Julius Meinl International AG

1862–2002

With a history spanning nearly 150 years, Julius Meinl International AG has pulled an about-face for the new century. Once renowned as one of the leading supermarket and retail groups in Central Europe, the Vienna, Austria-based holding company has all but exited retailing, returning instead to its earliest roots as a coffee roaster--the company's Meinl brands are leaders in Central Europe--and producer of gourmet teas, jams, jellies, and other fine foods. Meinl has nonetheless held on to its prestigious flagship store in Vienna's city center, which trades under the Gourmet banner. The company also has retained its retail networks in the Czech Republic and Poland, which total more than 100 stores, although Meinl has suggested that it is interested in selling these outlets as well. On the production side, Meinl operates coffee roasters in Austria, Italy, Slovenia, and Slovakia and a jam and preserve processing facility in Vienna. Meinl, which, although listed on the Vienna stock exchange, is controlled by the founding Meinl family, also operates its own bank, Meinl bank, which specializes in investment and private banking. Another Meinl operation is a successful online commerce site, selling the company's branded products around the world. To support sales of its roasted coffees, Meinl, which many consider as a primary player in the creation of the famed Viennese café culture, has begun an attempt to export the European coffeehouse; in 2002, the company opened its first coffee café in Chicago. The company expects to open similar cafés in other major cities in the early years of the new century. The company is led by Julius Meinl IV and Thomas Meinl, representing the fourth generation, and by Julius Meinl V, the fifth generation of the Meinl family to lead the business. Despite its narrowed focus, the company produced revenues of more than EUR 209 million ($200 million) in 2001.

Roasting Success in the Mid-19th Century

Vienna had long played a central role in the European coffee market. After the Austrian army broke through the Turkish siege of the city in 1683, the routed invaders left behind bags of green coffee beans--considered as camel fodder by the Turks. The first Viennese "Kaffiehaus" opened soon after. For the most part, however, Viennese coffee drinkers purchased the raw beans for roasting at home. Into this market came Julius Meinl, who opened his own small store in 1862. Meinl became noted for his blends of raw beans, imported from all over the world.

Yet coffee remained expensive, and the roasting process a delicate one--customers often burned the precious coffee beans. This situation led Meinl to the innovation that was to provide the basis for an empire that came to span much of the Austria-Hungarian empire: Meinl began roasting coffee in his own shop and selling the roasted coffee to his customers. The idea met with instant success, and before long Meinl had begun opening a chain of coffee shops throughout the city.

Customers did not come to Meinl's shop only to buy coffee. They also came to drink it, which led Meinl to begin converting his shops into coffeehouses. Before long, the coffeehouse culture caught on, becoming a hallmark of the Austrian capital city before the concept spread throughout Europe. Meanwhile, Meinl capitalized on the growing popularity of his retail chain to introduce other goods and commodities, with an emphasis on fresh foods and delicatessen items, and the shops began to evolve into full-scale groceries.

In 1891, Meinl built a new, dedicated roasting facility to meet the growing demand for his company's coffee, as the brand gained an international reputation for its distinctive blends. For its new facility, the company chose the spot on which the Turkish army had abandoned the original sacks of coffee beans. That location was to remain the company's headquarters into the 21st century.

The end of World War I and the breakup of the Austria-Hungarian empire spelled new opportunity for the Meinl company as trade restrictions were lifted in the Central European region. During the postwar era the company rapidly expanded its empire into the newly created independent countries of Central Europe. By the 1930s, the Meinl retail empire had grown to more than 600 company-owned stores, and some 400 franchised stores, making the leading retailer in all of Europe and a mainstay of daily life throughout most of Central Europe. The company also had built a strong string of food processing plants, enabling it to produce foods and other items under the Meinl brand.

That business grew again in the 1960s when the company acquired Bankhauses Brunner & Co.

