Eckes AG

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Eckes AG

Ludwig-Eckes-Allee 6
D-55268 Nieder-Olm
Germany
Telephone: (49) (6136) 35-0
Fax: (49) (6136) 35-1400
Web site: http://www.eckes-ag.de

Private Company
Incorporated: 1922 as Eckes & Co. OHG
Employees: 2,389
Sales: EUR 1.35 billion ($1.41 billion) (2002)
NAIC: 312111 Soft Drink Manufacturing; 312140 Distilleries; 312130 Wineries

German-based Eckes AG is Europe’s top manufacturer of fruit juices and the fourth ranked maker of spirits. The company’s non-alcoholic beverage division produces the major brands Hohes C., Granini, and Joker, among other fruit and soft drinks. The company’s brand-name liquors include Germany’s leading brandies Mariacron and Chantré, and other well-known liquors such as Eckes Edelkirsch and Echter Nordhäuser, as well as the international brands Stock and Stroh. The company’s alcoholic beverage division, which also markets wine and sparkling wine, is organized under the umbrella of Eckes & Stock International GmbH (ESI), which is the leading supplier of spirits in Germany, Italy, the Czech Republic, and Austria. Roughly half of the company’s total sales come from alcoholic beverages and about half of all revenues are generated abroad. Eckes AG is owned and controlled by descendants of company founder Peter Eckes.

Origins as a Distillery in 1857

The history of the Eckes family firm may be traced to the middle of the 19th century. In 1857 farmer Peter Eckes I, who ran a small transportation business in the German town Nieder-Olm, near Mainz, began distilling liquor from fruit and the byproducts of wine-making (pressed grapes and wine yeast). By the early 1870s, with the construction of the first railway service between Mainz and Alzey, the company exited the transport business to focus on beverage production.

When Peter Eckes I died, he was succeeded by his son Peter Eckes II, who expanded the distillery and added a new product—precious grape oil—which he sold to manufacturers of essential oils. The younger Eckes began purchasing raw materials from wineries all over the traditional German wine country of Rhein-Hesse. During the wine-making season, Eckes employed a staff of four to work day and night, seven days a week, at the distillery.

In 1883 the Eckes facility was expanded, allowing its output of grape oil and liquor to double in volume. This facility sufficed until 1906, when Eckes acquired larger property and built a new plant, which featured Nieder-Olm’s first 66-foot-tall chimney. The year before his death at age 61 in 1908, Peter Eckes II turned the business over to sons Heinrich and Jakob, who became co-owners. A third son, Richard, joined the Eckes business in 1913 but died two years later.

During World War I, German troops came though the small town, requiring food and shelter; Eckes helped supply the liquor. After the war, Jakob Eckes emerged as the driving force behind further expansion and modernization of the distillery. The Eckes brothers managed to expand the property the factory was built on through acquisitions and land swaps. A new boiler facility with an even taller chimney was erected and the factory further expanded.

A new Eckes enterprise, Eckes & Co. OHG, was founded in 1922 and was merged with the original family firm. The focus of the new company was on making consumer products, such as wine and high-quality brandy. The company hired master distiller Josef Kern, who developed the first range of Eckes brandies and other spirits. The new venture took off right away. Only two years later, alcoholic beverages, which were sold in barrels and jugs, accounted for almost two-thirds of total sales. In 1930 the company launched the first line of bottled alcoholic beverages under the Eckes brand name, which would become the cornerstone of the company’s brand strategy.

The year 1931 saw Eckes’s introduction of non-alcoholic beverages to its product line. When Ludwig Eckes, a son of Jakob Eckes, joined the company in October of that year, his first job was to market the company’s new line of apple and grape juices. While production facilities were modernized, the company made efforts to publicize the Eckes brand among consumers. Toward that end, in 1935 Eckes participated for the first time in a trade show in Berlin’s Kroll Opera, and Eckes beverages were well received. One year later, Heinrich Eckes retired and was succeeded by his son Peter. In 1939 the two juniors Ludwig and Peter Eckes became shareholders in the family enterprise. By then the company offered about 50 different alcoholic beverages for sale and employed about 70 people.

