CeWe Color Holding AG

Meerweg 30-32
D-26133 Oldenburg
Germany
Telephone: (49) (441) 404-0
Fax: (49) (441) 404-421
Web site: http://www.cewecolor.com

Public Company
Incorporated: 1961 as CeWe Colorbetriebe
Employees: 3,829
Sales: EUR 428 million ($561 million) (2004)
Stock Exchanges: Frankfurt
Ticker Symbol: CWC
NAIC: 812921 Photofinishing Laboratories (Except One-Hour); 443130 Camera and Photographic Supplies Stores

Headquartered in Oldenburg, northern Germany, CeWe Color Holding AG is the holding company of the CeWe Color group, the leading industrial photo finisher in Europe. Through its 22 state-of-the-art photo labs in Germany, France, Denmark, the United Kingdom, Poland, the Czech Republic, Slovakia, and Hungary, CeWe Color serves large retail clients—drugstore chains as well as department stores that offer photo development services—as well as smaller customers such as photo studios and retail stores all over Europe. The company's 1,300 couriers deliver color prints to more than 42,000 points of sale in 19 countries. CeWe Color's subsidiaries Japan Photo and Fotolab own about 230 retail outlets for photo supplies in Norway, Sweden, the Czech Republic, and Slovakia. Altogether, Europe's largest photo finisher produced 3.5 billion color prints in 2004 with roughly 500 million made from digital images.

Former Naval Officer Expanding the Family Business in the 1950s

Before Heinz Neumüller, the son of a physician who worked for the German army, founded CeWe Color Betriebe in 1961, he served as a marine officer during World War II. Rather than becoming a naval officer, Neumüller wanted to study engineering, but his family lacked the funds needed for enrolling him at a university in the late 1930s. Although the war cost him part of his left leg, Neumüller never lost his drive, ambition, and determination to succeed. The traits he acquired as a submarine commander during this time helped him later succeed in business: a positive attitude and high morale, thorough planning and flexibility in tactics, team spirit and leadership skills, working hard and delegating tasks to the right people, monitoring one's environment carefully, and acting promptly if necessary. After the end of the war Neumüller learned the nuts and bolts of accounting and running a company from the financial perspective as a volunteer at Schiffbau Unterweser AG, a shipbuilding company with about 600 employees in the harbor of Bremerhaven. Although he did not receive a salary, the training he received and experience he gathered proved invaluable for his future role as an entrepreneur. After he had finished his practical training in business management, he was offered a job there with the prospect of becoming CFO after two to three years. Neumüller's career took an unexpected turn, however, when he married Sigrid Wöltje, a master photographer whose father owned a reputable photo supplies store with an adjunct photo studio and photo lab in the northern German city of Oldenburg, in 1948.

When Carl Wöltje, his father-in-law, became Oldenburg's mayor in the same year, Neumüller—who had become a share-holder in Wöltje's family business—and his wife took over the task of running the store. Right from the beginning, delivering the highest possible service quality was Neumüller's foremost goal. When color photography technology was first introduced in Germany in 1951, he did not hesitate to acquire a license, create workspace, and buy the necessary equipment to offer this innovative, if expensive, new service to his customers. Neumüller and his wife and mother-in-law worked relentlessly on expanding the business, which in 1953 led to the opening of a second branch in Oldenburg. The main branch was renovated and expanded, too, and soon became the most modern photo retail store in northern Germany. In the second half of the 1950s a third Wöltje branch opened its doors in Oldenburg, and by the end of the decade the business employed more than 100 people. The photo lab in the main branch was expanded and new equipment was installed, capable of putting out 6,000 color prints a day. At the same time, customer service was expanded and a sales office set up in Bremen that sold photo supplies to large customers such as industrial firms, hospitals, large archives, and public institutions.