1923–1990

The Meinl family, now one of Vienna's wealthiest, also had expanded their interests beyond retailing. In 1923, Julius Meinl II, now head of the family company, established the Spar- und Kreditverein der Freunde & Angestellten der Julius Meinl AG, a savings and loan operation that later grew into the private Meinl Bank.

The outbreak of World War II, however, brought an end to the Meinl family's expansion. The company's bank was shut down in 1943; meanwhile, the country's Central European holdings were ravaged by the war. With the end of hostilities, most of Meinl's former retail empire had fallen within the sphere of influence of the Soviet Union.

Rebuilding in the Post-Cold War Era

Forced back within its Austrian market, Meinl nonetheless maintained its stature as a leading domestic retailer, while building an international reputation for its fine-quality roasted coffees. In 1956, the company, then led by Julius Meinl III, returned to the banking sphere with the reopening of the Spar- und Kreditvereines. That business grew again in the 1960s when the company acquired Bankhauses Brunner & Co. KG in 1969. The two banks maintained separate operations until they were merged under a single name, Meinl Bank, in 1979.

The early 1980s saw the first signs of a thaw in the Soviet Union-dominated countries of Central Europe. Meinl, which continued to enjoy strong name recognition in those countries, was among the first to stake a foothold in these markets. Hungary became the first country to relax its trade laws, allowing joint ventures with foreign companies as early as 1980. Meinl entered an agreement with the supermarket group Csemege, then Hungary's largest. As Thomas Meinl told Supermarket News: "The stores were shabby, dirty and desperately old-fashioned. There was not much choice of products, and those that were available were of poor quality." Meinl nonetheless entered the shops, setting up its own "Meinl Corners" to sell its branded coffees, teas, jams, and other products. In this way, the Meinl brand reappeared on the shelves in Hungary's kitchens. Elsewhere in the Eastern Bloc, Meinl reached distribution agreements with local partners to introduce its products to such markets as Czechoslovakia, Poland, and elsewhere.

The end of the 1980s brought the end of the Cold War era, reopening the Central European economy to outside interests. Meinl quickly prepared a new expansion drive into its former territories. In 1989 the company sold off one of its domestic subsidiaries, which had been operating a chain of discount stores in Austria, and used that capital to set up a new holding company, Julius Meinl International, to guide its expansion.

In 1990, the company moved to acquire a 51 percent controlling interest in former partner Csemege, using that company's 104 retail stores as a basis for its Central European relaunch. The company promptly renamed the stores as Csemege-Julius Meinl and began an extensive renovation program designed to bring the supermarket chain up to Western standards.

1992–1998

By 1992, Meinl had reentered a number of new markets, setting up four franchise stores in Poland, and beginning exports of its branded products to Romania and Bulgaria. The company, which took its Julius Meinl International holding company public with a listing on the Vienna stock exchange that year, also set up two new subsidiaries to prepare its reentry into the newly separated Czech Republic and Slovakia markets. The company made its first acquisition in Slovakia in 1992, acquiring the Baliarne coffee roasting plant. Meinl also continued adding to its Hungarian holdings, including buying up a 30-store chain in the western part of the country in 1992.

Meinl entered the Czech Republic in 1994 with the opening of its first store in Prague. That same year, the company expanded its Czech interests with the acquisition of the Pramen Brno supermarket chain, which operated 27 stores. The company continued building its holdings in the Czech Republic, expanding to 70 stores by 1996. Nearly all of these locations were owned outright by the country. Meanwhile, Meinl had been growing strongly in Hungary as well, nearing 150 Csemege-Julius Meinl stores at mid-decade. The company also had developed two other store formats, the 42-store chain of Jeee discount stores, and the eight-store chain of Jeee Cash se Carry stores.

Returning to Roots for the New Century

Poland became the company's next target in 1996, when the company acquired a 51 percent stake in small retail group Major SA, which then operated five stores. Meinl immediately began plans to add five new stores, with plans to increase its Polish presence to as many as 20 stores by the end of the decade. Meanwhile, in Austria, Meinl attempted to take a share of the supermarket sector, opening some 39 PAM PAM supermarkets in that country.