New Brands Bring Success after World War II

The year that Ludwig and Peter Eckes became company shareholders was also the year in which Hitler-led Germany marched into Poland. When Ludwig Eckes was drafted into the army, his sister Gertrud took over at the company for him. Already retired, Heinrich Eckes came back to manage the main production facilities once again. Despite all difficulties brought about by the war, the company managed to survive with employment at a minimum level. Eckes manufactured a dozen or so liquors and half a dozen other alcoholic beverages for the Versorgungsämter, the German government agencies that administered civilian food supplies, aw well as wine-related chemicals for the armaments industry. Since the production of spirits from wine yeast, called Olmer Pitt, was not restricted, the company continued to make it and distributed it among its customers at no cost. The company also continued to make limited quantities of grape and apple juice. Many male Eckes employees did not come back from the war, including Heinrich Eckes’s son Richard and Jakob Eckes’s son Hugo. Peter Eckes returned in 1948 and Ludwig Eckes the year after. After rationing was ended with the introduction of a new currency, the Deutsche Mark, in June 1948, it took about a year for the German beverage industry to return to normal operations. Eckes’s production facilities were relatively unharmed by the war. However, the purchasing of raw material was difficult. By 1949, there were 50 people working for Eckes again.

The 1950s became one of the most successful chapters in the company’s history. After Jakob Eckes’ death, Peter and Ludwig Eckes became the sole owners and personally liable shareholders of the family business. Their first venture was the launch of a new kind of brandy. Most of the brandies sold in Germany, including the French Cognacs, had a “hard” taste. What was missing in the market was a mild counterpart. The new mild creation Eckes launched in 1952 was labeled Chantré—the maiden name of Ludwig Eckes’s wife—and sold at a very affordable price in order to quickly gain a considerable share in the market. The strategy worked. The soft brandy became a best-seller immediately.

Beginning in 1953, Eckes’s annual sales tripled for three years in a row, reaching DM 81 million in 1956. The company had a hard time catching up with the exploding demand and was only able to satisfy it by subcontracting with other distilleries. Warehouse capacity was greatly expanded, a brand-new distillery built, and a fully automated bottling facility installed. However, the company’s premises remained a construction site until the early 1960s. By 1957 Chantré was the German market leader in the brandy segment with a 30-percent market share.

As a response to the overwhelming success of just one brand product, Eckes management decided to radically reduce the company’s remaining line of alcoholic beverages. Only four out of 13 products survived: the cherry liquor called Eckes Edelkirsch; a herb liquor known as 1857er Laurentiner-Klosterlikör; and two products under the Eckes label, apricot fruit liquor and Curacao. At the same time, the company invested in the expansion of its non-alcoholic beverages branch. Ludwig Eckes was the driving force behind the introduction of the company’s first orange juice in 1958. It was named Hohes C (High C), indicating the high levels of vitamin C it contained. Hohes C., positioned as the orange juice that supplied natural vitamin C to the whole family, turned out to be another instant success. In 1959 the company launched a new “naturally cloudy” apple juice called Dr. Koch’s and named after professor Julius Koch, a fruit juice expert who was hired to head Eckes’ newly-founded Institute for Beverage Research. The launch of the two new brand products was backed by a massive advertising campaign, which focused on the health benefits of drinking these fruit juices.

In 1961 Eckes was able to take over a small regional brandy manufacturer: Oppenheim-based Klosterbrennerei Mariacron. The brand Mariacron was launched nationally the following year. Ten years later, annual sales of Mariacron would surpass those generated by Chantré for the first time. Another successful product launch of the time was ZINN 40, a clear spirit made from wine, which competed successfully in the German market for many decades. On the soft liquor front, Eckes Edelkirsch became Germany’s number one fruit liquor in the mid-1960s.

To secure raw material supplies for the new consumer brands, the company established its own import organization and acquired shares in manufacturers of fruit juice concentrates and wine distillates, some in the United States and Italy. In addition, Eckes set up new operations, such as a plantation to grow varieties of tropical fruit in Brazil, and a plant for making apple juice in Argentina.

New Company Structure in the 1960s–70s

In 1963 the next generation of the Eckes family—Ludwig’s daughter Heidrun and son Harald, and Peter’s sons Michael and Peter Eugen—became shareholders in the company. The company’s legal form was changed into Eckes & Co. KG. Ten years later, the seniors stepped back from their leading roles in executive management. However, in order to protect the company from the seemingly inescapable fate of many family enterprises—weakness in leadership because of family disputes, a diminished capital base, or even disintegration of profits because of financial demands of family members—they established a new legal structure. Their main goal was to secure the company’s future growth by strictly limiting the family’s share in profits that could be taken out of the business.

