck’s cookie production was moved to Berlin. Between 1911 and 1913, the company greatly expanded its facilities at Cologne. However, the onset of World War I in the summer of 1914 interrupted Stollwerck’s success story. As a result of the war, the company lost all of its foreign subsidiaries. In the United States, Stollwerck Brothers Inc. was seized and auctioned off for one and a half million dollars in 1919. The meager compensation payments by the German government could hardly make up for such enormous losses. Stollwerck, like many other German manufacturers that did not profit from the war, found itself financially and organizationally weak in a fragile economic environment. The 1920s and 1930s brought even more hardship. In the early 1920s, the German economy was hit hard by the rapid devaluation of its currency, brought about mainly by the irresponsible financial practices of the German government. The hyperinflation of 1923 was followed by the worldwide economic depression that began at the end of the decade.

Company Perspectives:

We are an international company with a long tradition and we look back on a successful company history. Thus, for the future, too, we feel an obligation to our shareholders to secure a permanent growth that is in line with market requirements creating added value. Our major business is the production and international marketing of our chocolate products of premium quality. Our distinctive brand portfolio provides extensive and versatile business activities from premium quality to value for money. The centre of all our activities is the consumer/customer, whose needs and requirements are decisive for us. A trustful co-operation with clear targets and responsibilities charcterize our company’s policy. Therefore, motivated, commited and innovative employees are the solid base for a successful future.

In 1930, Stollwerck bought out the large German cocoa and chocolate manufacturer Reichardt. Taking over Reichardt’s high debt placed another strain on Stollwerck’s finances. Finally, the company’s financial position became so weak that German bank Deutsche Bank had to come to the rescue. The StoUwerck family gave up managing the company and sold its shares to the bank, which were then offered publicly. Deutsche Bank kept a majority stake in StoUwerck while the rest of the shares were distributed widely. In the fall of 1939, Germany’s National Socialist government under Adolf Hitler started another war. StoUwerck struggled with the increasing pressure of government restrictions on the production of chocolate and other sweets and found it more and more difficult to buy the necessary raw materials. This time the takeover of Reichhardt paid off, since StoUwerck received a double-portion of the rationed cocoa. By 1942, however, more than half of Germany’s chocolate factories had been closed down. Ultimately, half of StoUwerck’s production facilities and office buildings were destroyed by bombs in the last years of the war.

In mid-1949, StoUwerck resumed operations. The company reorganized its administration, rebuilt and modernized its production plants, and made its comeback as a major player in Germany’s chocolate industry during the postwar economic boom of the 1950s. In the 1960s, however, the company had to face new challenges. The former seller’s market had become a buyer’s market. Customers became more demanding. In the middle of the decade, the German government revoked the existing price restrictions on chocolate. Competition among chocolate makers intensified. StoUwerck’s management was not able to cope with the new market demands soon enough to prevent another downturn in the company’s history. In the business year 1970-71, StoUwerck incurred losses in the millions, and the company’s majority shareholder Deutsche Bank was feverishly looking for a strategic partner with the financial strength to rescue StoUwerck from collapse. However, none of the large German chocolate makers showed any interest. It seemed more likely that they were eagerly waiting for one of their competitors to disappear from the marketplace.

A New Era Begins with Hans Imhoff

In 1971, entrepreneur Hans Imhoff entered the picture at a time when StoUwerck’s prospects for survival were at a low point. Imhoff had not only built the largest wholesale food operation in the Rhineland south of Cologne but had also set up and successfully run his own chocolate manufacturing plant. As a child, he had grown up near StoUwerck’s chocolate factory in Cologne and was enchanted by the sweet smells hovering around the plant. In 1972, after many difficulties, Hans Imhoff—with the help of Deutsche Bank’s Alfred Herrhausen—became StoUwerck’s new chairman of the advisory board. With a personal loan that enabled him to take over the bank’s 46.5 percent stake in the struggling company, Imhoff initiated a radical reorganization program. The number of products made by StoUwerck was cut by over 80 percent, from about 1,000 to 190. StoUwerck’s workforce shrunk by two-thirds, from 2,011 down to 705, between 1971 and 1975. As a result, the company recovered within just a few years. When Imhoff took over, StoUwerck’s balance sheet showed DM6.4 million in losses. In 1975, the company reported a profit of DM6.9 million. In the same year, StoUwerck started building a brand-new production plant and headquarters in Cologne’s suburb of Porz. Imhoff sold the old premises to the German Rueger group and, as a part of that deal, took over Rueger’s 36 percent share in Stollwerck.

