Continental Bakeries in France

1. Continental Bakeries in France Best in France Case Study September 2006 - December 2006

2. Agenda Company overview First Phase Why it came to France? Constraints in France Adaptation to France Second Phase Benefits of direct investment Essential advice

3. Company overview First Phase Second Phase

4. Company overview Now we are going to present a Dutch company that is an European Leader in the food industry, a company whose name is mostly associated to the Biscuits segment. There are several facts that prove company's strong position in Europe. It is present in 6 European countries: and most importantly these countries represent the biggest biscuit markets in Europe: France with................1 350 Germany with.............. Also, it is positionned in the top three positions in all the segments it operates in and what is consistent with its strategy objective to become a Leader in the Biscuit industry in Europe it builted a strong position in the markets they entered, its sales went up 40% in 2005 compared to 1998 this increase is of course explained by their european expansion, and also by the fact that they had been acquired by IK company, a European private equity firm with Nordic roots, managing close to 4 billion euros in fund commitments. The current portfolio encompasses 24 companies Now we are going to present a Dutch company that is an European Leader in the food industry, a company whose name is mostly associated to the Biscuits segment. There are several facts that prove company's strong position in Europe. It is present in 6 European countries: and most importantly these countries represent the biggest biscuit markets in Europe: France with................1 350 Germany with.............. Also, it is positionned in the top three positions in all the segments it operates in and what is consistent with its strategy objective to become a Leader in the Biscuit industry in Europe it builted a strong position in the markets they entered, its sales went up 40% in 2005 compared to 1998 this increase is of course explained by their european expansion, and also by the fact that they had been acquired by IK company, a European private equity firm with Nordic roots, managing close to 4 billion euros in fund commitments. The current portfolio encompasses 24 companies

5. Products All the segments they are actually operating in are: pastry products; biscuits, bread substitutes they have a wide range of products within these segments: they have international products but as well national, regional or even specific distributor adaptation of their recepies to different tastes in France only 20 % of the products are made using an international reciepe all the 80 % remaining use local adapted reciepes. All the segments they are actually operating in are: pastry products; biscuits, bread substitutes they have a wide range of products within these segments: they have international products but as well national, regional or even specific distributor adaptation of their recepies to different tastes in France only 20 % of the products are made using an international reciepe all the 80 % remaining use local adapted reciepes.

6. Brands They have a limited nr of Strong brand name, the most well known here in France being the Haust. Tha major brands are illustrated on the slides. They also produce using private labeling They have a limited nr of Strong brand name, the most well known here in France being the Haust. Tha major brands are illustrated on the slides. They also produce using private labeling

7. Head Office The Head Office is situated in Netherlands, and all the backoffice, the supporting departments like accounting, marketing packaging etc are situated there The Head Office is situated in Netherlands, and all the backoffice, the supporting departments like accounting, marketing packaging etc are situated there

8. French subsidiary They came in france 10 years ago as importers. The importation was feasible since the products even if pertaining to the food industry were transportable, transportation from a single location to all the distribution chanels was possible Also producing and transporting same kind of international good they had the opportunity to enjoy the benefits of scale economies Afterwards they established a French Sales Subsidiary They have 3 employees on a fixed basis and several commercial agents that are more on seasonal basis ex/ Disney They came in france 10 years ago as importers. The importation was feasible since the products even if pertaining to the food industry were transportable, transportation from a single location to all the distribution chanels was possible Also producing and transporting same kind of international good they had the opportunity to enjoy the benefits of scale economies Afterwards they established a French Sales Subsidiary They have 3 employees on a fixed basis and several commercial agents that are more on seasonal basis ex/ Disney

9. French clients Their clients in France are all the main French distributors, And for each distributor they supply different types of products, and adapted reciepes, so we can imagine big is their variety interms of products and their adaptation Their clients in France are all the main French distributors, And for each distributor they supply different types of products, and adapted reciepes, so we can imagine big is their variety interms of products and their adaptation