Building Germany's Largest Industrial Photo Lab in the 1960s

The 1960s saw the introduction of "instamatic" compact cameras, which soon became very popular in Germany and helped turn amateur photography into a hobby for the masses. With the onset of the postwar economic boom in Germany, more and more people were able to afford cameras. Over time they were also able to travel during their increasing leisure time and, as a result, they took more pictures. Color photography, although still rather expensive, was on the rise. With these developments in mind, Neumüller took a major step that paved the way for his successful enterprise. In 1961 he founded a new company that focused solely on the photofinishing business. Taking the two initials of his father-in-law, "C"arl "W"öltje, he combined them to form CeWe, the name for his new company. At the time it was founded, Wöltje's photo lab had already reached a considerable size, ranking in the top-five league of photofinishers in Germany. In the first three years of CeWe Color Betriebe, Neumüller focused on modernizing and supplementing the existing equipment. To counterbalance the slowly but steadily deteriorating profit margins for color prints because of falling prices, more work processes had to be mechanized and automated. Looking into the future, Neumüller realized that state-of-the-art technology had to be combined with high volumes of processing orders and that only a photo lab of industrial dimensions would be able to compete in the long term. When the brand-new laboratory on the outskirts of Oldenburg was completed, the equipment that was moved there at first took up only a miniscule space in the 40,000-square-foot building. Therefore, it was called the "roller skate building" by some. In the following two years Wöltje's two photo labs in the city of Oldenburg were successively moved to the new location. Over time more buildings were added to the site: two office buildings, a shipping hall, and warehouse space. Finally, all of Wöltje's former photo processing departments were united under one roof.

As color prints increasingly replaced black-and-white prints, many small photo labs, often adjunct to inner-city photo studios or specialty stores for photo supplies, could not afford the additional personnel and special equipment necessary for color film development and for making color prints anymore, which was much more cost-intensive. CeWe Color's new photo lab, which started operations in 1965, catered to their needs and was able to offer higher-quality development services in a shorter time for less money than if these small enterprises would have done the same work in-house. Consequently, CeWe Color's business volume began to grow. When CeWe Color opened its new lab there were 180 people working there. Just four years later, the number of employees had almost tripled along with the processed volume. Despite a massive downslide in prices for color prints, caused by competitors aiming at a larger piece of the market, CeWe Color's client roster kept growing, due to Neumüller's customer-oriented approach and high quality standard. The pressure on prices increased as new players entered the market for photo works, including mail-order companies and department stores. Meanwhile, Neumüller traveled to the United States to learn how American photofinishing labs were organized. By the end of the 1960s, CeWe Color had gained a reputation that reached way beyond the German border.

Expansion at Home and in Europe Beginning in the 1970s

For Heinz Neumüller the 1970s began with a big tragedy: His wife Sigrid, who had worked relentlessly by his side in the family business for more than 20 years, passed away. Together they had successfully established CeWe Color as a major player in photofinishing. Every little space in the "roller skate lab" was taken. Neumüller decided to double it. The 1970s, however, also marked the beginning of CeWe Color's external expansion—at first in Germany and its bordering states, later into many parts of Europe. While the processing facilities in Oldenburg were greatly expanded, CeWe Color successfully launched a sales offensive in The Netherlands, where a distribution network was established in 1971. One year later a new CeWe Color photo lab was set up in Munich. In 1973 CeWe Color merged with northern German photofinisher Vereinigte Color, including two processing facilities, one in Hamburg and one in Bremen, and a majority share in Union-color, another competitor with photo labs in Lübeck, Paderborn, Berlin, Cologne, and Nuremberg. The company was renamed Vereinigte CeWe Color Betriebe. Two years later CeWe Color took over two more competitors: Nordcolor based in Lübeck and Koliphot based in Nuremberg. After these transactions CeWe Color had become Germany's market leader in color-photofinishing. The company's workforce more than doubled within three years: from 700 in 1972 to 1,600 in 1975.

Company Perspectives:

The Name CeWe Color stands for both innovation and continuity. Extensive experience with management and employees, continuous and manageable growth, and continuously high profits and dividends are hallmarks of the company. As a technology leader and cost leader we have managed to substantially expand our market position. With a market share of over forty percent on average in fourteen European countries, CeWe Color is the European market leader in industrial photofinishing.

By 1975 CeWe Color served about 4,000 clients a day. Roughly every fifth order was shipped abroad, mainly to The Netherlands, Belgium, and France. For another ten years, however, the company worked on expanding its network of processing facilities in Germany, before it entered another country. In the late 1970s the photofinishing market stagnated and competition became stiffer. To defend CeWe Color's leading position, the company introduced one-day service for standard films in 1977. A new marketing campaign that supported photo retail stores—an important clientele for CeWe Color—was launched two years later. In the early 1980s the price for color prints once again came under massive pressure. As a result, CeWe Color's closest competitor, photofinisher Heinze, went bankrupt. Other competitors also struggled, such as Freiburg-based Fotocolor Wermbter, which was acquired by CeWe Color in 1983. The company's network of processing sites now covered most metropolitan areas in Germany. By 1984 the CeWe Color group operated seven large photo labs, putting out more than 450 million color prints per year. Three more large facilities were built in Germany in the second half of the 1980s in order to guarantee the quickest possible processing of orders from large customers such as department stores.

