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

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Company Perspectives:

Ours is a permanent quest for perfection, one to which we lend all ou r strength, intelligence, imagination, passion, heart and soul. Here is a summary of our core values: Leadership: We are among the pioneer s in our industry and strive to achieve a leading position. Performan ce-oriented: We invest a great deal in the quality of our business pr ocesses and the skills of our employees.

Solution expertise: We continuously develop appropriate time-to-marke t solutions. Quality: We are committed to delivering Swiss quality. O ur appliances function longer, more precisely and more reliably than the industry average.

Proximity to customers: We help customers find solutions, which makes us an important contributor to the achievement of their goals. Innov ation: We continually surprise and delight with innovative solutions that set the standard for our industry. Values: Our appreciation of q uality and performance is all-embracing. It encompasses--but is not l imited to--the quality, functionality, design and performance of our products. Quality comes out in all that we do.

History of Franke Holding AG

Franke Holding AG is one of the world's leading producers of kitchen and related systems and equipment, including washroom and sanitary fa cilities systems. Franke products span the range of customer sectors, including the household and semi-professional market, and the profes sional restaurant, catering, and hospitality sectors. Among other cus tomers, the company is a leading supplier of kitchen and other system s for McDonald's restaurants worldwide. Franke's operations are group ed around three core divisions: Kitchen Systems, including the group' s historical production of sinks, as well as water tap and waste trea tment systems, food preparation surfaces and work tops, and the like; Washroom and Sanitary Facilities, including paper towel and soap dis pensers, toilet paper holders, as well as toilets, shower installatio ns, and sinks for the consumer, commercial, professional and industri al markets; and Franke Coffee Systems, grouped around subsidiary Fran ke Kaffeemaschinen AG, which develops and manufactures coffee machine s for the professional and semi-professional markets. Based in Aarbur g, Switzerland, Franke has expanded to include more than 85 companies throughout Europe, North and South America, Asia, and Africa. The pr ivately held company is led by Michael Pieper.

Sink Success in the 1930s

Franke started out as a small sheet metal plant, founded by Hermann F ranke in 1911 in Rohrschach, Switzerland. Franke struggled throughout his first decade in business, however, in large part because of mate rials shortages brought on by the outbreak of World War I in 1914. Th e difficult economic climate in Switzerland continued to plague Frank e's business into the next decade. Yet the growth of Switzerland's ec onomy, stimulated by its liberal banking policies, in the 1920s offer ed new opportunities for Franke's business. The company began focusin g its production on the construction sector, producing its first sani tary systems and fittings such as skylights and window frames. Anothe r product line, tops for ovens, brought the company into the kitchen as well.

By the 1930s, Franke had begun to explore new materials as well, lead ing the company eventually to specialize in the production of stainle ss steel equipment. The 1930s also marked the emergence of a new core operation, that of the production of kitchen sinks, launched in 1931 . This activity played a major role in the company's growth into not only a leading producer in Switzerland, but on a global level as well . By the end of the century, the company claimed to have produced mor e than 50 million kitchen sinks.

Into the 1930s, however, Franke remained a small business, with just ten employees. In the middle of the decade, the company moved to larg er facilities in Aarburg. Franke then began developing a new generati on of sink, a fully welded and smoothed sink. The company successfull y launched the new sink type in 1937.

The end of the decade presented new difficulties for the company, how ever. Founder Hermann Franke died in 1939. With son Walter Franke tak ing the leadership, the company then faced into the outbreak of World War II. Once again, the company was faced with severe materials shor tages. Yet the difficult conditions led the company to branch out aga in, and during the war years Franke began producing a more complete r ange of kitchen and sanitary equipment.

Fast-Food Expansion in the 1970s

By the end of the war, the company had grown to include more than 100 employees. The first stirrings of the postwar European economic boom encouraged the company to invest for future growth, with expanded pr oduction facilities and a steadily expanding range of products. By 19 49, the company had more than doubled its payroll and had launched pr oduction of entire kitchen systems. Sinks remained a central point in the group's production, and the Franke name became associated with t he most advanced sink design developments.