In the following 25 years, Imhoff continuously worked on StoUwerck’s growth and on expanding its reach. The company acquired many other chocolate manufacturers and expanded into both western and eastern Europe. In 1979, StoUwerck took over Sprengel, one of Germany’s oldest chocolate makers. Three years later, the company acquired the Belgian chocolate bar manufacturer Jacques Chocolaterie. After the reunification of East and West Germany, StoUwerck bought Thiiringer Schokoladenwerk, the largest chocolate factory in the eastern part of the country, and invested heavily in modernizing it during the next ten years. The disintegration of the former Eastern Bloc opened the markets of eastern Europe, in which Imhoff—although aware of the high risk—saw equally high potential for growth. By 1996, StoUwerck owned two of the largest chocolate and cookie factories in Hungary and chocolate manufacturing plants in Poland and Russia, making the company the number one maker of chocolate bars in all three countries. In the late 1990s, StoUwerck was able to acquire two other major chocolate brands. In 1998, the company got lucky when Dutch food giant Nestlé decided to dispose of “Sarotti,” one of Germany’s leading manufacturers of premium chocolate. One year later, StoUwerck acquired the premium chocolate brand “Gubor.” StoUwerck’s export business soared and the company sold its sweets in the United States again, as well as in Japan and China. As a result, sales increased from about DM100 million in 1971 to DM1.52 billion in 1998.

Key Dates:

1839:: Franz Stollwerck opens a small bakery in Cologne.
1869:: The company is renamed Franz Stollwerck & Söhne.
1876:: Franz Stollwerck’s five sons manage the company after his death.
1902:: StoUwerck is transformed into a public company.
1906:: The brand name “Alpia” is registered as a trademark.
1919:: The company’s subsidiary in the United States is lost after World War I.
1930:: StoUwerck acquires cocoa and chocolate maker Reichardt.
1931:: Deutsche Bank becomes StoUwerck’s majority shareholder.
1949:: StoUwerck resumes operations after World War II.
1972:: Hans Imhoff is elected chairman of StoUwerck’s advisory board of directors.
1979:: StoUwerck takes over German chocolate manufacturer Sprengel.
1991:: The company buys the eastern German chocolate factory Thiiringer Schokoladenwerk.
1998:: StoUwerck acquires Sarotti from Nestlé.
2001:: Hans Imhoff retires; StoUwerck’s eastern European subsidiaries are sold to Kraft Foods.
2002:: Swiss Barry Callebaut AG acquires Stollwerck.

Up until the late 1990s, Hans Imhoff was in firm control of every part of StoUwerck’s operations. In 1993, he saw a childhood dream come true when he presented in Cologne’s city-center a brand-new chocolate museum for which he had paid DM53 million out of his own pocket. One of the main attractions was a “chocolate fountain” where visitors could taste the warm chocolate pouring out. In the late 1990s, Imhoff transferred 30 percent of his 95 percent stake in the company held by Imhoff Industrie Holding GmbH to a nonprofit foundation, while the other 65 percent was transferred to a family trust. During the 1990s, StoUwerck operated in a tougher environment with stagnating markets, growing competition, and rising cost for raw materials. The Russian crisis in the late 1990s hit StoUwerck hard, but Imhoff paid the DM30 million in losses out of his own pocket to keep the roughly 2,600 stockholders happy.

The year 2001 was a turning point for StoUwerck. Hans Imhoff retired at age 79 after leading the company for 30 years. StoUwerck’s eastern European subsidiaries were sold to American food giant Kraft Foods Inc. for DM350 million. StoUwerck was planning to use the cash to strengthen its position in Germany and western Europe and to push the three core brands “Sarotti,” “Alpia,” and “Sprengel.” In spring 2002, the world’s leading producer of cocoa and chocolate products, Swiss Barry Callebaut AG, acquired a 96 percent stake in StoUwerck from Hans Imhoff. Barry Callebaut, which was majority-owned by Klaus J. Jacobs, the heir of an old German coffee dynasty, planned to integrate StoUwerck into its organization within two years and to delist the company’s shares from public trading.

Principal Subsidiaries

Sarotti GmbH; StoUwerck AG Werk Berlin; Stollwerck AG Werk Hannover; Thüringer Schokoladewerk GmbH; Wurzener Dauerbackwaren GmbH; Jacques Chocolaterie S.A. (Belgium); Chocolat Alprose S.A. (Switzerland); StoUwerck Werbe- und Marketing GmbH; StoUwerck Log-Trans Spedition GmbH.