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Moulinex S.A., the once proud leader of the European small household appliance market, has seen troubled times for most of the 1990s. With sales slipping, and losses topping FFr700 million for its 1995 fiscal year, Moulinex has also seen longtime rival SEB overtake its home French market. Yet a revised shareholder structure, and an intensive restructuring program led by CEO Pierre Blayau, formerly of French retailing giant Pinault-Printemps-Redoute, appear to be pulling Moulinex out of a slump that began as early as the late 1970s. By June 1997, the company was able to announce its first net profit--of FFr29 million on sales of nearly FFr7.7 billion--in five years.
Under the Moulinex and Krups brand names, Moulinex continues its original focus on small appliances, principally for the kitchen. The three principal categories of the company's product lines--Breakfast, Food Preparation, and Cooking&mdashe complemented by Moulinex's Floor Care (vacuum cleaners), Fabrics (irons), and Beauty/Health (hair dryers, electric toothbrushes) products. The Breakfast segment, including coffee makers, coffee grinders, espresso machines, and toasters, accounts for 29 percent of the company's annual sales, as does the Food Preparation segment's mixers, food processors, choppers, grinders, and centrifuges. Cooking equipment, including microwave, mini- and convection ovens, as well as deep fryers and grills, represent 26 percent of the company's revenues. Europe, at more than 75 percent of Moulinex's annual revenues, remains the company's primary market; in the U.S. and Asian markets, facing stiff local competition, Moulinex remains a somewhat small, but respected player.
A Stroke of Genius in the 1930s
For much of its history, Moulinex would remain the "child" of its founder Jean Mantelet. Born in 1900, Mantelet entered manufacturing in 1922, starting up a small business producing copper sulfate (also known as blue vitriol, used as an insecticide) sprayers for the agricultural market. By 1926, however, Mantelet gravitated towards the domestic appliance market that would become his fortune and in 1929, Mantelet founded the forerunner to Moulinex, Manufacture d'Emboutissage de Bagnolet, producing small, manual domestic appliances. Three years later, Mantelet had a stroke of genius that would prove the foundation of his first success.
Moulinex legend has it that Mantelet was inspired by his wife, or more accurately, the lumpy puree she served him one day for a meal. Mantelet saw a need for an improved device, one that would use a rotating motion to peel and prepare vegetables, while reducing the effort required by this chore. In 1932, Mantelet introduced his Moulinette "moulin à légumes" or vegetable mill at the Lyon Fair. Mantelet's experience in Lyon would prove equally provident for the future direction of his company. With a price of 36 francs, Mantelet found no takers for his vegetable mill Two months later, Mantelet brought the mill to the Paris Fair. This time, he priced the mill at 20 francs--and found immediate success. By the end of that year, Mantelet was producing some 2,000 mills per day and became convinced that his future and that of his company lay in low-end, mass-market products.
Even as Europe slipped into the Great Depression, Mantelet continued to believe in the viability of mass-market manufacturing. In 1937, inspired by Henry Ford's assembly line success, Mantelet acquired a four-acre factory in Alençon, and moved production to that Normandy village, beginning the company's long--and somewhat fateful&mdashsociation with that region. With the vegetable mill becoming a mainstay of any self-respecting French kitchen, Mantelet continued to devote his inventiveness to the household. Between 1929 and 1953, Mantelet's company would win more than 90 patents, for products such as the Mouli-Noix, a nutcracker; the Mouli-Râpe, a vegetable scraper; and the Mouli-Sel, a salt and spice mill. In 1953, Mantelet was awarded a patent for a new device, a manually operated, rotating vegetable peeler and scraper. In that year, Mantelet incorporated his company under the name Société d'Etudes Chimie et Méchanique (SECM). Two years later, after perfecting the new device, Mantelet adopted the more evocative "Legumex" (a combination of the French "légume" or vegetable, and "expansion") brand name.
