Sodiaal S.A.

views updated

Sodiaal S.A.

170 bis
Boulevard du Montparnasse
75014 Paris
France
Telephone: (+33) 1 44 10 90 10
Fax: (+33) 14321629 9
Web site: http://www.sodiaal.fr

Cooperative
Incorporated: 1964 as Sodima
Employees: 8,004
Sales: EUR 2.71 billion (US$2.5 billion) (1999)
NAIC: 311511 Fluid Milk Manufacturing; 311514 Dry, Condensed, and Evaporated Dairy; 311513 Cheese Manufacturing

Sodiaal S.A. is France’s leading dairy cooperative, owned by more than 15,000 dairy farmers located throughout France. Sodiaal processes more than ten percent of the country’s milk supply, placing it second behind former Besnier dairy processing subsidiary Lactalis, which processes some 20 percent of all French fresh milk. Sodiaal is best known for its Yoplait brand of yogurts and other fresh dairy products; through a worldwide network of licensees, subsidiaries, and joint-venture partnerships, such as those created with General Mills in the United States and Dairy Crest in the United Kingdom, Yoplait has captured the leading share in many of the world’s markets. Sodiaal also produces fresh milk products under the Candia brand name, including milk drinks, fortified and vitamin-rich milks for the children’s market, and sterilized milks, among others. Sodiaal’s Les Fromageries Riche Mont manufactures cheese products, including camemberts, bries, and other cheese specialties. Sodiaal also produces milk and dairy products for the industrial sector, through subsidiary Sodiaal Industrie. De-spite the cooperative’s brand successes, Sodiaal has struggled to remain profitable since the late 1990s, posting losses of more than EUR 15 million on sales of EUR 2.7 billion in 1999. In mid-2000, after examining the possibility of shedding its money-losing industrial and cheese production units—which raised an outcry among its members—the company instead shed its CEO, Nicolas Le Chatelier, naming Jean-Claude Dorbec in his place.

Building a Dairy Cooperative Leader in the 1960s

Dairy cooperatives came into existence in France in the 1800s, but it was not until the 1960s that local organizations began to organize their production and sales operations on a regional level. At that time, several cooperatives became dissatisfied with the limitations of the regional structure and wanted to organize on a national level. In 1964, six cooperative unions joined forces to create SODIMA (Société de Diffusion de Marques). The cooperatives pooled their resources and knowledge to develop a wide range of fresh dairy products and open the national market in France.

In 1965, SODIMA launched the first national and comprehensive line of dairy products under the Yoplait brand. Through Yoplait’s success, SODIMA was able to grow rapidly. Just four years later, Yoplait was introduced outside of France; SODIMA drew up a franchise agreement to give foreign companies the right to use the Yoplait brand name while the union continued to provide marketing, technical, and sales assistance.

In 1971, several member cooperatives also began to market Candia, the first national brand of fluid milk in France. Candia was an attempt to stimulate the milk market by changing milk’s image from common household staple to something far more appealing. Advertisements depicted milk as more of a luxury beverage, and Candia milk was packaged in brightly colored wrappers instead of the usual white. Like Yoplait, Candia was a success; a year later, the cooperatives introduced Candia skimmed fresh milk.

In 1974, in order to reflect the company’s changing interests, SODIMA changed the words behind its acronym to “Société de Developpements et d’Innovations des Marches Agricoles et Alimentaires” (Association for Development and Innovation in the Agricultural and Food Markets).

In 1975, Candia launched Viva, milk with a guaranteed vitamin content, and in 1976, it introduced Candy, a variety of flavored milks. By 1977, Yoplait was being marketed in 22 foreign countries, and the American General Mills Company had acquired the Yoplait franchise to produce and market its yogurt products in the United States. Yoplait soon became a major contender in the U.S. yogurt market. A year later, SODIMA’s annual worldwide yogurt sales topped one billion cups.

In 1982, SODIMA created the Yoplait International Institute, an organization to define the guidelines for innovation and research of Yoplait products. Half of the institute’s members were from SODIMA member cooperatives and half were from Yoplait’s international franchisers. Its chairman, Andre Gail-lard, was also SODIMA’s honorary president. SODIMA also organized the Andre Gaillard International Research Center, to be overseen by the Yoplait International Institute. Located in a suburb of Paris, the center was to coordinate SODIMA’s research policies, focusing on biotechnology and the development of new products.

In 1985, SODIMA International S.A. was founded as a subsidiary responsible for Yoplait business outside of France; it is especially concerned with marketing, technical, and sales activities.

Throughout the 1970s and 1980s Candia continued strengthening its position as a leader in the French milk market: pasteurized fresh milk was successfully repositioned and a liquid, ready-to-drink breakfast was introduced. Candia continued to grow in popularity with French consumers; by now, it handled about a third of all packaged milk produced in France.

In 1988, Yoplait began to market Ofilus, a variety of fermented milks with bifidus and acidophilus bacteria, two strains that help balance the digestive and intestinal flora. Ofilus comes in two varieties, one called Ofilus Nature, aimed at health-conscious, regular yogurt eaters, and one called Ofilus Double Douceur, aimed at those who prefer creamy foods. Yoplait had also become a leader in the fresh-cream market, introducing Silhouette, a cream with only a 12 percent fat content.

In 1988 SODIMA created two more subsidiaries: SODIMA CLB, in Lyons, responsible for Candia marketing and sales; and SODIMA Frais, in Paris, responsible for Yoplait marketing and sales. The sales staff of cooperatives producing Candia and Yoplait were transferred to these two main branches so that each brand would have a single sales force and delivery system.

