Deli Universal NV

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Deli Universal NV

Postbus 689
Rotterdam
NL-3000 AR
Netherlands
Telephone: ( +31) 10 402 17 00
Fax: ( +31) 10 411 76 94
Web site: http://www.deli-universal.nl

Wholly Owned Subsidiary of Universal Corporation
Incorporated: 1869 as Deli Maatschappij
Employees: 3,000
Sales: EUR 1 billion ($1.2 billion) (2003 est.)
NAIC: 511120 Offices of Other Holding Companies; 311423 Dried and Dehydrated Food Manufacturing; 312229 Other Tobacco Product Manufacturing; 423990 Other Miscellaneous Durable Goods Merchant Wholesalers; 424490 Other Grocery and Related Product Merchant Wholesalers; 424910 Farm Supplies Merchant Wholesalers; 424990 Other Miscellaneous Nondurable Goods Merchant Wholesalers

Netherlands-based Deli Universal NV is the wholesaling and distribution arm of Universal Corporation, alongside sister company Universal Leaf Tobacco Company. Deli Universal, which represents the continuation of the former Deli Maatschappij, is itself a federation of independently operating distribution and wholesaling businesses primarily active in the Netherlands. Deli Universal focuses on three core markets: Timber and Building Products, Agri Products, and Tobacco Sheet. The company's Timber and Buildings Products division is subdivided into three primary business units: regional distribution, through the Jongeneel network of 36 lumber centers catering to building contractors in the Netherlands; industrial, primarily through soft-wood specialist Heuvelman, as well as through its Bouter joinery business based in Bergambacht; and wholesale, through RET, Steffex, and Crailo, which supply wood products such as boards and plywood, as well as doors, ceiling and wall systems, and other materials and products to hardware stores and professional tradesmen and building contractors. Under Agri Products, Deli Universal includes: tea, under the more than 180-year-old Van Rees Group, supplying tea blends to packers worldwide; merchandizing, primarily of rubber, through Corrie, MacColl and Son in Engliand and Imperial Commodities Corporation in the United States; and canned goods, through Imperial Commodities Corporation. Deli Universal's Agri products also include the production and distribution of seeds and specialty grains and beans for confectionery and food processing through subsidiary Red River Commodities. Deli Universal's third division, Tobacco Sheet, is also the link to the company's past as one of the world's primary tobacco importers. This division, operating as Deli HTL in the Netherlands and as DHT in Germany, produces cigar wrappers and binders, as well as filler tobacco for cigars and cigarettes. Deli Universal has been part of the Universal Corporation since 1986.

Indonesian Tobacco Monopoly in the 1890s

The first efforts to cultivate tobacco in the Dutch East Indies in the mid-1850s were largely unsuccessful. These original tobacco crops, planted on the island of Java, yielded only low tobacco grades. Yet Dutch entrepreneurs remained convinced that the region's climate was capable of producing higher quality tobacco. The arrival of Jacobus Nienhuys in the future Indonesia marked the beginning of the colony's growth into a regional center for tobacco.

By the early 1860s, Nienhuys had settled in the region around the Deli River, on the eastern coast of Sumatra, where he began experimenting with tobacco varieties. In 1863, Nienhuys was granted the franchise to a large area along the river in order to establish a tobacco plantation. Nienhuys planted an experimental crop yielding 50 bales of what turned out to be superior quality tobacco. Encouraged, Nienhuys and partner P.W. Janssen began seeking financial backing in order to develop the plantation.

The pair succeeded in raising more than one million guilders by 1867, half of which came from the Nederlandsche Handel-Maatschappij (NHM). Two years later, Nienhuys and Janssen established the Deli Maatschappij with a concession to produce cigar tobacco along the Deli River. By 1870, the company's exports had already topped 207,000 kilos (450,000 pounds). In 1871, however, Nienhuys decided to return to the Netherlands. The company sought a replacement, and its choice was Jacob Theodore Cremer.

Then just 24 years old, Cremer had joined the NHM in 1867, arriving in the East Indies in late 1868. Cremer had become interested in the fast-developing tobacco industry in Sumatra and successfully lobbied for the appointment at the head of Deli Maatschappij. Under Cremer—later an important Dutch political figure—Deli Maatschappij grew quickly. By 1883, the year Cremer returned to the Netherlands, Deli Maatschappij's exports had soared to nearly 3.5 million kilos (7.6 million pounds). Cremer had also led the company on a drive to buy up most of the tobacco plantations that had appeared in its wake, and by the mid-1880s Deli Maatschappij already counted more than ten plantations. The company's shareholders had reason to be pleased with their investment. The company's average dividend payments had reached 73 percent, and by 1890 the company itself was valued at 32 million guilders.

