A.W. Faber-Castell Unternehmensverwaltung GmbH & Co. - Company Profile, Information, Business Description, History, Background Information on A.W. Faber-Castell Unternehmensverwaltung GmbH & Co.

Nuernberger Strasse 2
D-90546 Stein

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History of A.W. Faber-Castell Unternehmensverwaltung GmbH & Co.

A.W. Faber-Castell Unternehmensverwaltung GmbH & Co. is the organizational umbrella for the Faber-Castell Group, the world's largest and oldest manufacturer of lead and coloring pencils. Based in Stein near Nuremberg in Germany, the group manufactures lead, coloring, and mechanical pencils; erasers and rules; a variety of pens, colored markers, and highlighters; and chalk, charcoals, oil, and soft pastels and paints for a broad range of customers--from children and students to professional artists and CEO's. The group's industrial activities are organized under the management holding Faber-Castell AG; its service arm, Faber-Castell-Consulting, offers IT and management consulting services; and Faber-Castell Projetos Imobiliarios is the group's Brazilian real estate development arm, founded in 1994. Faber-Castell AG generates 85 percent of total sales abroad and operates 15 production plants and 19 distribution subsidiaries in 19 countries around the globe. The largest among the company's subsidiaries is located near Sao Paulo in Brazil, where every year some 3,000 employees produce 1.5 million wooden pencils as well as about 1,500 other items, including decorative cosmetics products such as eye and lip liners, lipsticks, and eye shadow pencils under its own brand name and for other cosmetics companies. Faber-Castell Brazil also grows its own wood in a sustainable forestry project. CEO Count Anton Wolfgang Graf von Faber-Castell owns 85 percent of the company that was founded by his ancestors.

Foundation for Pencil Dynasty Set Up in 1761

The history of Faber-Castell began in Stein, a small town south of Nuremberg. Joiner Kaspar Faber had settled in Stein and after a few years decided to make lead pencils. He made the square wooden shafts, drilled a groove in them, inserted graphite sticks, closed the gap with a small piece of wood and glued it all together. Finally, he gave the pencil a rectangular or oval form. Since stationary stores did not yet exist in pre-industrial Germany, Kaspar Faber's wife frequently stashed the pencils her husband made in a basket and sold them at the market in Nuremberg. There he competed with pencil maker Guttknecht who was also based in Stein. Guttknecht tried to sue Faber out of his territory. This action failed because at that time pencil making was an unregulated trade.

In 1784, Kaspar's son Anton Wilhelm took over the small workshop and incorporated the family business as A.W. Faber. From his father's savings he was able to acquire a larger property in Stein where the company's headquarters was still located 228 years later. In 1795, a new law issued by the traditionally bureaucratic German craft guilds imposed strict rules on every aspect of the pencil making trade. However, Anton Wilhelm carried on the family enterprise with much success and left his son Georg Leonhard a good-sized inheritance.

Georg Leonhard Faber expanded the family property but struggled against unfortunate events. The reign of Napoleon that followed the French Revolution of 1789 brought more than 20 years of war and political unrest to Europe. Moreover, the progressive exhaustion of the world's foremost source for graphite in England made the raw material for pencils more and more expensive, then unaffordable, and finally unavailable. Consequently, German pencil makers were pushed to use graphite of bad quality, which consequently earned a bad name for pencils made in Germany. In 1806, Stein and Nuremberg became part of the newly founded Kingdom of Bavaria. The new government lifted some of the obstacles to free trade and allowed pencil makers from outside the city to sell their merchandise at the Nuremberg market. The old rule of the craft guild was ended in 1808. The new, more liberal trade law gave way to increasing competition among pencil makers. In 1839, Georg Leonhard Faber died at age 51.

Success for A.W. Faber in the 19th Century

Georg Leonhard Faber's son Lothar was 22 years old when he took over the family business after his father's sudden death. By that time, the enterprise had grown into a small factory with 20 employees. After his apprenticeship as a merchant, the young man had spent three years working in Paris. His witnessing of a thriving pencil-making trade in one of the world's major centers of free trade deeply impressed Lothar Faber. When he returned to Nuremberg, the city was just making its first steps into the industrial age, led by a new generation of business people, engineers, and bankers. One of their first accomplishments was the first railroad in Germany which started operations between Nuremberg and Fürth in 1835.

