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SWX says cheese!

Fans of Emmi will soon be able to buy a chunk of the company.


The dairy food producer, Emmi Group, is upping the date of its floatation on the SWX Swiss Exchange to the fall of this year from a planned 2005/06 listing.

In what looks like the first SWX IPO announcement in months that will actually take place, the billion franc a year, cheese, cream, and yoghurt-making Emmi Group will float its shares this fall.

The announcement is the epitome of private equity trend that sees investors participating in only the most traditional of Swiss industries. This is not to say these are boring, stodgy firms in dead-end industries.

Rather, as the recent funding of privately-owned Sulzer Burckhardt and Elmicron, both spinouts of established Swiss manufacturing giants, demonstrate, these firms exploit skills developed in traditional Swiss industries. They are able to innovate and establish fast, sustainable, growth using modern management tools in new markets.

Majority owned by an association of dairy farmers, Emmi Group is typical of this trend. It originally planned to go public in 2005 or 2006, but changed plans when it saw that it had a prime opportunity to acquire the assets of its number one competitor, Swiss Dairy Foods, among others, Rodolfo Straub, Head of Capital Markets, Zürcher Kantonalbank, told Swiss Venture Update.

Emmi has the luxury of choosing when it goes public because the market is ripe for the IPO of a traditional Swiss industrial firm, unlike firms in newer or non-traditional sectors, as this week's cancellation due to lack of interest in the floatation of the Swisscom spinoff Bluewin, an Internet access provider, indicates.

Swiss Venture Update is aware of a host of other firms in the bioinformatics, software and alternative financial services sectors that have solid balance sheets who are ready to go public, but simply cannot because the capital market is averse to these sectors at the moment.

Capital for growth and independence

The cheese firm, whose rapid growth over the past three years has been driven by a number of strategic acquisitions at home and abroad, did not use private equity or venture financing for funding. It has borrowed money from UBS using traditional instruments and it did issue a set of convertible bonds last year, according to Straub.

The lead bank on the IPO is unlikely to be ZKB, despite its being responsible for the bond issue, because the regional bank's specialty is not market-making for public traded shares. "We are a bonds house, so it is still open who will be leading the Emmi IPO," says Straub.

Swiss yoghurt in Bogotá

Export is an important part of the company's strategy and it expects a 100 per cent increase in sales generated abroad. Overall, Emmi Group expects a net 30 per cent growth in 2002 and anticipates an improvement in margins when the new bilateral free trade agreements come into place.

It employs some 1400 people, up from 935 in 1998. Profits climbed from SFr47 million in 1998 to SFr84.2 million last year. Profits as a percentage of turnover remained steady at about 6.5 percent.

The majority of the group's income is from the cheese sales, exported to far-flung locations, such as Bahrain and New Caledonia, while its yoghurt also goes global to places like Israel and Columbia.

Marketing prowess

From its modest roots as an association of milk producers located in the German-speaking part of Switzerland, Emmi has gone global and is now marketing trendy products, such as low-fat creams and cheeses, energy drinks, and desserts in Germany and Austria.

The company is showing its marketing prowess by riding the "wellness" and "functional food" trends. Make no mistake; Emmi has learned its marketing lessons well.

CEO, Fritz Wyss, was quoted in Moneycab, an online Swiss business newsletter, as saying that "one can make any business profitable, if you've got the right marketing, one that a brand deserves".

Old dogs, new tricks

Like Emmi, a handful of Swiss companies in the so-called old economy have figured out how to turn low-knowledge industrial processes, or failing business models, into ones that capitalize on high knowledge, innovation, and lean management structures.

They have learned how to market themselves - as examples, think of once struggling firms like SIGG and Swatch Group.

As these old economy companies exploit trendy management tools such as branding, innovation management, and savvy marketing and public relations, they are able to generate growth, new jobs and revenues.

Looking at the performance of the more traditional firms, it is clear that new economy firms, software startups, photonics, and nanotechnology providers, can learn a thing or two from the so-called old economy.

By Valerie Thompson

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