Deli Maatschappij succeeded in gaining control of the Sumatran tobacco industry by the turn of the 20th century. In addition to its own plantations, Deli Maatschappij acquired the monopoly on tobacco exports, acting as the broker for other tobacco growers in the region. By then, Sumatra's tobacco had achieved worldwide renown for its quality. The crop became particularly prized as leaf for cigar wrappers. The leaf, with a small central vein—which made more of the leaf usable—was also thinner than other tobacco varieties, making it possible to wrap more cigars at a lower cost.

Tobacco growers in the United States attempted to stem the influx of Sumatra tobacco by demanding high import duties from the government. Even still, the Sumatra leaf, capable of wrapping up to four times as many cigars as U.S.-grown wrapper leaf, remained highly prized and cost-competitive. In the early years of the 20th century, a number of Western tobacco companies set up plantations in Sumatra in order to develop their own supply of the higher-quality leaf. Yet Deli Maatschappij maintained control of its export monopoly as well as control of the world market for wrapper leaf. By the outbreak of World War I, more than 92 percent of all imported wrapper leaf in the United States came from Sumatra.

The enormous profits—in large part as a result of the use of "coolie" slave labor—enabled Deli Maatschappij to invest elsewhere in the world, most notably in the construction of railroads in the United States and elsewhere at the turn of the 20th century. By the 1920s, however, the company's fortunes had begun to decline. Cigar smoking, which had previously dominated the tobacco market, began to wane in the buildup to World War II, and in 1927 sales of cigarettes—wrapped in paper, not in tobacco—surpassed sales of cigars for the first time.

Diversified Trader in the 1960s

The Depression-era dealt the next blow to Deli Maatschappij, as cigar sales plummeted. This period was followed by World War II and the Japanese occupation, which put a virtual standstill to Sumatra's tobacco exports and cut off Deli Maatschappij from its Dutch financial backers. By the end of the war, Deli Maatschappij reentered a dramatically changed market which had seen the emergence of a new class of tobacco giants. In the meantime, the formation of an independent Indonesia and the call to nationalize the industries dominated by the former Dutch colonial power placed Deli Maatschappij under new pressure.

Deli Maatschappij's operations in Sumatra were nationalized in 1958, becoming known as PNP Tobacco. Deli Maatschappij then moved its now greatly reduced operations to the Netherlands. The company maintained an interest in tobacco, however. In 1955, for example, the company had seized control of the United States' American Sumatra Tobacco Corporation, formed in 1910, which had emerged as one of the world's largest sources of wrapper leaf during and after World War II. That company, which had linked New York-based financial partners with farmers in Florida, Georgia, and elsewhere in the South, proved a poor match for its Dutch owners, and the operation was shut down by the early 1960s.

Other activities were more successful for the company, such as its production of tobacco sheets, used for manufacturing cigar wrappers, and other tobacco products. The company also used its long history in the import and export market to develop a diversified trading business. Acquisitions played an important role in the group's diversification. In the mid-1960s, the company acquired the Van Rees Group, a specialist in importing, blending, and merchandizing tea founded in 1819. The company also acquired interests in the rubber market and canned foods markets, which were brought under an umbrella company, Imperial Commodities Corp.

One of the company's most successful diversification efforts came with its purchase of wood products distributor Jongeneel in 1971. That company stemmed from a business founded by Huybertus Jongeneel in 1797 in Utrecht, becoming known as Firma Jongeneel & Zoon in 1800. Jongeneel began expanding beyond the Utrecht market in 1904, although remaining largely focused on its region until the 1970s. As part of the Deli Maatschappij, however, Jongeneel expanded to a national level, and by the beginning of the 21st century had established a network of 34 stores. Deli Maatschappij also acquired interests in the timber and lumber industries and handled trade in such items as sunflower seeds for the confectionery sector, vegetable oils, and coffee.

Company Perspectives:

Deli Universal seeks to be the leading supplier to professional buyers in each market segment it serves. To accomplish this objective, DU has made extensive investment in companies, staff and value-added customer services. DU is expanding rapidly through internal growth and acquisitions.

The Rotterdam based holding is small, which reflects DU's orientation towards decentralized, capable and leading distribution companies with strong local management.

Deli Maatschappij remained involved in the global tobacco market as well. Following the nationalization of its Indonesian interests, Deli shifted its focus to other markets, becoming a major player in Italy, Greece, and particularly the fast-emerging Brazilian market. Deli Maatschappij's expertise in the import/export market for flue-cured and burley tobaccos brought it into contact with Universal Leaf Tobacco Company for the first time in the mid-1960s, when the two companies entered a partnership to process burley tobacco in Greece. Burley tobacco, the variety used to manufacture so-called "American" cigarettes, was then fast becoming the world's most sought-after tobacco type.

That first partnership ultimately led to a full-fledged merger between Universal and Deli Maatschappij. Founded in 1918, Universal had grown into one of the world's largest leaf tobacco distributors, embarking on global expansion in the 1960s. Yet the uncertain future of the tobacco industry, as well as an unsuccessful hostile takeover attempt lobbied against the company, had encouraged Universal to diversify its operations. Universal's early attempts failed to produce the desired results. In 1980, for example, the company entered the fertilizer market, only to see that market collapse soon after. In 1985, the company acquired U.S. title insurance group Lawyers Title Co., but that market too went into a long slump following the crash of the housing market in the late 1980s.