There was much that needed improvement when Lothar Faber took over the family business. In addition, the market for pencils made in Germany was very limited, mainly because of their bad reputation. Middlemen dictated a price level that barely enabled pencil manufacturers to prosper. Nevertheless, Lothar Faber rolled up his sleeves and started making fundamental changes to the business that led to his success.

First of all, Faber significantly improved the quality of his pencils. He introduced and refined the so-called clay-graphite process, a new technology that had been invented at the end of the eighteenth century. The graphite was ground and mixed with clay, formed into strips, and baked. This technology enabled Faber to offer pencils of varying hardness or softness. Next, Faber modernized his manufacturing plant to ensure a steady quality and to increase the output and efficiency of his operation. Soon, a water-powered steam engine was driving the mechanized saws and planes. Faber's factory was now outfitted for mass production.

In another step, Faber focused on boosting the sales of his pencils. To distinguish his products from those of other manufacturers, he printed "A.W. Faber" on his pencils--a novelty at the time. Also, unlike any other pencil manufacturer, Faber--equipped with a beautifully carved wooden sample case--traveled through Germany and Europe, personally promoting his merchandise. Confident about the high quality of his pencils, he demanded prices as high as top quality pencils from England. Surprised by Faber's high prices, a Nuremberg businessman is said to have asked him sarcastically if his pencil mines were made from silver. But the young entrepreneur stuck to his guns and got plenty of orders on his promotional trips through Germany, Austria, Belgium, the Netherlands, France, England, Italy, and Russia. Within ten years, Faber had created a network of trade partners in many countries. In 1849, he sent his youngest brother, Eberhard, to the United States, where he established the company's first foreign subsidiary in New York. Soon after, A.W. Faber set up sales offices in Vienna, London, Paris and St. Petersburg in Russia and expanded its market as far as Africa, Australia, India, the Middle East, and China.

In the second half of the nineteenth century, the world's major supplier of high-quality graphite--the ore that looked like lead and therefore gave the lead pencil its name--the English Cumberland mines ran out of the material. Geologists started searching for new deposits in many parts of the world and one of them, Johann Peter Alibert, spotted a rich graphite deposit of high quality in Siberia, Russia, in 1847. Nine years later, Alibert sold Faber the exclusive rights to exploit the mine. This deal secured the company's raw material base for many years to come and gave it an independence and competitive advantage that ultimately led to Faber's market leadership.

Becoming the Market Leader

Lothar Faber's efforts paid off. His company was flooded with orders, so production capacity had to be expanded. With A.W. Faber's growth, its host community grew as well. Lothar Faber initiated and sponsored the construction of housing for his workers, a kindergarten, and even a church in Stein. In 1862, Bavarian King Maximilian II made Lothar Faber a peer by giving him the inheritable title of "Freiherr" and three years later appointed him Imperial Counselor to the Bavarian Crown. The entrepreneur who was now called Lothar von Faber as a sign of his nobility, stayed actively involved in local and regional politics for the rest of his life. His main focus, however, was on becoming the world's number one pencil maker.

Two of A.W. Faber's emerging competitors came from his own family--Lothar von Faber's two brothers, Johann and Eberhard. Eberhard, who managed A.W. Faber's New York office, started his own pencil company, Eberhard Faber, Inc., on the side. In 1876, Lothar's brother Johann, who had been sent to South America to explore the unknown market for A.W. Faber, left the family business to set up a pencil company of his own.

To stay on top of the market and to further enhance product quality, Faber established a number of standards for his pencils. He distinguished them by length, grades of hardness and other criteria, and gave them a hexagonal shape. His Siberian graphite, which was transported long distances on the backs of reindeer through undeveloped wilderness to the closest sea port, was of the best quality available at the time. Lothar von Faber also attempted to gain independence from middlemen for his second crucial raw material--cedar wood, which he obtained from California because his cedar plantation in Stein yielded wood that was too hard for use in pencils.

Another of Faber's strategies to grow the company was the expansion of his range of products. One of the new markets he developed was colored pencils for artists' use. Over time, Faber's catalogues grew to over 70 pages. Designed to emphasize the company's high-quality image, they were available in German, English, Spanish, and Russian.

