Dr. August Oetker KG - Company Profile, Information, Business Description, History, Background Information on Dr. August Oetker KG

Lutterstrasse 14
D-33617 Bielefeld

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Style, fashion and taste are all subject to constant change. Food and beverages are no exception. The strict orientation towards the needs of the consumer is the defining characteristic of the Dr. Oetker brand--and will remain so in the future. Products, services and communication will continue to unite Dr. Oetker with consumers in the marketplace--from generation to generation.

History of Dr. August Oetker KG

Dr. August Oetker KG is the management holding company for one of the largest players in Germany's food industry, with a leading position in the markets for frozen pizza, baking mixes, products for home canning, breakfast cereals, honey, and cream products. Headquartered in Bielefeld, the company supplies the country's supermarkets with about 370 products carrying the "Dr. Oetker" brand name. Dr. Oetker's four German production plants manufacture a great variety of processed food products, from baking powder to bake mixes, breakfast cereal, and honey, to frozen desserts, pizza, and seafood specialties. Although Germany is the company's major market, Dr. Oetker's food division Oetker International operates factories and markets products in most western and eastern European countries as well as in Canada and Brazil. Although best known for its "Dr. Oetker" line of products, the group holds a diverse portfolio of interests in other industries. Oetker's food division includes baked goods manufacturers Martin Braun KG and Swiss Agrano AG, as well as catering wholesaler "Frische Paradies," which serves upscale eateries in large German cities.

Oetker's sparkling wine, wine, and spirits division Henkell & Söhnlein is Germany's number-one seller of sparkling wine. Its best known German brands are premium sparkling wines "Fürst von Metternich," "Henkell Trocken," "Söhnlein Brilliant," and "Deinhard;" wines include the German brand "Deinhard Trocken," Hungarian labels "Csárdás" and "Dél Balatoni," and Italian brand "Prosecco Yello"; the division's most famous liquor is "Wodka Gorbatschow." Henkell & Söhnlein also owns leading sparkling wine manufacturers in the Czech Republic, Slovakia, Poland, Hungary, Austria, and France and distributes alcohol-free energy drinks such as "Red Bull."

Although Oetker's food and wine divisions generate about 43 percent of total sales, the company's less well known deep sea shipping division Hamburg SĂĽd alone accounted for another 44 percent. The company, which owns 19 ships, operates scheduled container freight services around the globe, with a strong market position on the Europe-South America route. Hamburg SĂĽd also charters ships on demand for its customers, which accounts for about one quarter of the division's revenues. Oetker's fourth consolidated business division is called "other interests" and includes such diverse holdings as five luxury hotels in Germany, Switzerland, and France; food retailer Meyer & Beck in Berlin; German specialty chemicals manufacturer Budenheim with U.S. subsidiary Gallard Schlesinger; the company's cookbook publishing house Dr. Oetker Verlag; as well as real estate management and construction subsidiaries.

In addition to Dr. Oetker's four consolidated business divisions, the group has major interests in other companies, which are organized in two nonconsolidated divisions. The group's beer and nonalcoholic beverage division is organized under the umbrella of the Radeberger group and includes national beer brands such as "Radeberger" and "Schöfferhofer," the nonalcoholic beer "Clausthaler," premium sparkling mineral water "Selters," as well as a number of regional beer brands in Germany, Poland, and the Czech Republic and beverage retail chain Getränke Hoffmann with 200 outlets in and around Berlin. Oetker's financial services division includes shareholdings in German bank Bankhaus Lampe, as well as in German life and property and casualty insurer Condor and auto insurer Optima. Dr. August Oetker is the fourth-generation CEO who heads the family-owned group consisting of more than 200 companies.

Baking Powder with Guarantee a Success in the 1890s

Dr. August Oetker's great-grandfather, who bore the same name, built the foundation of the Oetker empire in the last decade of the 19th century. Oetker did not invent baking powder, as some Germans believe. But in many hours of trial and error--the 29-year-old experimented late at night at the pharmacy he had taken over in 1891--he developed one that, according to his promise to German housewives, would always do the perfect job. That was not necessarily the case with other baking powders on the market at that time. Making sure that he used only top-quality raw ingredients and that they were mixed in the same ratio all the time, he called his baking powder "Backin," put a "Dr. Oetker" label on the packet, and started selling it on the side in Bielefeld. Dr. August Oetker's success was mainly due to his clever marketing ideas. To promote his baking powder, he published booklets with recipes and printed some of them on the packaging. In newspaper ads Oetker stressed "Backin's" high quality and reliability--"just the right amount for one pound of flour."

