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Marketing Strategy of Christian Salvesen Plc

Marketing Strategy of Christian Salvesen Plc

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Marketing Strategy of Christian Salvesen Plc
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Anjali Khurana
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Marketing Strategy of Christian Salvesen Plc - December 15th, 2010

Christian Salvesen was a European transport and logistics company with a long and varied history, employing 13,000 staff and operating in seven countries in the United Kingdom and western Europe. Since December 2007 it has been a wholly-owned subsidiary of French-listed transport group Norbert Dentressangle.


Statistics:
Public Company
Incorporated: 1872 as Christian Salvesen & Co.
Employees: 13,630
Sales: 737.8 million ($1.18 billion) (2001)
Stock Exchanges: London
Ticker Symbol: SVC
NAIC: 541614 Process, Physical Distribution, and Logistics Consulting Services


Company Perspectives:
Where we're heading: We aim to be recognized as Europe's leading provider of supply chain solutions by liberating all our potential to win in a fast-moving, networked world.


Key Dates:
1846: Theodore Salvesen founds Turnbull & Salvesen partnership as shipping agents in Leith, Scotland.
1851: Christian Salvesen joins brother's company, then takes over Theodore's share of the partnership in 1853.
1872: Christian Salvesen leaves partnership and sets up his own shipping company, Christian Salvesen & Co.
1891: The company purchases its first whaling vessel, later becoming the world's largest whaling company.
1958: Salvesen acquires its first cold storage facility in Grimsby.
1962: Company reduces its deep-sea shipping activity and launches coast coal shipments.
1963: Salvesen exits whaling industry.
1964: Salvesen begins its involvement in home building.
1969: The company acquires Whelmar home builders and becomes fourth largest private U.K. home builder.
1973: The company Acquires J&A Jackson bricklayers.
1982: Salserve is formed and dedicated to frozen and chilled food logistics business for Marks & Spencer.
1984: Salvesen acquires Aggreko and enters generator rental market.
1985: Company goes public on London stock exchange.
1990: Salvesen exits shipping after nearly 150 years.
1993: The company acquires Swift Transport Services and enters industrial logistics market.
1995: Salvesen acquires 40 percent of Germany's Wohlfarth.
1997: The company demerges from Aggreko, which is spun off as separate publicly listed company.
1999: Salvesen acquires Transportes Gerposa in Spain.
2000: Salvesen acquires full control of Wohlfarth.
2001: The company acquires France's Darfeuille and wins record ten-year £260 million contract with Tesco.


Company History:

Once known for its whaling fleet, Christian Salvesen Plc has recreated itself as a major European logistics company for the 21st century. Based in Northampton, England, the company offers warehouse design, fleet management, packaging, processing, and other distribution support services for customers ranging from supermarket leaders Safeway and Tesco, to retailers such as Ikea, to food producers including Danone and Chiquita Brands. About half of Salvesen's £738 million turnover comes from its Food and Consumer division, with operations primarily in the United Kingdom. The company's Industrial Division works under contract with such clients as General Motors, Texaco, Agfa, and Exxon Mobil. Salvesen, which split off its former Aggreko generator rental business in 1997, has been focusing increasingly on the European continent. Already by 2001, the company's European sales had grown to 45 percent of total revenues, with plans to raise that percentage to 50 percent. The company's expansion has come not only through internal growth but through an ambitious acquisition program as well, with purchases in France, Germany, and Spain that have strengthened the company's operations. In 2001, Salvesen has moved to bring all of its business under the single Salvesen brand name. Some 35 percent of the company, traded on the London Stock Exchange, remains in the hands of the founding Salvesen family. Operations are guided, however, by Chairman Jonathan Fry and CEO Edward Roderick.

Whaling Leader in the 20th Century

Theodore Salvesen, a native of Norway, had set up a shipping and forwarding agency with a partner in Leith, Scotland, in 1846. Theodore Salvesen was joined by younger brother Christian Salvesen, then 24 years old, in 1851. The younger Salvesen proved an ambitious businessman, and in 1853, Theodore turned over his share of the partnership Turnbull & Salvesen & Co.

The company's chief activity was in shipbroking, but it also established an import-export business, notably shipping Scottish coal and Norwegian timber. Ship management became another important part of the business in the middle of the 1850s. A Glasgow office was opened in 1869.

Christian Salvesen left the partnership in 1872 and set up his own business, based in Leith. The new company took the Norwegian flag as its symbol and continued to base its operations on trade between Scotland and Norway. Shipping began to play a larger role in the company's operations toward the end of the century, particularly with the involvement of Salvesen's sons, Theodore, Tom, and Fred. The company acquired its own fleet of cargo vessels--the company's coal exports were its chief source of income--and also began operating a cargo liner route between Scotland and Norway, before extending its cargo operations to the Mediterranean, and particularly the ports of Malta and Alexandria.