By the late nineteenth century, Nuremberg had become the world's center of pencil manufacturing, with 25 factories putting out 250 million lead pencils a year. A.W. Faber, the largest of them, employed a workforce of 1,000 and an additional 300 home workers in 1890. Faber's success, however, attracted competition. The company's brand name "A.W. Faber"--a synonym for top quality--was frequently imitated. To protect himself from this practice, Lothar von Faber drafted and promoted a petition in 1874 demanding that the German Imperial parliament recognize and protect brand names. A law based on Faber's suggestions passed the governing body a year later and paved the way for a unified German trademark law. By the 1890s, the tensions between Eberhard Faber, Inc. and A.W. Faber had grown and escalated in a law suit over the trademark.

Getting Ahead Between World Wars

When Lothar von Faber's era ended with his death in 1896, the company was left without a male heir. Since Lothar's only son, Wilhelm, had died before him at age 41, he was succeeded by his wife and later by his granddaughter Ottilie von Faber. In 1898, Ottilie married Count Alexander zu Castell-Rüdenhausen, a descendant of one of Bavaria's oldest noble families. Alexander became a new shareholder in the family business.

Count Alexander, who had no experience in doing business as a pencil manufacturer, made strategic decisions but left the day-to-day operations to the company's experienced directors. However, under his leadership the company introduced CASTELL 9000, a new lead pencil line with a green coating that became a huge success. CASTELL 9000 emerged as A.W. Faber's single best-selling article and remained a flagship product for almost 100 years after it was launched in 1905. In the same year, the company introduced an advertising poster showing a "pencil tournament"--two knights on horses fighting with huge pencils instead of lances--that was used to publicize the new "noble" image. The popular motive also became part of the company's stationery. Between 1903 and 1906, a castle was erected in Stein that became the company's new headquarters. From his huge study on the first floor, overlooking the production plants, Count Alexander steered the family operation with a global reach.

World War I, which broke out in 1914 and ended with Germany's defeat in late 1918, suddenly interrupted the company's growth. Moreover, with the United States entering the war in 1917, A.W. Faber was cut off from this major market, where the company lost its production facilities and sales offices. When the German economy entered a short growth period in the second half of the 1920s, Faber-Castell's production facilities were once more expanded. After Count Alexander died in 1928, his son Roland took over the enterprise at age 23, and the company was transformed into A.W. Faber, Castell-Bleistiftfabrik AG.

The early 1930s turned out to be a crucial time for A.W. Faber. In 1931, the company entered a cooperation agreement with Nuremberg-based Johann Faber AG, the company that was founded by Lothar von Faber's brother Johann in 1878. Since then, Johann Faber AG had become a fierce competitor of A.W. Faber. In the following years Johann Faber's manufacturing operations were moved to Stein and integrated into A.W. Faber's. Another action that insured the company's continued world market leadership was the acquisition of an interest in Johann Faber's production subsidiary in Sao Carlos, Brazil, which was the largest of its kind in South America, in 1937. The outbreak of Word War II two years later once more interrupted the company's development. Throughout the conflict, Faber-Castell, which by that time had been transformed into the legal form of a public stock company, was put under the leadership of an out-of-family CEO appointed by the Nazis, while Count Roland von Faber-Castell was drafted into the German army, leaving him with no influence over his company. During the war, however, his wife Nina managed to transform the company back into a sole proprietorship, which was renamed A.W. Faber-Castell in 1942.

Changes in the Second Half of the 20th Century

The bombing raids on Nuremberg had left Faber-Castell's premises almost untouched, and in 1946 the company resumed operations. The period after World War II saw Germany recover in record time. Throughout this period of enormous economic upswing, interrupted only by short recessions, Faber-Castell profited from the country's double-digit growth rates. In 1949, the company ventured into manufacturing ball point pens and afterwards kept expanding its product range, workforce, production capacity, and distribution network. Faber-Castell's product range grew to about 5,000 articles, including technical drawing instruments. In 1967, the company was able to acquire a majority stake in Lapis Johann Faber, the world's largest factory for lead and colored pencils in Sao Carlos, Brazil. The "economic miracle" years of the 1950s and 1960s were followed by the oil crises of the 1970s, which brought about a flood of technological innovations. One of them was the electronic pocket calculator that within a short time period replaced the slide rule, a product area in which Faber-Castell had achieved world market leadership.