10. Company values Adaptation to every single client Focused on Innovation Proactiveness Leadership Internationalization

11. Company overview First Phase Second Phase

12. Why it came to France Why did they enter the French market? Company�s goal: �to be number 1 in Europe� France is the biggest market in Europe (1,35 B euro) Why did they establish a French subsidiary? Better convenience for clients (administrative procedures and taxes) Necessity for local differentiation of products Specificity of sheltered French market: easier to compete with local producers Avoidance of duplication of facilities Company approach to international growth: They wanted to be number one in Europe and France is the biggest market. If you want to be leader in this industry in Europe you cant go around France. Comparison: German market 1,21 Billion Their perception about France: Specialized persons: They are more specialized persons, but they are not concentrated, so this represents an advantage and a disadvantage as well.Company approach to international growth: They wanted to be number one in Europe and France is the biggest market. If you want to be leader in this industry in Europe you cant go around France. Comparison: German market 1,21 Billion Their perception about France: Specialized persons: They are more specialized persons, but they are not concentrated, so this represents an advantage and a disadvantage as well.

13. Constraints in France Foreseen Constraints Protectionism France is already well known for its bread products Must modify product to French tastes Discovered Constraints Diverse and varied taxes and paperwork TVA system: end distributor must add the TVA (TVA Law art. 283.1 since 1st September 2006) �Shop Culture� Distributors from same group (ex. Leclerc) not well connected Cost of transport Protectionism constraint: factories in France are generally set up around small towns where the factory is the major employer; therefore, companies do not want to overly support foreign businesses who will threaten the livelihood of these communities Tax constraint: an example tax is the �taxe eco-emballage� (packaging tax) Company did not face extreme risk when entering the French market due to the low fixed costs of about 200,000 euros TVA system is different from other countries in the fact that it is a local issue in France vs. a national issue in other countries TVA Law 283.1 of June 2006 Protectionism constraint: factories in France are generally set up around small towns where the factory is the major employer; therefore, companies do not want to overly support foreign businesses who will threaten the livelihood of these communities Tax constraint: an example tax is the �taxe eco-emballage� (packaging tax) Company did not face extreme risk when entering the French market due to the low fixed costs of about 200,000 euros TVA system is different from other countries in the fact that it is a local issue in France vs. a national issue in other countries TVA Law 283.1 of June 2006

14. Key Constraint Costs Communication Difficult to find many experienced bilingual talents in France Taxes Wide array of taxes leads to costs in figuring out how to pay them and who should pay them Transportation Taxes: the fact that they have to pay taxes is not a constraint, but the fact that there are so many different and narrowly defined taxes causes added costs and annoyancesTaxes: the fact that they have to pay taxes is not a constraint, but the fact that there are so many different and narrowly defined taxes causes added costs and annoyances

15. Adaptation to France Recruitment/Selection: only French and distribution agents to deal with �shop culture� Innovative products but still low prices 20 years experience - Anticipating clients� needs Administrative procedures Communication policies BUT� In France: 20% international receipts 80% national Company�s portfolio is internationalIn France: 20% international receipts 80% national Company�s portfolio is international

16. � further adaptation needed

17. Company overview First Phase Second Phase

18. Benefits of direct investment Their perception about the benefits of an investment in France: Cheaper labor force compared to Netherlands Current high transportation costs Increased coordination and control Distributors prefer local producers (because of logistic and TVA issues) Easier to find labor force The possibility of monopsonycal situation on local labor markets

19. Essential Advice Buy an existing French company Hire French employees Favor �royalties�

20. We thank Antoine CONSTANS French and Belgian Regional Director 19 rue Steffen - 92600 Asni�res sur Seine Haust.fr@wanadoo.fr 01.41.11.03.66 Professor Michael SEGALLA

21. Our Team Szilard BUKSA Buksaszilard@gmail.com Jacques DE SONIS Jacques.de-sonis@mailhec.net Jordi GUITART CLERMONT Guitartclermont@gmail.com Heather HURST Heather.hurst@bba04.mccombs.utexas.edu Diana LUPUSOR Dianalupusor@yahoo.com

22. Thank you for your attention Any question?