Kavli engelsk by Bodoni

OLA HONNINGDAL GRYTTEN KJELL BJØRN MINDE JO GJERSTAD (PICTORAL EDITOR)

KAVLI – an industrial fairytale VALUE CREATION FOR GOOD CAUSES

Bodoni Forlag • Bergen 2013

KAVLI

– an industrial fairytale Published by Bodoni Forlag October 2013

Paper: 130 g Profi-silk From Igepa Group, Reinbek, Germany Fonts: Minion Pro 10.5/14.5 pt and News Gothic BT 8.5/12 pt Endpaper front: Olav Kavli and Kavligården as per 1918 Endpaper back: Damsgårdssundet as per 1948 with Kavli’s new factory Editions: 3000 copies 324 pages, 640 illustrations Project manager and facilitator: Jo Gjerstad Layout and typography: Stig Moe, Bodoni Graphics: Sverre Mo Photography: Magnus Vabø and Espen Visnes, Bodoni

Graphical production: Bodoni Binding: Bokbinderiet Johnsen, Skien using 115 g Geltex Escarlata from Guarro Casas S.A. Barcelona, Spain The authors do not accept responsibility for any errors Enquiries about the book can be directed to: BODONI FORLAG, P.O.Box 6045 5892 Bergen, Norway www.bodoni.no This book must not be copied in a way that would contravene the Norwegian Copyright Act or duplication agreements entered into with Kopinor or special interest groups for copyright holders of intellectual property. © Bodoni Forlag ISBN 978-82-7128-673-6 Bergen 2013

CONTENTS 7 Foreword 8 Timeline 11 From smallholding to a multinational company 21 Kavli Cheese 29 In business 45 Expansion in all directions, 1912–1920 57 From success to failure – and back again 63 Primula 77 Success despite economic downturn 89 An international company 107

War and reconstruction

129

More popular abroad

155

Establishment of the Kavli Trust

165

Almost devoured

181

Building a corporate group

193

New international momentum

209

Identity crisis

223

New head of the group

231

The Q adventure

249

Strategic expansion

275

A responsible benefactor

289

Cheese – not fish

303

Notes

312

Sources and literature

316 Appendix

Cheese is a very old product. Cheese making had spread to Europe even before Roman times and some ancient remnants of cheese have been found in Poland. These may be 7500 years old. There are approx. 5000 different types of cheeses in the world today.

AKNOWLEDGEMENTS

his book is about an extraordinary Norwegian company, which through its 120 years’ history, has become an international group based on cheese. The company was founded by Olav Kavli in 1893 and later taken over by his son Knut. It currently manufactures food products in five countries and outsources in two. It has 800 employees, a turnover of NOK 2.5 billion and its products are exported to more than 20 countries. What makes it different from other companies is it attempts to achieve the highest profits in order to support charitable causes. The group has been owned by the foundation O. Kavli and Knut Kavli Trust since 1962. In 2012 it awarded NOK 25 million to national and international culture, research and humanitarian affairs. An important factor behind the company’s success is innovation. The most central ones being caviar sandwich topping based on tinned cod roe in 1917 (which is considered the world’s first spreadable processed caviar), Primula in 1924, cheese in a tube in 1929, and the Q-Meieriene concept in 1997. A driving force in the development was the establishment of the foreign companies in the UK, Denmark and Sweden when the group became global in the 1930s. This book project has been interesting and demanding at the same time. During our portrayal of the story we have had to make some difficult choices and we have chosen not to take stand in conflict situations, but to present various opinions surrounding the issues. The primary concept in the portrayal is linked to Olav Kavli’s vision of sustainable growth and innovation to give profits. As the authors of the book, we would like to thank Jo Gjerstad (pictorial editor), Magnus Vabø (photographer) and Odd Magne Havneraas (research assistant) for their cooperation. We would also like to give thanks to the more than 60 people we have interviewed. We hope the book will be a useful contribution to business history research and provide reading value to those interested. Earlier this year a Norwegian text on the Kavli history was published. This book is not at blueprint of that publication. Bergen 23 September 2013

Ola Honningdal Grytten

Kjell Bjørn Minde

TIMELINE 1872 Olav Kavli is born in Årø outside Molde on 7 January, 1872. 1890 Olav Kavli moves to Bergen and starts studying commerce. 1893 Olav Kavli gets a trading licence in Bergen and establishes the Ole Kavli Cheese and Delicacy Food in Hollendergaten 16.

1896 Knut Kavli is born in Bergen on 10 April, 1896. 1905 Kavli exports its first cheese to Denmark. 1910 Olav Kavli visits the USA for the first time. Cheese exports to the USA. 1911 Walter Gerber from Switzerland, produces the first successful commercial processed cheese. 1912 Olav Kavli establishes a canning factory at Steinshamn on the Coast of Romsdal with his brother-in-law Andreas Sæbjørnsen.

1914 Kavli starts dairy operations by leasing Fjeldbygdens Dairy at Sandnes. 1917 Kavli and Sæbjørnsen start manufacturing one of the world’s first caviar sandwich toppings. 1918 The new Kavligården in Lodin Lepps gate 2, Bergen is finished. 1920 Kavli starts experimenting with its own soft processed cheese. 1923 Kavli introduces soft processed cheese to the public for the first time in November 1923. 1924 The business goes bankrupt. 1924 Kavli starts manufacturing Primula, one of the world’s first long-lasting cheese spreads. 1924 O. Kavli AS, Bergen is established. 1924 Knut Kavli becomes the general manager of the company. 1924 Kavli enters into a partnership with Vestfold Flatbrødfabrikk AS, Barkåker. 1926 The Primula brand name is registered. 1929 Kavli launches the world’s first cheese in a tube. 1929 Primula receives the best award at the international food show in Barcelona 1929. 1933 Kavli opens a sales office in Stockholm. 1933 New factory in Damsgårdsveien 59, Bergen. 1934 Kavli opens a factory in Vienna, Austria. 1935 Kavli opens a factory at Nexø in Bornholm, Denmark. 1936 Kavli opens a factory in Gateshead outside Newcastle, England. 1938 Mayonnaise manufacturing starts. 1938 Kavli launches bacon cheese in a tube – the company’s most popular flavoured cheese spread.

1940 Kavli opens a factory in Stockholm, Sweden. Low-fat mayonnaise is launched. 1945 The Danish factory in Nexø is bombed. Manufacturing in Denmark is stopped. 1946 Olav Kavli publishes his biography ‘Med ost i kofferten’. 1947 Kavli launches ‘Raketosten’ in Sweden. The cheese became a Swedish icon. 1948 Kavli starts Glamsbjerg Ostefabrik AS, Denmark with Otto Mønsted AS. 1952 Olav Kavli is appointed Knight, First Class of the Royal Order of St. Olav. 1958 Olav Kavli dies in Bergen on 22 September, 1958. 8

1961 Kavli England moves to new premises in Gateshead outside Newcastle. 1962 Knut Kavli establishes O. Kavli and Knut Kavli’s Charitable Trust through a deed of donation. 1963 Kavli Sweden moves to new premises at Hagsätra outside Stockholm. 1965 Knut Kavli dies in Bergen on 22 October, 1965. 1965 The Kavli trust gives its first donations. 1967 Karin Kavli donates NOK 600 000 to the Kavli trust. 1968 Cheese manufacturing is wound up in Denmark. 1968 Kavli buys spice and mustard manufacturer C. Thyge Ludvigsen & Co AS and O. Kavli AS Copenhagen is established.

1968 Kavli establishes Norsk Hundefor AS. 1976 Kavli Denmark starts manufacturing its own cordial drink ‘Fun’. 1977 Kavli Norway moves into the first phase of construction at Midtun in Bergen. 1981 The Group Council is established. 1981 The board of directors of the trust becomes the head of the group. 1984 Kavli Norway moves from Damsgård in the city centre to Midtun in Bergen. 1984 Kavli buys Vestfold Flatbrødfabrik. 1988 A group advisory body connected to the Kavli trust is established. 1991 Kavli Denmark moves into new premises at Hvidovre outside Copenhagen. 1992 Kavli Sweden moves to a new factory at Älvsjö outside Stockholm. 1993 Kavli Denmark buys Nutana AS. 1994 The group is reorganised. The trust becomes the owner of the new company O. Kavli Holding AS, which in turn becomes the owner of the other companies in the group and head of the group.

1997 Kavli buys pâté manufacturer Castle MacLellan Foods Limited, Scotland. 1997–2001 Kavli establishes Q-meieriene. 2000 The Kavli Trust gets new statutes. 2000 Kavli establishes Kavli Oy in Helsinki, Finland. 2001 Kavli establishes Kavli International AS, Bergen. 2002 Kavli sells Nutana AS. 2003 Kavli buys Blombergs Gløgg, Denmark. 2008 Kavli buys the cordial drink manufacturer Pebas AS, Ringkøbing, Denmark. 2009 Kavli takes over the HaPå brand name from Nestlé and moves its manufacturing from Hamar to Bergen.

2009 Q-meieriene launch ’Skyr’. 2011 Kavli buys Druvan AB, Eslöv, Sweden. 2012 Kavli Sweden buys out Tiger and Bärry yoghurt. 2013 Vestfold Flatbrødfabrik is closed and manufacturing is moved to Germany and Latvia. 2013 The group has a turnover of NOK 2.5 billion and 800 employees. 2013 The Kavli trust awards more than NOK 25 million to research, culture and humanitarian work. 9

Olav Kavli 1872–1958

Knut Kavli 1896–1965

Chapter 1

FROM SMALLHOLDING TO MULTINATIONAL COMPANY Norwegian multinational food conglomerate Most people probably associate the Kavli Group with soft cheese spread. This is without doubt a logical association. However, Kavli is much more than this. The company is now a multinational conglomerate that produces and sells foods worldwide. It has factories and dairies in five countries: four in Norway, Sweden, Denmark, England and Scotland. The Group also has a company in Finland that concentrates exclusively on sales, and it has production in Germany and Latvia on a contract basis. The company’s most important products include soft cheese spread, flatbreads, biscuits, milk, yoghurt, juice, soft drinks, pâtés, caviar, mayonnaise, mulled wine, and food dressings. In 2013, the Group is one of Norway’s largest and most international food groups, with 800 employees and a turnover of approximately NOK 2.5 billion.1 It is also one of the oldest companies of its kind in Norway. Few Norwegian manufacturing companies have succeeded in establishing an international presence in connection with products other than fish. Kavli has succeeded in this, however, and it has done so based on something as un-Norwegian as a range of well-reputed cheeses. It all started with the dream of Olav Kavli, son of a smallholder from Årø outside Molde. It continued with a small cheesemonger’s shop in Bergen in 1893. The company subsequently started an export business in 1905. The next step was an even bigger one: the production of one of the world’s first durable cheese spreads – Primula – in 1924. Nine years later, in 1933, the company opened its first undertaking abroad, in Sweden, followed by Austria, the United Kingdom, Denmark, Belgium and Finland, one after the other. In 1962, Knut Kavli transferred ownership to an independent foundation, the Kavli Trust (O. Kavli and Knut Kavli’s Allmennyttige Fond), which has been the owner since then. In 1997, the Kavli Group decided to challenge Tine’s monopoly on dairy products and founded the dairy company Q-Meieriene. The result is the current international food group based in Norway’s historic fishing capital. Even though the group operates in high-cost countries in terms of both labour and dairy products, its products are sold in more than twenty countries. Kavli is a strong, internationally-oriented group that exports food products to large parts of the globe from its base in Norway. That alone is an admirable achievement. Today, the Kavli Trust is a highly regarded and recognised foundation. It owns Kavli Holding AS, which, in turn, owns 10 subsidiaries. The Kavli Trust currently

KAVLI – AN INDUSTRIAL FAIRYTALE

allocates approx. NOK 25 million every year to good causes related to research, culture and humanitarian work. In this book, we will try to explain how the company managed to achieve the strong position it holds today. We will do so by telling the story of its development. We will trace its history from 1872, when Olav Kavli was born, through to the start-up of the business in 1893 and its development into a multinational food conglomerate 120 years later.