The construction boom occurring across Europe, as the continent rebui lt and modernized its cities following the war, presented still great er growth opportunities for Franke into the 1950s and 1960s. Demand f or sanitary installations and systems was particularly high, as that market evolved rapidly in the postwar years. Private, in-house bathro oms, showers, and toilets now became the norm in many markets where p reviously they had been unavailable; public and communal washroom fac ilities also were modernized. The rapid growth of the sector led Fran ke to develop a dedicated Washroom and Sanitary Equipment product gro up into the 1950s. By the end of the decade, the company's product of fering spanned the complete range of washroom equipment and fittings.

Meanwhile, the construction boom occurring elsewhere in Europe, and t he strong demand for the company's state-of-the-art kitchen and washr oom equipment, attracted Franke's expansion interest. The company beg an adding its first international components in the 1950s, starting i n Germany in 1955. Over the next decades, the company added operation s throughout Europe, entering Italy in 1963 and France in 1964, among other markets. By the early 1970s, the company had added 12 foreign subsidiaries. During this period, the company expanded strongly, boos ting its number of employees from 750 at the start of the 1960s, to m ore than 2,500 into the 1970s.

A major milestone in the company growth came in 1972. When McDonald's began to expand its restaurant empire into Europe, it turned to Fran ke to provide much of its kitchen equipment. The company's relationsh ip with McDonald's quickly expanded, and the company became a major p rovider to the fast-food giant worldwide. The company's expertise in this area also brought it contracts from many of McDonald's competito rs, including Burger King. Nonetheless, McDonald's remained one of th e company's largest customers, accounting for a significant portion o f the group's annual sales--nearly 20 percent into the 2000s.

Coffee Equipment Extension in the 1980s

Franke added the production of colored enamel-coated sinks in 1973, i n part to accommodate shifting consumer trends. The company also resp onded to the needs of the professional and commercial markets, develo ping its so-called compact sink system. Introduced in 1979, the compa ct sink system added to Franke's standing as one of the world's leadi ng sink producers. By then, the company was under the direction of Wi lli Pieper, a friend and business partner of Walter Franke, who took over the company after Franke's death in 1975.

Under Pieper, the company's growth continued. In the early 1980s, the company became interested in expanding beyond its kitchen and sanita ry systems operations. The company's target fell on the promising pro fessional coffee machine sector. Always strong in its European base, the sector was undergoing something of a revolution in the United Sta tes, where the appearance of the first Starbucks in the early 1980s i nspired a new appreciation for gourmet coffees.

In 1984, Franke acquired century-old coffee machine producer Augsberg er. The company's intention was to redevelop its new subsidiary, now called Franke Kaffeemaschinen AG (later known as Franke Coffee System s in English), into a producer of high-end, high-tech coffee machines . The rapid success of this subsidiary led the company in 1988 to res tructure its operations into several core divisions, including Kitche n Systems, Washroom and Sanitary Facilities, and Coffee Systems.

The restructuring prepared Franke for a new period of strong growth. Led by Michael Pieper, son of Willi Pieper, who took over as group CE O in 1989, the company began transforming itself into a truly global operation. Over the next decade and half, the company entered most of the major world markets. By 2005, the company counted some 85 subsid iaries worldwide. Acquisitions formed a major role in the group's exp ansion. In 1990, for example, Franke expanded in the United Kingdom t hrough the £8 million purchase of Carron Phoenix.

Global Leader in the New Century

The collapse of the Soviet system and the newly liberalized markets i n Eastern Europe presented a fresh opportunity for growth close to ho me. Franke began expanding into the Central and Eastern European mark ets through the 1990s and into the 2000s. The company turned to Polan d, in 1993, establishing a subsidiary in Warsaw. Franke also entered Russia that year, and then established operations in Hungary in 1994. Closer to home, the company established a dedicated subsidiary for t he Portuguese market in 1995.

