Groupe Lactalis

10-20, rue Alolph Beck
53089 Laval Cedex 09,
France
Telephone: (33) 2 43 59 42 59
Fax: (33) 2 43 59 42 63
Web site: http://www.lactalis.fr

Private Company
Incorporated: 1933
Employees: 15,700
Sales: EUR 5.5 billion ($6.5 billion) (2005)
NAIC: 311511 Fluid Milk Manufacturing; 311512 Creamery Butter Manufacturing; 311513 Cheese Manufacturing; 422430 Dairy Product (Except Dried or Canned) Wholesalers

Groupe Lactalis, formerly known as Besnier S.A., is France's largest dairy products producer and the second largest producer of cheese in the world. Its products are sold under the company's renowned President label, but also under brand names such as Bridel, Lactel, Sorrento, Rondele, and Locatelli. The company also owns approximately two-thirds of famed Société des Caves et des Producteurs Reunis de Roquefort, the world's leading producer of Roquefort cheese. Best known for its brie and Camembert, Groupe Lactalis produces a wide variety of cheese, butter, and milk products. Its products reach 143 countries; the company operates 65 plants in France and 13 in foreign countries. A private company, Groupe Lactalis is owned 100 percent by the Besnier family. Emmanuel Besnier, grandson of the company's founder, continues to lead the family business.

A SMALL FAMILY BUSINESS FOUNDED IN 1955

Besnier was founded as a single plant in Laval, in the Loire Valley region of France, by Andre Besnier, a former cooper by trade. In 1955, Andre's son, Michel, who had started with the family business as a delivery boy, took over the dairy company's operations. Besnier remained a small, single-plant operation until well into the 1960s. But after a flood destroyed the factory's entire dairy production in 1966, Michel Besnier became determined to protect the company from such calamities in the future by expanding its operations to multiple plants and diversifying the company's dairy products. As a first step, in 1968, Besnier created its own brand, the President label, which, in many parts of the world, would become synonymous with French cheese. The following year, the company opened a second plant, in Mayenne, adding to its cheese production capacity. By then, however, Michel Besnier was already preparing to take a new direction in an ambitious plan to build the family's business. In 1969, Besnier made the first of a long string of acquisitions, buying the cheese maker Bourdon, based in the Normandy region.

That first acquisition made Besnier hungry for more. In 1973, the company acquired a cheese making plant in Charchigné from Preval and followed that acquisition with the purchase of the Buquet cheese dairies. The following year, Besnier solidified its position in the Normandy region, the traditional center of Camembert cheese production, by forming the Société Laiterière de Normandie with rival Bridel. At the same time, the company expanded its own Camembert production with the acquisitions of Groupement Laitier du Perche and of Laiteries Prairies de l'Orne. One year later, Besnier expanded again, adding brie to its product line with the purchase of cheese producer Renault of Doué la Fontaine. Another takeover followed in 1976, when Besnier acquired Stenval Sud.

By 1978, Besnier was thriving; in that year, the company built a new, state-of-the-art production facility in Donfront. The capacity of the new plant, located on 18 acres in the heart of Normandy, was reported to be three times larger than that of the company's principal competitors of the time. With production levels reaching up to 400,000 units of Camembert per day, the Donfront factory was among the largest soft-cheese plants in the world. Meanwhile, the company's line was augmented with the Lepetit brand name. Then, in 1979, Besnier expanded its butter production unit, building a butter plant in Isigny le Buat.

Besnier started the next decade strongly. In 1980, the company acquired the cheese making group Atlalait and that group's six plants in the Loire and Deux-Sévres, building on the company's position in western France. In that year, Besnier also moved into eastern France, with the takeover of the Jean Lincet cheese dairy. By then, foreign demand was building for Camembert and other French soft cheeses. In response, Besnier established a small plant in the United States, in Belmont, Wisconsin in 1981, which focused on supplying soft cheeses to the U.S. market. The company also began industrial production in Villalba, Spain in 1983.

By then, Besnier's sales had swelled to more than FRF 5 billion per year. The company's takeover drive continued, with the acquisition of Martin Collet in 1982, and the acquisition, between 1982 and 1985, of six cheeses from Claudel Roustand Galac. To fuel further expansion, however, Besnier set its sights on acquiring a larger cheese operation. When the Société de Collecte des Prodicteirs de Preval (SCPP) went bankrupt in 1982, Besnier purchased that group's 34 percent stake in the FRF 3 billion-per-year Preval dairy operation. Besnier claimed that its purchase also gave it the right to exercise an option to buy an additional 24 percent of Preval from majority stakeholder Union Laitière Normande (ULN). More than twice Besnier's size at the time, with annual turnover of some FRF 10 billion, the ULN denied Besnier's action to exercise the option. Despite threatening legal action, Besnier lost that takeover bid.