The Kavli name Mount Romsdalshorn. A detail from Johan FredrikEckersberg’s famous painting of the Romsdal Peaks from 1867 as seen from the northern side of the Romsdalsfjord.

The name Kavli comes from the Isfjord in Åndalsnes.2 The innermost and most dramatic tributary of the Romsdalsfjord, it is surrounded by spectacular mountains with towering peaks. Kavli originally is the name of a group of farms. Written records of the name can be traced back to 1550. It is uncertain where it actually stems from, although most people believe it has Norse roots. This could indicate that there were farms there during the Viking era and perhaps even earlier.3 The name may have different origins, one of which is ‘kalv’ (calf), since the young of red deer or cattle grazed on the hillsides there. ‘Kalv’ was also a popular man’s name during the Norse period. Some people believe the place could have been called Kalveli, and then later Kavli, because, from certain angles, the mountain behind it appears to ‘calf ’, i.e. break off like ice from a glacier.4 Others believe that the first part of the name comes from the Norse words kafli or gavl, which probably refers to the pronounced ridge over the hillside where the farms are situated.

Olav Kavli’s background Olav Kavli’s father, Knut Andreas Olsen, was born at a place called ‘Kavliplassen’ at Lergrovik near Molde. In 1882, member of parliament Hans Rasmus Astrup purchased 60 acres of Lergrovik and built a large country home called Kviltorp. ‘Kavliplassen’ and the neighbouring smallholding, Grimshaugen, became part of Kviltorp. They disappeared in 1899 when the Astrup family built a private graveyard on the farm. Today, Kviltorp campsite is situated on the site where the smallholdings once stood. The photo shows Lergrovik farm. Kavliplassen was situated slightly to the right.

The Kavli Group and its history are inextricably linked to its founder, Olav Kavli, or Ole Knudsen Kavli (1872–1958), which was his real name, and his son Knut Kavli (1896– 1965). Their story is like a fairy-tale about a poor rural family that bettered themselves and became international pioneers and leaders of industry.

1: FROM A SMALLHOLDING TO A MULTINATIONAL COMPANY

View of Isfjorden in approx. 1910, with the Kavli farms on the right. Some of Norway’s most famous mountains surround this innermost arm of the Romsdalsfjord: Romsdalshorn, Vengetind, Gjuratind, Kirketaket and Torshammeren. Isfjorden was an ordinary farming village in Romsdal up until 1900. An additional source of income was ‘skreppehandel’, a trading system whereby clothes and shoes made in the village were purchased and sold to fishing communities in Northern and Western Norway. From the early 1900s, this trade developed into a fairly extensive shoe and garment industry.

According to church records, Ole Knudsen Kavli was born on 7 January 1872 on a smallholding in Årø. The farm was situated at Fannestranden in Bolsøy parish, approximately five kilometres from the town of Molde. He grew up on the farm, where he stayed until leaving home at the age of eighteen. His father was Knut Andreas Olsen (later Kavli), who was born in 1836 on a cotter’s farm called Kavliplassen, also in Bolsøy. His mother was Anne Jensdatter Stavem. She was born in 1834 and came from a cotter’s farm in Torvika, on the other side of the fjord from Åndalsnes.5 Olav was the fourth of six children, two girls and four boys: Sofie, Johan, Anna, Ole (Olav), Knut and Fredrik Ziegler. The latter name stems from the children’s maternal great-great-grandfather, Reinhold Ziegler, a wealthy Norwegian industrialist and

Olav (Ole) with his father, mother and five siblings. From the left: Olav, his father Knut Andreas Olsen, Fredrik, Anna, his mother Anne Jensdatter Stavem, Knut, Johan and Sofie.

Kavli Holding AS

Karin Kavli (Carlson)

Erling Thofte

born on 21.06.1906 in Stockholm – died 08.03.1990

born 1889 in Oslo – died 1979

Knut Kavli

Signe Tofte (Kavli)

born on 10.04.1896 – died 23.10.1965

born on 30.06.1899 – died 07.11.1973

Anna Mikkelsen

born on 15.09.1862 – died 20.12.1941 in Oslo

Johan Knutsen Kavli Sofie

born 1865 –

Ole (Olav) ‘Oste-Kavli’

born 1867– Took over his parents’ farm in 1899, the buildings burned down in June 1904.

born on 07.01.1872 – married in Bergen 1895 – died 22.09.1958

Anna

f. 1870 –

Knut Kavli born 1874 –

Fredrik Ziegler Kavli born 1878 – died 1930

Madli Iversdatter Raa

born on 31.03.1835 – died 01.12.1923

Hans Mikkelsen Sæle

born in Fana on 04.05.1835 – married in Bergen on 21.04.1862

Anne Jensdatter Stavem

born on 27.03.1834 – 10.04.1909

Knut Andreas Olsen Lergrovik

Anna Larsdatter Røsberg born on 1829 – died 1911

Peder Olsen Lergrovik

(also named Peder Røsberg) born on 04.08.1826 – died 1903

Serianna

b. 15.11,1828 –

Andreas

b. 13.09.1830 –

Ole

b. 16.09.1833 –

Synnøve Olsdatter Skjevik

‘Cheese Kavli’s’ grandmother (mother’s side) and grandfather (mother’s side)

– died 02.08.1870

Knut Elen

b. 1788 –

Christened on 09.06. 1791 –

Ole Pedersen Kavle Lergrovik

born on 27.12.1795 – married on 19.04.1824 – died 1868. Took over Kavliplassen when his parents died. (Crofter under the control of Bergsbakken for a few years)

born on 21.01.1836 – married on 10.07.1864 – Took over Kavli Croft when his parents died. Crofter. Bought in 1865, property number 13 in Ytre Årø. Freehold, known as Lergrovik-Kavli. Acquired the name of Knut Olsen Årø. Acquired the name of Knut Kavli before 1873.

Marit

Christened on 07.07.1797 –

Anna (Anne) Nilsdatter Øvstedal born on 05.09.1802 – Moved from Stavernhaugen at Lesja to the croft under the control of Torvik in Eid.

Jens Fredriksen Stavem, Lesja

born on 1796 – married at Tresfjord Church on 17.06.1832 –

THE KAVLI FAMILY 1749–1965 Mali Olsdatter Grønnes – died 24.04.1838

Crofter and tailor, Peder Pedersen Kavli

Christened on 28.10.1749 at Grytten Church - confirmation in 1766 – married on 07.12.1788 – died 11.05.1819. Address: Grønneset, 1797–1799 Bergsvika in Nesjestranda. Lergrovik in Bolsøy from 1799.

1: FROM A SMALLHOLDING TO A MULTINATIONAL COMPANY

Torvika by the Romsdalsfjord. Olav Kavli’s mother, Anne Jensdatter Stavem, grew up at Jensplassen (circled) in this village.

representative of the General War Commissioner.6 He bought Lesja Jernverk (an ironworks) in 1709. It was built after royal privileges were awarded in 1660 and was in partial operation until 1812. Even though profits were quite poor during Ziegler’s period of ownership, he died a rich man in 1729. Thereafter, the family’s fortune gradually dwindled. The ironworks was sold in the mid-18th century, but one of the daughters, Birgithe Marie Irgens Ziegler, married the ironworks’ new owner, Hans Holmboe.7 Some of Ziegler’s descendants migrated eastwards down the Gudbrandsdalen valley, while others headed west down the Romsdalen valley. While some of his descendants took the grander surname von Ziegler, others settled as cotters in Torvika across the fjord from Åndalsnes, and added ‘Cotter’s Widow’ to their names, as Olav Kavli’s grandmother had done following the death of her husband.8 Running a smallholding in Romsdal was a far cry from the General War Commissioner’s office and owning an ironworks. The farm at Årø was originally small, even for a smallholding, but the landscape was flat and open for that part of the country, and there were several large farms there. The biggest was Inner Årø, which was one of the most affluent in the area. It was owned by the Krohn family from Bergen.

Everyday life Olav Kavli’s parents had many different jobs in order to feed the family, which was not unusual for that period. 9 In addition to building up the farm from just two cows and a horse to six cows, a horse, approx. 30–40 sheep, some hens and a few pigs, fjord fishing was an important source of food, primarily for their own consumption, but they also sold some of the catch in the local market. Moreover, both parents and their children helped out with the haymaking on large farms. The father and sons also ran a lumber and transport business, and they ploughed fields for farmers. Olav’s father was also a cobbler. Their daily diet consisted of gruel made from barley or oats for breakfast, fish, potatoes and vegetables for dinner, and flatbread and herring for supper. To drink, they usually had water, diluted milk or cultured milk. They made juice and jam from

KAVLI – AN INDUSTRIAL FAIRYTALE

Olav Kavli travelled on the ‘Geiranger’ steamer when he left Molde on a cold winter’s day in 1890 headed for Bergen. At that time, ‘Geiranger’ was five years old and the flagship of the Søndmøre Dampskibsselskap’s coastal post route from Bergen to Trondheim.

