Known until 1994 as BSN Groupe S.A., Groupe Danone is one of the largest food companies in the world. It is the leading food company in France, Italy, and Spain and is ranked third in Europe and seventh worldwide. The company's operations revolve around three core businesses: dairy products, which includes yogurts, cheeses, desserts, baby foods, and other products; beverages, which is mainly comprised of mineral water and beer; and biscuits, which includes cookies, crackers, cakes, and other baked items. Groupe Danone holds the number one position worldwide in dairy products, with Danone (Dannon in the United States) the world's top dairy product brand; the number two position worldwide in bottled waters, with Evian the leading mineral water brand in the world; and the number one position worldwide in sweet biscuits (cookies). Five of the company's brands generate more than half of overall revenues: Danone, Evian, Lu (a major European biscuit brand), Galbani (a leading Italian-style cheese brand), and Kronenbourg (the leading beer brand in France). Other key brands include Blédina, a leading French baby food brand, San Miguel and Mahou beer in Spain, the water brands Volvic and Ferrarelle, and in the biscuits sector: Jacob's in the United Kingdom and Ireland, Papadopolous in Greece, Saïwa in Italy, De Beukelaer in Germany, Bolshevik in Russia, Opavia in the Czech Republic, Britannia in India, Bagley in Argentina, and Campineira and Aymoré in Brazil. Outside of its three core areas, Danone (which is pronounced dah-KNOWN) owns sauce brands in the United Kingdom (HP) and the United States (Lea & Perrins) and owns a minority stake in the number two maker of glass containers in Europe, BSN Emballage. Groupe Danone products are sold in more than 150 countries; 37 percent of revenues are generated in France, about 39 percent in the remainder of the European Union, 7.5 percent from Latin America, seven percent from Asia, 6.5 percent from North America, two percent from Central Europe, and the remaining one percent from elsewhere.
In 1958, 39-year-old Antoine Riboud inherited the glassmaking company founded by his great uncle nearly a century before in Lyons. Riboud had begun his career working in its factory during World War II. Souchon-Neuvesel produced hollow glass, bottles, jars, flasks, and glass tableware. A small company, it recorded only about US$10 million in sales that year.
Riboud concentrated on hollow glassmaking until 1966, when La Verrerie Souchon-Neuvesel merged with Glaces de Boussois, a maker of flat glass for automobiles and housing. The new company was named Boussois Souchon-Neuvesel, and Riboud was named president.
In 1967 the company boasted FFr 1.1 billion in sales and was renamed BSN. It had become a major European maker of glass containers, but was still dwarfed by its competitor and France's largest glassmaker, Compagnie de Saint-Gobain, founded in 1665 by Louis XIV. The next year Riboud made one of the largest French takeover bids ever for this company, with more than ten times as many employees as BSN, using tactics considered radical in France at the time: he proposed to swap BSN convertible bonds for Saint-Gobain stock. Saint-Gobain's board members fended off the offer by claiming that it violated French laws and European Economic Community rules on monopolies. Saint-Gobain also launched a major publicity campaign to rally support from stockholders against BSN's 'cheap' bid. The Wall Street Journal called it 'the David-vs.-Goliath campaign,' and Riboud's tactics brought him the admiration of younger businessmen ready for fresh air in the French business establishment. Sadly, in the midst of such publicity, Riboud's apartment in Paris was bombed by a terrorist gang. In the end, shareholders came to Saint-Gobain's rescue, acquiring a 40 percent holding to BSN's ten percent, and BSN dropped the bid.
1970-85: Diversification into Filling the Bottles
BSN's defeat led Riboud to diversify into the food industry. 'I saw it would be better to fill the bottles rather than just make them,' he explained to Forbes in 1980. In 1970 BSN acquired Société des Eaux d'Evian, Société Europé-ne de Brasseries, and Brasseries Kronenbourg, becoming a leader in natural spring water and baby food, as well as the largest brewer in France. The next year, in an effort to tap the consumer taste for premium beers, BSN introduced its Kanterbraü beer.
In the meantime, BSN established its first flat-glass manufacturing subsidiary, Flachglass A.G., in West Germany in 1970, and two years later it acquired a controlling interest in Glaverbel, a Belgian flat-glass producer. Together with earlier expansion programs in West Germany, Austria, and the Benelux countries, these acquisitions gave BSN almost half the European market for flat glass.
The establishment of the Common Market at the end of the 1950s forced French companies to be more competitive, and between the early 1960s and 1973 France became the fastest-growing industrialized country after Japan. BSN also experienced rapid growth, culminating in 1973 with a merger between BSN and Gervais Danone, France's largest food company and the leader in yogurt, natural cheese, deserts, and pasta. That year sales for the new BSN-Gervais Danone topped FFr 9 billion.