The Preval setback proved to be a rarity in Besnier's aggressive expansion. The company completed its acquisition of Claudel Roustand Galac in 1985. That group had been a subsidiary of Nestlé, of Switzerland; its acquisition by Besnier had given Nestlé a 20 percent share of Besnier. In 1987, however, Nestlé agreed to sell its stake back to Michel Besnier, once again giving him complete control over the family business. With the 1985 acquisition of the Picault dairy operations, based in Normandy, and the cheese dairy plant of Moreau, based in the Ardennes region, the Besnier family business was worth some FRF 8.8 billion by 1987. Profits also were soaring, jumping from FRF 60 million in 1986 to FRF 194 million in 1987. Exports had grown to represent more than 25 percent of the company's sales, with approximately 60 percent of export sales going to neighboring European countries. Besnier also boosted its U.S. presence in 1987 with the opening of a larger plant in Turlock, California, which enabled the company to add fresh milk products, including cream and yogurt, to the U.S. market.

KEY DATES

1933:: Andre Besnier establishes a cheese making business.
1968:: Besnier creates the President brand.
1969:: Cheese maker Bourdon is purchased.
1974:: Besnier forms the Société Laiterière de Normandie with rival Bridel.
1990:: Besnier acquires competitor Bridel.
1992:: The company secures a 57 percent interest in Caves de Roquefort.
1996:: Marcillat is acquired.
1999:: The company changes its name to Groupe Lactalis.
2004:: Groupe Lactalis enters the Indian market.

EYEING THE EUROPEAN UNION: 1990–99

By the late 1980s, Besnier had built the family business into a dairy empire of some 36 plants, processing more than two billion liters of milk per year into more than 400 products under the President, Lepetit, Claudel, Lactel, and other branded and private label names. Sales in 1988 had risen to FRF 9.7 billion, and profits had nearly doubled to FRF 378 million. Besnier's growth during the previous two decades had been impressive, but it proved to be just the beginning. By the early years of the 1990s, Besnier would more than double its sales.

With the creation of the European common market looming in 1992, Besnier moved to consolidate its position in France while simultaneously stepping up its expansion into foreign countries, the better to compete with the European dairy giants. The next phase of the company's expansion began in 1989. In that year Besnier made a number of smaller acquisitions, including that of Hugerot, of the Aube region of France, and the acquisition of the milk production operations of Valmont, a subsidiary of the Perrier group. The Valmont acquisition also helped confirm Michel Besnier's reputation for transforming the failing operations of some of its acquisitions into profitable additions to the Besnier group. Also in 1989, the company expanded into the Los Angeles market, with the acquisition of the small fresh dairy operation, Atlantis, while the company deepened its European presence with the purchase of Laiterie Ekabe, of Luxembourg, and the formation of a partnership to bring the company into the Catalonia region of Spain. Another partnership, with a Belgian dairy cooperative, led to the formation of SA Laiterie Walhorn Molkerel.

Besnier, however, reserved its biggest move for 1990. In that year, the company outmaneuvered its larger competitors, including Sodiaal, ULN, and Bongrain, as well as a number of foreign competitors, to purchase the Bridel dairy company, another family business described as the patriarch of the French Camembert industry and Besnier's fiercest competitor. The purchase, for an estimated FRF 2 billion, catapulted Besnier to the top of the French dairy industry, giving the company total annual revenues of more than FRF 17 billion. The combined operations gave Besnier a large share of the French dairy market, with 16 percent of cheese products, 24 percent of milk, and 24 percent of the country's butter production. In January 1991, Besnier reinforced its position with the acquisition of another family-controlled cheese producer, Girod, based in Saint-Julien-en-Genevois, adding that company's FRF 240 million in sales. Three months later, Besnier outmaneuvered its competitors again, acquiring the Jean-Jacques fresh dairy operations and the rest of the Valmont dairy operations from the troubled Perrier group, which had been forced to recall all of its bottled water after the water had been found to contain traces of benzene. These purchases helped raise Besnier's sales to some FRF 22 billion by the end of that year.

By October 1992, Besnier caused a new stir in the French dairy industry. After Nestlé's takeover of Perrier in the beginning of 1992, the Swiss company announced its intentions of selling off another Perrier subsidiary, the renowned Caves de Roquefort, the leading maker (with 80 percent of world production) of the famous French blue cheese. Again, Besnier outran its competitors, paying Nestlé FRF 863 million for 57 percent of Caves de Roquefort. The remaining shares of the Roquefort operation continued to be controlled by French bank Crédit Agricole. To finance the Roquefort acquisition, Besnier set up a subsidiary unit, Société pour le Financement de l'Industrie Laitière (SOFIL), which increased its participation in Roquefort to 69.5 percent in 1993. Besnier's acquisition spree in the 1990s, however, had brought the company heavily into debt, with FRF 2.5 billion owed even before the Roquefort acquisition. To finance its debt without going public, Besnier sold 40 percent of SOFIL to three French banks—Crédit Lyonnais, Banque Nationale de Paris, and Société Generale—raising as much as FRF 800 million in capital.