Romsdal

Su nn f ls da rd

5 - Ytre Årø

4 - Kavliplassen ne Fan

MOLDE

3 - Grønneset

n rde

fjo ang

rden

ldefjo

den

fjor

Grunnefjorden

fjo

To re

Romsd

2 - Jensplassen in Torvika

fjord

Tres

fjo

alsfjord

de fjor

1 - Kavli

ÅNDALSNES 6 - Øvstedal

1. Kavli in Isfjorden where Peder Pedersen Kavli, Olav Kavli’s great-grandfather, was born in 1749. 2. Jensplassen in Torvika, where Anna Nilsdatter, born Øvstedal, and Jens Fredriksen Stavem became cotters in the 1830s. The place where Anne Jensdatter Stavem (Olav Kavli’s mother) grew up. 3. Peder Pedersen Kavli (Olav Kavli’s great-grandfather) moved to a cotter’s farm here at Grønneset. He and his family only stayed here for a few years. 4. Kavliplassen, Lergrovik. This smallholding was run by the Kavli Family for three generations. 5. Ytre Årø. Knut Kavli bought property number 13 at Årø in 1865. Olav Kavli grew up here with five siblings. The oldest brother, Johan (born 1867), took over the farm. The farm burned down in 1900, and a new farm was built on a new plot of land. 6. Øvstedal in the Tresfjord, where Olav Kavli’s maternal grandmother, Anna Nilsdatter Stavem, grew up as a farmer’s daughter. She came from a very gifted family.

1: FROM A SMALLHOLDING TO A MULTINATIONAL COMPANY

berries in the autumn, which gave them something to put on their bread and something to drink on special occasions. On festive occasions, they sometimes also had potato dumplings, meat, suet or bacon.10 Everyone worked hard. The children had to help in order to make ends meet. Physical work was regarded as most important, but schooling and education were also valued. During the haymaking season, the boys had to get up at four or five o’clock in the morning. The day did not end until late in the evening. However, they had many breaks and their days were full of play and fun. Church was compulsory on Sundays, and they went by boat over to the old church at Bolsøya. They also attended the home mission’s meetings. Their free and informal style appealed to the family. Sundays were associated with get-togethers, religious celebration, rest and a good dinner.11

During the war, the Germans had 100 horses stabled on the site where Kavliplassen had once stood. This is what it looked like in 1947.

Kviltorp campsite now stands on the site of Kavliplassen.

17 2

KAVLI – AN INDUSTRIAL FAIRYTALE

Grandmother’s influence

In 1873, Olav Kavli’s maternal grandmother, Anna Nilsdatter Stavem, published her hymnbook ‘Nogle aandelige Sange’ (Spiritual Songs) with the help of her nephew, Walter Scott Dahl (real name Øvstedal).

When his maternal grandmother, Anna Nilsdatter Stavem (maiden name Øvstedal) became a widow, she moved to the farm at Årø. Even though she came from a poor background, her relatives were of good standing. Her brother, Nils Nilsen Dahl, was a vicar and president of the Norwegian Odelsting (a chamber of the Norwegian parliament), who in turn was father to Walter Scott Dahl, a famous lawyer and politician. He was a member of parliament for Venstre, Norway’s liberal party, and prosecutor in the impeachment process against the Selmer government, which paved the way for the introduction of a parliamentary system in Norway. This resulted in his becoming a government minister.12 Anna took on child-minding responsibilities at Årø. She played a central role in the activities of the puritan Haugean movement in Romsdalen, and she wrote two psalm and song books. In fact, she published both books through her own publishing company.13 Some of her writings live on today. Olav helped to publish a new edition of her second song book from 1873. Some of the songs have melodies associated with well known psalmists such as Mathias Orheim and Ludvig M Lindemann. She also had other sides to her personality. While she focused on leading a frugal and healthy life, she also liked to smoke a chalk pipe. She did want to keep this a secret, however, but her addiction was so strong that most people could smell the tobacco from a long way off. At Christmas time, there was always a strong beverage for both the adults and children to prevent indigestion after the consumption of rich food. But for the rest of the year both Olav’s parents and his grandmother abstained from alcohol. His grandmother’s strong belief in God, her open-mindedness and realism mixed with a sense of adventure, as well as great knowledge, influenced the siblings’ upbringing.14 Olav was very close to his grandmother. The first night after leaving home, he wrote the following on his way to Bergen: ‘And the image of my grandmother stood before me. I sensed I could hear her reading the evening prayer she had written and taught us: Oh God be my friend tonight,  Watch over me whilst I sleep,   and tomorrow, happy again,   I promise you my goodness. It felt like my grandmother was sitting beside me, stroking me gently on my cheek. “Sleep, Olav, my boy” – and I fell asleep. So blessed.’15

The Haugean heritage His grandmother was greatly influenced by the Haugean movement, which had a deep and lasting influence on spiritual life, culture, public enlightenment, welfare, business and industry, and politics. Perhaps the Haugeans contributed more to the creation of modern Norway than any other group at that time.16 The Kavli family’s entrepreneurship was partly the result of the need to earn a living and partly a legacy of the Haugean belief in strong

1: FROM A SMALLHOLDING TO A MULTINATIONAL COMPANY

personal responsibility. Olav quickly learned that frugality, hard work and saving money were virtues. He started saving as a little boy, with one thought in mind: raising capital to start his own business. People close to the industrialist Olav Kavli did not see him as a very religious man. He abstained from alcohol and was very anti-smoking, however.17 He had great respect for both the church and the word of God.18 His biography also confirms that his belief in God was also evident at times. He knew his Bible better than most people and could quote long passages from it. This became apparent when he visited the Holy Land in the 1930s, an experience he described as the most wonderful of his life.19 Puritan frugality, simplicity and the desire to create were qualities that he bore with him all his life, both privately and in his business dealings.20

The dream Olav Kavli told how, already as a boy, his dream was to venture out into the world. He liked being on a boat out on the fjord and walking in the mountains. He was stocky but with an athletic build. His favourite place, however, was the steamer wharf in Molde, where he could sit for hours watching the bustling life on the quay. He entered adolescence with the dream of one day becoming a postmaster on board a steamer, and perhaps eventually a retailer or travelling salesman. Already as a little boy he started saving money towards his big dream. At the age of seven, he got his first paid job clearing land near where he lived. He was paid approx. 30 øre a day, less than NOK 20 per day in today’s money. After a good week’s work, Olav deposited two Norwegian kroner in his newly opened bank account.

Ved min gamle Mands Død Mel.: O Fader, lad Dit Ord og aand Jens Ziegler var den Dødes Navn, som sank i Gravens Favn. Hans Lægems Styrke den var svag, og bortsvandt Dag for Dag Saa kom da Herren blid, Og endte al hans Strid Han løste ham af Lidelsen, Han, hver en Synders ven. 2. O, jeg vil haabe det og tro, Han kommen er til ro. Han led og bad saa inderlig Gud om at hjelpe sig. Han gikk af Verden ud i Haab til Himlens Gud, At han ved Jesum var forløst, Og dette var hans Trøst. 3. Som gamle Simeon han bad,Trods Smerten, hjerteglad. Han stundede af Længsel hen Til Jesum, Frelseren. Han sukked først og græd, i sin Elendighet. Men Herren lindrede hans Nød, Han fik en freidig Død. 4. Han stille, sagte sovnet hen, I Tro paa Frelseren. Han ønsked selv, hans Hedenfart Til Jesum skete snart. I Troen favned han Sin kjære Frelsermand, Og han befalte Sjæl og Aand i Jesu egen Haand. 5. Giv, jeg maa tinde ham igjen Hos Alles bedste Ven! Did staar nu hele min Attraa, Mens her jeg leve maa. Der samles Ven med Ven Hos Gud i Himmelen, Og ingen Skilsmis mere er Hos Gud vaar Fader kjær.

 Anna Nilsdatter Stavem wrote this song following the death of her husband. It was published in her hymnbook ‘Nogle aandelige Sange’ (Spiritual Songs).

The Tresfjord and Øvstedal. Olav Kavli’s maternal grandmother, Anna Nilsdatter Stavem, grew up here.

KAVLI – AN INDUSTRIAL FAIRYTALE

In the middle of January 1890, at the age of 18, Olav Kavli left Molde on a steamer. He was heading for Bergen. The small village, which had grown up over several centuries beside the shore at Moldefjæren, was given trading rights under the control of Trondheim. The basis of its economy was the timber trade with Holland, and the rich herring fisheries along the Romsdal coast. When Denmark/Norway introduced a new system of counties in the 17th century, Molde became the seat of the county of Romsdal. Despite strong protests from both Bergen and Trondheim, Molde was awarded full trading rights by Christian VI and became a market town in 1742.

He also cleared rocks for others and worked as a horse and cart driver. He quickly realised that tourists were good tippers, and made sure that he treated them well. Olav also earned money decapitating fish, the heads being used for guano production. He transported stones and rocks for road and bridge works. When Olav turned eighteen, he had saved NOK 60 in start capital, which was approximately a month’s wages at that time.21 That money was later to form the basis for the whole Kavli Group.

Chapter 2

KAVLI CHEESE To Bergen In 1889, at the age of seventeen, Olav Kavli finally decided to leave home. Bergen, Oslo or Trondheim was his intended first stop. After that he would venture further afield should the opportunity arise, which he was convinced it would. Initially, his parents tried to persuade him to seek work and later start on his own as a retailer in the local area, but in the autumn he decided to leave. His aim was to combine a day job with evening classes and build a reputation as a trustworthy employee with a company before starting his own business. It was not uncommon at that time for boys of his age to find work outside the local area. Many of them went to sea, while girls would often enter domestic service in the nearest town or on a farm. Many teenagers moved to the cities to attend school or to seek employment in one of the emerging industries. What was unusual about Olav was that he travelled far to build up his own business the very first time he left home.

This is the sight that met 18-yearold Olav Kavli when he arrived in Bergen on a cold winterâ&#x20AC;&#x2122;s day in January 1890. The city surrounded by mountains and with a population of approx. 54,000 must have seemed huge to the boy, who was used to Molde with just over 2,000 inhabitants. A big adventure awaited him.

KAVLI – AN INDUSTRIAL FAIRYTALE

When Olav Kavli arrived in Bergen, the new building belonging to the YMCA in Nedre Korskirkeallmenningen (centre) had just been completed (inaugurated on 26 May 1889). The new neogothic building was designed by architect Schak Bull and cost the astronomical sum of NOK 90,434. It housed business premises as well as a reading room, conversation room, library, gym and a function room. There were seven rooms on the second floor. They were rented out to travellers, one of whom was the young Olav. Bergen YMCA was founded in 1875 by teachers at the Home Mission Sunday School. Its purpose was to provide boys over the age of 15 (confirmation age) with a place of recreation. The members participated in gymnastics and sports, language and mathematics courses, and they took part in bible discussions and meetings featuring speakers who addressed more general topics. For many years, they organised free Christmas events for people without a family. Up to 300 people would participate. On 22 April 1912, the scout movement in Bergen was established in ‘Ynglingen’, as the building is known by the people of the city. Travellers can still stay there cheaply, just as they could in 1890.