Oetker soon added new products that carried the "Dr. Oetker" brand, including vanilla-flavored sugar and pudding mix. To keep up with the ever-growing demand, his "side business" expanded to industrial proportions. In May 1900 a brand-new "Dr. Oetker" factory started operations. To better distinguish his merchandise, Oetker introduced a trademark--a woman's head in profile on a red background--which he started printing on all of his packages in 1900. Around the same time he established the company's own trial kitchen where all "Dr. Oetker" products were rigorously tested by baking-savvy women. The company's product range expanded further to include powder for dessert sauces, gelatin, pancake mix, ice cream powder, and other dessert specialties in different flavors. In 1908 August Oetker established his first foreign subsidiary in Vienna, Austria, which also became a success.

Surviving Two World Wars: 1914-45

The outbreak of World War I in 1914 suddenly interrupted Oetker's successful growth. August Oetker's son Rudolf was drafted to serve in the German army and lost his life in the Battle of Verdun in 1916. The company founder himself died two years later. His legacy, however, was the creation of one of Germany's first brand name products.

The widow of the company founder's son remarried Richard Kaselowsky, who took over the company's management. Under his leadership Oetker further expanded internationally after World War I had ended. By 1920 the company employed 600 people and produced about 300 million packages with the "Dr. Oetker" brand name on them. New subsidiaries sprang up abroad, extending the company's reach to The Netherlands, Belgium, Luxembourg, Denmark, Norway, and Italy. Kaselowsky was no less imaginative than his predecessor when it came to advertising his products. In the late 1920s the company promoted the "Dr. Oetker" brand with 20-minute-long commercials in movie theaters. A promotional truck pulling a giant Bundt pan traveled all over the country, educating German housewives about the latest "Dr. Oetker" products and baking tips.

Whereas Germany's lower and middle classes had lost their savings in the hyperinflation of the early 1920s, many of them lost their jobs in the early 1930s. The mass unemployment caused by the worldwide economic depression led to mass poverty and political and social unrest. In those times of hardship and food scarcity for many, Dr. Oetker published "lean" recipes that showed housewives how to make delicious baked goods with less ingredients. Adolf Hitler's National Socialist party, which resumed political power in Germany in 1933, eased the suffering by sponsoring job programs, but drove the country into another devastating war. Richard Kaselowsky, his wife, and two half-sisters were killed in a bombing raid during World War II in 1944.

Building a Diversified International Group After 1945

Rudolf August Oetker, the founder's grandson, took on the leadership of the family business after World War II. Born just six months after his father had lost his life in the battlefield, Rudolf August had no formal education but a bank apprenticeship. In 1941 he had been introduced into the family enterprise and rolled up his sleeves after the war to revive the shrunken organization. A number of foreign subsidiaries that had been expropriated during the war were re-purchased. Soon it became obvious that "Dr. Oetker's" popularity was unbroken. Only the Holy Bible was sold more often in Germany than the company's cookbooks. Demand for "Dr. Oetker" products grew fast after the currency reform in June 1948. In the 1950s the company established 15 foreign production and distribution subsidiaries and grew significantly during the "economic miracle" years. In the 1960s Oetker ventured into the frozen food market and expanded its product range to include ready-made frozen entrees and cooled desserts, ice cream, and Créme fraîche, a French specialty made from cream, followed in the 1970s by frozen pizza.

Rudolf August Oetker also opened a new chapter of the company's history, however, as he began to diversify the group through acquisitions. In 1955 he became the personally liable partner in Hamburg-SĂĽdamerikanische Dampfschiffahrts-AG (for short, Hamburg-SĂĽd), one of Germany's largest deep sea shipping companies in which the Oetker family had acquired a stake in 1934. Founded in 1871 by prominent entrepreneurs in Hamburg, the company had grown to its size through the ever-expanding trade and the streams of emigrants and migrant workers between Europe and South America in the late 19th and early 20th centuries. During that time, tens of thousands of seasonal farm workers from eastern and southern Europe crossed over to South America on container ships to harvest coffee and wheat. After World War I Hamburg-SĂĽd offered passenger service for tourists for the first time, cruising the seas around Scandinavia and the Mediterranean. The company's flagship luxury cruise liner "Cap Arcona" became infamous when the ship brought more than 26,000 refugees from besieged Eastern Prussia to the West in the last months of World War II. Then Hitler's SS took over the ship and converted it into a floating prison. On May 3, 1945, a British dive bomber sank the ship anchored in LĂĽbeck's harbor--and more than 4,500 prisoners, some transferred there from concentration camps, drowned.