Yet Franke's expansion continued beyond Europe. In 1995, the company entered mainland China, establishing a presence in what was soon to b ecome the world's fastest growing economy. In 1997, Franke boosted it s presence in South America, launching a local subsidiary in Brazil.

Further international growth led the group into Bulgaria in 2000 and Thailand in 2002. The company also acquired a presence in South Afric a, through its purchase of City Metal Products (CMP), formerly part o f Boumat Ltd. The addition of CMP, renamed as Franke South Africa, pl aced Franke as the leading manufacturer and distributor of sinks and sanitary products in that country. In 1999, the company bought out it s joint venture partner in China. The following year, it established a new subsidiary in Makati City, in the Philippines.

By the beginning of the 2000s, Switzerland, which had accounted for m ore than 40 percent of the group's sales a decade earlier, had been r educed to just 15 percent. For the new century, the company launched a restructuring operation in order to focus on just three core divisi ons: Kitchen Systems, including its washroom and sanitary business; C ontract Manufacturing, for McDonald's and others; and Coffee Systems. As part of its restructuring, the company sold off parts of its dive rsified operations, which included industrial technology and automoti ve equipment. In 2003, the group's restructuring included the sale of its bathroom furniture subsidiary in a management buyout.

The streamlined group now launched a new series of acquisitions in or der to boost its core operations. Franke's Coffee Systems division pr oved particularly active in its bid to acquire scale. In 2001, the di vision acquired KAMA Kaffeemaschinen & Service, based in Worb, Sw itzerland. The following year, the company moved into the top ranks o f coffee machine producers, buying up Germany's Bremer. In 2003, the coffee systems division moved into The Netherlands, buying up KO-ks B enelux B.V. This was followed by an entry into the United States in 2 004, with the purchase of ESI, based in Seattle. That subsidiary was renamed as Espresso Specialists Inc.

Other acquisitions included Niggemann Food Service Technik in Bochum, Germany, acquired in 2000, boosting the group's contract manufacturi ng operations for the fast-food restaurant market in Germany and Euro pe. The company moved into Denmark at the end of 2001, acquiring that country's A/S Panda Stal, a manufacturer of sinks. Although a small company, at just EUR 3 million in sales, the Panda purchase provided Franke with a beachhead for further expansion in the Nordic market.

In 2002, Franke took the leadership position in the European stainles s steel sanitary product market through its acquisition of W&G Si ssons Ltd. The purchase of W&G Sissons, which also gave the compa ny operations in Belgium, followed on the company's decision to form a new dedicated Washroom & Sanitary Equipment division as a subdi vision of its Kitchen Systems division in 2002.

Franke returned to the acquisition drive in 2004, buying up 49 percen t of Italy's Faber Group. Specialized in the production of hoods and extraction systems for ovens and stoves, Faber claimed a position amo ng the global top three in that category, with production plants in n ine countries, and sales of more than EUR 250 million. In 2005, Frank e bought up full control of Faber.

The company turned to South Africa, buying water heater manufacturers Supa Heat Geysers and the Geyser Company, gaining a market share of more than 35 percent in that country. By October 2005, Franke had rea ched an agreement to acquire AquaRotter, a subsidiary of Grohe based in Germany. As it neared the end of its first century, Franke had gro wn from a small sheet metal workshop into a leading globally operatin g company.

Principal Subsidiaries: Espresso Specialists Inc. (United Stat es); Franke (Thailand) Co., Ltd.; Franke Douat Ltda. (Brazil); Franke France S.A.S.; Franke Kitchen Systems (Pty) Ltd. (South Africa); Fra nke KS International; Nortesco Inc. (Canada); NIRO-Plan AG.

Principal Competitors: DHS-Dillinger Huette Saarstahl AG; Akti engesellschaft der Dillinger Huettenwerke; Independenta S.A.; Permast eelisa S.p.A. (Italy); Huta Florian S.A. (France); Scott Company of C alifornia Inc. (United States); Karl Steiner AG; Teich AG.


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