Salvesen turned over the business to his sons in the 1890s; Theodore Salvesen proved the most aggressive businessman of the three and launched the company into a new area of business. At the time, the company had begun importing and marketing whale oil and other whale-based products. In 1891, determined to compete against the Norwegian whaling industry, the company purchased a stake in its own whaling vessel. The company began to build up a fleet of whaling vessels around the close of the century. A purchase of a majority stake in an Icelandic whaling company in 1902 turned out to be unprofitable for the company. Yet by 1905, Salvesen itself had built up a fleet of ten whale catchers and owned and operated a number of whaling stations. As the Atlantic whale population dwindled in the early years of the century, Salvesen turned south, opening in 1907 a base in the West Falklands from which to hunt the Antarctic whale populations. In 1909, the company opened a second, more profitable base in southern Georgia.

By 1912, Christian Salvesen was the leading whaling company in the world, with bases in Iceland; the Faroe, Shetland, and Falkland Islands; and southern Georgia. Despite losing one of its ships at the start of World War I, Salvesen's whaling operations continued throughout the war, when demand for whale oil was heightened by the war effort. Following the war, the company took advantage of the increased demand--and high prices--for ships and sold off a large part of its fleet. This move, and the company's longheld policy of retaining a large proportion of its profits, helped keep the company afloat during the economic crisis years of the late 1920s and 1930s. Nonetheless, the company was forced to close a number of its whaling stations.

The company was less fortunate during World War II, which saw a good portion of its fleet destroyed or requisitioned for the war effort. At the end of the war, the company began to rebuild its fleet, boosting not only its whaling operations but its overall cargo shipping lines as well. Taking the company's lead was Harold Salvesen, son of Theodore, who in turn began hiring management from outside the family. While Salvesen remained a family-owned and controlled firm for a good time to come, the company's new management helped it to transform itself from a traditional family-owned company to a modern business.

With the development of new types of oils and other products from fossil fuels, demand for whale oil dropped in the 1950s. The company was also faced with tightening quotas--first introduced in the 1920s--and rapidly declining whale populations. Salvesen began to transition away from whaling in the late 1950s and by 1963 had exited the industry altogether. A year later, Harold Salvesen retired, replaced by nephew Max Harper Gow, himself a great-grandson of Christian Salvesen.

Diversification in the 1970s

Gow remained as company chairman until 1981 and led Salvesen into a new era of diversified operations. An early addition to the company's activity stemmed from an experiment Salvesen had carried out in the 1950s, in which the company had fitted out a new type of deep-sea fishing trawler that was capable not only of catching fish and loading the catch up a whaler-like stern ramp, but also processing and freezing the fish. The experiment led the company to acquire a cold store facility in Grimsby in 1958 to store its catches. At the time, frozen foods were just beginning to be embraced by consumers, and Salvesen quickly found a market for its surplus cold storage space among neighboring food processing companies. By the early 1960s, the company had branched out to offer freezing facilities as well.

In 1965, Salvesen's food processing business took on a greater scale when the company acquired the cold storage facilities of Frigoscandia. In 1967, Salvesen pushed further into the food processing industry, acquiring vegetable processing operations. At the same time, the company abandoned its deep-sea fishing experiment in the face of stiff international competition. Rising demand for Salvesen's products also led to a new demand for transport services as well. In 1969, the company bought up trucking company Daniel Stewart and began building a nationally operating fleet of vehicles. By 1973, about 25 percent of the company's sales came from its food processing operations and transportation operations.

At the same time, Gerard Elliot, another Salvesen family member--and future company chairman--had been developing another diversified business, replacing whaling with fishmeal production and processing. The company boosted its fish-related activities during the 1960s and 1970s. The company's overseas shipping operations were winding down as the industry turned toward large bulk carriers. At the beginning of the 1970s, Salvesen began selling off some of its ships; meanwhile the company's fish operations turned away from fishing and more toward fish selling. The company also ended one of its original operations, shutting down its ship's agent business that had been part of the company since its founding in 1846.

However, the company had not yet abandoned shipping. During the 1960s, the company had developed a successful business in another shipping line, that of coastal coal shipments. This wing, developed by another Salvesen family member, was started up in 1962 when the company acquired Henry & MacGregor, based in Leith. The company built up a larger fleet of coal carriers, most of which were operated under contract with the Central Electricity Generating Board. Meanwhile, Salvesen remained committed to maritime operations, finding a new opportunity with the development of the North Sea oil fields in the early 1970s. The company began operating drill ships in 1973, then shifted its concentration to the operation of safety ships and other services for offshore oil platforms.

Another area of diversification was in home building and property management, begun in 1964. Operating under the Whelmar name since the acquisition of that company in 1969, Salvesen's home building division grew to become the fourth largest homebuilder in the United Kingdom during the 1970s. Supporting this business was the addition of brickmakers J&A Jackson in 1973. By the time of the economic crisis of that decade, home building and related operations were the company's largest revenue generator and accounted for more than half of Salvesen's profits. The collapse of the building market in the second half of the decade led the company to rationalize its homebuilding operations, reducing its sphere of activity before exiting the market altogether in the mid-1980s.