The year 1986 marked the beginning of CeWe Color's international expansion. To gain better access to the large markets in France, the company took a first step and acquired a color photo lab in Paris in 1986. In the following year, a modern photofinishing lab was established there. Increased efforts to win over customers abroad resulted in a growing number of orders from Austria and Switzerland, which were served by CeWe Color's branches in Freiburg and Munich. In 1987 Denmark's largest specialty photo retail chain was won as a new customer by the company's northern German subsidiary Nordcolor.

Transition to Digital Technologies in the Late 1990s

In the late 1980s, when electromagnetic imaging technologies first emerged, CeWe Color hosted a symposium about the future of classical photography. Participants agreed that the traditional way of capturing images with the help of chemicals would have a long and secure future. Asked about the future of video for amateur photography in Bilder eines Mannes Heinz Neumüller replied that he could not imagine that paper prints would totally disappear one day and that people would be content to carry a monitor around. For another two decades his prediction proved accurate. While digital imaging technologies were refined, CeWe Color focused on further growth in the markets that suddenly opened up with the fall of the Berlin Wall. After the reunification of Germany in 1990, another large processing facility was built in Dresden to serve the eastern part of Germany as well as the first customers in Poland. To raise more capital for new acquisitions, the company was reorganized under the umbrella of a new holding company, CeWe Color Holding AG, in 1992. Company founder Heinz Neumüller became head of the newly established advisory board, a position he held until his retirement in 1998. In the following year the company went public. Throughout the 1990s and into the new millennium CeWe Color conquered new markets by means of new distribution networks, new processing facilities, or joint ventures in many parts of Europe, including the Czech Republic and Poland, Belgium, Slovakia, Romania, Slovenia, Croatia, Lithuania, the United Kingdom, and the Ukraine. In 1998 the company acquired a majority share in northern European photo specialist retail chain Japan Photo Holding Norge AS, with 32 outlets in Norway and Denmark.

By the late 1990s digital imaging technology had made significant progress and early generations of pricey digital cameras were available to consumers. In 1997, when the Internet was just emerging as a new distribution channel for business, a new subsidiary, CeWe Color Digital, was founded to explore business models and develop innovative technologies and services based on digital imaging. When the company set up a first digital terminal in Oldenburg, there were an estimated 30 digital cameras in the whole city of roughly 150,000 inhabitants. By 1999 the company offered delivery of images on CD-ROM and had its first version of an Internet platform for use by its clients as well as by consumers, called "Photoworld," up and running. Consumers were able to send in their digital images via the Internet and pick up paper prints at the photo shop of their choice two days later. A major breakthrough followed in February 2002, when CeWe Color and the German film and photo equipment manufacturer Agfa presented the jointly developed "DigiFilm-Maker," a terminal where—with the push of a button—image data were transferred to a CD that was then sent to a photo lab for development, to the Photo Marketing Association (PMA) in Orlando. By the end of 2002, CeWe Color had installed roughly 2,400 such terminals in photo specialty stores. Many other large photofinishers, such as Kodak, later adopted the new technology.

Key Dates:

1961:

Heinz Neumüller founds CeWe Color Betriebe in Oldenburg.

1964:

The first industrial-scale photofinishing laboratory is built.

1973:

CeWe Color merges with northern German photofinisher Vereinigte Color.

1975:

After the takeover of two German competitors the company becomes Germany's market leader in color-photofinishing.

1986:

CeWe Color acquires a photo lab in Paris, France.

1991:

The company develops more than one billion color prints in a year for the first time.

1992:

CeWe Color Holding AG is established.

1993:

CeWe Color Holding AG becomes a public company.

1997:

The new subsidiary CeWe Color Digital GmbH is founded.

1998:

CeWe Color acquires a majority share in northern European photo specialty retail chain Japan Photo.

2001:

The company takes over French competitor Konica Photo Service France.

