Miquel y Costas Miquel S.A. - Company Profile, Information, Business Description, History, Background Information on Miquel y Costas Miquel S.A.

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Company Perspectives:

From the outset the principal line of business has been the manufacture of fine and specialty lightweight papers, with the main specialisation being hi-tech cigarette papers. ... The company's state-of-the-art technology, developed in house, enables it to be present in the major world markets, including those that are most demanding when it comes to total quality. Consequently, customers and their requirements have always been the focal point of the company's business.

History of Miquel y Costas Miquel S.A.

Miquel y Costas Miquel S.A.(MCM) is a manufacturer of specialty papers and one of only four cigarette paper manufacturers in the world. The Barcelona, Spain-based company is also one of the oldest Spanish paper companies, with a continuous history dating back to 1725. MCM is known throughout the world for its flagship Smoking brand rolling papers, and exports accounted for 78 percent of the group's sales of EUR160 million in 2003. Altogether, MCM ships its products to more than 70 countries worldwide. Roll-your-own cigarette papers account for just 2 percent of the group's revenues, however. Papers for the cigarette industry is the group's largest segment, generating 45 percent of its sales. The company also produces a range of specialty papers, including filter paper for vacuum cleaner bags; decorative overlay paper; filter papers for preventing insects from attacking fruit; grid pasting tissue for automotive batteries; and adhesive papers for transfers. Most of these products were developed by the company's own research and development efforts. MCM's specialty papers operations are carried out by subsidiary MB Papeles Especiales. Specialty papers add 13 percent to the group's sales. MCM also operates its own pulp production, some 50 percent of which is sold to third parties, representing 23 percent of sales. The company also grows its own hemp and sisal for its specialty papers. MCM has been listed on the Madrid Stock Exchange since the late 1970s.

Rolling Papers in the 19th Century

Christopher Columbus introduced tobacco to Europe, bringing the first tobacco leaves into the Spanish port of Barcelona. The earliest cigarettes, however, were rolled in corn leaves. It was only toward the beginning of the 18th century that thin papers began to be used as cigarette paper, and Spain took credit for originating the "roll-your-own" cigarette market. By the middle of the 18th century, cigarette papers had become quite common, although many preserved the yellow color of corn leaves. The Barcelona area, and the Catalan region in general, became a noted center for paper production, and the many cigarette paper producers introduced a number of innovations, such as glue lines and the use of rice paper, that later became industry standards.

One of the earliest and oldest of Spain's paper producers was the Miquel family, which started manufacturing paper by hand in 1725. The family later built a mill in Capellades, outside of Barcelona, taking advantage of the river there and the abundant supply of water. The Miquel (later Miquel y Costas) family launched its own cigarette paper production in 1752, establishing their business as the world's oldest continuously operating producer of cigarette and roll-your-own papers.

The growth of the cigarette paper industry in Spain also gave rise to one of the earliest examples of consumer product packaging. During the 19th century, paper producers began to distinguish their products, sold in booklets of cigarette-sized papers, with highly illustrated covers. The booklets in turn stimulated demand and also gained consumer brand loyalty, foreshadowing the mass-produced, consumer culture of the late 20th and early 21st centuries.

The Miquel y Costas' family emerged as a leading innovator and producer of cigarette papers into the second half of the 19th century. The company began to specialize in thin rolling papers in 1820. In 1879, brothers Llorenzo, Antonio, and Pau Miquel y Costas incorporated the family business as Miquel y Costas Hermanos. The brothers aimed at developing new technologies to enhance the quality of their papers, as well as to increase the efficiency of the production process. In support of this, the company built a new factory in La Pobla de Claramunt that year.

From the outset, Miquel y Costas left the door open for an extension into other paper categories, noting in its articles of incorporation its intention to produce and market various types of paper. Yet cigarette papers remained at the heart of the family business. The company also foresaw the development of the international paper trade, taking advantage of Spain's presence in Latin America to begin exporting its cigarette paper booklets there by the early 1880s. By the end of the century, Miquel y Costas had developed an international network of sales agents spanning South American, Mexico, Cuba, and New York. In 1901, the company added a new shareholder, and the company's name was changed to Miquel y Costas & Miquel, or MCM.

Branding in the 1920s

The invention of the first industrial cigarette making machines transformed the tobacco industry in the late 19th century. Whereas cigarette smoking had remained relatively minor in comparison to pipe and cigar smoking, the ability to mass produce cigarettes led to their eventual dominance of the tobacco market. The new tobacco product also represented an opportunity for specialty paper producers such as MCM, which quickly began producing papers to be used in the new cigarette production machinery.

Yet the original coarse quality of the manufactured cigarettes providing MCM, like many of its competitors, with a dual opportunity. During the late 19th century and early 20th centuries, the custom rose among Spanish smokers to unroll the mass-produced cigarettes in order to roll the tobacco into roll-your-own paper. In this way, companies like Miquel y Costas often doubled their sales, selling once to the manufacturer, and again to the consumer.

MCM earned a place among the majors in 1924 with the launch of its Smoking brand. Smoking quickly became the company's flagship brand and helped expand the company's exports worldwide. This development took off especially after the company's participation in the International Exhibition in Barcelona in 1929. In that year, the company converted its status to a limited liability company. Before long, Smoking had become one of the world's strongest selling rolling paper brands.