The Légumex peeler was an instant hit. Within two months, the company had sold more than 36,500 units, and by the end of the year, more than 134,000 of the machines had been sold. Yet this success paled in comparison with Mantelet's next triumph. Only one year later, Mantelet brought the company into the era of the electric appliance. In 1956, SECM introduced its electric coffee mill, dubbed the Moulinex, at a price of 2,800 francs--less than half the price of any other coffee mill on the market. As Chantelet himself wrote, "A new price is a new market." By the end of that first year, the Moulinex had sold nearly 1.5 million units, capturing 50 percent of this "new" market. During this time, also, Moulinex adopted its famous slogan, "Moulinex Libère la Femme!" (Moulinex liberates women), capturing the imagination of housewives eager to escape the drudgery of household chores in the economic renaissance of postwar Europe.
Flush with this success, Mantelet changed the name of his company, in 1957, to capitalize on the fame of the Moulinex. The company also began rapidly enhancing its product lines, while remaining true to Mantelet's cherished mass-market, low-price category. By 1962, Moulinex had grown to become the premier French-based electric home appliance producer, dominating in particular the coffee mill market, with a 66 percent share, the hair dryer market, with a 62 percent share, and the mixers and blenders market, with a 75 percent share.
The economic boom of the 1960s continued to lift Moulinex's fortunes. The company was expanding, opening a series of factories centered exclusively in the Normandy region. Moulinex quickly became the region's premier private employer, growing from 800 employees in the late 1950s to more than 12,000 just 20 years later. In 1969, Moulinex went public, trading on the Paris stock exchange. By 1978, with annual sales of FFr1.67 billion, the company had risen to the rank of 92 among France's largest corporations, while nearly 65 percent of sales came from beyond France. Mantelet himself was listed among the top 25 wealthiest men in France. Yet trouble was brewing for the company: if Moulinex's first 20 years had seen phenomenal success, its next two decades would present near-constant struggles.
The Decline of a Giant in the 1980s
A variety of factors would contribute to Moulinex's difficulties, not the least of which was Mantelet himself. By the beginning of the 1980s, the company faced an increasingly saturated market. With 95 percent of French households already owning irons, 87 percent with a vacuum cleaner, and 70 percent with a pressure cooker, reflecting a similar situation throughout much of the key domestic appliance market, Moulinex found little room for maneuvering. A similar situation existed beyond France, in much of Moulinex's core European market. Meanwhile, Moulinex's belated implantation in the United States, begun in 1975 with the opening of a subsidiary production facility, was less than a sparkling success--the company had backed its U.S. entry on a single product, a food processor dubbed "La Machine," but this failed to capture the imagination of the U.S. household.
Moulinex's sales held steady, if stagnant, buoyed principally by the 1978 introduction of the first microwave ovens for the home market. But if the microwave proved a hit, the company would also produce a string of flops. Such was the case with its electric yogurt maker, its professional-style steam press, its electric pasta maker, among others. The company's total volume was slipping, as were its profits before the recession of the early 1980s had even got underway. Yet the company--that is, the 80-year-old Mantelet--refused to take the steps necessary to react to these changing market conditions. The company's employee list would remain swollen at 12,000 workers, and would even continue to grow. Mantelet--who, with no children of his own, often referred to Moulinex as his only child; in turn, Mantelet was known as "Papy" to his employees--refused to consider consolidating production and closing any of its many factories. Automating production, which had already become a necessity in the manufacturing world, also remained excluded from the Moulinex world. In the face of declining sales, the company reluctantly instituted a series of temporary layoffs, and would attempt other stopgap measures, such as four-day workweeks.
Indeed, the company would find itself in an embarrassing position. Despite the need to take more drastic measures to improve both productivity and profitability, Moulinex had firmly implanted itself in the Normandy region&mdashø the exclusion of anywhere else. The company had long been the region's largest private employer, an honor that was quickly becoming a burden and placed Moulinex in a delicate position. Any move the company might make, in terms of eliminating payroll, would have severe repercussions for the region's economy. Only the recession of the early 1980s enabled the company to trim its payroll, scaling back to 8,500 employees. By the mid-1980s, however, Moulinex had once again rebuilt its workforce to nearly 10,000.