After the Roquefort acquisition, Besnier slowed the pace of its purchases. Turning to consolidating the company's operations and improving the profitability of its recent operations, Besnier considered selling off the Roquefort subsidiary, Sorrento, based in Buffalo, New York, to Kraft Foods. The lull did not last long, however. By the end of 1993, Besnier had made several new investments, including the acquisition of small (FRF 60 million) cheese producer Rousel, based in Puy-de-Dome, near Chamalieres, and a 51 percent controlling interest in Alsace Lorraine-based Unicoolait (Union des Cooperatives Laitières), a group of 820 cheese producers in the region with FRF 550 million in sales. Besnier also was maneuvering toward another major purchase. In January 1993, he stepped up his stake in Fromageries Bel, the maker of the worldwide top-selling processed cheese product La Vache Qui Rit (Laughing Cow) with FRF 6.8 billion in 1991 sales. Besnier's share increased to 8 percent, giving him slightly more than 5 percent of the voting rights in the company. By the beginning of 1994, however, Besnier had extended his share of Bel's voting rights to 20.57 percent. Bel's main shareholder and chairman, Robert Fievet, was then 84 years old; at the same time, succession issues were beginning to present themselves to the Bel founding family and controllers of the majority of that company's voting rights. Besnier adopted a wait-and-see attitude, making no secret of its interest in eventually adding Bel to the Besnier fold.

With FRF 24 billion in annual sales in 1993, Besnier was not only France's largest dairy products group, it also had become one of the largest in Europe, behind industry leader Nestlé. As the French dairy industry moved closer to consolidation, Besnier began focusing on new product development, introducing, among others, its own emmental cheese. In 1995, the company expanded its U.S. operation, building a 60,000-square-foot facility in Belmont, Wisconsin. The following year, the company made its first move to expand into the reviving Eastern European market. In April 1996, Be-snier created a joint venture in the Ukraine with Nikolaiev. Four months later, Besnier entered Poland with the 83 percent purchase of that country's Polser dairy. In 1997, the company set up a Russian subsidiary, Besnier Vostok. Meanwhile, questions about the possible successor to Michel Besnier, who turned 67 in 1996, were answered as Besnier began grooming son Emmanuel, 26, to take over the company's operations. When Michel died in 2000, Emmanuel assumed control of the company.

A NEW NAME FOR THE NEW MILLENNIUM

Besnier continued its growth through acquisition strategy into the late 1990s. During 1998, the company added Italy-based Locatelli to its arsenal. Besnier bolstered its U.S. holdings in 1999 with the purchases of Concord Marketing and Simplot Dairy Group Inc. By this time, the United States was the company's second largest market behind France. The addition of Concord and Simplot nearly doubled Besnier's U.S. sales.

As part of its policy to focus on international markets, Besnier announced it would adopt the Groupe Lactalis corporate moniker in early 1999. The company stressed that the new name was easy to pronounce in all languages and reflected its dedication to milk and dairy products.

As the largest privately held dairy in Europe, Groupe Lactalis entered the new millennium on solid ground. In 2002, it purchased the remaining shares of the Bel group of soft cheeses. The following year, it added Kraft Foods Inc.'s Invernizzi cheese operations in Italy to its holdings. During the latter half of 2004, Groupe Lactalis purchased a total of six companies in the Ukraine, Moldavia, Kazakhstan, Spain, Italy, the United Kingdom, the United States, and Poland. Included in these deals was the McLelland Group, the third largest cheese company based in the United Kingdom, and U.S.-based Rondele gourmet cheese. Italy's Edigio Galbani S.p.A. was purchased in early 2006.

While it continued to make strategic purchases, the company also eyed entering new markets as crucial to its future success. In early 2004, Groupe Lactalis began importing and distributing its President and Bridel brands throughout India, including Delhi, Mumbai, Chennai, Bangalore, Kolkata, Goa, and Pondicherry. It also entered the Japanese consumer market in 2005 by selling its President brand in department stores and upscale supermarkets. In 2006 the company announced a partnership with Nestlé to manufacture and market a line of yogurts and chilled desserts in Europe.

Groupe Lactalis's actions over the past several years left it in an enviable position among its competitors. Indeed, the company claimed that every second, seven President brand products were sold somewhere in the world. By this time, Groupe Lactalis's annual cows' milk collection was more than 6.9 billion liters, including 2.2 billion liters processed outside of France. The company also processed 160 million liters of sheeps' milk and 55 million liters of goats' milk. From this, Groupe Lactalis produced 275 million gallons of fluid milk, 310 million pounds of butter, 1.25 million pounds of cheese (including 190,000 tons outside of France), and 627 million pounds of fresh dairy products, including cream and yogurt. With sales of Euro 5.5 billion, Groupe Lactalis appeared to be on track for success in the years to come.

M. L. Cohen

Updated, Christina M. Stansell

PRINCIPAL SUBSIDIARIES

Lactalis United Kingdom; Lactalis Europe du Nord; Lactalis Deutschland; Lactalis Iberia; Lactalis Locatelli; Lactalis Luxembourg; Lactalis Portugal; Lactalis Polska; Lactalis Ukraine; Lactalis Vostok; Lactalis USA; Sorrento Lactalis.