In 1988, ULPAC, one of the founding cooperatives of SODIMA, and Centre Lait, another union member, merged into the Alliance Agro-Alimentaires 3A, to collect milk from the central and southwest regions of France and produce both Yoplait and Candia products. The union of these two cooperatives signaled the cooperatives’ desire to strengthen the agricultural sector in their regions in preparation for the upcoming single European market in 1992.

Name Change in the 1990s

In July 1989 SODIMA announced the creation of SODIAAL (Société de Diffusion Internationale AgroAlimentaire). Headquartered in Paris, this group economically united six SODIMA-member cooperatives. Each cooperative was responsible for managing one aspect of SODIAAL, such as milk intake or investments. SODIAAL—which took over as the cooperative’s name in the 1990s—was formed in anticipation of the unification of the European market in 1992 and the expected increase in business opportunities. The cooperative actively sought expansion into new international markets, forming partnerships with local dairy groups. One such partnership was created in 1990, when Sodiaal and former British milk monopoly Dairy Crest created the joint-venture Yoplait Dairy Crest Ltd., with Sodiaal’s share of the partnership at 51 percent. Yoplait Dairy Crest quickly achieved success in the United Kingdom, introducing new products such as the best-selling Petit Pilous line.

By then, Sodiaal had also begun to look beyond Europe. In 1989, Yoplait opened a plant in Tianjin, China, with the larger ambition of developing the modern Chinese dairy industry. International Trust and Investment Corporation, working through Tianjin Agricultural Industry and Commerce Corporation, was SODIMA’s main partner in the venture. The cooperative also reached agreement with U.S.-based General Mills to form the partnership Yoplait/General Mills Inc. in order to market the Yoplait name to the American consumer. The combination of the Yoplait formula with the marketing and distribution clout of General Mills all but assured the brand of success—by 1999, Yoplait had overtaken Dannon as the number one-selling brand of yogurt in the United States.

By the mid-1990s, Sodiaal had seen its annual sales grow to more than FFr 17 billion. While the Yoplait brand accounted for nearly 29 percent, and Candia sales added an additional 23 percent, the company’s industrial sales, through Sodiaal Industrie remained its chief revenue generator, with 30 percent of the company’s sales. Yet in 1996, after weathering the extended economic crisis, the cooperative was faced with a new industry-specific crisis, as prices for industrial dairy products, including for butter and powdered milk, collapsed world-wide. By the end of 1996, Sodiaal watched as its profits slipped—down to just FFr 6 million, from more than FFr 76 million the year before.

Sodiaal moved to enter new markets in order to increase its sales, launching Yoplait Polska as a first step in entering the countries of eastern Europe as well as two subsidiaries for marketing Yoplait and Candia in Tunisia. These moves helped Sodiaal return to profitability in 1997. Yet the cooperative was unable to sustain this tendency—by the end of 1998, the company’s losses had reached FFr 62 million, a figure which rose to FFr 100 one year later, while revenues remained largely stable.

Company Perspectives

Thanks to its know-how and acknowledged capacity for innovation, Sodiaal has created brands of the first order in France and abroad.

Sodiaal began to eye the necessity of restructuring its operations. In 1998, the cooperative’s cheese division underwent a name change, from the industrial-sounding Ideval to the more evocative Les Fromageries Riches Monts. The cooperative, which had limited its new product development largely to the introduction of new flavors for existing products, also sought to recapture growth through new product innovations, such as the introduction of its drinkable yogurt Zap in 1998. By 1999, however, Sodiaal was rumored to be considering a more drastic reorganization, including the sale of its cheese and industrial products subsidiaries—with one potential buyer being former Besnier dairy processor Lactalis, the largest private dairy processor in France—in order to refocus the group on its more profitable Yoplait and Candia lines. These proposals, favored by CEO Nicolas Le Chatelier, raised an outcry among much of the French dairy industry and Sodiaal’s own members, who feared pricing pressures should these divisions fall into private hands. In July 2000, Sodiaal removed Le Chatelier from his position, replacing him with former head of the Cedilac-Candia division Jean-Claude Dorbec.

Sodiaal entered the new century seeking partnerships—rather than outright sales—for its troubled divisions. At the same time, the cooperative expected to continue its highly successful formula of spreading the Yoplait and Candia names through a system of franchises, partnerships, and licenses. These efforts had already paid off for the company—in 1999, Yoplait topped rival Dannon in yogurt sales for the first time. In that year, the company announced a new joint-venture partnership, with Finnish dairy cooperative Valio, to form the joint ventures Yoplait Valio Nord OY in Finland, and Yoplait Valio Nord AB in Sweden.

Principal Subsidiaries

SODIMA International S.A.; Les Fromageries Riches Monts S.A.; Yoplait S.A.; Cedilac-Candia S.A.; Sodiaal Industrie; Yoplait Dairy Crest Ltd. (U.K.; 51%); Yoplait/General Mills Inc. (U.S.A.; 50%); Yoplait Polska (Poland; 65%), Yoplait Valio Nord OY (Finland; 50%); Yoplait Valio Nord AB (Sweden; 50%).

Principal Competitors

Lactalis S.A.; Bongrain S.A.; Nestle S.A.

Key Dates

1964:: Six regional dairy cooperatives establish national marketing cooperative SODIMA.
1965:: Sodima introduces Yoplait brand.
1969:: First international franchise agreement is signed for Yoplait brand.
1971:: Company introduces Candia fresh milk brand.
1990:: Sodima is reformed as Sodiaal; forms U.K. joint-venture Yoplait Dairy Crest.
1997:: Yoplait Polska subsidiary is opened.
1998:: Company changes name of Ideval cheese division to Les Fromageries Riches Monts.
1999:: Yoplait becomes number one yogurt brand in United States.
2000:: Jean-Claude Dorbec is named CEO.