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01/10/2007 | Channel:
Established in 1889, with 3500 employees worldwide, Bahlsen is the largest family-owned biscuit manufacturer in the world. Libbie Hammond spoke to Jim Tierney, MD of Bahlsen's UK operation
Biscuits are one of the oldest foods known to man. According to Oxfam, evidence has been found that indicates biscuits were eaten in Ancient Egypt and the Roman Empire. However, it seems unlikely that our ancestors would have been able to enjoy such luxurious biscuits as those produced by Bahlsen.
Headquartered in Hanover, Bahlsen is the market leader for cakes and biscuits in Germany and one of the leading manufacturers of sweet biscuits in the UK. Bahlsen produces over 140,000 tonnes of product each year from production facilities in Germany, Poland and Switzerland. The company's annual turnover is £400 million, of which 40 per cent is generated outside of Germany. Bahlsen's sales operations span Europe and are located in the UK, Austria, France, Poland, Italy, Spain, Belgium, and Luxembourg, and the company has a global export market.
Jim Tierney, managing director of the UK operation of Bahlsen, has been at the helm for the past 16 years, and during that time has taken a struggling subsidiary and transformed it into one of the strongest divisions within the Bahlsen Group. He commented: “The Bahlsen brand is all about premium quality and indulgence. Today's consumers are defining 'special treat occasions' as the perfect time to pamper themselves with high-end produce and our products fit this trend. Even with all the current media focus on healthy eating, I think that consumers are not prepared to give up treating themselves even if it is a small indulgence.” Research backs up Jim's comments, with the 'special treats' category accelerating at a year-on-year growth of over 10 per cent according to Nielsen. “The average number of special treat lines stocked in grocery multiples has increased by a third since 2006,” continued Jim. “This means more competition on shelf, but also more opportunities for selling the range.”
When Jim joined Bahlsen UK, the products weren't at all widely stocked in the major multiples - instead they were sold in independents. Changing this was part of Jim's turnaround of the division. “It didn't take a financial genius to work out that 70 per cent of our costs were associated with getting less than 20 per cent of our
business,” he said. “I withdrew from servicing the independents on a direct basis and put that out to a network of regional distributors and then concentrated on dealing with the multiples,” Jim explained. “At this time I also took the opportunity to radically review our product portfolio, because we had a rather scattergun approach in the hope that it would generate more sales, but it wasn't working. So I stood back and took a more focused approach to distribution and selected a smaller, targeted range.”
It was also at this time that the multiples started to take more notice of the 'continental biscuit'. Jim explained: “Continental biscuits are higher quality than the traditional 'round and brown' that you find in the UK, and they have different shapes, tastes and textures. I normally use the analogy that a Bahlsen biscuit is a 'German-engineered biscuit' because so much care and attention goes into producing it. For example Choco Leibniz - our flagship product - is an all butter biscuit, covered with continental chocolate and finished with a moulded imprint.” In fact, a Choco Leibniz contains more chocolate than biscuit - 63 per cent by weight is chocolate.
Over 100 years of biscuit experience goes into a Bahlsen product - company namesake Herman Bahlsen founded the company in Germany in 1889. The grandson of the founder is still running the company, and Jim told me that Werner Michael Bahlsen is still very much involved in the day-to-day operations. “This was one of the reasons I joined the company,” he said. “I prefer the fact that it's a family company rather than a faceless corporate multinational that is only beholden to its shareholders. I think that because it's privately-owned the decisions are made for the good of the company and the employees, plus the communication channels are a lot
The company has had a modern approach to manufacturing since its foundation - for instance, up until 1904, everyone's biscuits had always been sold loose. From then on Bahlsen's range could be bought in dustand moisture-resisting TET packaging, and Bahlsen still has the red TET logo on its packaging to reflect this. “Essentially not much more than a paper wrap, it was revolutionary at the time, and is an example of the company's progressive and totally modern approach to the business,” said Jim. “The high quality standards that were set back then continue to be adhered to today. Suppliers are subjected to rigorous procedures to ensure that only more of the best goes into every biscuit.”