By 1973, however, BSN began to suffer from the impact of the energy crisis, which had severe consequences for the two main markets for flat glass, the construction and automotive industries. For the next five years the profits of many major French companies declined sharply, mainly because of higher costs for energy and raw materials. After a period of growth, the French foreign trade balance fell into deficit. Fortunately BSN had made most of its acquisitions with stock rather than cash, so the company's finances were able to weather the crisis. Riboud tried to help the flat-glass sector recover by building three new glass units in northern France and adding more efficient float glass equipment to BSN plants all over Europe. Nonetheless, beginning in 1974, the company shut down 22 furnaces and reduced its workforce by 30 percent. In five years of restructuring the company spent FFr 2.5 billion. The crisis was a turning point for the company; from now on glass would be primarily a complement to its food and beverage businesses.
BSN acquired a minority interest in Ebamsa (later known as Font Vella S.A.), the leading Spanish bottler of natural spring water in 1973, and between 1974 and 1977 introduced several new products, including Lacmil and Gervillage. In an effort to dominate the European beer market, in 1978 BSN acquired a minority interest in Alken, a large Belgian brewery. A year later it acquired one-third interests in the breweries Mahou in Spain and Wührer in Italy, and a majority interest in Anglo-Belge in Belgium. BSN next bought four French food manufacturing firms through an exchange of stock interests with Générale Occidentale, a move encouraged by the French government, which was eager to invigorate the food industry and actually drew up a special incentive agreement for investments in food processing and food exports. In 1980 the company entered Japan's dairy market through a joint venture with Japan's Ajinomoto. BSN also bought two French producers of frozen foods and ice cream and two breweries in Nigeria. As it moved into these new fields, BSN nearly doubled its annual sales in grocery products.
At the same time, BSN was finally leaving the flat-glass industry, prompted in part by the fear that another oil crisis was imminent. In 1980 BSN sold its West German flat-glass ventures to the British company Pilkington Brothers, and by 1981, BSN had sold its flat-glass subsidiaries in Germany, Austria, Belgium, and the Netherlands. The following year, it sold the French Boussois subsidiary, the last of its flat-glass operations, leaving it with only nine glass container factories. Also in 1981 BSN acquired Dannon, the largest U.S. yogurt-maker, from Beatrice for US$84.3 million.
In 1983 BSN-Gervais Danone changed its name back to BSN. In an effort to increase efficiency, Riboud installed computerized production lines, which meant that the company had to lay off 1,000 of its 40,000 employees, a move opposed by the unions but encouraged by French President François Mitterand, who praised BSN for its contribution towards modernizing French industry. By 1984, BSN had acquired all shares of the champagne makers Pommery et Greno and Lanson Pere et Fils, and had introduced a number of new yogurt products, as well as the Plastishield plastic-coated bottle. Since 1981, the company's sales had risen sharply, and that year it made a record capital investment totaling FFr 2.4 billion. But in July, the European Economic Community imposed fines of about US$3.2 million on BSN and Saint-Gobain for price-fixing in the Benelux glass market.
BSN continued to grow in the latter half of the 1980s. In 1985 BSN sold its glass-jar and glass-tableware operations to Verreries Champenoises and acquired a minority interest in that company. BSN also bought the pharmaceuticals-maker Bottu, which specialized in pain relievers and artificial sweeteners.
1986-89: Snapping Up the Cookie Market
In 1986, the company's 20th anniversary year, sales were 35 times higher than the FFr 1.1 billion of its first year. That year, BSN acquired Générale Biscuit S.A., the top producer of biscuits and toasted bread in Continental Europe. BSN also merged its Kronenbourg and Société de Brasseries breweries under the Kronenbourg name. The company acquired Sonnen Basserman in West Germany, and became the world's largest bottler of natural spring water. It also bought a majority interest in Angelo Ghigi, an Italian pasta maker.
In August 1988 BSN acquired the Belgian Maes Group Breweries, the British H.P. Foods, and the American Lea & Perrins as part of Riboud's strategy to gain a more substantial market in Britain and the United States for BSN products (64 percent of BSN's total sales still came from France). Concentrating on growth, Riboud also built several new yogurt plants and bottling facilities in strategic locations, and he spent more than US$100 million on European television advertisements for BSN brands.
In 1989 BSN bought the European operations of RJR Nabisco for US$2.5 billion, making it the world's second largest producer of biscuits. Also in 1989 BSN made several Italian acquisitions and became the leader in food production in that country.
