There are limits to how far you can develop a business in the world’s most dangerous region – even more so if that country happens to be Israel.
When you’ve fought recent wars with some of your neighbours it’s not exactly easy to open a new factory or outlet in the neighbouring country, nor plan a regional marketing strategy – areas of little concern for companies in Europe and the US.
Israeli companies have to look further for opportunities if they are to realise their multinational dreams. The Strauss Group, a multi-generational family business based in Tel Aviv, has done exactly that – and prospered greatly from it.
Much of that has been down to the determination of its third-generation head, Ofra Strauss, who has been behind a series of acquisitions and alliances that has elevated the food and beverage company into a $1 billion-plus revenue a year powerhouse with a global presence. The 51-year-old chairperson of Strauss Group says the internationalisation of the company comes down to the efforts and advice of her parents – and custodians of the Strauss business legacy.
“They encouraged me to broaden my horizons, work abroad and look for opportunities in other places,” says Ofra, who has taken the theme of broadening horizons into running the Strauss Group. Taking over the reins of the eponymous company nearly 10 years ago from her father, Michael Strauss, Ofra has certainly done a lot to internationalise the group.
Through developing some clever strategic relationships with much bigger food and beverage companies such as Unilever, PepsiCo and Lavazza, as well as some savvy acquisitions in the US, Latin America, Eastern Europe and at home, Ofra has turned a largely domestic company into a multinational.
The Strauss Group now has a presence in 22 countries and derives 47% of its revenues from outside Israel.
Along the way, the Strauss Group has notched up some pretty impressive performance achievements. By the end of 2009, the company was turning over $1.6 billion a year, making it the second-largest food company in Israel. But even more impressively, Strauss is now the sixth largest coffee buyer in the world – ahead of even Starbucks.
Strauss brands – such as Max Brenner chocolates, Sabra refrigerated dips, and Doncafe – have become leading names in their respective markets.
It’s little wonder that Ofra’s achievements began to gain attention from the wider business community and international media. Soon after she orchestrated the merger of the coffee and chocolate producer Elite, she made it onto a list of the world’s most powerful businesswoman in Fortune magazine.
And last year, the Financial Times placed her 12th in a league table of the most important businesswomen in the world, sharing a platform with the likes of Indra Nooyi, chairman and chief executive of PepsiCo, and Irene Rosenfeld, chief executive of Kraft Food.
Ofra takes all these accolades in her stride and says running a family-controlled business, with a strong legacy, has underpinned her success and that of the company in the last few years.
“The foundations of success at the company were laid by my grandparents and then my father. They passed on the values that are still inherit within the company today – and will be passed on to future generations,” says Ofra.
The family controls around 74% of the Strauss Group, through holding company Strauss Holdings, which Michael Strauss chairs. The publicly traded part of the Strauss Group is quoted on the Tel Aviv Stock Exchange.
Part of the family’s success at developing the company has been due to a series of shrewd strategic relationships with world leaders in the food and beverage sector. These have included joint ventures with PepsiCo to produce food dips for the US market, Unilever to make ice cream and Danone in diary production. To help the company achieve pre-eminence in coffee production, the Strauss Group has also enlisted the help of outside capital, signing an agreement with private equity group TPG Capital in 2008.
Ofra’s brother Adi Strauss, her nephews Ran and Gil Midyan, and her aunt Raya Strauss Ben-Dror all sit on the board of Strauss Holdings. The president and chief executive of the Strauss Group is nonfamily member Gadi Lesin, a long-term employee of the company.
“I want experienced people around the board table who genuinely care about the company and give us their best advice on the myriad of issues we are dealing with,” she says. “The last thing we want in our boardroom are a bunch of ‘yes people’.”
This goes along way in describing Ofra’s management style – one that encourages contrarian views. “If opinions don’t differ, something is wrong. Some might voice concerns about risk – be they money or management related – while others talk about opportunity. It’s about learning to listen and mitigating risks,” she says.
Ofra learnt many of her management skills during the 10 years she worked at the Strauss Group prior to becoming chairperson. Beforehand she spent a year in New York working for Estee Lauder in a marketing role. Ofra Strauss would no doubt have also gained some invaluable insights into business management during her time in the Israel Defence Forces, where she was an offi cer. Prominent business commentators in Israel have often said that the IDF nurtures entrepreneurs because of its culture of encouraging improvisation and the questioning of authority – all under the stress of war.
Edouard Cukierman, managing partner at Tel Aviv-based Catalyst Private Equity Management, says that many of the country’s leading entrepreneurs and business people cite their training in the IDF as crucial to their success.
