Corporate Profile: André & CIE. S.A.
May 01, 1997
by Teresa Acklin
André dedication to trading stands out in commodity world
By Morton I. Sosland, Editor-in-chief
Amidst an environment that has prompted practically all of its major international competitors to adopt new strategies and new modes of management and operations, André & Cie S.A., one of the classic “big five” in global grain trading, has steadfastly held to a course that has retained “pure trading” as its core business. Instead of actively diversifying into a broad range of industrial activities within and without relationship to its agricultural base, as its trading competitors have done to varying degrees, the André Group has continued to focus on identifying specific areas of grain, feed and related trade around the world where it has been able to carve out business.
Often, André has done business that its competitors have either neglected or have decided was not of a size to justify attention. It sometimes has done business where others were forestalled by access problems and financial complexities. André's recent growth has focused largely on developing relations with new or growing importing and exporting countries, mainly in Southeast Asia and the Mediterranean, as well as on paying increasing attention to soft commodities.
Even while putting a conservative face to many issues and emphasizing its relatively small size compared with other multinational enterprises, André also underscores the flexibility its ownership and philosophy afford, as well as the company's goal of continuing to be “one of the world's leading trading companies.”
Along this line, stress is placed on its globe-circling network of offices and agents in every region of the world. “The firm is engaged in a permanent process of adjusting its network to the ever-changing demands of international trade,” the company said.Swiss Orientation
In this, the 120th year since André's founding in Switzerland, the group and its owners still like to look on themselves as being particularly Swiss in orientation and in thinking. This means a reluctance to seek attention, a preference for quiet, if not secrecy, and a distaste for glamour and the glare of publicity.
Wryly noting how strength in the Swiss franc prior to recent months had been a terrible disadvantage for a company that does most of its business in dollars but measures its results in the franc, the company expressed some satisfaction with recent weakness in the Swiss franc.
The anniversary this year provided a small opening into the André Group's philosophy of doing business. Further, the retirement of Brian Corke, a long-time wheat trader who is well known around the world, offered an opportunity to take a look at how André conducts its business and develops its people and how this differs in many respects from the other multinational companies that usually are counted among its competitors. (see accompanying article on page 7.)
In looking at the world grain trading scene, which itself has changed immensely in the past several decades and nearly totally over the history of the André Group, it is quite amazing to find in the beautiful lakeside city of Lausanne, Switzerland, on a quiet street that offers a striking view of Lac Leman, a company with the strong philosophy of the family-owned André Group. Even while acknowledging that benchmarks are not available to allow specific comparisons of the André business with these other companies, particularly when it comes to trading activity, the people who run André are willing to make several statements.
One is their belief that, while acknowledging a global trading group with subsidiaries and agents in more than 70 countries around the world ought not to be considered a “small business,” they are indeed “small” in comparison with some of their most giant competitors. This point is reinforced by noting that the company still has its headquarters staff totally housed within the modern building the group completed in Lausanne in 1972 and that the number of people working in that building, 350, is itself a relatively small total. Indeed, the total employed in the group's international trading activities is estimated at barely 1,000.
While the André Group emphasizes trading in wheat and other grains and in proteins, where it has sought to be particularly active, as well as in soft commodities like sugar, coffee and cocoa as the core of its business, attention is devoted to more than just trading per se. André has emphasized, almost from its start, the importance of seeking to identify and to serve the special needs of both sources and customers, looking for ways it may be especially helpful and thus to build a relationship that would have an enduring quality.
Whether it's a particular need for a special milling wheat or for a soybean meal that fits a definite need, André has emphasized through its long history this customer-building aspect of trade, of developing a staff of experts who may be called upon when needed. At the same time, it has shunned to the maximum extent possible doing business where “price” alone determines a sale.
Of course, its managers say, being competitive is essential to a trading business, and André has not refrained from participating in large tenders when that is the only way of doing a trade. Yet, to a great extent, emphasis has been of a more special nature.
Particularly satisfying for those who have provided André guidance in this direction has been the evolution of global markets into new patterns that for the most part affirm the wisdom of the group's strategies. The days of massive global tenders have largely given way to global trade in grain and related commodities being conducted with individual customers, each of whom has identifiable needs that fit into the André way of trading. Privatization in country after country has provided the chance for André and its network of agents, correspondents and representatives to prove its ability to do business in a way that is different from what may now be called “old ways.”Focus on Special Markets
The view of André's management is that they see themselves less and less competing with the very large multinational trading companies, that their focus has been and will continue to be on developing and cultivating special relations with odd markets, where service in areas like logistics as well as the building of personal relationships have more to do with doing business than a competitive price edge.
Considerable focus has been on markets where small quantities trade and in special qualities and even grades, where other traders are less inclined to devote time. “Being able to originate and transport large quantities of goods and to split them into smaller lots to feed smaller markets offers a potential for obtaining the margins that are essential for a viable business,” it was emphasized.