The school that Olav Kavli attended was probably Monssen’s School in Kong Oscars gate 15. It was run by school principal Henrik A. Monssen. In addition to the principal, it had three male and two female teachers. For a fee, youth from the general populace could receive the tuition in bookkeeping and commercial subjects required to qualify for a position in a trading house or shop.

His parents wanted him to wait until he was 18 before embarking on such a big adventure without having secured a job or a place to live. He reluctantly respected their wishes, but, when he turned 18 on 7 January 1890, he was a free man and left a few days later. Even a snow storm and his mother’s admonishments to at least wait until the worst of the weather was over were not enough to deter him. He travelled third class on a steamer from Geiranger to Bergen to save money. The steamer was somewhat lacking in creature comforts, and homesickness did not just set in, it seemed to take over his whole being as seasickness and the fear of the unknown also made their mark. When the boat berthed at the quay in Ålesund, he thought about turning back, and by the time he arrived at Måløy, he was seriously considering it. However, at Florø, the thought that the money he had spent on the ticket would be wasted stopped him. During his darkest hours, his grandmother’s evening prayer comforted him. It had helped him on numerous occasions and would continue to do so in future.

In Bergen Nothing and no one was waiting for Olav when he arrived in Bergen: no friends, no contacts, no job or place to stay. As a result, a boatman recommended he find lodgings at Ynglingen, which later became the YMCA.1 It was suitable for a non-smoking, nondrinking young man, who, with his mother’s encouragement, had considered becoming a minister of the church. When he arrived in the middle of the night he discovered it was full, but the manageress did not have the heart to turn a young man out onto the streets. She took him in and he shared a room with another young man. He discovered that his room mate was a cobbler, and, given Olav’s knowledge of shoemaking, they soon became friends.

2: KAVLI CHEESE

The new friend took the newly arrived Olav to a commercial high school already the next day. The core subjects were bookkeeping and commercial studies. Everything had gone so smoothly and swiftly that he felt that it was the right path for him to follow. He did so well at school that, after only a month, he started working as a private teacher for another student who had difficulty understanding the curriculum. The pay was 40 øre per hour, and he taught an hour a day, seven days a week. Both Olav Kavli and his friend passed the exam without any problems and were even praised by their self-righteous teacher and headmaster Henrik A. Monssen ‘the professor’ as he called himself. Young Olav loved to sing, a passion he inherited from his grandmother. What he enjoyed most about going to church were the psalms and the music. He was accepted as a member of a Sandviken Choir Association led by organist Lars Søraas sr., and was quickly given the job of writing down notation for a fee of five øre a page. He wrote quickly, which enabled him to earn up to NOK 2 a day. By comparison, the daily wage of a male industrial worker in Norway in 1890 was approximately NOK 3.2 His income was not high, but it was respectable. In addition, he also kept the accounts for Mr. J.H. Stigum, warden of Bergen Prison, which in turn led to a part-time job as a prison officer. Moreover, the job at the prison also meant a free dinner every day he worked there. Thus, he managed well.

Lars Søraas Sr. 1862–1925 was a teacher, conductor and composer. He was organist at Sandviken Church for more than 30 years. Today Lars Søraas is best known for the music he composed for Per Sivle’s poems ‘Lerka’ (The Lark) and ‘Den fyrste song’ (The First Song). In 1907, he started publication of the Lars Søraas Book of School Songs, which his son, Lars Søraas jr carried on. Warden J. H. Stigum, qualified as a prison officer at Trondhjem Prison. He became known as a philantropist, due to the significant improvements he made to the prison’s interior and the way it was run. He finally became a prison inspector in Bergen.

◄ As a result of the Norwegian Prison Act of 1857, 56 new district prisons and almost as many courthouses were built in Norway during the next few years. On assignment for the Norwegian government, architects Heinrich Ernst Schrimer and Friederich Wilheln von Hanno developed a series of prison designs that varied in size, for eight to 40 inmates. Bergen prison was based on these designs, with Franz Wilhelm Schiertz as the executing architect. It was built between 1862 and 1867 and was linked to the district courthouse by a footbridge. The prison had 57 cells. It was closed in 1990.

KAVLI – AN INDUSTRIAL FAIRYTALE

The person that Olav Kavli referred to as Madam Jørgensen was probably one of two sisters, Anna or Berentine Jørgensen. They ran a small grocery shop at Nøstegaten 40.

Underpaid and exploited He felt that his luck had improved even more when he was offered a job as a shop and office assistant by an older friend from school, but he was to be greatly disappointed. The shopkeeper paid him NOK 15 a month including board and lodging. This corresponded to approximately NOK 30 a month. The job was clearly underpaid. He was actually paid less than the average wages of a boy in domestic service in Norwegian cities at that time, and they were far from well-paid. It turned out that, in practice, the job was a combination of servant, child-minder, coachman, wood cutter and caretaker. And he rarely worked less than seven days a week. The food was grim and in short supply. He lost weight and could hardly afford any material pleasures, most of the time just an occasional glass of milk and a fruitcake from a nearby shop. One of the owners of this shop, Madame Jørgensen, encouraged Olav to leave his employer who was grossly exploiting him and she advised him to go home. The situation made him despondent and he seriously considered returning home to Fanestranden.3 However, he eventually got sales jobs and did well. One of the retailers he had an agreement with was Lars Nyheim, who came from Hafslo just north of Sogndal. He encouraged Olav to start his own business. Nyheim would be his first customer. The idea excited him and it was not long before he told his employer. To his surprise, the shopkeeper offered him higher pay of NOK 100 per month, a wage increase in cash terms of 567 percent in relation to his original wage! Needless to say, it was tempting, but at the same time it infuriated Olav. His boss had argued that it was not financially feasible to increase his wages, and now he was offering almost seven times his original wages. He now realised just how much he had been exploited. As a result, he made one of the most important decisions he would ever make: to hand in his notice after six months of service and start for himself. At first he traded on commission and supplied retailers with wholesale products. This did not generate much revenue, but Olav was used to a frugal life and managed on what he had. The plan was to expand and make good money – which he would eventually do. This was the prelude to the founding of the Kavli Group.

Cheesemonger Ole Kavli, Hollendergaten 16 On 28 March 1893, two and a half months after his 21st birthday, he was granted a trading licence. It cost NOK 35, taking a large bite out of his savings. However, it proved to be a profitable investment. He registered his business with the Business Register in Bergen the same day. We can read the following, written in his own handwriting: Notification is hereby given that I, Ole Knudsen Kavli of Østre Jernbanegade 4, am engaged in trade here in Bergen under the company name O. Kavli.

Lars Nyheim from Hafslo, who offered to be Olav Kavli’s first customer, owned a grocery shop at Fredrik Meltzers gate 1.

The magistrate announced the registration on 7 April the same year.4 The first shop opened in Hollendergaten 16 near the YMCA, where he had his first lodgings. There were many shops selling dairy and meat products in this area, including Kjøttbasaren (the food hall), which is in a very central location in Bergen. Initially, the company was called Ole Kavli, Olav Kavli’s real name. To start with, the shop functioned as both a retailer and wholesaler, with the latter becoming most important from an early stage. He also travelled to villages around Bergen to sell his products.

2: KAVLI CHEESE

His product range consisted of typical dairy products, i.e. cheeses and butter, in addition to meat products, primarily bacon and sausages, as well as tinned food. However, Olav wanted to focus on the product that he knew most about – cheese! And that is what happened. The business came to be best known as Cheesemonger Ole Kavli (Ostehandler Ole Kavli) and this was the name registered in the City of Bergen’s Business Register. Even though he had acquired expertise in various types of white cheeses, often from abroad, whey cheese from Ytterøen’s cheese factory in Trøndelag became the business’s most important product.5 Olav moved house to Østre Jernbanegate 4, now part of Lars Hilles gate. A lot of the office work was done there because space was limited in the shop. He did not make much money in the first few months, but before long he was in a position to recruit more staff, taking on an office clerk and a combined messenger boy and shop assistant, in addition to himself. This proved to be fruitful. The boy, Arnt Andersen, was both energetic and clever. A lifelong working relationship was formed, but the boss and his assistant always knew their clearly defined roles. Andersen stayed with the company for more than 40 years and was both transport manager and, later, warehouse manager. This type of lifelong commitment became commonplace in the company. His first trusted office clerk, Borghild Dale, came from his home town of Molde. Besides himself, she was the first to be granted ‘powers of procuration’, on 23 August 1901. This meant that she was authorised to sign agreements, pay bills and otherwise commit the company with her signature. She continued in this role until 10 January 1905, when the new office secretary, Jenny Eriksen, took over all responsibility.6

Framework conditions

It was a proud Olav Kavli who received a trading licence on 28 March 1893. This confirmed that he was a commercial trader in this city surrounded by mountains. The prospective merchant was only 21 years old.

The timing of Olav Kavli’s new business venture in Bergen in 1893 could hardly have been better. The city, its trade and industry, as well as the standard of living, were growing rapidly. It established its position as Norway’s second largest city and export capital.7 The population, commerce and industry increased rapidly in and around the city.

KAVLI – AN INDUSTRIAL FAIRYTALE It was no coincidence that Olav Kavli set up business in Hollendergaten. At the end of the 1800s, it had changed from being a distinguished residential street to a place farmers visited to cover their needs. Here, they could find board and lodging and also sell their produce – butter, cheese, bacon and potatoes – to the grocery shop owners in the street. One of them was Olav Kavli.

2: KAVLI CHEESE

The trend was the same across most of Norway. A dairy industry emerged and the consumption of industrially produced cheese increased considerably. The timing was thus ideal in many ways.8 Several things helped to pave the way for success, but the most significant factor was probably Olav Kavli himself.

Figure 2.1

Population of Bergen and Norway 1850–1910 BERGEN

Norway 3 000 000

90 000

Bergen Norway

80 000

Population growth and urbanisation The 19 century was a period of strong population growth. Norway had barely 0.9 million inhabitants when it became independent in 1814, but, when Kavli started his business in 1893, the population had increased to more than two million.9 An increase in agricultural productivity released manpower for overseas and domestic migration, especially to the cities, where more and more people kept arriving. In 1850, Bergen and its environs had 25,100 inhabitants. By the year Kavli started in business, the population had risen to 56,700 and it subsequently rose to 71,500 in 1899.10 This growth not only created large urban markets where there was a demand for farm produce, it also led to more arenas for commerce. Bergen was also the domestic and foreign trading centre for Western, Southern and Northern Norway. th

70 000

2 500 000 2 000 000

60 000 50 000

1 500 000

40 000 1 000 000

30 000 20 000

500 000

10 000 0 1850

-60

-70

-80

-90

1900

-10

Left axis: Population of the Municipality of Bergen in accordance with the city boundaries in 1877. Right axis: Mean population of Norway. Source: Statistics Norway: Historical statistics 1994, pp. 77–80 and Statistics Norway: Populations, population tables relating to the cities and parishes 1855–1910.

