The 10-foot high copper stallion statue no longer welcomes visitors to the former front office of the Schimmel Co., now the administration building for Bell Flavors & Fragrances’ European headquarters in Leipzig, Germany. Having been removed and shipped to a horse farm before the German Army could melt it down for armaments during World War II, the proud symbol, nevertheless, still has a presence. Its image – the mane flowing as it stands proudly on its hind legs–is captured on an oil painting as well as in the form of a small porcelain statue, both of which reside inside the company’s Schimmel Library. (Editor’s note: Schimmel means white horse in German).
The library, a historical repository of the world’s largest and oldest collection of books, notes and artifacts on flavor and fragrances, attests not only to Jim and Raymond (Buz) Heinz’ proclivity for learning, but also to their penchant for preserving legacies from the past.
Those traits are no doubt hereditary for Bell’s co-presidents, going back to their father, Edward Heinz. In acquiring the company from founder William Bell in 1967, Edward re-energized it by focusing on its original tenets, that of creative flavor development and unparalleled customer service.
It’s a heritage that began in 1912, when the Wm. M. Bell Co. began doing business in Chicago as an innovative flavor house initially serving candy companies, ice cream parlors, grocery stores and soda pop shops. Today, Bell Flavors & Fragrances (the company changed the name in 1981) has expanded well beyond the former “Candy Capital of the World” and services not only those original customers but other clients with nine manufacturing facilities located across several continents. Ranked among the Top 15 global flavor and fragrance companies, the company’s annual sales range between $150-200 million annually.
Sales alone, however, don’t properly reflect the impact and influence the company wields within the flavor and fragrance industry.
Take, for example, its acquisition of the Schimmel Co. in 1993, a move many German-based companies as well as multinationals viewed as high-risk. But as Jim Heinz, president of Bell explains, “Schimmel was the oldest, and for more than 100 years, the largest fragrance company in the world, dating back to its founding in 1829. Following WWII and the erection of the Iron Curtain dividing Germany into East and West, Schimmel was expropriated and became state-owned property, and for the next 40 years became the primary supplier to all of the Eastern Bloc countries producing food, beverages and cosmetics.”
Once the Berlin Wall fell in 1989, ushering in the collapse of the Soviet Union and its control over the Eastern Bloc countries, Germany began the reunification process, a costly and complicated effort spanning more than 10 years.
During that time, the government began the enormous task of privatizing thousands of the previously expropriated properties serving scores of industries. In doing so, it sought out companies to first take over existing “businesses” and begin the process of introducing free enterprise into former East Germany.
“Both Buz and I were interested in acquiring Schimmel and making it become the base for our European headquarters,” Jim explains.
Nevertheless, that wasn’t a straightforward process, points out Buz. As mentioned earlier, chosen companies were given preference. One company actually took over Schimmel in 1991, only to give up and walk away two years later.
“All the people they had installed vanished one day without a word ever being said,” Buz continues. “Schimmel was then put into liquidation by the German government and that’s when we received a call toward the end of 1992.”
Following negotiations concerning the value of the company as well as the number of employees to be retained, Bell completed the acquisition in June 1993. In one sense, it soon became clear why other groups walked away.
“You have to remember that in East Germany and for that matter, the entire Eastern Bloc, everything operated on a planned economy,” Buz says. “What the East Germany government did was form ‘Kombinats,’ a conglomeration of many companies into one large unit. In Schimmel’s case, 12 companies were formed into one. There really weren’t any customers in a traditional sense, no cost accounting measures. The plant produced what it was told to produce; it really didn’t have anything to do with what the market needed.”
The lack of such basic free market foundations were compounded by the fact that during the last few years at Schimmel, the company deferred any kind of maintenance.
“Reactors leaked, and it was difficult to maintain any kind of production,” Buz adds.
Add to that a culture shock for those employees at the company-unemployment. Only a few years before that their country enjoyed 100% employment and now unemployment was staggering, so those early years proved to be quite challenging.
“We had committed to retaining 65 employees upon the acquisition,” Buz says. “One of the earliest obstacles involved actually finding them in the existing labyrinth of various buildings. I remember once looking for the perfumery department, which was hidden upstairs in the old administration building. You had to climb through a wall to get to the department, and then you find 12 people virtually hiding there, leery of being let go.”
Another issue was language. The employees only spoke German and Russian, Russian having been compulsory when the Soviet Union maintained hegemony over Eastern Europe.
Upon acquiring Schimmel, the Heinz brothers determined that it was critical for one of them to stay and manage the acquisition. In deference to Jim still having a young family, the older Heinz elected to take on the responsibility. In addition, he also enlisted his son, Michael, who was just completing his MBA from the University of Chicago, to join him in Leipzig. To ensure a smooth transition, both learned German.
But even with such challenges, it would be incorrect to say that the Schimmel acquisition necessitated a complete rebuilding from the ground up. There were several critical benefits that had attracted the Heinz brothers to making the purchase.
First, as Buz notes, the East German system fostered an extremely high standard of education. As a result, half of the former Schimmel employees had PhDs.