Refocusing in the 1980s

The arrival of Gerald Elliot as chairman ushered in a new area of streamlined operations for the company. Salvesen now moved to restrict its expansion focus on a more narrow range of operations. Among these was the company's rapidly growing Food Services division, which had been developing rapidly in the late 1970s. The company had expanded beyond simple transportation services to offer a wider range of distribution services; its frozen food distribution contract with Marks & Spencer was illustrative of this. Food Services also brought Salvesen onto the European mainland, with the opening of a first cold storage facility in France in 1977, followed by new facilities in both France and Belgium. Marks & Spencer prompted the company to expand its services through the opening of a series of dedicated frozen and chilled foods storage facilities, beginning in 1982. These formed the basis of the company's Salserve subsidiary.

In 1981, the company approached the U.S. market, acquiring Merchants Refrigerating Co., giving Salvesen nine cold storage facilities throughout that country. Three years later, the company took on a new wing, acquiring Aggreko, a fast-growing specialist in the rental of power generators.

Salvesen went public in 1985. Its new status prompted the company to streamline its operations, shedding its seafood and home building divisions in 1986. The company also sold off parts of its offshore oil activities, such as Salvesen Offshore Services. The company's remaining offshore oil divisions, including Salvesen Oilfield Technology, as well as a number of other industrial-focus businesses, were regrouped under a new Industrial division.

Throughout the late 1980s and into the 1990s, Aggreko continued to grow quickly, expanding throughout much of its western European base, before entering the U.S. market in 1986 with the acquisition of Electric Rental Systems, based in Louisiana. In 1968, the company paid $4 million to acquire two mobile air conditioning specialists, Mobilair amd Pierce Industrial Air, becoming a leader in that market. Aggreko moved farther afield, adding acquisitions in Singapore and Australia.

Until the mid-1980s, Salvesen had concentrated on food distribution services. In 1986, the company responded to a new request from Marks & Spencer to develop distribution facilities for hanging garments and other household items. By 1988, the company's distribution business had grown sufficiently to allow the company to separate it from its Food Services division. In that year, Gerald Elliot retired, replaced by John West. For the first time, the company's chairmanship was given to someone from outside the Salvesen family.

Major Logistics Player for the 21st Century

West continued the company's concentration on its core elements, notably Food Services, Distribution, and Aggreko. The company exited shipping altogether in 1990. In 1992, Salvesen Oilfield Technology was sold off as well. Then in 1995, the company sold its Salvesen Brick operation for £63.5 million. Meanwhile, a restructuring of management had moved much of the company's administrations to its three remaining divisions.

After shrugging off a takeover offer from rival Hays Plc in 1996, Salvesen continued its restructuring drive. In 1997, the company slimmed down further with the spinoff of Aggreko as a separate, publicly listed company. At the same time, Salvesen began looking for buyers for its food processing division. Unable to find a buyer, the company proceeded in restructuring the division, eliminating a number of its vegetable processing and packing plants. These moves fit in nonetheless with the company determination to refocus itself yet again, now as a dedicated logistics company with a focus on food and consumer goods transport on the one hand, and industrial logistics services on the other, a business first entered into with the £84 million acquisition of Swift Transport Services in 1993. Another important addition was a 40 percent stake in Germany's Wohlfarth, acquired in 1995.

Salvesen continued boosting its logistics operations through acquisitions in the late 1990s, beginning with the purchase of Spain's Transportes Gerposa for £66.6 million in 1999. The company's new management team, composed of Chairman Jonathan Fry and CEO Edward Roderick, continued to focus on building the company into a major player in the European logistics market. Toward achieving this goal, the company now began to unify its operations under the single Christian Salvesen brand name. The company also stepped up its international operations at the end of 2000 with the acquisition of full control of Wohlfarth. Two months later, the company's industrial distribution wing grew through the purchase of France's Darfeuille, based outside of Lyon.

By mid-2001, Salvesen appeared to have successfully completed its transition to a dedicated logistics group, particularly after winning a record ten-year, £260 million contract with British supermarket giant Tesco. With sales of more than £730 million at the end of its 2001 fiscal year--and more than £830 million when including annualized contributions from its most recent acquisitions--Salvesen had taken a place among the top players in the rapidly consolidating European logistics market.

Principal Subsidiaries: Salvesen Logistics Ltd; Christian Salvesen SA (France); Christian Salvesen (Belgium) NV; Christian Salvesen Nederland BV (Netherlands); Agro Handelsgesellscaft mbH (Germany); Christian Salvesen Gerposa SA (Spain); Tendafrost Frozen Foods Ltd; Inverleith Insurance Co. Ltd.; Wohlfarth GmbH & Co. Spedition (Germany); Darfeuille Associes SA (France).

Principal Competitors: DHL Worldwide Inc.; Exel SA; Hays Plc; Tibbett & Britten Group Plc; Wincanton Plc.
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