More ominously, however, the Moulinex image itself had begun to suffer. Once the pride of the French kitchen, the Moulinex name had become synonymous with low-end, technologically uninspired products. But the market was changing rapidly. Households no longer sought out simply a basic product, but instead demanded the more feature-rich packages offered by the increasing numbers of Moulinex's competitors. Here, too, Mantelet was seen as an impediment. Stubbornly focused on production on the one hand, and marketing on the other, Mantelet had long ignored a third crucial component of the home appliance market: distribution. Yet product distribution was undergoing a grand shift in France and elsewhere. The rise of mass distributors, including the hypermarket phenomenon, was rapidly drawing customers from the traditional small retail store. Mantelet's relationship with the company's distributors remained strained at best. With many of the new mass distribution arrivals proclaiming a policy of selling low-end, mass-market products "at cost," and with other distributors seeking higher profit margins on sales, Moulinex allowed a flood of competitors--especially the emerging Asian industrial giants&mdashø push its products off the store shelves.
When the crisis of the early 1980s hit full force toward the middle of the decade, Moulinex was in no condition to react. Sales slipped, profits plunged, and by 1985 the company posted its first-ever net loss. The company's near-future prospects were bleak indeed, especially as the company's inventory continued to rise to alarming levels, reaching some 18 percent of its total revenues. Meanwhile, Moulinex's last new product success, the introduction of a mini-oven in 1982, would wait years for a successor. But finding an heir for the company's product line would prove simple in comparison to the issue of Moulinex's future leadership. Mantelet, turning 85 at the mid-decade mark, was finding it difficult to let go of his "child." With no children of his own, Mantelet had long refused to begin grooming a successor--a situation not uncommon among self-made business leaders of Mantelet's generation. Observers, particularly in the stock market, had long been clamoring for clarity on the issue. By the mid-1980s the issue of Mantelet's succession had become an affair of the state, with the unions representing the Moulinex workforce calling for government intervention to force Mantelet to pass on the reins of his company's leadership.
For his part, Mantelet had been making reluctant moves to find a new parent for his child. At the beginning of the decade, he had begun seeking a merger of Moulinex with another corporation. Philips, Electrolux, and others expressed interest in adopting the French small appliance flagship. In 1984, the company was nearly sold to Black & Decker; that agreement, however, was scuttled by Mantelet's refusal to give up his majority control. And rather than softening his position, Mantelet would make any acquisition of the company more difficult, particularly with his insistence that any new parent be a French-based concern, that the employee base be maintained at its current levels, and that any merger agreement would in fact remain a partnership agreement. Despite these requirements, Moulinex nonetheless appeared at last to have found a suitor in Scovill, the American industrial group, which purchased some 20 percent of Moulinex in a planned takeover. However, Moulinex's increasing losses ended the chances of a marriage, friendly or not, with Scovill.
The clouds that had been hanging over Moulinex would soon turn into a full-scale storm. In March 1986, Mantelet suffered a stroke, rendering him paralyzed on one side and partially aphasic. Suddenly, the company found itself with no leadership at all. Yet Mantelet, far from becoming more supple, actually hardened in his resistance at giving up his company. Refusing still to name a successor, Mantelet seemed simply unable to give up the firm to which he had devoted so much of his life. For much of the following year, Moulinex effectively remained without a leader. At last, in 1987, the crisis at the company forced Mantelet's hand. While still refusing to choose a successor, and continuing to cling to ultimate control of the company, Mantelet turned the company's reins over to three of his top managers: Gilbert Torelli, in charge of sales; Roland Darneau, in charge of production; and Michel Vannoorenberghe, in charge of finance.
The trio went to work attacking the problems of a company in full disarray, taking measures that included shutting the company's factories four days each month, and persuading Mantelet to reduce the company's workforce by 1,300 employees&mdash′imarily through early retirements and other voluntary incentives. Meanwhile, Moulinex began inching towards what was fast becoming its sole recourse in the issue of Mantelet's succession--an employee buyout of the company. At last, Mantelet allowed this move to occur in 1988. But an employee buyout was seen as a difficult maneuver in the best of situations. And Moulinex's precarious position--coupled with the sheer size of the proposition--made a successful buyout seem remote indeed. In fact, the buyout of Moulinex by its employees--with principal ownership falling to Torelli, Darneau, and Vannoorenbergh--introduced a new phase of crisis for the company.