1990-96: Global Expansion
The early 1990s were marked by BSN's aggressive expansion into the newly opened markets of Eastern Europe, as well as into Asia, Latin America, and South Africa. In Eastern Europe, BSN began by extending the marketing and manufacturing of its existing brands into the region. It later started acquiring or taking controlling stakes in companies, such as cookie makers Cokoladovny of the Czech Republic and Bolshevik of Russia. In Asia, BSN entered into a joint venture, called Britannia Brands, with an Indian partner in 1990 to acquire RJR Nabisco's Asia-Pacific businesses, which included the leading biscuit maker in India and units in New Zealand, Singapore, Malaysia, and Hong Kong manufacturing and marketing biscuits, snacks, nuts, and other products. Three years later, BSN bought out its Asian partner, taking full control of the Britannia companies. China was another target of BSN growth; by the mid-1990s the company had established several joint ventures there producing biscuits, dairy products, Asian-style sauces, and other products. In Latin America, the company in 1994 took a 49 percent stake in Campineira de Alimentos, the number two producer of biscuits in Brazil.
Back in Western Europe, BSN was active consolidating its position by taking control of several companies, including cookie makers Papadopoulos of Greece and W & R Jacob of Ireland, French mineral water manufacturer Mont Dore, and Spanish dairy product producer Danone SA. The company also made selective divestments in areas in which it was unable to gain the number one or two position; an example of this was the champagne sector, which saw BSN sell its Lanson and Pommery brands to LVMH Moet Hennessy Louis Vuitton for about FFr 3.1 billion (US$613.7 million) in 1990.
BSN also received much press in 1992 for its intervention in a takeover battle between the Agnelli family of Italy and Nestlé S.A. for control of the French mineral water company Source Perrier. BSN made a bid itself for the company that controlled Perrier, but only to signal that it sided with Nestlé, from which it hoped to buy Perrier's Volvic mineral water brand. In the end, Nestlé prevailed and agreed to sell Volvic to BSN for about US$500 million. The addition of Volvic vaulted BSN into the top spot worldwide in noncarbonated mineral water.
In mid-1994 the company jettisoned its BSN name, which, according to the company 'seemed to reflect the company's past rather than looking ahead to the future.' In fact, glass containers, the founding business, were by this time responsible for less than ten percent of overall revenues. In addition, the BSN name was not well known outside of France. The company settled on the name Groupe Danone, because the Danone brand was its number one international brand, accounting for about a quarter of revenues, and Danone products were produced in 30 countries and sold internationally. At the same time, the company adopted a new logo picturing a young boy looking up at a star. Soon thereafter, the company began expanding its use of the Danone brand beyond dairy products into biscuits, mineral water, and baby foods.
By 1995 Danone's sales had reached US$16.18 billion, nearly double the 1989 figure of US$8.43 billion. This growth was largely the result of Antoine Riboud's aggressive global expansion program in the 1990s, which included US$5 billion spent on acquisitions. Riboud chose this juncture of Danone's history to retire, and named his 40-year-old son, Franck Riboud, to succeed him as chairman and CEO in mid-1996. A few months later, Danone entered into a joint venture with the Coca-Cola Company through which the companies agreed to sell refrigerated juice in Europe and Latin America under the joint Minute Maid and Danone brand names.
Late 1990s: Focusing on Three Core Areas
In May 1997 Franck Riboud announced the adoption of a new company strategy focusing on three core business areas--dairy products, biscuits, and beverages (specifically water and beer)--in which the company had global leadership. These areas also represented 85 percent of group sales. In the second half of 1997 and in 1998, Danone sold more than half of its grocery product holdings and its entire confectionery business. These disposals included the Panzani, La Familia, Maille, Amora, William Saurin, Agnesi, Liebig, Carambar, and La Pie qui Chante brands. During 1999 Danone sold off additional grocery businesses, including Spanish frozen food maker Pycasa (sold to Nestlé), frozen and chilled ready-to-serve meal units Marie Surgelés and Générale Traiteur (sold to Unigate plc), and its 50 percent stake in Star S.p.A., an Italian maker of a wide range of food products. As a result of these divestments, in late 1999 Danone retained in its grocery sector only HP Foods Ltd., a U.K.-based maker of brown sauces and Asian specialties under the HP, Lea & Perrins, and other brands.
Danone also substantially reduced its holdings in the glass container sector, moving closer to its complete exit from the founding business. The company's container activities were first merged with the food and beverage glass packaging operations in Germany owned by Gerresheimer AG. This enlarged glass container operation adopted the BSN Emballage name, with a U.K. management buyout firm called CVC Capital Partners purchasing a 56 percent stake in the entity and Danone retaining a 44 percent interest. Having established a much finer focus on its three main sectors, Groupe Danone was likely in the early 21st century to seek additional opportunities for global growth in these areas.