With a federal low-interest loan for the postwar reconstruction of Germany's destroyed harbor and fleet Oetker rebuilt the company. In 1951 Hamburg-SĂĽd was transformed into a private company in which OHG Dr. August Oetker held 49.4 percent. Oetker added another old German shipping firm, Deutsche Levante Linie, to Hamburg-SĂĽd, which within only a few years outgrew all of his German competitors. In 1961 Rudolf August Oetker became the company's sole owner. Container freight shipping replaced the piece-good transportation in the following decades and the emerging airline industry took away most passengers from passenger lines. Despite some crises, however, Hamburg-SĂĽd managed to stay on top of the business.

Aside from Hamburg-SĂĽd, Oetker acquired major stakes in several breweries, wineries, and distilleries; luxury hotels in Germany, Switzerland, and France; Bankhaus Lampe, a bank; and direct life and casualty insurer Condor. In 1981 Rudolf August Oetker retired and was succeeded by his eldest son Dr. August Oetker. He remained actively involved in the business, however, as an advisor and shareholder.

Fourth Family Generation Taking Over in the 1980s

August Oetker was chosen by his father from among his seven brothers and sisters to lead the company into the 1980s. After graduating from high school he felt drawn to the sea and started working as an apprentice at deep sea shipping company Knoehr & Burchard in Hamburg. For another three years Oetker worked at other shipping companies and agencies in Germany and abroad, and studied business administration at MĂĽnster University from 1968 until 1972. After graduating from college Oetker worked at investment banks in London and New York. In 1978 he was thrust involuntarily into the spotlight of the German media when his brother Richard was kidnapped. The then-34-year-old August delivered the DM 21 million that the kidnapper had blackmailed from his father. In 1979 August Oetker joined the family business and two years later he took the leading position.

In the 1980s August Oetker streamlined the group's organization, introduced new products, and launched programs for making the company's operations more environmentally friendly. Several legally independent subsidiaries in the food sector were reorganized under the umbrella of Dr. August Oetker Nahrungsmittel KG, the new management holding company for the group's domestic activities. One of the company's successful new product launches was a line of breakfast cereals. In 1987 Oetker hired his first full-time environmental manager, who in the following years introduced environmental programs in several areas. For example, Oetker started using organically grown grains in its breakfast cereals. In 1995 the company published its first environmental report based on audits that were conducted in cooperation with the Umweltbundesamt, the German federal environmental protection agency. In the same year August Oetker was awarded the title "Eco-manager 1995" by the WWF and the German magazine Capital. In 1988, Oetker expanded into Turkey, where a joint venture was set up with the Piyale family enterprise to market "Dr. Oetker" products.

Taking Risks and Sticking with Family Tradition in the 1990s and Beyond

After the fall of the Berlin Wall and the disintegration of the Soviet Union August Oetker initiated an expansion program into Eastern Europe. Despite the obvious risks, he saw mainly opportunities. In 1990 the company acquired three East German breweries in Potsdam, Leipzig, and near Dresden and later built a brand-new factory for frozen entrees and baked goods in Wittenburg, located in the Eastern German state of Mecklenburg-Vorpommern. In the following years the company established subsidiaries in Hungary and Slovakia, took over food manufacturer Oliwa and pizza maker Rigga in Poland, and set up a joint venture with a food manufacturer in Moscow, Russia, to produce breakfast cereals. In 1993 the company's holding for its international business, Oetker International GmbH, was split into two subgroups, one for Western Europe and the Americas, and one for Eastern Europe. August Oetker's brother Richard took over the management of Oetker International East. Later in the decade Oetker's food division expanded into Croatia, Slovenia, Macedonia, Bulgaria, and Malaysia. Oetker's sparkling wine division acquired German competitor Deinhard AG and Polish wine maker Vinpol. The national beer brands "Radeberger Pilsener" and "Schoefferhofer Weizen" grew in the two-digit range, while sales of "Binding" and other regional brands declined. In summer 2002 Oetker decided to merge the existing seven sales organizations for beer into two and to rename the company's beer division Radeberger.