He continued: “Bahlsen has developed close relationships with many suppliers, some of which have been partners for a number of years. The company also sources ingredients ethically from supply bases all over the world, which involves someone from Germany going to visit the cane fields or the palm oil trees or the raisin and nut producers, to make sure that the product is grown properly and the working conditions for the labour force are acceptable.” In fact, Bahlsen was recently accredited by the Ethical Company Organisation, which certifies that the company or brand in question has scored highly in an overall analysis of its Corporate Social Responsibility record - and such independent certification and endorsement can strengthen brands, clearly positioning them in the league of ethical companies.
“The issue of sustainability - making sure the ingredients are sourced from ethical suppliers and use of natural ingredients - is being driven by environmentally conscious consumers,” said Jim. “Another of our achievements this year is to remove trans-fats from our products, and also we are removing artificial colours and flavours from a number of our products and this will continue throughout next year as well.”
The company's main production facilities and research and development are still performed in Germany, but there are now also production facilities in Switzerland and Poland. The NPD department works very closely with the European divisions to assess the key trends and tastes in all markets. The products usually start life on the German market, but the UK office is advised of new initiatives and has to identify which products they may be able to introduce successfully to the UK market. “They develop their production plans around the level of interest that is generated outside of Germany,” explained Jim. “We start with a year plan which we then update on a monthly basis. We place orders into Germany and the product is delivered into a third party warehouse in the UK that handles our warehousing and distribution.”
The introduction of a third party logistics provider was another initiative of Jim's. “In my early days at Bahlsen we had our own warehousing and distribution and weren't doing it very well and it was costing us a lot of money,” he said. “So one of the decisions I took was to employ somebody who could do it a lot better and at lower cost than we could.”
This relationship is built on trust and Jim explained that his logistics provider has to fulfil a lot of strict criteria. “You can be severely penalised if you don't deliver to the trade on this specific date or in these exact quantities and in a condition that they find acceptable,” he said. “We have to rely on our third party partner to be very rigid in following our criteria, and our current partner, who we have had for five years, is dedicated to delivering to the grocery multiples, which is what we want for our products.”
When asked about his ways of working, Jim explained that as far as he was concerned, he had a simple approach. “We are all about distribution, awareness and rates of sale, and that is my mantra.
“Raising brand awareness is a fundamental issue,” he continued. “The challenge for Bahlsen was that our brand recognition was low compared with some of the larger manufacturers, although we had done press advertising and posters, we hadn't really ventured into TV. The opportunity came up about two years ago for us to sponsor the Yorkshire Weather, and I thought 'well - let's put it to the test as I was a firm believer that sponsorship was probably better value than classic media advertising. So we tried it for 12 months and we found it to be very successful. It returned us a 30 per cent improvement on sales in the region compared to the rest of the country, and awareness has remained strong there ever since.
“Then the opportunity arose for us to sponsor Parkinson on ITV, which we thought was a very good fit with our product - a premium biscuit and a premium TV show”. He continues: “I am pleased to say this affiliation has significantly increased our brand awareness still further and brand sales are up about 32 per cent nationally versus the same time last year.”
With Bahlsen's popularity continuing to rise, it would be natural to think that Jim has high hopes for 2007, but he identified some challenges on the horizon. “The main issue facing the sector is a shortage of ingredients worldwide,” he said. “I have received communications from our parent company saying that milk powder has tripled in price, other prices have increased by 25 per cent in the last six months and this recent terrible weather has caused uncertainty over wheat prices too. I was in Germany recently and they are estimating that there will be a 25 per cent increase in the cost of raw materials and this clearly has an impact on the category and the price of the products, which is something I will be paying close attention to.”
He continued: “I also think that retailers could give smaller players like Bahlsen a better hearing, because I don't think that we get a fair share of voice or shelf presence compared to some of the bigger players in the marketplace. But that is probably all to do with how much you are going to pay!”
Jim joined Bahlsen looking for an exciting new challenge and role, which is what he has found. But he was also tempted by something far simpler that most of us can relate to: “I had some affinity with the brand, as a chocolate biscuit eater,” he declared. “I thought that if nothing else I would get some fantastic biscuits and now I get as many as I like!”
He continued: “As to what my dream job might be, I think I am past my sell by date! But in another life I would love to have been an F1 driver…I would like to be like Lewis Hamilton. It's a shame that this isn't the right audience for our sponsorship really - it doesn't fit with the brand image but I would like the entertainment that comes with it!”