He says: “You are exposed to a lot of sophisticated technology at an early age. Coupled with this, you have to make decisions under often challenging circumstances – great breading ground for entrepreneurs.”
Board of directors’ expert Beverly Behan says Ofra’s skills as a chairperson and entrepreneur were demonstrated during her time as an adviser to the Strauss Group.
“When she was appointed chairperson, she didn’t just follow a list of best practices, which you might sometimes expect from a next generation leader. Instead, she energised the decisionmaking process and was not scared to make bold decisions,” says Behan.
An example of this, adds Behan, was the recruitment of four new directors for the company a few years back.
“Ordinarily, this would be a difficult task for any board and could take years to implement. Ofra got on with the task and managed to find the right directors within the space of a few months,” she says.
“And these managers were not just rubber stamp cronies for the family members on the board.”
Ofra’s grandparents –Hilda and Richard Strauss – set up the Strauss Group in 1936 after they left Germany for Nahariya in northern Israel.
The first Strauss dairy began in the family home, known today as the Founder’s House, where Ofra still hosts weekly management meetings.
Michael Strauss joined the family business in 1956 after studying in Switzerland. But the Strauss Group didn’t really get going until the late 1960s and especially after the signing of an agreement with Danone, the French foodproducts multinational.
“This was a particularly useful alliance for us – we learnt a lot from Danone,” says Ofra.
The 1990s saw the Strauss Group do another international deal with the Anglo-Dutch food giant Unilever and cooperate more with local coffee producer Elite. Then in 2001 Ofra became chairperson.
A couple of years later, the new chairperson made her first big business decision and merged the Strauss Group with Elite to create the second-largest food company in Israel.
It also propelled the Strauss Group into the world of coffee, which Ofra built on further with the distribution agreement with Lavazza, Italy’s biggest coffee maker. In the meantime, Ofra made some big connections – most impressively, with the chairman and chief executive of PepsiCo, Indra Nooyi. Last summer, the two agreed to open a manufacturing plant to produce refrigerated flavoured spreads through Sabra, a salad company joint venture between Strauss and PepsiCo’s Frito-Lay snacks subsidiary.
Nooyi said at the time: “The partnership between PepsiCo and Strauss creates a connection, which is greater than the sum of its parts.” The chief executive, who has on numerous occasions been voted the most powerful woman in corporate America, added: “As far as I’m concerned, PepsiCo and Strauss are partners forever.”
The importance of guaranteeing the company’s legacy through future generations isn’t taken lightly by the current adults of the Strauss family.
Indeed it is something the family takes very seriously. “We have two assets, the children and Strauss,” Raya Strauss said to her brother many years ago. “Either we shall make history, or we’ll become history.”
Ofra meets with all the fourth generation of the family – 16 children – four times a year.
“Typically, these sessions with the next generation involve me giving business presentations to those aged 16 and above. My father might also talk about our beliefs, and my sister Irit Strauss might talk about philanthropic issues as well as leadership skills,” she says.
To help with succession and family business issues, the Strauss Group works with one of the leading family business academics and consultants, John Ward.
“The Strauss values like ‘daring and caring’ are a classic duality of purpose. They ensure each contrarian force plays off each other to achieve their goals,” says Ward. When it comes to some of the bigger issues involving Israel and the Middle East, Ofra is guarded and conscious of the fact that she doesn’t want to step too much into the muddy waters of Middle East politics.
Nevertheless, she says the Strauss Group has a role to play in promoting understanding and tolerance. “We believe in diversity and dialogue – and dream of peace,” she says. “As a company our belief in duality drives us forth to find what we have in common with all sides.”
Ofra might have impressed most of the world’s top managers and business media outlets, but some still need convincing. “The merger with Elite might have happened under her leadership, but the seeds of this were laid many years before by her father,” says a local analyst.
“I think she alone needs to orchestrate a transformational acquisition to really seal her legacy.” Such criticism doesn’t particularly faze Ofra.
For one thing, analysts reckon the Strauss Group has plenty of cash available to make a big acquisition – some suggest as much as a half a billion dollars. Even with the much tighter credit environment post the financial crisis, there would still be plenty of banks, private equity and investment groups that would lend the group further funds if needed.
Asked where she sees the company going in the next few years, Ofra doesn’t give many details away, but is clear on the strategic objective.
“After the economic crisis, the Strauss Group plans to grow through acquisitions,” she says.
That transformational acquisition critics talk about might not be too far away.