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David in a world of Goliaths

Denise Kenyon-Rouvinez is President and Founder of the Family Business Network Suisse Romande, and Associate of The Family Business Consulting Group.

Despite competing with 75 other brands of water on the Swiss market, Pascal and Nicolas Rouges' skill and motivation has made sure that Henniez is the second most consumed brand of water in the country

Deep in forests on the hills of La Broye near Payerne in French-speaking Switzerland are three springs of pure mineral water. In a seven year journey down though the geological strata of the earth the water reaches the springs in all its purity and enriched by precious mineral salts and trace elements. A beautiful 250 hectar forest preserves Henniez water and guarantees its purity. These springs have made the name and the fame not only of the small village and its spas there, but also of the company Sources Minérales Henniez SA (Henniez), which began its commercial operations in 1905.

In 1909 Henniez produced 149,000 bottles of mineral water. With the arrival of Henri Pahud in the company in 1916 – a visionary man and a hard worker – the company grew quickly to reach production of over 15 million bottles in 1947. Henri, however, had only one daughter who had no children – a problem if he wanted the keep the company in family hands. When succession issues finally came around, he overcame this problem by turning to his two nephews – Edgar and Georges Rouge – whom he trusted and eventually sold the company to. Edgar and Georges worked together for many years and when Georges passed away in the 1980s, Edgar – who had two sons, Pascal and Nicolas, who were keen on the business – bought back Georges's shares. Today, Pascal (44) and Nicolas (40) run the show and the company has a production capacity of 260 million bottles per year. "We each have our field of expertise," says Pascal. "I am an engineer and am in charge of production and technical operations and R&D; whereas Nicolas, who is keen on marketing, is the CEO and is in charge of commercial operations."

Surviving in a market of giants
Since June 2002 there are only two family-owned mineral water producers left in Switzerland. Eptinger – more active in the Swiss-German part of the country – and Henniez are competing against many international market leaders. Four companies – Nestlé, Danone, Pepsi and Coca-Cola – cover 30% of the world's market. Nestlé, with 77 brands is by far the market leader with 17% of the world's market in 2002, while Danone, with 50 brands, is second with roughly 14% of the world's ­market.

"For each euro we invest in marketing, Coca-Cola invests four; for each salesman we have they have four" says Nicolas.

In Switzerland, 75 different waters compete on the market. This intense competition means a stress on margins. The company constantly has to modernise and rationalise its production lines to be one step ahead of competition. Nicolas and Pascal, however, have a strategic advantage because they know what they stand for. They do not try to compete on size; they could most probably not afford it. But they invest their time and efforts in building a personal relationship with their distributors and clients. "In Switzerland people do not order a mineral water, they ask for an Henniez," says Nicolas. "To survive in this market we need to innovate, be very quick and constantly watch our costs. We must have European competitive prices – which is not always easy with operations located in an expensive country – and we make no compromise on quality."

Familiness
Specialists of the field of family business would not be surprised to hear that to survive in such a tough market, the Rouge family and Henniez heavily rely on other family businesses, such as Eckes-Granini with whom they have a 49% joint-venture. Eckes is a third generation family business producing high-quality fruit juices. Henniez bottles all Granini fruit juices for the Swiss market. Henniez also relies on the Sandoz foundation for part of their equity and on thousands of privately-owned shops, hotels and restaurants for their distribution. Recently the company joined forces with Tetra Pak and its GlaskinTM technology (PET with internal glass-like coating) for the packaging of Granini juices. In an extended family-like atmosphere, Henniez also takes special care of their 330 employees, which is probably why the average fidelity rate is 18 years.

The infamous third generation
The two brothers have definitely brought Henniez into a new era. Under their command the company turnover has tripled in just 10 years: from €39.5 million in 1982 to €116 million in 2002. Of working in the family firm Nicolas and Pascal say, "We never doubted we wanted to work in the business. We never felt an obligation to do so, but we always knew that we were complementary and that we could work well together." Never lacking in motivation, they created Cristalp, a still water, in 1991. Cristalp is now the number one Swiss still water brand and ranks second, after Evian, in all brands consumed in the country. But the brothers didn't stop with water. To compete with the cola giants, they launched Virgin Cola in 1998, followed by Virgin Ice Tea in 1999. It is interesting to note that the recipe for Virgin Ice Tea was created by the two brothers to address the high Swiss consumption of iced tea (30 litres per capita). Despite their success, the brothers have no notion of selling the family business and turning a handsome profit. Nicolas and Pascal are in firm agreement on this point. "We are much more interested in alliances that can enable us to be stronger, keep a human dimension and a personal touch."

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