Grupo Leche Pascual S.A. History

Company Perspectives:

Leche Pascual Group's main activity is the packaging and preparation of milk, fruit juices, breakfast cereals, ultra-pasteurised liquid egg and omelettes, mineral water, as well as top-quality dairy products and the marketing of all these products.

Key Dates:

1965:

Dairy cooperative is formed in Aranda de Duero, Spain.

1969:

Tomás Pascual takes over dairy cooperative, founding Industrias Lacteas Pascual.

1973:

Company becomes first to introduce ultra high-temperature (UHT) milk in Spain.

1974:

Company changes name to Leche Pascual; acquires Bezoya Mineral Water.

1980:

Leche Pascual launches first skim milk products in Spain.

1982:

Company enters real estate and property development market.

1994:

Company forms Pascual International and begins export operations; acquires dairy products packaging plant in Montauban, France.

1995:

Leche Pascual builds new production facility for UHT yogurt.

1996:

Company builds PET mineral water bottling plant; acquires 33.3 percent stake in new egg production business in Morocco.

1998:

Company becomes first foreign company to receive Grade A classification for imported dairy products in the United States.

1999:

Tomás Pascual turns over company leadership to son Tomás Pascual Gómez-Cuétara.

2000:

Company undergoes restructuring, splitting off property development and real estate operations.

2001:

Company acquires Naransur, a producer of orange juice.

2003:

Company announces construction of EUR 30 million dairy process facility in Catalan region.

Despite the controversy at home, Pascual had in the meantime discovered a strong international market for its UHT yogurts, and in 1994, the company created a dedicated International Division to handle its growing export interests. By the beginning of the new century, Pascual had succeeded in developing export markets to more than 60 countries. Among these was France, which the company entered in 1994 through its acquisition from the French government of a dairy products packaging plant in Montauban.

In another international move, the company bought a 33.3 percent stake in the launch of an egg production facility in Rabat, Morocco, in 1996. That business began operations in 1998, with more than 150,000 laying hens. Part of the facility's egg production was directed at Pascual's new omelet preparation facility, which the company built at its home base of Aranda de Duero in 1996.

Pascual's international interests took on greater weight in the late 1990s when the company, seeking new outlets for its production, parlayed its long-held insistence on high-quality standards into an entry into the U.S. market. For this the company was required to receive Grade A certification, a status that no foreign company had yet achieved. In 1998, however, Pascual's efforts paid off, and the company became the first to import Grade A certified dairy products into the United States.

Pascual also stepped up its mineral water operations that year. After inaugurating a new PET bottling plant in 1996, the company expanded production with the acquisition of Zambra, located in Cordoba. That purchase added sales of more than 23 million liters of bottled water to the company's existing production.

By the late 1990s, Leche Pascual had grown into Spain's second largest milk companies, and one of the largest dairy products groups as well. In 1998, the company took a step closer to the lead with the acquisition of Morais SA, a dairy company that sold its milk products, including UHT milk, creams, milk powder, and concentrated milk under the Frixia and Pastoral brand names. Nonetheless, the company's growth was outpaced by chief rival Puleva, which captured the leading position at the beginning of the 2000s.

In 1999, company founder Tomás Pascual, then 73 years old, turned over control of the company to son Tomás Pascual Gómez-Cuétara. The following year, the group restructured, splitting off its property development and real estate wings, and creating a new holding company, Corporacion TIP. Under the new structure, Leche Pascual was transformed into a dedicated food products group. In its new form, the company began a strategy of targeting growth through mergers and acquisitions. The company's first purchase came in 2001, with the acquisition of orange juice maker Naransur.

The following year, however, the company attempted to add to its diversified line of food products. In March 2002, Pascual launched its own soft drink line, starting with a new brand, Euro Cola, meant to compete head-to-head with cola giants Coca Cola and Pepsi. In the meantime, the controversy surrounding Pascual's UHT yogurt came to a boiling point, resulting in a boycott against Pascual products in the Catalan region, the center of the country's yogurt production.

In response, Pascual announced that it would stop buying milk from Catalonian farmers, citing high transport costs needed to bring their milk to the company's facilities 300 kilometers away. Following the European parliament's decision to disallow classification of UHT products as yogurt, Pascual moved to placate Catalonian farmers, resuming milk purchases in the region. The company then went a step further, and in July 2003, announced its intention to invest some EUR 30 million to build a new dairy processing facility in the region. Despite the controversy, the Pascual brand remained one of the strongest in the Spanish market at the turn of the century.