Figure 2.2

Cheese and butter price developments in relation to the Norwegian Consumer Price Index 1850–1910 (1850 = 100)

Growth years

1850=100

Despite some setbacks in the economy in the 1880s, the period from 1880 to 1897 saw the strongest growth in purchasing power until then.11 Norwegian wages, adjusted for inflation, increased by 50 percent during the period. The economy’s value creation, expressed as the gross national product per inhabitant, rose by almost 30 percent, with most growth taking place in the last decade.12 Increased purchasing power created a favourable climate for starting a business. In the decade when Kavli was founded, more businesses were started in Bergen than at any other time up to that point. Demand was high and it was relatively easy to get credit. The economy was booming.

160

180

140 120 100 80

Butter White cheese Consumer price index

60 40 20 0 1850

1860

1870

1880

1890

1900

1910

Sources: Ramstad 1982, p. 484 and Grytten 2004, p. 79–93

Changing consumption patterns As purchasing power increased, consumers changed their habits as regards what foodstuffs they wanted to spend their money on. The more affluent people became, the more money they spent on luxury products.13

KAVLI – AN INDUSTRIAL FAIRYTALE

Karl Gustav Patrik de Laval 1845–1913 was a Swedish civil engineer, philosopher and industrialist. Today, he is regarded as one of Sweden’s greatest inventors. He took out a total of 93 machinery patents and started 37 companies in his lifetime. He was issued a patent for a centrifugal milk separator on 20 December 1878. The following year, he was awarded first prize at a number of large exhibitions throughout the western world.

Milk and dairy products became more important than earlier in the 1890s, and they increased substantially as a proportion of the average household budget between 1800 and 1910. Quality cheese went from being an uncommon product to everyday food for most people. Swiss cheese producers were given grants to come to Norway to teach Norwegians cheese-making techniques in the 1800s, and a number of agricultural colleges were established, especially by the Haugeans – a movement that Olav Kavli knew well. Knowledge was increasing rapidly at the same time as a transformation was taking place from subsistence farming to commercial agriculture, with the emphasis on Norwegian-produced milk and dairy products. Cheese, butter and cream were ‘in’ products in the 1890s. One reason for this was that they were seen as very nutritious. Olav Kavli had invested in a growing market.

Dairy cooperatives Another reason for the increase in the consumption of cheese and milk was that prices fell relative to other food prices. This was largely due to more efficient production processes than before, when cheese was made by hand on farms. The Swedish Karl Gustav Laval’s milk separator was also introduced. It increased the efficiency of dairies from the 1870s onwards. The first Norwegian dairy cooperative was founded in Tolga in Eastern Norway in 1858, and there were 845 dairies in the country in 1900.14 There are several explanations for this impressive increase. One important factor was that industrial production methods led to large economies of scale. The price of milk and cheese peaked in 1857 after which it fell by as much as a fifth until 1910, twice as big a fall as the general price level.15 Demand for butter increased so much, however, that the price remained high. The framework conditions were as good as they could possibly be when Olav Kavli started his business. The population and the purchasing power increased rapidly, consumer habits changed in favour of dairy and meat products, and industrial production methods resulted in a favourable price development. Olav Kavli was certainly in the right place at the right time when he started his business in Bergen in 1893.

Chapter 3

IN BUSINESS Starting a family Kavli’s business expanded right from the start. During this period, Olav Kavli also met midwife Anna Magdalene Michelsen. They married on 15 April 1895. He was 22 and she was 32. They had two children, Knut (a son) born on 10 April 1896 and Signe (a daughter) born on 30 June 1899. We know little about their marriage. However, their relationship became strained and they lived increasingly separate lives until they divorced in 1917. His wife was only active in the company for a few years, during which she had power of procuration. Anne died on 20 December 1941. Their son, Knut, would later become his father’s right-hand, but Signe was kept out of the business. She married ship owner Erling Thofte, and spent most of her life in America.

New premises While white cheeses had become cheaper due to more efficient production processes, the price of whey cheese, which Kavli soled most, was rising. This was due to a strong increase in demand, and consequently the business thrived. Through business trips to more and more areas in Western and Central Norway, the company built up a significant network of customers. The premises in Hollendergaten soon became too small and the company planned to move to the ‘real’ centre of the delicatessen trade in Bergen, the Kjøttbasaren food hall between Bryggen and Torvet, a very central location1. However, the food hall was being refurbished, and renting premises there was very lucrative. They therefore had to wait until premises became available and the company’s finances were good enough to pay the rent. Magnus Barfots gate 31 therefore became the business’s temporary premises. The family lived in the same building. In 1900, the company was registered in the Business Register under the new address, and it changed its name from Ole Kavli to Olav Kavli at the same time.2

In 1899, the small Kavli family visited the photographic studio of the Swedish brothers Josef and Benjamin Larm in Småstrandgaten 7 in Bergen.

KAVLI – AN INDUSTRIAL FAIRYTALE

It was still permitted to sell some products on the pavement in Norway in the 1890s, for example potatoes. Otherwise, all products had to be sold from suitable tables. A couple of sacks of potatoes, scales, a place in front of the Kjøttbasaren Food Hall, a customer with a basket and a bonnet – the perfect setting for a sale. Olav Kavli had an office in the Finnegården building (background) from 1901. The locals called it ‘Olsens Bazar’ (Olsen’s food hall) after the builder and merchant Johan Wilhelm Olsen. The building housed a number of small trading stalls with a rich selection of articles for sale.

Finally, in 1901, they were able to move into the Kjøttbasaren food hall and it started operating under the name O. Kavli. Their office was in the neighbouring building, Finnegården. The Kjøttbasaren food hall, which was a brick building and therefore cool, was ideal for storing dairy and meat products. The range could now be substantially increased. Advertisements in the city’s newspapers and magazines from the time show that the company advertised several types of white and whey cheeses, as well as a wide selection of cured meat sausages and high-quality tinned foods. The business also sold Norwegian, American, Danish and Dutch bacon, ham and other high-quality meat products, fresh, salted and smoked.3 The basis for rapid expansion had now been laid in earnest through the acquisition of satisfactory premises and first-class products. The product range consisted of gourmet produce for that era. Local historian Kåre Fasting reports that the business recorded a profit for the year 1900 of NOK 10,000 before tax and the owner’s salary. In 1902, it was NOK 14,000.4 This corresponded to between 11 and 16 times a normal annual income in Norway at that time – impressive for such a small company.

3: IN BUSINESS

Kavli in Kjøttbasaren The Kjøttbasaren Food Hall or to give it its official name ‘Byens Bazar’ (Bergen’s food hall) was completed in July 1877. It was a modern sales hall with 71 stalls. The citizens of Bergen could purchase everything they needed for their daily requirements there. Olav Kavli acquired a storehouse in the food hall building in 1901.

► Inside the food hall, the stalls were close together and separated by iron gratings that were closed and locked after business hours.

Olav Kavli was quick to realise the power of advertising. The product selection in this advertisement is impressive: cured sausages, tinned foods, bacon, tinned ham, smoked or nonsmoked picnic ham and cheeses. If you shopped at Kavli’s you got what you came for.

KAVLI – AN INDUSTRIAL FAIRYTALE

Recession Rough waters lay ahead, however. The economy went into recession from the summer of 1899 and thereafter a financial meltdown, called the Kristiania-crisis. It lasted until 1905.5 It hit the big towns and cities hardest. They experienced a financial crisis as well as a property crash. Value creation and the public’s purchasing power fell. Business and industry experienced a wave of bankruptcies. However, Kavli emerged unscathed from these crisis years, despite considerable problems.

For Olav Kavli it was natural that his first business trip in 1893 would be to Ytre Arna, a village that had grown up around the textile factory founded by Peter Jebsen in 1846. The village had a population of 315 in 1855, which had increased to 1,213 by 1893. It had two dominating shops. One of them, Arne Forbruksforening (consumer association), founded in 1867, is considered to be Norway’s first cooperative. The cooperative’s competitor was Gudmund Aasgaard, who started a larger business in 1875. Olav Kavli offered his products to the consumer association’s manager, Andreas Garnes, and also to Andreas Eide, who was the manager of Aasgaard’s store.

Stagnation The crisis had a ripple effect. The year 1898 started extremely well, but in the autumn there were definite signs that the situation was deteriorating. The number of bankruptcies in Norway increased threefold and investments fell in most years during the period 1900–1905.6 Several commercial banks had to close down after huge losses on loans granted to property speculation.

Kavli’s response to the crisis While the crisis also affected Kavli, the company responded to the challenges with a growth strategy. The business’s sales were slower than expected and employees were not always paid on time, but, to compensate for the loss of sales revenues in Bergen, Olav increased his business trips in the surrounding area. Through affordable quality products, furnishing generous credit to local retailers and personal trust, the company increased its revenues. Cost-cutting measures were also implemented, such as a wage freeze, renegotiation of the rent paid to the Kjøttbasaren food hall, as well as moving the office from Finnegården to Bratten at Tyskebryggen in 1905.7 Olav Kavli had a strong desire to expand and he had the ability to do so. The number of staff employed by the company increased at a time when many others were being laid off. He saw opportunities where few people did. Many of his business ideas failed, but some of them succeeded with a vengeance.

Business trips He spent a lot of time travelling on business, and there were a number of reasons for this. The most important was perhaps his love of adventure. He read a lot of travel literature and was very interested in foreign cultures, geography and history. His business trips were often a combination of tourism, observation, sales and marketing.8 He was good at combining business with pleasure in this way. He made his first business trip as early as in 1893, the same year the company was founded. He only travelled a short distance from Bergen to the small industrial town of Ytre Arna, where Peter Jebsen started one of Norway’s first hosiery and textile mills

3: IN BUSINESS

under the name Arne Fabrikker. His trips gradually became longer. First he travelled inland to the fjord villages of Hordaland, such as Kvam, Øystese and Dale, then out to the islands of Hordaland, such as Sotra, Askøy and Øygarden. Customers paid in cash and the trips proved to be extremely profitable. He later visited Førde, Florø, Måløy, Stord, Haugesund and Stavanger.9 Initially, the company sold quite a lot directly to consumers. Olav would set up a stall in the market square or other central location where he sold sausages, ham, tinned foods and cheese. Later on, he switched to wholesale. When the Kristiania crisis hit in 1899, he had been selling his wares from Kristiansand in the south to Trondheim in the north. During the crisis, he extended his route to include the whole area from Kristiania to Kirkenes, calling at most of the coastal towns and cities of any size. He presented his products to wholesalers and retailers, and built up a network of contacts who acted as agents. His cheese range was impressive for that time. It consisted of both imported and Norwegian cheeses, and he experimented with storage conditions and additives.