The year 1996 was to mark a new turning point in Julius Meinl's history, however. In that year, Austria joined the European Common Market, eliminating the trade barriers that had previously protected Austrian businesses. Meinl soon found itself faced with head-to-head competition with a number of Western Europe's retailing giants as they prepared to enter the Austrian market.

In the late 1990s, Meinl's Austrian stores, which numbered some 340, were struggling, slipping into losses. In 1997, the company split its Austrian operation into separate production and retail subsidiaries, then sold off most of its industrial wing to a Swiss investment group. Part of the company's reasoning behind this move was its interest in focusing its own production interests on a more limited number of high-quality, Meinl-branded items. This interest was quickly revealed to include an exit from retailing, at least in the Austrian market. By 1998, the company was rumored to be looking for buyers.

Meinl appeared to have found its buyer at mid-1998 when German retail group Rewe agreed to buy up its Austrian retail holdings. That deal quickly foundered on the Austrian monopolies commission's objections that the deal would give Rewe too great a share of the Austrian retail market. The purchase finally went through, but in a far limited form, when Rewe made a new offer to acquire just half of Meinl's Austrian stores.

1998–2002

Meinl nonetheless remained committed to selling off its Austrian grocery holdings, and by mid-summer had announced its intention to convert some 100 of its remaining stores into a new "Gourmet" concept, featuring an emphasis on fresh foods and delicatessen items, while putting up another 77 stores, including 21 supermarkets, for sale. By 2000, with profits under pressure, Meinl had abandoned the smaller store format as well, selling out almost all of its remaining properties to the Spar supermarket group. The company kept, however, its historic Graben city center store, which continued to operate under the Gourmet fascia.

Meinl had in the meantime continued to expand in its more successful Central European operations, buying up Czech store chain Pronto Plus in 1998, adding 20 stores to bring its total to some 120 in that country. Yet the slump in the Eastern European economies at the end of the decade, as well as ferocious competition from Europe's major supermarket groups, which were battling for dominance of these markets, thwarted the modestly sized Meinl's expansion plans. By 1999, the company had sold off its Hungarian holdings to Belgium's Delhaize supermarket group. At the same time, Meinl announced its intention to end further investment through its international subsidiary. While the company held onto its Czech and Polish stores, these were slated for restructuring, reducing the number of outlets, while the company looked for buyers in the early 2000s.

Instead, Meinl decided to concentrate its efforts on boosting worldwide sales of its roasted coffees, which included such famous labels as Jubiläum, Der Mocca, Präsident, Der Schonende, Kaiser Melange, King Hadhramaut, and others. To these the company added its own branded teas, as well as jams, jellies, and other gourmet food items. Initially targeted at the Western European markets, Meinl's sales quickly took off worldwide, particularly through the development of its own e-commerce site. At the same time, the company began to look for other investment opportunities, with a particular interest in online businesses.

Central Europe remained, however, a privileged market for the company, where its brand retained continued strong recognition. By 2002, the company moved to reenter these markets in its new, more specialized form. The company began selling its coffee in Hungary at the beginning of that year, launching the brand first through retail channels before adding sales to the restaurant and café sector as well. Meanwhile, Meinl sought to boost its brand recognition in farther-flung markets.

In 2002, the company opened its first international coffeehouse, choosing the city of Chicago for this new move. Featuring a "European" design (the company flew in the café's décor from Austria), the new coffee shop offered table service and free newspapers, as well as American-style takeout service. The shop proved a ready success, and the company made plans to roll out more shops in Chicago and in other major cities. Expansion of the café concept was to remain limited, however, as Meinl viewed this new activity primarily as a means of stimulating sales of its coffee and other branded products. Meinl had successfully negotiated a return to its roots as one of the world's most respected coffee brands.