In the West the food sector went through a phase of stagnating growth. New competitors, shrinking consumer demand, and the consolidation of retail chains contributed to the declining prices in some segments. Instead of giving in to the pressure to lower prices, Oetker kept investing in advertising its brand name and stuck with its quality standards. The company increasingly focused on strategically important market segments, invested in new product development, and unified the packaging design scheme for its baking ingredients. With sales of ice cream declining sharply, Oetker sold off this part of the food division, closed its Austrian subsidiary, but invested heavily in penetrating Europe, including Turkey, with its frozen pizza lines "Ristorante" and "Culinaria."

In the early 1990s the weak dollar after the Persian Golf crisis and recessions in South America, Australia, New Zealand, and the United States took their toll on Hamburg SĂĽd. Later in the decade overcapacities put pressure on freight rates, which declined constantly. Oetker decided to cooperate with other shipping companies and focused on promoting Hamburg SĂĽd's capacities for refrigerated shipping services. In 1996, however, the shipping company slipped into the red. A merger with major competitor Hapag-Lloyd was considered, but abandoned. Instead, Oetker invested in rationalizing Hamburg SĂĽd's operations and sold off a few ships to boost the company's cash flow. The financial crises in Asia and South America in the late 1990s kept the shipping company in the red. Despite the unfavorable conditions, Hamburg SĂĽd took over several competitors during the decade, including Furness Withy & Co., Laser Lines, Alianca, and Transroll. Finally, in 2000 the deep sea shipping market recovered and Hamburg SĂĽd, which by then had become one of Germany's two leading players, turned up profits again.

Some of Oetker's five luxury hotels, which were organized under the umbrella of Oetker AG--Brenner's Parkhotel & Spa in Baden-Baden, Park Hotel Vitznau at Vierwaldstädter See in Switzerland, the Bristol in Paris, the Hotel du Cap Eden Roc in the French Cap d'Antibes, and Chateau du Domaine St-Martin in Vence in the French Provence--were struggling with low occupancy rates and high cost. Frankfurter Bankgesellschaft von 1899 AG, in which Oetker had acquired a majority stake, merged its banking operations with Bankhaus Lampe KG, after Frankfurter had lost DM 42 million in the mid-1990s when two of the private bank's corporate clients went bankrupt. In 2001 Bankhaus Lampe's business amounted to EUR 3.7 billion.

By the beginning of the 21st century, 98 out of 100 Germans knew the "Dr. Oetker" brand. Despite intensifying international consolidation in the food manufacturing and retail markets, there were no signs that the Oetker group would abandon its family tradition when the company entered its 111th year. At the beginning of the 1990s Rudolf August Oetker had distributed shares in the group's various operations among his eight children. He kept the company's stakes in luxury hotels and banks for himself, in which he had a personal interest. Two of Rudolf August Oetker's children other than August and Richard Oetker were actively involved in the family enterprise. Christian Oetker was responsible for market research in the group's food division. Daughter Rosely Schweizer was the personally liable shareholder for Henkell & Söhnlein. August Oetker was not concerned about not being able to find a successor among his family, including his own six children. The 58-year old Oetker told Frankfurter Allgemeine Zeitung reporter Svenja Wilke in the spring of 2002, however, that he found it more important for his successor to have the skills needed to successfully carry on the company than to bear the name Oetker.

Principal Subsidiaries: Oetker International GmbH; Langnese Honig KG; Agrano AG (Switzerland); Henkell & Söhnlein Sektkellereien KG; Hamburg-Südamerikanische Dampfschiffahrtsgesellschaft KG; Binding-Brauerei AG; Bankhaus Hermann Lampe KG (70%); Meyer & Beck Handels-Kommanditgesellschaft; Brenner's Park Hotel GmbH; Dr. Oetker Verlag KG; Chemische Fabrik Budenheim Rudolf A. Oetker KG; Gallard Schlesinger Industries Inc. (United States); Douglas Holding AG (11.5%).

Principal Competitors: RUF Lebensmittelwerk GmbH & Co.; Maggi GmbH; C.H. Knorr GmbH; Wagner TiefkĂĽhlprodukte GmbH; Freiberger Lebensmittel GmbH & Co.; Hapag Lloyd AG.


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