Restructured Hopes for the 1990s
Yet the new management--although remaining under Mantelet's control&mdash⟩peared to make a promising start. Moulinex relaunched its product line, updating its designs and features, to the extent that by the start of the 1990s, nearly all of the company's products were less than 18 months old. The company's marketing was revised as well, with a successful advertising campaign helping to improve Moutlinex's image among consumers. Meanwhile, the company began shifting into the higher-margin high-end market. At the same time, the company began, for the first time in history, to look outside its operations for growth. In 1988, the company acquired small appliance makers Swan and Girmi, and followed these acquisitions with that of the Krups brand in 1991. The result was a fresh growth spurt in the company's sales, which neared FFr3 billion by 1989. By the time the Krups acquisition was fully consolidated, Moulinex's revenues topped FFr8 billion.
Once again, however, Mantelet seemed to impede the progress of his company. This time, it was Mantelet's death in 1991 that sparked a new company crisis. To the end, Mantelet had refused to choose a protégé to lead the company. Upon his death, a power struggle erupted among the principal shareholders, Torelli, Darneau, and Vannoorenbergh. As the trio fought amongst themselves for ultimate control, the company itself once again slipped into disarray. Factories became more or less fiefdoms, with managers making independent decisions as central control all but disappeared. Abuses grew rampant: one executive reportedly ran up company credit charges of more than FFr5 million per year; another granted himself a FFr400,000 Mercedes--before quitting the company. Meanwhile, the payroll once again swelled to more than 14,500 owner-employees, including a large number of superfluous middle managers, just at a time when a fresh recession was brewing, plunging the European economies into a prolonged crisis.
The employee buyout had become a trap. As the recession took hold, sales collapsed and profits disappeared, reducing Moulinex to nearly five years of losses. Yet the company was paralyzed from taking the most necessary steps: drastic cuts in payroll, the closing of a number of its outdated factories, and the stepping up of the automation of the remaining production activities. With the tension among the top three managers and principal owners reaching its own crisis level--ranging from tapping telephones to reportedly coming to blows in the halls of the company's headquarters--Moulinex needed to free itself of its employee-ownership arrangement.
In 1993, a quartet of financiers rode in to the rescue. The holding giant Euris, the Suez Bank subsidiary Soffo, Francarep of Groupe Rothschild, and IDI orchestrated a buyout of the majority of Moulinex's shares, taking control of the company's operations. While the quartet might have expected to perform a quick turnaround--and in the process a fast return on their investment--the restructuring of Moulinex would require another four years before the company returned to even meager profitability. One source of this delay was, once again, the company's position in the Normandy region, and the awkward--if not politically suicidal--necessity of shutting down some of its facilities. Yet, in order to compete successfully, the company needed desperately to transfer much of its production, at least for its low-end products overseas, to the lower-cost Asian region, and also to the company's new facility in Mexico, the latter essential if Moulinex still hoped to make its presence felt in the important North American markets.
Moulinex would remain in more or less of a holding pattern until 1996, when Pierre Blayau was named as the company's CEO. Meanwhile, losses had reached alarming levels, climbing to more than FFr700 million in 1995. Blayau, however, came to the company with a reputation as a specialist in overcoming crisis conditions--and for having the temperament that was not shy about taking drastic measures. In June 1996, then, Blayau announced the closing of two of Moulinex's oldest factories and the reduction of the company's workforce by more than one-third by the turn of the century. Where such an announcement would have previously met with extreme resistance in the Normandy region, by 1996, there seemed no other choice if Moulinex was to survive. By 1997, Blayau's restructuring of the company seemed to be bearing fruit: in June 1997, the company announced its first--albeit somewhat symbolic--return to profitability in more than five years.