In line with this policy, the André group has not resisted withdrawing from activities that no longer make sense in the context of the standards the company brings to the business. Instances were cited of withdrawing from grain origination in markets where both competitive and market developments no longer justified the investment of people and resources deemed necessary. But even as the group withdrew from one or another aspect of the business, it often found new opportunities, such as its recent building of grain marketing to Central America and several nations of northern South America.
One area where André has especially developed an expertise is in what it describes as the expanding opportunities for “running a book of affreightments,” which it compared to the “book of commodities” that traditionally serves as the framework of international commodity trading. Noting how the paper-based market for entering into ocean freight commitments with ship owners and operators has expanded greatly in recent years, both in size and in sophistication, André said it has found position-taking within this market to be an increasingly important part of its business.
As a significant participant in this market, André has been able to draw on its long-time experience as Switzerland's leading ship owner to establish relationships with brokers in both Switzerland and Britain that are important interfaces in this relatively new marketplace. While this expanding freight market relates to all sorts of commodities moving in ocean trade, the primary focus has been on the Panamax-size vessels that are mainly used for moving large grain cargoes around the world.Four Business Components
André divides its business into four major parts, of which trade in agricultural commodities is the largest. It has a financial services division that seeks to work primarily with customers and countries that need its expertise in financing, both of commodity transactions and even capital investments. The group said it stands ready to supply all types of industrial equipment, complete agricultural food processing factories and installations for packaging agricultural and food products.
In transport, which does not include the “paper freight” market noted earlier that falls under commodity trading, the company operates a fleet of 12 ocean-going vessels as Suisse-Atlantique S.A., totaling about 700,000 tonnes deadweight. It also operates a fleet of special aircraft, which are designed to carry freight primarily in short take-off and landing (STOL) situations and which are used frequently in international relief activities.
Its fourth major area of activity is described as “agricultural industry.” While André says it does not have an “industrial leg,” like many of its competitors, the group has two soybean crushing plants in South America, one in Argentina at Puerto de San Martin, where daily processing capacity is currently being doubled from 2,500 to 5,000 tonnes; and at Araucaria, in the interior of Brazil, with 3,000 tonnes of capacity.
These plants, along with small oilseed processing plants in several other countries, are viewed not as diversification but as an essential backstop to the group's participation in global soybean meal markets. This capacity is considered especially important in the development of protein markets in the Mediterranean countries where quality has become an increasing issue.
Once a separate department, but now under the broad commodity umbrella, is the important role André & Cie plays in maintaining Switzerland's strategic food stocks. As a neutral nation surrounded by other nations and with no access of its own to the sea, Switzerland has a policy of maintaining food reserves, of which grain is an important component. André operates elevators and silos located at points around the nation that maintain these strategic stockpiles.
Traders and Managers
In developing its staff, André historically has differentiated between people with trading skills and those who are destined to be managers. As reflected in the career of the newly-retired Mr. Corke, who spent the past 25 years primarily in international wheat trading in Lausanne, André prefers to allow its traders to gain expertise in a specific commodity area and to allow these traders to build relationships with customers around the globe, while remaining in a specific commodity area.
A separate development track is in place for business managers. When a young person is hired as a management trainee at Lausanne headquarters, he frequently is assigned to other locations, often to Argentina, where the company has a diversity of interests, or to an agent or representative office in a smaller country. Describing working for a group like André as a “demanding profession,” the company acknowledged that it has become more and more difficult to attract young Swiss to work in the business. Thus, about half of the 350 people working at the headquarters are not Swiss.
The problem of attracting young Swiss to the company has not yet eased, even as unemployment has increased in the country, from 1% historically, to the current level of 7.5%. Asked about universities as a source of job entrants, note was made that more than half the student body in Swiss universities come from outside the country.
André does not require a university education to join the company in either management or trading. A key to the group's philosophy emerged in a discussion of the skills that are looked for in hiring young people. “Commodities are not the only focus,” it was stated. “More important to us is a capacity to grasp the needs of customers, to have a youngster who is able to relate to our customers and to understand how best to serve them.”
Also important to recruiting is to look for young people with the capacity to comprehend any given situation, as well as the ability to come up with a program for structuring and restructuring in order to add value. These young people have to be able to deal with financing issues and complexities, with transportation and any number of different matters. “We mix it all up to find a good mix,” came the answer. “We seek fluency in trading, financing and transport among others.”
Asked how André views itself in comparison to the other leading multinational companies that also had a beginning in grain, the response was to the effect that “we see ourselves as kind of the leader in our emphasis on pure global trading and probably as number five in the volume we do.” The observation was further made, “We don't want to be number one in market share. That measure, for which real benchmarks are lacking, has little to do with profitability, and we believe there is no possibility of growth without profits. But most important of all, there is no lasting profitability without adding value for our customers.”