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Ihr Platz GmbH + Company KG is one of Germany's top three drugstore chain operators, with more than 830 stores throughout the country. Ihr Platz, which means "Your Place" in German, owns nearly 690 stores. The company's network also includes 145 franchised stores. Nearly all of the company's stores operate under the Ihr Platz name; the company operates some 90 stores in the Berlin region under the Drospa name, acquired in 2000. Altogether, the Ihr Platz group's network includes a combined floor space of nearly 275,000 square meters, more than 8,000 employees, and sales of EUR 840 million (approximately $1 billion) in 2004. The company claims an 8 percent share of the total German drugstore market. After several years of losses in the first half of the 2000s, Ihr Platz, formerly owned and operated by the founding Frömbling family, nearly went bankrupt in 2005. Instead, investment banking giant firm Goldman Sachs Group led a buyout of the business, and put into place a rescue plan under the guidance of turnaround specialist Alvarez & Marsal. This involved placing the company into a Chapter 11-styled insolvency in order to restructure the company's debt, something of a revolution in Germany. Within months, Ihr Platz was able to relaunch its expansion. CEO Sankar Krishnan and CFO Michael F. Keppel both came to the company from Alvarez & Marsal.
Late 19th-Century Origins as Soap Business
The Frömbling (or Froembling) family founded a business manufacturing soap, opening the Osnabrücker Seifenfabrik Frömbling in Osnabruck, in the northeast of Germany, in 1895. The company prospered and by 1911 was able to expand its production, opening a second factory in Osnabruck, called the Osnabrücker Stärkefabrik. The company began marketing its soaps on an international level, and by 1920 the company's soaps, including its top seller "Frömblings Beste," had found their way to store shelves in a number of markets, especially markets such as Argentina with growing German immigrant communities.
The Frömbling family made the leap to the retail market in the 1930s with the acquisition of Wilhelm Stützer, based in Wilhelmshaven, also in Lower Saxony, in 1931. That purchase also added Stützer's own soap production capacity to that of Frömbling. The following year, the company reincorporated as Seifen-Specialgeschäfte Wilhelm Puls and moved its headquarters to Oldenburg. The company's stores then traded under the name Seifen-Puls. The company began opening new stores and, by World War II, operated more than ten stores in the region.
The company rebuilt its operations following the war, raising its store network to 18 by the end of the 1940s. In 1950 the company moved its headquarters to Rastede. In the early years of the 1950s, the company began emphasizing its retail network, opening a number of new stores. The company's initial focus remained on a regional level. By the end of the decade, however, the family-owned company began to develop national aspirations, boosting its store network to nearly 250 by the beginning of the 1960s. The company also changed the names of its stores, to Der Seifen-Platz (the Soap Place) in 1962. By then, the company's revenues had risen to the equivalent of EUR 25 million, compared with less than EUR 1 million just ten years earlier.
The company underwent a steady expansion through the 1960s, expanding its network to more than 400 stores. The company's expansion was further aided by the introduction of a franchise network in 1969. At the same time, the Frömbling family continued to expand their retail concept, developing a wider range of goods and sundries and embracing a true European-style drugstore format. By 1973, the company decided to relaunch its retail network under a new brand, "Ihr Platz," German for "Your Place." Revenues by then had grown to more than EUR 110 million.
Expansion and Rebuilding
Ihr Platz expanded steadily through the 1970s, developing a national notoriety in part through sponsorships of popular soccer teams. By 1980, the company's store network included all of West Germany, with the sole exception of the Berlin and Hannover markets, where competition was most intense. By then, the company's network topped 550 stores. The German reunification at the end of the 1980s opened new expansion opportunities for Ihr Platz. Into the 1990s, as its store network topped 600, the company's revenues passed the DEM 1 billion mark (EUR 600 million) for the first time.
Through the 1990s, the company renewed its expansion effort. A new generation of the Frömbling family now led the company beyond Germany for the first time, as the company added retail operations in Switzerland, under the Estorel name. That operation launched its own expansion drive at the end of the 1990s, doubling in size to 13 stores by 1999. Estorel nonetheless remained only a small part of Ihr Platz's overall business, accounting for less than EUR 15 million of the Ihr Platz group's nearly EUR 1.2 billion by decade's end.
A larger diversification effort came with the company's entry into the perfumery market, through its control of a chain of Yaska-branded perfumeries. By the end of the 1990s, Ihr Platz had opened nearly 100 Yaska stores, generating turnover of approximately EUR 90 million. Also in the late 1990s, the company overhauled its flagship Ihr Platz chain, refurbishing its store network with a more modern design. As part of the refurbishing effort, the company added a number of new technological features, such as an in-store shopping channel, "ShopTV."
