CeWe Color Holding AG - Company Profile, Information, Business Description, History, Background Information on CeWe Color Holding AG



Meerweg 30-32
D-26133 Oldenburg
Germany

Company Perspectives:

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

History of CeWe Color Holding AG

Headquartered in Oldenburg, northern Germany, CeWe Color Holding AG i s 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 R epublic, Slovakia, and Hungary, CeWe Color serves large retail client s--drugstore chains as well as department stores that offer photo dev elopment services--as well as smaller customers such as photo studios and retail stores all over Europe. The company's 1,300 couriers deli ver color prints to more than 42,000 points of sale in 19 countries. CeWe Color's subsidiaries Japan Photo and Fotolab own about 230 retai l outlets for photo supplies in Norway, Sweden, the Czech Republic, a nd Slovakia. Altogether, Europe's largest photo finisher produced 3.5 billion color prints in 2004 with roughly 500 million made from digi tal images.

Former Naval Officer Expanding the Family Business in the 1950s

Before Heinz Neumüller, the son of a physician who worked for th e German army, founded CeWe Color Betriebe in 1961, he served as a ma rine officer during World War II. Rather than becoming a naval office r, 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 h e acquired as a submarine commander during this time helped him later succeed in business: a positive attitude and high morale, thorough p lanning and flexibility in tactics, team spirit and leadership skills , working hard and delegating tasks to the right people, monitoring o ne's environment carefully, and acting promptly if necessary. After t he end of the war Neumüller learned the nuts and bolts of accoun ting and running a company from the financial perspective as a volunt eer 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 finis hed his practical training in business management, he was offered a j ob there with the prospect of becoming CFO after two to three years. Neumüller's career took an unexpected turn, however, when he mar ried Sigrid Wöltje, a master photographer whose father owned a r eputable 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 shareholder in W&oum l;ltje'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 photog raphy technology was first introduced in Germany in 1951, he did not hesitate to acquire a license, create workspace, and buy the necessar y equipment to offer this innovative, if expensive, new service to hi s customers. Neumüller and his wife and mother-in-law worked rel entlessly on expanding the business, which in 1953 led to the opening of a second branch in Oldenburg. The main branch was renovated and e xpanded, too, and soon became the most modern photo retail store in n orthern Germany. In the second half of the 1950s a third Wöltje branch opened its doors in Oldenburg, and by the end of the decade th e business employed more than 100 people. The photo lab in the main b ranch was expanded and new equipment was installed, capable of puttin g out 6,000 color prints a day. At the same time, customer service wa s expanded and a sales office set up in Bremen that sold photo suppli es to large customers such as industrial firms, hospitals, large arch ives, 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 photogra phy into a hobby for the masses. With the onset of the postwar econom ic boom in Germany, more and more people were able to afford cameras. Over time they were also able to travel during their increasing leis ure time and, as a result, they took more pictures. Color photography , although still rather expensive, was on the rise. With these develo pments in mind, Neumüller took a major step that paved the way f or his successful enterprise. In 1961 he founded a new company that f ocused 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, W&ou ml;ltje's photo lab had already reached a considerable size, ranking in the top-five league of photofinishers in Germany. In the first thr ee years of CeWe Color Betriebe, Neumüller focused on modernizin g and supplementing the existing equipment. To counterbalance the slo wly but steadily deteriorating profit margins for color prints becaus e of falling prices, more work processes had to be mechanized and aut omated. Looking into the future, Neumüller realized that state-o f-the-art technology had to be combined with high volumes of processi ng 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 t he outskirts of Oldenburg was completed, the equipment that was moved there at first took up only a miniscule space in the 40,000-square-f oot 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 s hipping hall, and warehouse space. Finally, all of Wöltje's form er photo processing departments were united under one roof.

As color prints increasingly replaced black-and-white prints, many sm all photo labs, often adjunct to inner-city photo studios or specialt y stores for photo supplies, could not afford the additional personne l 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 wou ld have done the same work in-house. Consequently, CeWe Color's busin ess volume began to grow. When CeWe Color opened its new lab there we re 180 people working there. Just four years later, the number of emp loyees had almost tripled along with the processed volume. Despite a massive downslide in prices for color prints, caused by competitors a iming at a larger piece of the market, CeWe Color's client roster kep t growing, due to Neumüller's customer-oriented approach and hig h quality standard. The pressure on prices increased as new players e ntered 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 t he 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 busine ss for more than 20 years, passed away. Together they had successfull y established CeWe Color as a major player in photofinishing. Every l ittle space in the "roller skate lab" was taken. Neumüller decid ed to double it. The 1970s, however, also marked the beginning of CeW e Color's external expansion--at first in Germany and its bordering s tates, later into many parts of Europe. While the processing faciliti es in Oldenburg were greatly expanded, CeWe Color successfully launch ed a sales offensive in The Netherlands, where a distribution network was established in 1971. One year later a new CeWe Color photo lab w as set up in Munich. In 1973 CeWe Color merged with northern German p hotofinisher Vereinigte Color, including two processing facilities, o ne 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 Col or Betriebe. Two years later CeWe Color took over two more competitor s: Nordcolor based in Lübeck and Koliphot based in Nuremberg. Af ter these transactions CeWe Color had become Germany's market leader in color-photofinishing. The company's workforce more than doubled wi thin three years: from 700 in 1972 to 1,600 in 1975.