Company History:

Grupo Leche Pascual S.A. (also known as Leche Pascual Group) is one of Spain's leading producers of milk and dairy products, and is also a leading producer of bottled mineral water and fruit juices. The company is also extremely active on the export market, with sales in more than 60 countries worldwide--including the United States, where Leche Pascual became the first dairy products importer to receive the all-important "Grade A" certification. Leche Pascual's more than 300 products includes a range of fresh and UHT "long-life" milk products, butter, cream, yogurt, and other dairy items; bottled mineral water through its Bezoya, Cardó, and Zambra brands; fruit juices under its Zumosol brand; adult and children's cereals; egg products, including pasteurized liquid eggs; and pet foods, including feed products. The company also produces a variety of products for the restaurant, catering, and institutional food markets. In 2003, Leche Pascual sparked a great deal of controversy in its attempt to market a pasteurized, long-life desert product as yogurt--in the European Community, only yogurts containing live cultures are allowed to be marketed as such. The majority of the company's production takes place in nearly 20 Spanish production facilities; the company also operated production facilities in Portugal, France, and the United States. Spain remains the group's largest market, while its total European sales represent some 70 percent of overall sales of approximately EUR 1 billion. The Americas, including Puerto Rico, add 22 percent to annual sales. A private company, Leche Pascual remains wholly controlled by the founding Pascual family, and is led by CEO Tomás Pascual Gómez-Cuétara, son of the company's founder.

UHT Pioneer in the 1970s

As a child, Tomás Pascual, born in 1926, had helped out by delivering milk by donkey, before going to work at his father's bar. In 1969, Pascual took over the dairy cooperative in his home town of Aranda de Duero, in the Burgos district of Spain, which had opened in 1965. Initially known as Industrias Lacteas Pascual, or Pascual Dairy Industries, the company concentrated on the production of fresh milk and fresh milk products. By the end of its first year, the company's production had already reached 100,000 liters.

Pascual quickly revealed a flair for innovation--in 1973, the company became the first in Spain to produce UHT (ultra high-temperature) milk, which, packed in sterilized "bricks" had a shelf life of several months. The new sterilization procedure and packaging techniques enabled Pascual to begin selling its milk beyond its immediate area. By the following year, Pascual began to assert itself as a brand, changing the company's name to Leche Pascual S.A.

UHT milk quickly gained a majority share of the Spanish milk market--by the end of the century, more than 90 percent of all Spanish milk sales were of UHT milk, a figure emulated throughout much of Europe. Pascual differentiated itself early on by an insistence on high quality standards, even though the company was forced to charge higher prices for its products as a result. Yet Pascual proved a wily marketer, reportedly hiring groups of housewives to telephone storeowners asking why Leche Pascual products were not featured on their store shelves.

Over the next decades, Pascual began adding other products, starting in 1974 with the acquisition of Bezoya Mineral Water and the expansion into the bottled mineral water market. In 1980, the company added to its status of dairy products pioneer by becoming the first Spanish dairy company to produce skim milk. In 1985, the company added semi-skim milk as well. Then, in 1987, the company added a third major component with the launch of its own branded line of fruit juices, Zumosol. Pascual also expanded beyond its core food market, adding operations in the construction, property development, and real estate markets in the early 1980s. These activities, however, remained minor contributors to the group's overall sales; in 2000, the company restructured, separating its non-dairy businesses from its core Leche Pascual operation.

Diversification and Internationalization in the 1990s

The construction of a new production facility enabled Pascual to extend its offerings to include butter and cream products in 1989. The following year, the company purchased CEREX, giving it a facility for producing breakfast cereals in Vallodolid. Pascual quickly launched adult and children's breakfast cereals under its own brand name. In 1992, it began expanding the facility, investing some EUR 3.4 million during the 1990s.

Pascual added to its mineral water business as well, acquiring the Cardo Valley mineral water bottling plant in 1991, located in Tarragona. Two years later, Pascual built a new production facility in order to add another new product line, that of pasteurized liquid eggs. The company continued adding new products throughout the decade, including tortillas and pet foods. In 1993, the company added livestock feeds to its assortment, with the purchase of Pascual de Aranda SA.

Dairy products remained the company's core operation, however, accounting for 60 percent of sales. In 1994, the company began preparations to added another product line, acquiring the technology to produce UHT dessert products. In 1995, the company began construction of the first stage of a new production facility, which, completed in three stages by 1999, added such products as custards, rice puddings, and a UHT yogurt product.

Yet this last product brought the company a great deal of controversy--in Spain, as well as a number of other countries, products labeled as yogurt were required to contain live cultures. The production process for pasteurized yogurts, however, destroyed the cultures. Pascual began lobbying the Spanish government for a change in national legislation, and in 1998 the company was granted the right to launch its UHT yogurt on the Spanish market. Nonetheless, lobbying efforts by chief rival Danone, the world's largest dairy products company, and other Spanish yogurt producers, brought the issue to the European Community, which, in 2003, ruled against Pascual.

Further Reading:

• Crawford, Leslie, "Yogurt War Leaves a Sour Taste," Financial Times, March 12, 2003, p. 14.
• Hemlock, Doreen, "Spanish Milk Producer First to Meet US Standards," Sun Sentinel, September 11, 1999.
• "Leche Pascual Enters Soft Drinks Segment," Expansion, March 5, 2002.
• "Leche Pascual Invests 30m Euros in New Plant in Catalonia," El Pais, July 27, 2003, p. 9.
• Nash, Elizabeth, "Consumer Boycott of Milk Firm's 'Yoghurt' Keeps Food War Alive," Independent, March 22, 2003, p. 17.

Source: International Directory of Company Histories, Vol.59. St. James Press, 2004.

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