Britain It was only a matter of time before he made his first trip abroad. He considered four markets: Denmark, France, Great Britain and Sweden. Since the British market was the largest, it was the obvious choice. He took the first targeted steps in 1903.10 Through correspondence he came into contact with British importers and wholesalers of dairy products. He was invited to Britain to present his products. The following year was the right time to travel to the UK and try his luck. With a combination of Puritan frugality and a sense of adventure, he found the perfect solution: a free trip on a steamer from Bergen to Newcastle. He even persuaded the ship’s captain, Mr. Ellertsen, to take some cheese samples along to promote Norwegian exports in the hope of attracting more and larger freight assignments.

In 1903, Kavli made a trip to England on the ‘Venus’, which belonged to the steamer company Det Bergenske Damskibsselskap.

KAVLI – AN INDUSTRIAL FAIRYTALE

King’s Cross railway station in London as it was in 1904, when Olav Kavli tried to make his first sales to the British market. It was here the crestfallen young Norwegian had to ask the stationmaster for a ticket to Newcastle in return for his gold watch. The railway station was designed by architect Lewis Cubbett and built in 1851–52. It has retained its original design and serves as the terminus for mainline Edinburgh-bound trains.

After arriving slightly late in Newcastle, the trip continued to London by train. Norwegian whey cheese was presented to several large trading houses. Their managers were very polite and showed considerable interest in the range. He formed many contacts and his collection of business cards grew, but, of a dozen interested parties, no one dared order such specialised cheese for the British market. He stayed longer than expected in the hope of getting the cheese onto the gourmet market, but to no avail. Because of this, Olav concentrated more on exploring London, and ended up spending nearly all his cash. There was no time to arrange a bank transfer from Norway, so he had no other choice but to go to King’s Cross railway station and request a meeting with the station master. Being the entrepreneur that he was, Olav offered to pawn his gold watch for a ticket to Newcastle. The station master was friendly and understanding, and like many other people he probably thought Olav was just a poor innocent soul from a small coastal Norwegian village. He patted Olav on the shoulder and said ‘God bless you son. You can call here tomorrow morning and I will help you.’ And that is precisely what he did. With a kind smile and warm heart, the station master gave him a ticket at his own expense.11

3: IN BUSINESS

At home in Norway, he sent more product samples to England, although no customers were won over. The trip had given Olav insight into the British market, and he was impressed by the friendliness and politeness he found, and, in particular, the compassion shown by the station master at King’s Cross. London had been a once-in-alifetime experience, and he therefore believed the trip to have been a good investment. He carried with him a dream of conquering the British market, which he would go on to do – 25 years later, in 1929.

Sweden After the fruitless efforts in Great Britain, Sweden was the next market the company hoped to export cheese to. Whey cheese would probably suit the Swedish palate and tastes. It had to be durable and reasonable to purchase and ship. In spring 1905, several product samples were sent to Stockholm, Gothenburg, Malmö and Jönköping. The feedback was positive and the Swedish market was growing strongly. Olav travelled by boat from Bergen to Kristiania and then by train to Stockholm, where he arrived on 2 June. Several Swedish wholesalers and retailers showed considerable interest in the special Norwegian cheese. His timing was not ideal, however. On 7 June, the Norwegian Parliament voted unanimously in favour of ending the union with Sweden. The Swedes were furious and, in Stockholm, 50,000 people took part in a protest march against Norway and in support of the Swedish royal family. Olav also participated in the march to honour the Swedish King, who he had nothing against. However, as the evening progressed, it developed into a protest against Norway, which he wanted no part of. He tried to sympathise with Sweden while also supporting Norway’s demand for its own king and foreign service. It was his downfall. Two contracts for a trial purchase of cheese were cancelled and almost all contact with Swedish merchants was broken off. Olav described the events as follows: … when I returned to Stockholm and met my Swedish friends, they showed their respect in a different way. They said it was beneath them to be in the company of a Norwegian, to which I responded “If you do not have the slightest understanding for Norway’s lawful rights, then we do not need to be friends.“ I thus said my goodbyes to Sweden and left for Denmark…12

King Oscar II (1829–1907). Olav Kavli’s visit to Stockholm in June 1905 was a huge failure. Momentous political events led to the cancellation of contracts, and access to the Swedish market became impossible.

KAVLI – AN INDUSTRIAL FAIRYTALE

King Oscar II and Norway Ever since the time of King Carl XIII, the Swedish kings had tried their best to show Norwegians that they were their kings as well. King Carl Johan took the initiative to build the royal palace in Christiania, which was completed in 1848 (four years after his death). It was used by King Oscar I, his son. King Oscar II learnt to read and write Norwegian already as a young crown prince. Like his brother King Carl XV and his father and grandfather, he was crowned in the Nidaros Cathedral in Trondheim when he acceded to the throne in 1872. King Oscar II had been the monarch for almost 33 years in 1905 and it preyed heavily on his mind when the union started to fall apart. The Swedish Royal Family was divided in its views on Norway. Already in 1895, Crown Prince Gustav had proposed a war against Norway to be followed up by a military coup. The Swedish foreign minister supported the plan. Queen Sophie, however, was a strong opponent of military rule, as was the royal couple’s youngest son, Eugen. He had a number of Norwegian friends and considered war against Sweden’s brother people to be insanity. King Oscar II could hardly have been uninfluenced by their views.

The crowning of King Oscar II in the Nidaros Cathedral in Trondheim on 18 July 1873.

The royal palace in Christiania.

3: IN BUSINESS

Denmark If Norwegians had become unpopular in Sweden after the dissolution of the union, they certainly became popular in Denmark in return. And when, later that year, Norway chose a Danish prince to be the new Norwegian king, their popularity rose even further. Norwegian cheese was well-received, and it was relatively cheap on the Danish market. Denmark was initially considered to be a much harder market to break into than the Swedish market. The dairy and deli food industry was large and cost-efficient, with a product range that far exceeded Norway’s. Kavli was positively received. Many people were interested, and he signed several contracts on good terms. The profit margin could be twice as high as he was used to in Norway. In addition to contracts for cheese, Kavli also won export contracts for Norwegian tinned fish. As a result, the company became an agent for the export of tinned fish products from Ålesund to Denmark. Through his contacts, he also promoted exports of dried fish.13 He did not charge commission for this, but built up a good reputation, a network and goodwill. From 1906 the company exported cheese, tinned fish products and smaller quantities of delicatessen products to all the largest cities in Denmark: Copenhagen, Århus, Ålborg and Odense.14

Olav Kavli experienced failure in Stockholm, but success in Copenhagen. In addition to cheese, Olav Kavli negotiated agreements for the export of tinned fish products and clipfish to Denmark. This is what Copenhagen looked like when Olav Kavli visited the city for the first time. The church spires tower above the surrounding buildings. The Holmen Bridge across the canal leads to Christiansborg and the royal palace square.

KAVLI – AN INDUSTRIAL FAIRYTALE

It was lively in the mountains during the building of the Bergen Railway. The 1900 census shows that there were 524 winter residents on the stretch from Upsete–Kleven: 394 men, 75 women and 55 children. Most of them came from Aurland and Voss. Approx. 15% of them were Swedish. They were nicknamed ‘rallere’ (navvies) and built the Rallarvegen, or Navvies’ Road. They were the most experienced rock blasters, and were likely to become foremen and managers. During the summer, the workforce at least doubled. The picture above shows navvies outside the Haversting tunnel.

The Bergen Railway Following his successful entry into the Danish market, Olav Kavli concentrated more on the Norwegian market for a while, and responsibility for Denmark was left to trusted colleagues. He sent staff to dairies and cheese factories to learn more about the production of cheese. Olav was among the keenest to learn. He studied cheese production at producers in Trøndelag and Jæren. Increased knowledge resulted in a wider range. This included several types of Gouda, Edam, spiced and whey cheeses. Gradually, the business came to offer more than one hundred different types of cheeses and brands from both Norway and abroad.15 The railway line between Oslo and Bergen was the most costly transport investment ever up to that point in Norway. Construction started in 1901, and it was opened on 27 November 1909. The railway line was 493 km long. The tracks were difficult to lay and it took six years to blast through the solid rock in the 113 tunnels. Finse became northern Europe’s highest railway station at 1,222 metres above sea level. A total of thirty-nine stations were built.16

3: IN BUSINESS

Building the mountain railway required extensive resources, and thousands of workers were mobilised. They needed provisions, and food was especially important. Olav Kavli spotted the opportunity and travelled to the mountains to meet the workers face to face. Sometimes he travelled by horse and carriage on the Rallarvegen Road (the Navviesâ&#x20AC;&#x2122; Road), and other times on skis.17 He was accepted as one of them and gained immense trust, and sales rocketed. Durable products, especially whey cheese, tinned products and some cured meats sold in abundance, and the deliveries led to rapid expansion in turnover. While the profit margin was modest, the large volume meant high profits in any case. Deliveries to the builders of Bergen Railway looked promising for business, and this resulted in the company taking on new staff.

With the summer came travellers, and up to 100 horses and carters took part in transporting people and goods from FlĂĽm via Myrdal to Hallingskeid and Finse. There were four trading stalls in Myrdal to cater for the needs of all these people. The navviesâ&#x20AC;&#x2122; cooks were strong women, and it was with them that Olav Kavli won most favour. He was a country boy and spoke their language. The mountain railway line was dependent on makeshift solutions during its first few years of operation.

KAVLI – AN INDUSTRIAL FAIRYTALE

America Olav Kavli had long dreamed of travelling to America, and now he saw a potential market on the other side of the Atlantic. Approximately 830,000 Norwegians migrated to North America between 1822 and 1930, and by the time Kavli travelled there the number of descendants of Norwegian emigrants probably equalled the population of Norway.18 It was obvious that traditional Norwegian foodstuffs, including whey cheese, cured meats and tinned fish products, could be sold on the American market. Goat’s cheese and old cheese (gammelost) were already being exported to a certain extent, but only in small quantities of varying quality. One of the biggest problems was poor packaging, which resulted in gross discolouring of perishable products. With reference to this, Olav is supposed to have jokingly said: Almost all the Norwegian cheese exported to America turned out to be a ‘type’ of old cheese when it eventually arrived at its destination in fragile packaging. At least we can boast about the range of different types of old cheese, which seem more extensive over there than here at home.19

The target area was primarily the northern part of the American Midwest, i.e. Minnesota, North and South Dakota, where many Norwegians lived, and also New York, where the concentration of people of Norwegian descent was highest. In one week, he sold goat’s cheese, whey cheese, Edam cheese, Gouda cheese and spiced cheese for more than NOK 10,000 to three Norwegian-American companies in Minneapolis and St. Paul. They also enquired about Norwegian reindeer meat, elk, red venison and tinned fish products.20

This undated photograph from America is in Kavli’s archives. It probably shows employees of a company that imported Norwegian tinned foods. As we see from the wall on the right, Bjelland products from Stavanger were popular. ‘National Anchovis’ it says under Bjelland’s emblem. Symptomatic for the times, the women are standing while the man (the boss) is sitting.