By 1975 CeWe Color served about 4,000 clients a day. Roughly every fi fth order was shipped abroad, mainly to The Netherlands, Belgium, and France. For another ten years, however, the company worked on expand ing its network of processing facilities in Germany, before it entere d another country. In the late 1970s the photofinishing market stagna ted and competition became stiffer. To defend CeWe Color's leading po sition, 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 mas sive pressure. As a result, CeWe Color's closest competitor, photofin isher Heinze, went bankrupt. Other competitors also struggled, such a s 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 print s 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 expa nsion. To gain better access to the large markets in France, the comp any 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 g rowing number of orders from Austria and Switzerland, which were serv ed 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 th e company's northern German subsidiary Nordcolor.

Transition to Digital Technologies in the Late 1990s

In the late 1980s, when electromagnetic imaging technologies first em erged, CeWe Color hosted a symposium about the future of classical ph otography. 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 Bilde r eines Mannes Heinz Neumüller replied that he could not ima gine that paper prints would totally disappear one day and that peopl e would be content to carry a monitor around. For another two decades his prediction proved accurate. While digital imaging technologies w ere refined, CeWe Color focused on further growth in the markets that suddenly opened up with the fall of the Berlin Wall. After the reuni fication of Germany in 1990, another large processing facility was bu ilt in Dresden to serve the eastern part of Germany as well as the fi rst customers in Poland. To raise more capital for new acquisitions, the company was reorganized under the umbrella of a new holding compa ny, CeWe Color Holding AG, in 1992. Company founder Heinz Neumül ler became head of the newly established advisory board, a position h e held until his retirement in 1998. In the following year the compan y went public. Throughout the 1990s and into the new millennium CeWe Color conquered new markets by means of new distribution networks, ne w processing facilities, or joint ventures in many parts of Europe, i ncluding the Czech Republic and Poland, Belgium, Slovakia, Romania, S lovenia, 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 outlet s in Norway and Denmark.

By the late 1990s digital imaging technology had made significant pro gress and early generations of pricey digital cameras were available to consumers. In 1997, when the Internet was just emerging as a new d istribution channel for business, a new subsidiary, CeWe Color Digita l, was founded to explore business models and develop innovative tech nologies 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 fir st version of an Internet platform for use by its clients as well as by consumers, called "Photoworld," up and running. Consumers were abl e 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 brea kthrough followed in February 2002, when CeWe Color and the German fi lm and photo equipment manufacturer Agfa presented the jointly develo ped "DigiFilm-Maker," a terminal where--with the push of a button--im age data were transferred to a CD that was then sent to a photo lab f or development, to the Photo Marketing Association (PMA) in Orlando. By the end of 2002, CeWe Color had installed roughly 2,400 such termi nals in photo specialty stores. Many other large photofinishers, such as Kodak, later adopted the new technology.

A Winner of Market Consolidation After 2000

While digital photography gained momentum, the photofinishing market in Europe underwent a massive consolidation. Although hobby photograp hers took more pictures with their digital cameras, they deleted many of them and did not order as many paper prints. The terrorist attack s of September 11, 2001 in the United States, as well as an unfavorab le economic climate in Western Europe, caused a lasting downturn in t ourism. The photofinishing industry, a highly seasonal business that made a considerable part of its sales from developing vacation pictur es, suffered as a result. The German market for color prints diminish ed from five billion in 2001 to 3.7 billion four years later. In addi tion, large drugstore chains initiated a ruinous price competition th at drove many photo specialty stores into bankruptcy or out of photof inishing. Consequently, 20 out of 42 large processing facilities were closed down, reducing total industry capacity by one third. Kodak, o ne of CeWe Color's major competitors, abandoned the European photofin ishing market altogether. In 2001 CeWe Color began to close down olde r and smaller processing facilities, but expanded sites closer to gro wth markets, for example, in Slovakia and in the Ukraine. Nonetheless , the company's net profits plummeted, in part caused by restructurin g efforts and high investments in new equipment for digital processin g. CeWe Color answered by raising prices. Although the company had ga ined a significant market share--about 45 percent in Germany and roug hly 40 percent in Europe--it remained to be seen if this measure woul d find lasting acceptance in the marketplace.

It was in 2002 when digital photography turned into a mass market. Th e future impact of the transition from film-based to digital photogra phy on the photofinishing industry, however, seemed to be open at tha t time. On the positive side, costs for processing digital images wer e lower than for processing films. In addition, CeWe Color's photo-en hanced products, such as T-Shirts and aprons, stickers and calendars, mugs and mouse pads, and its innovative "photo books"--customer-desi gned photo albums that included text added by customers over the Inte rnet, printed on high-quality paper, and bound into books offered thr ough CeWe's Internet portal--seemed to catch on with consumers. On th e negative side, while digital orders grew rapidly, the volume of tra ditional photo development business dropped more significantly than e xpected. In a stagnating market, a new round of price wars with major competitor Fuji, resulting in lower prices for digital prints, seeme d likely. One major promise of CeWe Color's executives for the future lay in the increasing popularity of the photo cell phone or "camerap hone"--little mobile phones with photo capabilities. If future genera tions 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 rate s 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 Col or AG & Co. OHG (Austria); CeWe Color Fotoservice AG (Switzerland ); CeWe Color Sp. z.o.o. (Poland); Fotolab a.s. (Czech Republic); Fot olab Slovakia a.s.; CeWe Color Magyarország Kft. (Hungary); Ja pan Photo Holding Norway A/S; Japan Photo Sverige AB (Sweden).

Principal Competitors: Fuji Photo Film Europe GmbH; Spector Ph oto Group N.V.; Color Drack GmbH; Fotolabo Club GmbH.

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