Trouble had begun to loom for the company as the 21st century neared, prompting Business Week to refer to "blunders" committed by the newest generation of Frömblings who had taken leadership of the company. Making matters worse, the company went through a series of CEOs in the early 2000s, as it tried to put a halt to a steady drop in sales.
Nonetheless, the company appeared to have made a roaring start to the new decade. In 1999, the company agreed to sell off its perfumery business in order to concentrate on its core drugstore operation. The nearly 100-store Yaska chain was sold to fast-rising Douglas Group, which held several retail formats, including bookstores, clothing stores, and cafes, and especially a chain of more than 600 perfume shops. In return, Douglas agreed to transfer its own drugstore operation, Dropsa, to Ihr Platz.
The addition of the Dropsa chain added 250 stores, including 100 in the Berlin market alone, as well as more than EUR 350 million to Ihr Platz's revenues. The company, now boosted to the position of the number three drugstore chain in Germany, planned to maintain the Dropsa name in the Berlin market, while converting the rest of its new stores to the Ihr Platz signage. Yet the addition of Dropsa proved too much for Ihr Platz to swallow, with the integration of that operation compounded by the group's management troubles. By 2000, Ihr Platz's sales appeared to have entered a free fall, from nearly EUR 1.2 billion in 2000, sales slid below EUR 1.1 billion by 2000, and slipped under the EUR 1 billion mark by 2003.
By 2004, the company's fortunes appeared to be sputtering to an end. As sales continued to slip, the group's debt levels rose, nearing EUR 150 million. The company found itself unable to pay its debts, and neared bankruptcy by the end of the year. Temporary rescue came from its main bank, Deutsche Bank, which led a consortium bank into the acquisition of the group's debt, giving the company a reprieve of several months in order to put into place a restructuring of its operations. As part of that process, the group agreed to sell off its Swiss retail operation to the Muller Group in December 2004. Nonetheless, the Deutsche Bank rescue was seen as something of a formality toward the company's inevitable declaration of bankruptcy, and the complete dissolution of the business.
In the meantime, Ihr Platz's distress had caught the attention of investment banking powerhouse Goldman Sachs. In January 2005, the U.S. company bought up all of Ihr Platz's bank debt, and then brought in Alvarez & Marsal, a group that specialized in turning around failing companies. With two Alvarez & Marsal executives, Sankar Krishnan and Michael F. Keppel, taking over Ihr Platz's top management positions, the company began negotiating with its remaining creditors to restructure the company's debt. The company also began negotiations with labor unions in an effort to shut down 80 of the group's poorest performing stores, a move which would have entailed the elimination of some 10 percent of the group's staff.
Negotiations on both fronts quickly broke down, in part because of the extremely negative German cultural attitude toward bankruptcy. Indeed, the use of bankruptcy as a mechanism for restructuring and rescuing struggling companies, as seen in the Anglo Saxon corporate world, had been unheard of in Germany, and had been legally possible in the country only since 1999. Having failed in its negotiations with the company's creditors, the Goldman Sachs-backed team decided to take advantage of the new bankruptcy laws, and declared Ihr Platz to be insolvent in May 2005.
The move raised eyebrows in the country, and was viewed as something of a revolution in the corporate world. As an insolvent company, however, Ihr Platz enjoyed a greater latitude of movement; for example, the company quickly received a court order allowing it to shut down its 80 money-losing stores, as well as one of the group's warehouses. The insolvency filing also enabled Goldman Sachs to buy out the group's creditors within a week, allowing the company, now debt-free, to put into place a new and more favorable line of credit. Meanwhile, under the new bankruptcy code, the German government agreed to take over salary payments for a three-month period, allowing Ihr Platz to use its cash flow to make payments to its suppliers and similar critical creditors. As a further concession, the company received an exemption from some EUR 5 million in trade taxes.
Meanwhile the Alvarez & Marsal team, led by CEO Krishnan and CFO Keppel, also put into a place a public relations campaign intended to remove the stigma of insolvency by focusing on the fact that the "restructuring" of the company was meant to save more than 8,000 jobs across the country.
Krishnan and Keppel backed up the group's financial restructuring with a revitalization of the Ihr Platz stores themselves. The company revamped store interiors, placing greater emphasis on so-called "lifestyle" promotions, including the introduction of a line of art supplies and the addition of seasonal features such as barbecue grills. The company also added a section for organic cosmetics and beauty and skin care products.
By the end of 2005, Ihr Platz's resurrection appeared well in hand. By December of that year, the company announced that it was once again prepared to launch an expansion of its retail network, intending to open three new stores. The new stores were also to feature a new format, with an emphasis on organic goods. In 2006, Ihr Platz had hopes of returning to profitability, putting its difficulties behind it to focus on a future as one of Germany's leading drugstore groups.
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