Value-Added Specialist in the 2000s

In 1986, however, Universal found a more successful acquisition—that of Deli Maatschappij. Under the merger, Universal restructured its operations, creating the holding company Universal Corporation. The company's tobacco interests were then combined together into a new, larger Universal Leaf Tobacco, while its trading operations where regrouped under the Deli Universal name.

By the 1990s, Deli Universal's trading operations had emerged as the primary counterpart to Universal's tobacco interests and the main motor for the company's diversified business interests. The company now began to shift its focus toward developing activities in value-added niche markets, moving beyond commodities to more specialized products.

Acquisitions again formed part of this transition, such as the purchase of Houthandel Heuvelman (later Heuvelman Hout) in 1994. That company, founded in 1876, grew into one of the Netherlands' leading suppliers of wood and wood products. Heuvelman also operated its own cash-and-carry store for the building trade, called Megamat, in Rotterdam. In 1995, following its acquisition by Deli Universal, Heuvelman acquired firewood specialist Houthandel van Dooren. In that year, Deli Universal spun off its spice trading operation into a joint venture with Suiker Unie.

Deli added Steffex Handelmaatschappij BV in 1994, a purchase that enabled the company to add the importing and distributing of doors and decorative products in the Netherlands and Belgium. Deli Universal was also active in the lumber market through its control of RET, founded in 1914 as Rubber en Theekistenfabriek in Utrecht. RET, which originally produced crates for Deli's tea and rubber trade, grew into a major Dutch importer of lumber products and developed a particular specialty in the wall and ceiling panel sector.

Deli Universal expanded its lumber products operations again in 1998 with acquisition of Astrimex. Founded in 1946, that company had adopted the Astrimex brand in 1990, which became a top brand of ceiling and wall panels. In 2002, RET and Astrimex's ceiling and wall panel businesses were merged into a single unit. The RET brand for these products was phased out in 2004 in favor of the Astrimex name.

By then, Deli Universal had made a number of other acquisitions. In 2001, the company acquired family-owned Gouderak Holding, based in Eindhoven. Gouderak was then the Dutch and European leader in the recreational wood products sector—that is, garden sheds, screens, decorative borders, and the like. The company strengthened its position in this market in 2002 with the acquisition of Begenco and its well-known Hillhout brand name.

While Deli Universal's operations remained close to its Netherlands base, in 2003 the company began to expand beyond the country's borders when it acquired Germany's JéWé, an internationally operating manufacturer and distributor of products for the do-it-yourself sector. By then, Deli Universal accounted for nearly half of parent company Universal Corporation's annual sales of $2.5 billion.

Key Dates:

1863:: Jacobus Nienhuys begins experimenting with tobacco crops in Sumatra along the Deli River.
1869:: Nienhuys founds Deli Maatschappij, which is granted the concession for developing trade in Sumatran tobacco.
1880:: After acquiring a number of other tobacco plantations, Deli Maatschappij achieves monopoly control of Sumatran tobacco exports.
1955:: American Sumatra Tobacco Corporation is acquired.
1958:: Independent Indonesian government nationalizes Deli Maatschappij's tobacco operations in the country.
1960s:: Deli Maatschappij enters into a partnership with Universal Leaf Tobacco Company to import and process burley tobacco in Greece and acquires Van Rees Group of tea importers.
1971:: The company acquires Jongeneel, a specialist in the wood and wood products market.
1986:: Deli Maatschappij merges with Universal, becoming Deli Universal.
1994:: Deli Universal acquires Houthandel Heuvelman and Steffex Handelmaatschappij BV.
1998:: Astimex is acquired.
2004:: Astimex becomes the company's main brand name for wall and ceiling panels.

Principal Subsidiaries

B.V. Deli-HTL Tabak Maatschappij; Bouter & Zn. B.V.; Corrie, MacColl & Son Ltd.; Crailo B.V.; Deli Universal, Inc.; Deutsch-holländische Tabakgesellschaft mbH & Co. KG; Gouderak B.V.; Handelmaatschappij Steffex B.V.; Houthandel H. & P.H. Heuvelman B.V.; Imperial Commodities Corporation; Jongeneel B.V.; Momentum Technologies Inc.; Red River Commodities, Inc.; Red River-Van Eck B.V.; RET; Van Rees B.V.

Principal Divisions

Timber and Building Products; Agri Products; Tobacco Sheet.

Principal Competitors

Imperial Tobacco Group PLC; Gallaher Group PLC; Shanghai Cigarette Factory; R.J. Reynolds Tobacco Holdings Inc.; Austria Tabak/Gallaher Continental Europe Div.; General Tobacco Co.; Morshansk Tobacco Factory Joint Stock Co.; Cigarrera Biggott Sucesores S.A.