Company Perspectives:

With subsidiaries in 12 European countries, and with the majority of its workforce active outside of Germany, the Eckes-Group is a European enterprise. With our “multi-domestic” concept in our structure and management of the group, we tap into the diversity and individual strength of Europe’s countries as our potential for growth and success.

Ludwig and Peter Eckes themselves had followed such a rule, never taking more than 10 percent of the company’s profits, plus a sum to cover their taxes. As a result, the Eckes-enterprise was well-funded. The company’s own financial assets accounted for roughly half of the total assets on the Eckes balance sheet. In the summer of 1973 the two senior partners transferred 30 percent of the Eckes parent company, Eckes & Co. KG, into family trusts, kept a small amount of shares for themselves, and distributed the rest among family members. The company’s legal form was changed again to Eckes & Co. KGmbH. However, to give every family member an opportunity to learn through their own entrepreneurial activity, a number of Eckes subsidiaries, many of them abroad, were entrusted to younger family members, who were then solely responsible for their management.

The second step was the establishment of a governing body to oversee the management of the Eckes family enterprise. The newly established Stiftungsbeirat, the advisory board for the family foundations, was comprised of members of the Eckes family as well as some non-family members. This group then elected the executive management board. The number of Eckes family members was limited to half of the members of each body. The two senior partners Ludwig and Peter Eckes became members of the Stiftungsbeirat, while the juniors Harald Eckes-Chantré, and Michael and Peter Eugen Eckes became the first members of the company’s executive management board. The Swiss manager Max Rüegger became the board’s first chairman. Ludwig and Peter Eckes stayed actively involved in the family business after they officially retired. Besides being members of the Stiftungsbeirat, Ludwig Eckes lobbied for the company and the German spirits industry as the president of the Bundesverband der Deutschen Spirituosen-Industrie, the national trade association of German distillers, while Peter Eckes represented the company in Germany’s trade association for fruit juice manufacturers. Ludwig Eckes died in 1984, Peter Eckes in 1987.

Diversification and Acquisitions in the 1980s–90s

By the beginning of the 1980s, Eckes was one of Germany’s leading manufacturers of alcoholic and non-alcoholic beverages. The next two decades were characterized by the diversification of the company’s product lines and later by international expansion, mainly through acquisitions. Diversification began in the late 1970s, when Eckes acquired shares in a German sparkling wine maker and a Californian vineyard, and ventured into beverage vending machines with a manufacturer of coffee concentrate as a business partner. In the 1980s the company acquired Lorenz + Lihn Obst-Edelerzeugnisse GmbH, the leading German manufacturer of fruit jams for diabetics, and Schneekoppe GmbH, a manufacturer of a line of health food products. However, none of these activities became a major priority and would be discontinued in the mid-1990s. Rather, the company took the strategic path of capitalizing on their major brand names by extending the respective product lines.

The Hohes C orange juice was also sold in two other versions—one with pulp and one with calcium. Later the Hohes C range was further expanded to include apple and multivitamin juice, as well as a number of fruit juice blends. Dr. Koch’s apple juice was complemented by the launch of several variations, including Dr. Koch’s Trink 10, a multivitamin fruit juice; Dr. Koch’s Plus E, a vitamin E-enriched fruit juice; Dr. Koch’s Minikal, a line of six different dietary fruit nectars; Dr. Koch’s Goldklarer Apfelsaft, a clear apple juice; Dr. Koch’s Trink 10 junior, a multivitamin juice for kids; and Dr. Koch’s Vital, a fruit beverage for people age 50 and older.

Line extensions within the company’s major alcoholic beverage brands included Eckes Edelkirsch Cream, Mariacron Premium, and Cognac Chantré, among others. Besides the extension of major brands, Eckes launched a number of other products under different names, including several fruit juices, non-alcoholic soft drinks, liquors and alcoholic drinks, some of them especially designed for the needs of the restaurant and catering industry.