3: IN BUSINESS

Gatherings where Norwegian was spoken were an important means of communicating with the Norwegian market in the USA. In accordance with American culture, Olav became a devout church attender and he was asked on several occasions to speak at services about his home country and products. Since he had inherited substantial Bible knowledge from home, it was not difficult to incorporate the Word of God. With his charm and great knowledge, Kavli became a natural focal point at after-church refreshments. Here, he met business people who were interested in imports from the ‘old’ country. It all started in a Norwegian parish in Minneapolis, where Pastor Tvedt practically ordered him up to the pulpit. He began his speech with a biblical quote from the First Book of Samuel, Chapter 17, Verse 17: 21 And Jesse said unto David his son, Take now for thy brethren an ephah of this parched corn, and these ten loaves, and run to the camp to thy brethren; and carry these ten cheeses unto the captain of their thousand, and look how thy brethren fare, and take their pledge.

He then gave them news from Norway and talked about Norwegian nature, history, spirituality and, last but not least, cheese. According to himself, he did so until the congregation was moved to tears.22

This is what Minneapolis looked like when Olav Kavli entered the pulpit in one of the city’s churches to talk about Norway and how delicious Norwegian cheese was. The contrast between Molde (which he left seventeen years earlier) and the capital of Minnesota could not have been greater. Most citizens of Minneapolis are of German or Scandinavian descent. More Norwegian immigrants ended up in Minnesota than anywhere else in the USA. Today, 17% of the state’s citizens consider themselves to be Norwegian-Americans.

KAVLI – AN INDUSTRIAL FAIRYTALE

B. Westergaard & Co.

Børge Westergaard 1884–1953

Børge Pedersen Westergaard was born in Stavanger on 21 September 1884. Like so many other young Norwegians, he saw a future on the other side of the Atlantic, and in the summer of 1902, at the age of seventeen, he emigrated to the USA. On 12 June 1902, he registered on Ellis Island where he specified that he intended to apply for American citizenship to engage in commercial business. He was granted citizenship on 16 April 1914. In the meantime, he had been back in Norway to find a wife and start a family. His bride was Ellen Marie Andersdatter, also from Stavanger. Her name and the names of their two children, Elenore B. Westergaard and John Albert Westergaard, are listed on the Bergenfjord’s passenger list for the voyage from Bergen on 10 November 1914. They were heading for New York to meet their husband and father. Awaiting them was their home in 10 Cranberry Street, which was now ready. Børge (called Borge in America) Westergaard founded an import business for Scandinavian food products and, as the years passed, he became Kavli’s general agent for the east coast and mid-west. He also developed a close and personal friendship with Olav Kavli (see pages 136–137). The company no longer exists.

3: IN BUSINESS

Alliance with Westergaard His most important business contact in America was established in New York. It was where he met a young Norwegian, Børge Westergaard, who imported cheese from Norway. His premises were rather dilapidated and highlighted the problems of exporting cheese. Quantities were small, packaging was poor and profits were low. Westergaard had practically no capital or credit and he shipped the products as cheaply as possible. A lot of the cheese was infested with mould on the outside when it arrived, and he had to rub it off and dry the cheese before it was sold to Norwegians in the big city. These two adventurers got on famously. Westergaard enjoyed great trust in the Kavli system. He was allowed to purchase on credit at competitive prices. He became the largest customer in the whole of North America, and the general agent for the East Coast and Midwest of America. The contract, signed in Brooklyn on 27 April 1922, states that Westergaard was to receive two percent commission on all cheese products and on tinned fish roe that Kavli was going to sell in the area.23

Olaf Runshaug 1885–1967 Olav Kavli’s success in Norwegian circles in the US did not go unnoticed. In this article, in the newspaper Nationen in January 1922, he is described as a pioneer and leader in his field. Kavli’s colleague Olaf Runshaug is also mentioned. He also started out with a small delicatessen business. In 1905, after two years in business, he started wholesale trading and soon became one of the leading players in Bergen. In 1922, he exported cheese successfully to America.

KAVLI – AN INDUSTRIAL FAIRYTALE

By 1905, the company had outgrown its premises in Finnegården and the Kjøttbasaren Food Hall. Olav Kavli found new premises in the recently built commercial building ‘Bratten’ at Tyskebryggen 7. The company remained there until completion of the Kavligården building in Lodin Lepps gate in 1918. Bratten, designed by architect Edvard Madsen, was named after an old twin building with the same name. In 1296, it was referred to as ‘Brattin’.

In 1910, Margrethe Stigum’s address was Allehelgens gate. Her occupation was cashier. In 1914, Olav Kavli’s residential address was Welhavens gate 24 in the Møhlenpris area.

Back in Norway, trips were made to the Norwegian dairies. The objective was to secure a good agreement for standard cheese products that were durable and well-packaged. Kavli was invited to a number of dairies to hold lectures on the American market, marketing, packaging and the quality of products. These measures proved to be successful and exports of various types of cheese, particularly whey cheese, took off. In fact, exports increased so much that the Norwegian Ministry of Agriculture regarded it as a potential future growth industry. At the same time, cheese prices were developing in the right direction. As a result, Kavli’s revenues and profits grew. The expansion also meant that the company had to move into new and larger office premises in Bratten in Bergen. Olav lived in the Møhlenpris area and later at Minde, which was on the outskirts of the city at that time. The business was now managed by professional staff with commercial education and experience. Female office staff still had great influence. In September, 1909, Kitty Sannæs was granted powers of procuration. This was also extended to apply to Margrethe Stigum from October the following year. It was not until May 1911 that the first man was shown this kind of trust. The person concerned was Sigurd Martin Martinsen, who became the company’s finance and office manager, a safe anchor in a visionary enterprise.24 This role was soon transferred to Hans Askeland, who was with the company for 69 years. He started as a 16-year-old apprentice in 1911 and, while working his way up, he took his middle school exams. He proved to be a calm, diligent and talented leader, who became office manager before he turned nineteen and later became a director of the company in Bergen.25

Chapter 4

EXPANSION IN ALL DIRECTIONS 1912–1920 Many ideas at one time Following his trip to America in 1910, Olav Kavli’s main concern was ‘expansion’, which proved go in several directions. The product range was extended and the company started to expand into new areas. In the space of eight years, the company established its own canning factory, a woollen mill, a crate factory, a furniture factory and a sawmill, as well as engaging in pig breeding and farming. It also took over three dairies and became involved in the hotel trade. It has been claimed that the Kavli Group employed more than 200 people in 1918, but, according to our sources, this figure must have been 350 by the summer of 1920. We have included all the undertakings in which Kavli had a minor or major interest in this figure.1 It was no coincidence that this huge expansion took place during precisely this period. From 1906 to 1916, the Norwegian economy was once again growing strongly. There was another boom from the end of the war on 11 November 1918 until late summer 1920. Money was abundant and there was a great desire to invest and a hunger for adventure, both at home and abroad.2 The economic growth was the best the Norwegian economy had ever experienced, and inflation was at its highest since the Napoleonic wars in the early 1800s. The boom was due to an expansionary wartime monetary policy combined with food shortages. This led to an accumulation of money. Interest rates were low while inflation was high, which resulted in real interest rates plummeting to minus thirty per cent, at the same time as the money supply increased many times over. It was more profitable to borrow money and invest it than to save. During the war, investment opportunities were limited and money was often placed in securities, but, after the war, money was invested for other purposes. In these conditions, Norwegian businessmen had a strong desire to invest, and a hunger for adventure. Olav Kavli was one of them.

KAVLI – AN INDUSTRIAL FAIRYTALE

TRADE MARK FOR CHEESE

Product development

Giuseppe Garibaldi 1807–1882 The cheese named after the Italian freedom fighter and hero, Guiseppe Garibaldi, was a great success with Italian-Americans.

Product development became an important part of the expansion strategy, while Kavli was also willing to take substantial risk. In spring 1911, the company was offered a 15-tonne surplus batch of old cheese at a 50 percent discount. At that time, cold storage facilities were not commonplace and the cheese began to ferment. Ammoniac was produced during the fermenting process, which was also a calculated risk. A small amount of cheese fermentation gave additional flavour, and this was thought to appeal to more exotic markets than Norway. They tried conserving the cheese by packing it in sealed barrels and burying them one metre below the ground in the hope that the fermentation process would stop in an environment that was cooler than the air temperature. The cheese was left there for half a year. It turned out that the fermentation process had continued, but at a slower rate than before. This type of well-aged and fermented cheese was not marketable in Norway. After pressure from Olav Kavli, the company’s experts agreed that it was worth trying to preserve the cheese by brushing and drying it. Following this, it would be covered in wax in suitable portions. It was given an exclusive wrapping and exported to the USA under the exotic name of Garibaldi. It was named after Giuseppe Garibaldi (1807-1882), a popular Italian hero, politician and successful military commander, who was a central figure in the unification of Italy as a sovereign nation in the mid-1800s.3 It was hoped that the cheese would sell well among Americans with Italian tastes, of whom there were many in New York. The company was prepared for a considerable loss, but it never happened. The cheese became a remarkable sales success, and several requests were received for new batches. Some were exported, but it proved difficult to replicate the same flavour. New attempts at burying old cheese were not as successful. Consequently, it was decided not to start permanent production of Garibaldi cheese.4 Another product development project was to make brown cheese attractive to Americans of non-Norwegian descent. The company tried to sell it as caramelised

4: EXPANSION IN ALL DIRECTIONS

cheese in small packages. Several experiments were made with various types of packaging to help make the product successful, but to no avail. It was then decided to cut the cheese into small cubes and call it Norwegian Caramels in the Midwest and Cheese Caramels elsewhere in the US. These were sold in grocery and sweet shops. The latter actually sold more, although they were never really a success.

Establishment of a canning factory The next project involved tinned products. The company’s management largely agreed that profits on tinned products could be increased if the company was involved in the manufacturing process. The canning industry was growing rapidly in Western Norway, and the company therefore decided to establish its own canning factory. Andreas Sæbjørnsen was a central figure in this connection. He became part of the Kavli family through his sister’s marriage to Fredrik Ziegler Kavli, Olav Kavli’s brother.5 They wanted the factory to be close to the big fishing grounds to give them guaranteed access to fresh ingredients and a well-qualified workforce. They were attracted to Steinshamn, a fishing village on Harøy, out at the ocean’s edge on the border between Sunnmøre and Romsdal. A seam-folding machine and motor were purchased, and experiments started in 1911. The first experiment was on fish roe. The preservation of roe made the product dry and tasteless or alternately gave it a strong salty taste. Kavli and Sæbjørnsen boiled cod fish backs to obtain stock and poured it over the roe. Then they sealed the tins. The roe absorbed the stock, and it became moist and full of flavour.