Second, because it serviced the entire Eastern Bloc, its employers spoke the languages of Eastern Europe. Moreover, despite the lack of true customers, Schimmel had a vast network of contacts throughout Eastern Europe and the former Soviet Union, providing an excellent foundation for client development.
And finally, it had a library, one that contained 35,000 volumes on flavors and fragrances, surpassing any other single collection in the world and making it an ideal research and reference tool. (Today, the library’s resources are open to all industry professionals upon request.)
Within three years, the company had re-established contacts throughout Eastern Europe and Russia. In five years, the Heinz’ business plan, which called for the company to diversify its sales base into Western Europe, had already begun establishing a foothold there. On the tenth anniversary of the acquisition, Bell GmbH had firmly stamped its mark as a flavor and fragrance entity on the continent and beyond.
Today, Germany accounts for 30% of Bell GmbH’s sales, the remaining 70% emanating from Europe, Africa and the Middle East. Since the acquisition, the company has invested nearly $30 million into upgrading and expanding the campus. The Milititz campus (Milititz was once a suburb of Leipzig before it was absorbed by the city) is one of the largest sites for flavors and fragrances in Europe, sitting on 60 acres. It has more than 600,000 sq. ft. of office, research and development and production space, featuring some of the latest computer-controlled technology available in flavor and fragrance processing as well as research. Nearly 250 staff the campus.
Plans call for the construction of a new $21-million facility by 2010 that will be dedicated to savory flavors research as well as to house a logistics center and new automated compounding equipment.
Such ongoing investment into facility improvements reflects Bell’s general philosophy of leading the industry in innovation and customer service, affirms Jim. The company works with more than 3,000 customers, companies ranging from multinationals to regional leaders. Those companies, be they in confectionery, bakery, dairy, savory, beverage or pet food, understand the importance of using quality ingredients in their products.
“We create high quality flavors and fragrances in all categories and sell those at a very good value to them,” Jim says. “Because we don’t have as high an overhead as some of our multibillion-dollar competitors, we can offer a better price.”
At the same time, the company remains completely committed to funding its research and development teams throughout the world in order to remain in the forefront of flavor innovation, a trait founder William Bell epitomized.
“We’re investing between 10% to 15% of our revenues back into R&D annually,” he says. “With facilities in Northbrook, Leipzig, Montreal, Guadalajara, Shanghai, we can address local and regional tastes while sharing our knowledge internally.”
For example, in addition to sharing information regularly among R&D counterparts throughout its facilities, the company also holds quarterly workshops on an annual basis. This year, members from applications, research and development and marketing in Canada, Mexico and the United States discussed relevant trends affecting various segments in the food industry.
In confectionery, the company continuously works on developing new flavors and formulations to provide customers with innovative product concepts and market solutions.
“Right now, we’re seeing a lot of interest in sweet and savory combinations in confectionery,” says Simon Poppelsdorf, v.p. – technical services, flavors. “There’s also a trend in the United States known as the immigration effect, whereby influences from abroad are having an impact. You see that with South America, which has a long history of eating candies, candies that are quite exotic in flavor and texture compared to what you see here in the mainstream markets.
“There’s then an ongoing push for bolder flavors, many of which are quite different and strange, but appeal to the younger generation,” he adds.
One of those could be the coffee berry, adds Michael Natale, director of marketing. “It’s the actual berry that grows on coffee bushes, but it’s really fruity and a bit tannic. Plus, it’s high in anti-oxidants.”
Natale also notes the growth of products that act as beauty supplements, such as Mars Snackfood’s Dove Beautiful line, which contains vitamins such as C and E, and minerals such as biothin and zinc oxide.
“You see beauty and skin care companies such as Borba come out with ‘good for your skin’ gummie bear boosters,” he adds.
Another area that’s become a priority involves dealing with ingredient supply fluctuations. To cope with shortages in such commodities as vanilla, honey, maple syrup, cocoa and lemon juice, resulting in exorbitant price increases, Bell has developed extenders and replacers.
“Say a company uses honey in its formulation, but is finding it difficult to purchase it because of limited supply or cost,” Poppelsdorf says. “We can provide them with an extender that reduces honey use to 10% and still allows them to maintain the sweetness and integrity of the label simply by stating the product contains honey and natural flavors.”
Most importantly, such products allow confectionery and food companies “to stabilize their costs,” Jim adds.
That’s probably one of the reasons the company was selected for the past two successive years as the No. 1 sweet flavors supplier in Food Processing Magazine’s Reader’s Choice poll. And it’s probably why Jim believes that Bell is one of the “jewels” in the flavor and fragrance industry.
Having realized a 15% growth rate in 2008, the chief executive believes confectionery and food companies appreciate working with someone who has a local presence but wields global capabilities.
He hopes to continue to expand that global reach with the acquisition of a Brazilian flavor and fragrance company next year, thus providing Bell with yet another facility in the country that’s the “engine for South America.”
And, as with the Schimmel Co., it’s safe to say that Bell will look to make its presence felt there as well.