In the 1930s, cigarette manufacturers had begun to use higher-quality papers for their cigarettes, thereby putting the end to the re-roll market. MCM, which retained a tradition of innovation, was able to respond to demands for higher quality paper and quickly asserted itself as an important partner to the world's tobacco companies. At the same time, the company continued to supply the roll-your-own market. In 1935, the company established a subsidiary, Sociedad Espanola Zig Zag, using overlap production technology developed by the French Zig Zag company at the turn of the 20th century.

The Spanish Civil War devastated the Spanish cigarette paper industry. Already hit hard by the end of their re-roll sales, most of the companies in the industry were forced out of business by the time the war ended. MCM also suffered during the war, which saw it lose its export markets. The end of the war in 1939 enabled the company to recapture some of its export sales, yet full recovery would have to wait until the period following World War II.

Specialty Paper Development in the 1970s

As it worked to rebuild its international sales, MCM also moved to expand its operations. In 1952, the company established a new subsidiary, Cellulose de Levante, also known as Celesa, and built a rice pulp mill in Tortosa, Tarrogona, near the Ebro river. The pulp mill enabled MCM to control the quality of its pulp and also gave the company a strong secondary activity. Before long, the company had begun to sell off some 50 percent of its pulp production.

MCM's pulp capacity provided it with further expansion opportunities as demand for specialty papers grew during the 1960s. In the mid-1960s, the company began to receive request for higher-grade papers. The company responded by importing raw flax in order to produce flax pulp at the Celesa site, launching production in 1967. In that year, also, MCM added a new component to its operations when it began planting hemp on its own plantations near the Celesa site. The company began production of hemp pulp soon after. At the same time, the company began producing high quality flax- and hemp-based cigarette papers.

Miquel y Costas sold off majority control of MCM in 1968 as the company prepared to expand beyond cigarette papers. In 1970, MCM established a new subsidiary, Papeles Anoia, which began producing a wide range of specialty papers and fabrics, including artificial leathers, technical fabrics, and specialty filter. In 1975, the company further expanded its operations with the acquisition of SA Paya Miralles.

Leading RYO Producer in the 20th Century

MCM went public in 1979, listing on the Barcelona Stock Exchange, following the death of dictator Francisco Franco and the creation of a Spanish democracy. The public offering enabled the company to invest in developing its technologies and production processes, as well as expand its production capacity.

Until the mid-1980s, MCM's production had been based exclusively in Spain. In 1985, however, the company moved closer to Latin America, one of the major tobacco markets, establishing Miquel y Costas Argentina. The company further boosted its Argentinean presence with the acquisition that year of Paperleras Reunidas's operations in Buenos Aires.

Back at home, the company's Celesa subsidiary launched production of sisal pulp in 1989. The following year, MCM joined with Papelera del Besos, a specialty papers maker, to establish the 50-50 joint venture MB Papeles Especiales. As part of the joint venture, Papelera del Besos bought a share in two of MCM paper mills. Located in a facility in Pobla de Claramunt, the joint venture began producing specialty filter papers.

Yet MCM was struggling with losses as it entered the 1990s. In 1991, the company put into place a thorough restructuring, which including modernizing its plants, improvement in quality, and a shift into higher-margin product categories. In this way, the company was able to return to profitability by 1992. Into the middle of the decade, the company came under new ownership, although members of the Miquel y Costas family nonetheless remained prominent shareholders. The company subsequently added a listing on the Madrid Stock Exchange's Mercado Continuo in 1996.

MCM meanwhile had begun working on what it called the next generation of cigarette papers. The company's commitment to research and development enabled it to release a new type of fine hemp cigarette paper. In 2002, the company introduced another new rolling paper product, the Smoking King Size Deluxe, featuring a long slim format and luxury paper. The company hoped to establish a new market for "slim" cigarettes with this product. Also in 2002, MCM payed EUR3.6 million ($3.1 million) to its joint-venture partner Papelera del Beso in order to acquire full control of MB Papeles Especiales.

By 2004, MCM's sales had topped EUR165 million ($205 million). The company had firmly established itself as one of the world's leading cigarette papers manufacturers. MCM was by then one of just four producers of papers for the tobacco industry and had also emerged as one of the world leaders in roll-your-own papers. The company remained committed to its history of innovation and in 2003 created a new subsidiary for new product development, Miquel y Costas Tecnologias. MCM appeared set to move into its fourth century as one of Spain's leading specialty paper producers.

Principal Subsidiaries: Celulosa de Levante, S.A.; Desvi, S.A.; M.B. Papeles Especiales, S.A.; Miquel y Costas Argentina SA; Papeles Anoia, S.A.; Payá Miralles, S.A.; Sociedad Española Zig Zag, S.A.

Principal Competitors: Bollore SA; Zaklady Celulozy i Papieru CELULOZA SWIECIE S.A.; VENEPAL SACA; Krasnoyarsk Pulp and Paper Mill JSC; Tsepruss JSC; International Paper Company; Petrocart S.A.; Stora Enso Oyj; Frantschach Pulp and Paper Czech A.S.; UPM-Kymmene Corporation; Svenska Cellulosa AB.


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