Two years before he died in 1978, Count Roland had chosen his son Anton Wolfgang as his successor among his ten children. The 35-year-old attorney, who had attended Swiss business schools and gathered practical experience working at investment bank Credit Suisse First Boston, seemed to be the best choice to become the new Faber-Castell CEO. After his father's death, Count Anton Wolfgang put a renewed emphasis on profitable, environmentally friendly products of top quality. First, he streamlined the company's operations. The production of unprofitable articles was ceased and the product range slimmed down. To replace the lost business from slide rules, Faber-Castell started producing make-up pencils for international cosmetics companies. During the 1980s, the company expanded its product range to felt tip pens, such as markers and highlighters. Early in the decade, Faber-Castell initiated a pioneering sustainable forestry project for its subsidiary in Brazil. To be independent of other suppliers, the company established its own growth of Caribbean pine trees about 240 miles away from its Sao Carlos production plant in the Brazilian savanna. On 27,000 acres, Faber-Castell grows its own wood, which can be harvested after ten to fourteen years and used for making lead and colored pencils. The plantation, which was set up in the Minas Gerias province on former grazing land with dry, sandy soil, also includes a nursery that plants about two million pine trees a year.

The 1990s saw the company once more reinvent itself. While its Brazilian subsidiary was profitable, the German production slipped into the red in 1992 and 1993. Faber-Castell laid off about 30 percent of its German workforce and worked on improving the company's image. Marketing research had shown that the Faber-Castell brand name was well known but not necessarily associated with "exclusivity." The company redefined its core competence in a handful of product categories and gave its products a more upscale look. Faber-Castell communicated its focus on tradition and high value with a new image campaign. The company's redesigned logo included the "pencil tournament" motive that had boosted Faber-Castell's popularity at the beginning of the century. Along the same lines, the company also introduced the "Count von Faber-Castell Collection," a luxury set of five pencils with a silver grip and sharpener in a wooden box made from rare wood and a silver cover which sold for over $100. The "noble collection" was later extended to include mechanical pencils, fountain pens, and blotters. In 1994, Faber-Castell re-acquired the trademark rights the company had lost in the United States as a result of World War I. In exchange, A.W. Faber-Castell sold the 25 percent stake Roland Count von Faber-Castell had acquired in its former U.S.-subsidiary Faber-Castell Co. after World War II. Faber-Castell Co.--in the meantime under independent U.S. management--had taken over Eberhard Faber Inc. in 1987.

In the second half of the 1990s, the company established new production plants and sales subsidiaries in countries around the globe, including the Czech Republic, Colombia, India, and Costa Rica. A new distribution center for the Asian-Pacific region was set up in Singapore in 2000. In the same year, a new management holding company for the company's industrial activities, Faber-Castell AG, was established. The new century saw another Faber-Castell innovation--the silver-colored triangular-shaped lead pencil Grip 2000, which featured lacquer bumps for a firm grip. In the summer of 2001, the company celebrated its 240th anniversary and launched a limited edition of its premium sets, including a pencil with an extender made from massive white gold and a cap with three embedded diamonds. For the cost of a small car, the sets sold out within a short time.

After a first experiment to sell Faber-Castell products over the Internet failed, Count von Faber-Castell was looking for new distribution channels to expand the company's markets. At age 60, he had not decided yet if his 21-year-old son Alexander, who was studying in the United States, might take over his global family enterprise, or if taking Faber-Castell public was the better choice.

Principal Subsidiaries: Faber-Castell AG (Germany); A.W. Faber-Castell Produktion GmbH (Germany); A.W. Faber-Castell Vertrieb GmbH (Germany); Faber-Castell COSMETICS GmbH (Germany); A.W. Faber-Castell Brasil S.A.; A.W. Faber-Castell Argentina S.A.; A.W. Faber-Castell (India) Pvt. Ltd.; A.W. Faber-Castell (Aust.) Pty. Ltd. (Australia); Maderin ECO S.A. (Costa Rica); A.W. Faber-Castell (Guangzhou) Stationery Co. Ltd. (China); A.W. Faber-Castell Peruana S.A. (Peru); Tecnacril Ltda (Colombia); PT. A.W. Faber-Castell Indonesia; A.W. Faber-Castell (M) Sdn. Bhd. (Malaysia); Faber-Castell Projetos Imobiliarios (Brazil); A.W. Faber-Castell USA, Inc.

Principal Competitors: Schwan-Stabilo Schwanhäusser GmbH & Co.; STAEDTLER Group; LYRA Bleistift-Fabrik GmbH & Co.; Dixon Ticonderoga Company; Newell Rubbermaid Inc.; Caran d'Ache SA; Parker Pen Co; Montblanc International GmbH.


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