During the 1980s, Eckes had already acquired a number of distilleries, such as the German Weinbrennerei Stromburg, Siegert & Co. and the Italian Distillerie Sanley DI. SA. After the two German states were reunited in 1990, and after two independent divisions for alcoholic and non-alcoholic beverages had been founded in the year after, the company bought East Germany’s largest distiller Nordbrand Nordhausen in the state of Thuringia in 1991. With a hefty investment in the new subsidiary and its major brand, the clear liquor Nordhäuser Doppelkorn soon became Germany’s market leader in its niche market for Korn, a popular clear spirit. In 1995 Eckes acquired two internationally renowned distillers, Italian Stock S.p.A. and Austrian Sebastian Stroh Ges. m.b.H. In addition, the company established distribution partnerships to market its alcoholic beverages in France, Luxembourg, Austria, Hungary, the Czech Republic, the Baltic, and Russia. On the other hand, Eckes also took on the distribution of manufacturers’ brands, such the international sparkling wine brand Freixenet. However, the market for liquors began stagnating in the 1990s. Consequently, the company refocused its growth strategy on non-alcoholic beverages.

Key Dates:

1857:: Peter Eckes I starts distilling brandy from the byproducts of wine-making.
1922:: Eckes & Co. OHG is established.
1930:: The company launches the first bottled brandy under the Eckes brand name.
1952:: The soft brandy Chantré is launched in Germany.
1958:: Eckes introduces the orange juice Hohes C.
1962:: Another national brandy is launched under the Mariacron label.
1973:: The Eckes family trusts take over 30 percent in the company.
1991:: The company is transformed into the family-owned joint-stock corporation Eckes AG; acquisition spree ensues.
2001:: Eckes takes over the French Joker group and the Finnish Oy Marli AB.

Major opportunities for growth in that market were mainly seen beyond Germany’s borders. Therefore, a series of international acquisitions began in 1993, when Eckes took over the Hungarian fruit beverage maker Sio Nektar Kft. One year later the company was able to acquire a majority stake in its top German competitor, Granini, which was merged with Eckes’ non-alcoholic beverage division. The new company—in which Eckes held a 74-percent stake, while the previous owner, the German Melitta group, kept the remaining share—was named Eckes-Granini GmbH & Co. KG. In 1995 Eckes formed Eckes-Granini (Suisse) S.A., a joint venture with the Swiss Henniez S.A. to manufacture and market brand-name fruit juices in Switzerland. Three years later Eckes took over Les Vergers d’Alsace SA, a major manufacturer of fruit juices in France.

Two more major acquisitions made Eckes Europe’s leading manufacturer of fruit juices. In 2001 the company took over the French Joker group, the country’s leading producer of branded fruit juices. In the same year Eckes bought Finnish beverage manufacturer Oy Marli AB. In order to mobilize the necessary cash for additional acquisitions in the European non-alcoholic beverage market, Eckes put its alcoholic beverage division up for sale in October 2002. However, when it became clear that the package deal would not bring the intended results, Eckes abandoned the idea. Looking ahead, the company was planning to revive domestic sales of its Chantré brand and to further expand the company’s non-beverage arm into other parts of Europe, such as the Mediterranean, Scandinavia, the Baltic states, and Russia. When confronted with the management decision to sell off Eckes AG’s alcoholic beverage division in late 2002, the chairman of the company’s employee council at company headquarters reportedly shouted: “Eckes without ‘Eckes Edelkirsch,’ without ‘Chantré’ and without ‘Mariacron’—that is like Volkswagen without cars!”

Principal Subsidiaries

Eckes-Granini GmbH & Co. KG; Eckes-Granini Deutschland GmbH; Eckes-Granini France S.A. (France); Joker S.A.(France); Les Vergers d’Alsace S.A. (France); Oy Marli Ab (Finland); Eckes-Granini Nordic Oy Ab (Finland); Eckes-Granini Ibérica S.A. (Spain); Sió-Eckes Kft. (Hungary); Eckes-Granini Austria GmbH (Austria); Eckes-Granini (Suisse) S.A. (Switzerland); Aronia S.A. (Poland); OOO Eckes-Granini Rus (Russia); Eckes & Stock International GmbH; Eckes Spirituosen & Wein GmbH; Nordbrand Nordhausen GmbH; Stock Plzen a.s. (Czech Republic); Stock S.p.A. (Italy); Stock Austria Gesellschaft m.b.H. (Austria); Stock Trade d.o.o. (Slovakia).

Principal Competitors

PepsiCo, Inc.; The Coca-Cola Company; Cadbury Schweppes plc; The Procter & Gamble Company; Rauch Group; Allied Domecq PLC; Bacardi Limited; Diageo plc; Pernod Ricard; Henkell&Soehnlein Sektkellereien KG; Berentzen Group.