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The end of an era as Wessanen quits dairy sector

20-Sep-2002

Dutch firm Wessanen has finally drawn a line under its less than illustrious recent past with the sale of its last remaining dairy unit, Leerdammer. The cheese business has been bought by France's Fromageries Bel for €190 million.

Wessanen said that the disposal would result in a book profit of around €100 million, which would help it continue to develop its new wellness strategy. The sale is subject to approval by the relevant authorities but Wessanen said it expected the deal to be completed during the final quarter of the year.

Leerdammer produces a range of cheese products sold throughout Europe under its eponymous brand name. It claims to be the biggest selling brand of hard cheese in Europe with annual sales of €292 million in 2001. It will now join the Bel portfolio which includes brands such as La Vache Qui Rit, Port Salut and Mini Babybel. Bel's brands are sold throughout Europe, the US and North Africa, and the company posted sales of €1.7 billion in 2001.

Wessanen has had a troubled time in the last decade or so, starting with the ill-conceived merger with compatriot group Bols. The fact that both companies were Dutch was just about all they had in common - Bols is a liqueur maker - and the 1993 merger created little in the way of synergies. Things went from bad to worse with a succession of profit warnings, and in 1998 the liqueur unit was demerged and bought out by the CVC venture capital group.

Since then, Wessanen has been steadily refocusing its business, and the initial results were quickly seen. Within a year of the demerger, Wessanen's profits were growing once again, but this was not enough for the company's management. In October 2000, they announced the decision to dispose of all Wessanen's dairy operations in order to focus on the new wellness food area - the production and retailing of healthy, natural food products.

Although the dairy business is generally referred to as Wessanen's core business, in fact its entry into this market is relatively recent. For the first 200 years of its existence it concentrated on trading in rice and grains, and it was only in the 1970s that it began moving into the dairy field. Now that, too, is old news, and Wessanen is completely focused on its new business model.

While recent results have been acceptable, the wellness market is still relatively new and subject to vagaries. In the company's most recent set of results, announced last month, it highlighted the difficulties faced by its US Tree of Life health food business as traditional retailers reduced the number of health food products in order to cut costs. The performance of Tree of Life's European business was also described as merely 'satisfactory' but Wessanen clearly sees this as a temporary blip rather than a long-term trend.

The number of health food products on the market would certainly suggest that there is consumer demand, and that it is only going to grow even more in the future, and the newly streamlined Wessanen will be well-positioned to take advantage of this. But if there is one thing which Wessanen's recent past history shows, it is that it can take nothing for granted, and that there are likely to be as many tears of despair as there are tears of joy.

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