2002:

CeWe Color and German manufacturer Agfa jointly develop and market the DigiFilm concept.

2005:

U.K.-based digital photofinisher Standard Photo-graphic joins the group.

A Winner of Market Consolidation After 2000

While digital photography gained momentum, the photofinishing market in Europe underwent a massive consolidation. Although hobby photographers took more pictures with their digital cameras, they deleted many of them and did not order as many paper prints. The terrorist attacks of September 11, 2001 in the United States, as well as an unfavorable economic climate in Western Europe, caused a lasting downturn in tourism. The photofinishing industry, a highly seasonal business that made a considerable part of its sales from developing vacation pictures, suffered as a result. The German market for color prints diminished from five billion in 2001 to 3.7 billion four years later. In addition, large drugstore chains initiated a ruinous price competition that drove many photo specialty stores into bankruptcy or out of photofinishing. Consequently, 20 out of 42 large processing facilities were closed down, reducing total industry capacity by one third. Kodak, one of CeWe Color's major competitors, abandoned the European photofinishing market altogether. In 2001 CeWe Color began to close down older and smaller processing facilities, but expanded sites closer to growth markets, for example, in Slovakia and in the Ukraine. Nonetheless, the company's net profits plummeted, in part caused by restructuring efforts and high investments in new equipment for digital processing. CeWe Color answered by raising prices. Although the company had gained a significant market share—about 45 percent in Germany and roughly 40 percent in Europe—it remained to be seen if this measure would find lasting acceptance in the marketplace.

It was in 2002 when digital photography turned into a mass market. The future impact of the transition from film-based to digital photography on the photofinishing industry, however, seemed to be open at that time. On the positive side, costs for processing digital images were lower than for processing films. In addition, CeWe Color's photo-enhanced products, such as T-Shirts and aprons, stickers and calendars, mugs and mouse pads, and its innovative "photo books"—customer-designed photo albums that included text added by customers over the Internet, printed on high-quality paper, and bound into books offered through CeWe's Internet portal—seemed to catch on with consumers. On the negative side, while digital orders grew rapidly, the volume of traditional photo development business dropped more significantly than expected. In a stagnating market, a new round of price wars with major competitor Fuji, resulting in lower prices for digital prints, seemed likely. One major promise of CeWe Color's executives for the future lay in the increasing popularity of the photo cell phone or "cameraphone"—little mobile phones with photo capabilities. If future generations of consumers still wanted some of their digital images printed on paper or organized in albums, if they still sent them to a lab or printed them out at home, or if they got used to just looking at them on mobile phones, computers, or TV screens, remained to be seen. By 2005, Germany and France remained CeWe Color's most important markets, but the Eastern European countries promised the highest growth rates for the future.

Principal Subsidiaries

CeWe Color AG & Co. OHG (Germany); CeWe Color S.A.S. (France); CeWe Color Danmark A.S. (Denmark); CeWe Color Nederland B.V. (Netherlands); CeWe Color Belgium S.A.; CeWe Color AG & Co. OHG (Austria); CeWe Color Fotoservice AG (Switzerland); CeWe Color Sp. z.o.o. (Poland); Fotolab a.s. (Czech Republic); Fotolab Slovakia a.s.; CeWe Color Magyarország Kft. (Hungary); Japan Photo Holding Norway A/S; Japan Photo Sverige AB (Sweden).

Principal Competitors

Fuji Photo Film Europe GmbH; Spector Photo Group N.V.; Color Drack GmbH; Fotolabo Club GmbH.

Further Reading

"CeWe Color fuerchtet keinen Preiskampf," Börsen-Zeitung, September 2, 2003, p. 11.

"CeWe Color will 2005 zurueck ins 'normale Fahrwasser,'" VWD Wirtschaftsnachrichten, March 14, 2005.

"German CeWe Color Starts Operations in Four Countries in Eastern Europe," SeeNews, October 4, 2005.

"On the Horizon: Digital Retail Markets General Sessions Look at Cameraphones, In-Camera Editing, and Printing Opportunities," Digital Imaging Digest, April 2005, p. 4.

"Photographic Firm Has German Buyer," Birmingham Post, November 1, 2005.

Pieper, Claas, "Schlummernde Bilderflut," Spiegel, May 28, 2005, p. 78.

"Rein ins kalte Wasser—aber bitte lächeln," Börse Online, July 11, 2002, p. 23.