TRADE MARK FOR CANNED GOODS

‘Knutbua’ (the building on the right) where Olav Kavli and Andreas Sæbjørnsen started production of tinned fish products. ‘Knutbua’ burnt down in 1918.

KAVLI – AN INDUSTRIAL FAIRYTALE

The factory opened for ordinary operations in 1912. It was next to an abandoned wharfside warehouse called Knutbua. Workers were hired, most of them women. The product range grew rapidly, especially in 1917.6 Later, the Steinshamn factory produced different types of tinned fish products, such as sardines, mackerel, fish balls, haddock fish cakes, cod tongues and fish stock, as well as fish roe. Bouillon was also produced, in addition to meatballs, meat cakes, pickles, pâtés and sandwich toppings.

The world’s first caviar spread

The facility in Steinshamn was quickly rebuilt after the fire in 1918. After the production of tinned food stopped, the facilities were used as a whaling station by the Sæbjørnsen brothers, Andreas, Karl and Bjørn.

The most important innovation by far was caviar spread made from cod roe, cod stock, tomatopaste, sugar, salt and water which is considered to be the world’s first caviar spread.7 The production at the canning factory was successful and of such high quality that many of the products were sold at 10–20 percent above market price. The factory received a silver medal for its products at the jubilee exhibition in Oslo in 1914. O. Kavli quickly expanded as a company, but its cash flow gradually became a problem. A good solution at this point was to allow Andreas Sæbjørnsen to take a 50 percent interest in the canning factory. The factory was therefore named Kavli & Sæbjørnsens Hermetikfabrik. Its registered address was in the nearby town Ålesund, which was in the process of taking over Bergen’s position as Norway’s most important fishing port. Andreas Sæbjørnsen became general manager while Olav Kavli was chair of the board.

4: EXPANSION IN ALL DIRECTIONS

Members of the Kavli and Sæbjørnsen Families in Steinshamn. Back row: Ole Einar Sæbjørnsen and Andreas Sæbjørnsen (first and second from the left). Olav Kavli (fourth from the left), Fredrik Kavli (sixth from the left) and Koba Kavli (seventh from the left). Front: Anna Sæbjørnsen (first on the left) and a young Knut Kavli (far right).

Success was short-lived, however. Production came to a temporary halt in 1918 when the plant burned down. Prior to that, trading conditions had gone through a bad period with a strong fall in exports to Europe during the war.8 The factory was rebuilt in modern premises after the fire, and production resumed. However, Norwegian fish products were boycotted by the Mediterranean wine-producing countries following Norway’s ban on the import of strong alcohol in 1919. The factory closed down completely during Kavli’s bankruptcy in May/June 1924. Instead, a whaling station was built by the three Sæbjørnsen brothers, Andreas, Karl and Bjørn, as a replacement for the canning factory.9

The Romsdal Budstikke newspaper carried a long article about the grand jubilee exhibition in Kristiania on 18 June 1914. It only had complimentary things to say about Kavli and Sæbjørnsen’s canning factory in Steinshamn.

49 3

KAVLI – AN INDUSTRIAL FAIRYTALE

Sogndal Dairy (the large building with a chimney) was leased by Olav Kavli in 1918. He experimented with different recipes to develop long-life cheese spreads. In 1920, the leasehold became a tenancy.

Dairy operations Cheese and dairy products still remained the company’s main focus, and Kavli pursued his idea of opening his own dairy for cheese, butter, milk and cream production. As a result, the company decided to look for dairies that were for sale. Because of overproduction of dairy products in Norway, many dairies struggled during the first decades of the 1900s. There were therefore several candidates on the market. While they were looking at different options, an opportunity arose to take over the leasehold for the dairy Fjeldbygdens Meieri at Sviland near Sandnes in Rogaland. This would entail lower investment and capital costs. The dairy started operations in 1898 at time when a nationwide boom in private dairy start-ups swept the country. By 1914, the equipment was both worn out and old, and the premises were old-fashioned.10 Kavli invested in the buildings and in new machinery, which resulted in less profit and higher capital costs than originally anticipated. From 1918, Kavli also leased the dairy Sogndal Meieri in Sogn. It was under threat of cutbacks and possible closure, so the expense was definitely feasible. Here, extensive experiments were conducted on product development in the cheese-making plant. Olav Kavli was very keen to develop durable cheese spreads. This would satisfy a demand and make the logistics much easier. He therefore remained in Sogndal for a prolonged period to participate in the experiments.11

Kavli’s most important product in Sogndal was old cheese (gammelost).

4: EXPANSION IN ALL DIRECTIONS

From 1920, the leasehold was changed to a tenancy. The dairy was initially a cooperative formed by 72 farmers in 1913, and it was the largest dairy in the area. The factory building itself was a three-storey stone building with a tall factory chimney that towered over the village. The most important products were ‘old cheese’ (gammelost) and later spiced cheese (nøkkelost). The production building was in operation until 1955 when a new one was built. Even though Kavli withdrew in the 1920s, it remained in operation until 1996 when the dairy was converted into student accommodation.

Woollen mill In 1917, Kavli was also asked to purchase Sogn’s Uldspinderi og Fargeri (dye works and wool spinners) with an attached power plant that supplied the village with electricity from 1913 to 1944. The factory was built by the Scot Wilfred Burton Rowley Kennedy in 1887 on the former premises of Sogndal Tændstikfabrik (match factory) by the Sogndal river. The factory has had many owners since then. The machinery was old and profits low, and Kavli needed partners to fully finance the acquisition. He managed to bring in three other investors: industrialist and merchant Christian Mohn, and ship-owners Peder Kleppe and Henrik Østervold. They negotiated a price of NOK 200,000.12 Converted to the current (2013) purchasing power of the Norwegian krone, this corresponds to NOK 4.5 million.13 Investments of even higher value in machinery and buildings came on top of this. The purchase price amounted to more than 63 normal annual salaries for that era.14 What attracted Olav Kavli most was the potential of the power plant, in addition to the profits linked to the manufacturing of ‘shoddy goods’, i.e. replacement products of somewhat poorer quality than the originals, often vaste material from other products.

Peder Kleppe 1872–1969

Henrik Østervold 1878–1957 Peder Kleppe and Henrik Østervold were two of the ‘new’ men in Bergen shipping circles. They both came from the country, from Sund and Austevoll, and had settled in Bergen as shipmasters. They both sailed for Adolph Halvorsen, who was involved in North Sea shipping and the banana trade with the West Indies. They were friends and colleagues. 1915 and 1916 provided good opportunities for expansion. Kleppe and Østervold grasped this opportunity and started their careers as shipowners. Their close relationship with Olav Kavli led to the acquisition of office premises in the Kavligården building when it was completed. Their telephone number also went through Kavli’s switchboard. Østervold also got himself noticed when he won a gold medal for sailing at the Belgium Olympics in 1920 with the 12-metre boat ‘Atalante’.

Along with Mohn, Kleppe and Østervold, Olav Kavli aquired Sogn Uldspinderi og Fargeri (a woollen spinners and dyers) in 1917.

KAVLI – AN INDUSTRIAL FAIRYTALE

Following the acquisition, the woollen mill was called AS Sognefjorden Uldvarefabrik. Operations were quickly resumed in 1918, and they proved to be a great success despite the post-war depression. ‘Shoddy’ goods, new and highly productive machinery, and a relatively low-cost and flexible workforce saved the mill. When Kavli went bankrupt in the summer of 1924, the shares in the factory were sold. Operations continued until 1972 and, in 1975, the premises were taken over by N. H. Lerums Saftfabrikk AS (a soft drink company), and later by Sogn og Fjordane University College in 1995.14

Other dealings It did not stop there. The money surplus generated by the war needed to find areas to invest in. It did not pay to put money in the bank because interest rates were low and inflation high.16 Olav had not finished with Sogn and he invested just as much in a sawmill, which was called Kavli & Jørgensens Sagbruk. After that, it was not unnatural to invest in a crate factory, which manufactured crates for the canning factory, the woollen mill and the dairies.17 He also became involved in farming, primarily pig breeding. In addition to the aforementioned enterprises, he purchased shares in a number of companies, ranging from temperance hotels to fishing and fish processing businesses, and from fuel to waste management. Among other things, he bought a shareholding of NOK 7,200 in Kristiansund Havfiskeselskap and NOK 10,000 in Brændtorv AS.

Grand Hotel, Molde The next investment opportunity was Solemdal Møbelfabrikk (a furniture factory) in his hometown of Molde, where he had a shareholding of NOK 10,000. His most prestigious investment, however, was the acquisition of the Grand Hotel in Molde. The hotel was built in 1885 by Hans Rasmus Astrup (1831-1898), who also came from Bolsøy. He was an active and wealthy industrial entrepreneur, a man of the church, philanthropist and politician for the Liberal Party.18 The hotel lost a lot of its grandeur during the First World War, and Olav said that he saw it as a privilege, but at the same time a great responsibility, to restore it to its former glory. He purchased the hotel with his son Knut and other good friends from his business circle. The restoration work started in spring 1919, but there was a fire and the hotel burned down. The plan was to immediately rebuild it in its original style. A new holding company was formed, in which Olav and Knut Kavli had a shareholding of NOK 2,500 each. Unfortunately, the insurance amount only covered half the rebuilding costs. The recession, which set in from late summer 1920, finally stopped all plans of rebuilding the hotel. The insurance money was paid out, and this provided Kavli with the necessary cash flow when a tidal wave of bankruptcies started in the ensuing years.19

The newspaper Sogns Tidende, 17 February 1916.

4: EXPANSION IN ALL DIRECTIONS

Hans Rasmus Astrup 1831â&#x20AC;&#x201C;1898

Speculation in shipping A little known fact about Olav Kavli is his extensive speculation in shipping shares. From 1912, he purchased substantial shareholdings, and rates increased dramatically during the First World War due to a shortage of tonnage and dangerous assignments. Ever since childhood, Olav had a passion for ships and he now saw a golden opportunity to earn big money quickly. Credit was cheap and easily available during the war. The combination of shipping shares on the way up and reasonable loans, with real interest rates below zero, was tempting for many speculators. Tax returns from 1915-1923 indicate that Olav Kavli went in for this with great determination. In 1917 alone, the profit on the portfolio amounted to more than 30% and, in 1918, he purchased shares for the sum of NOK 676,000.20 This was partly financed by reinvested profits and partly by loans. In fact, at their height, his shipping commitments almost equalled his investments in cheese and delicatessen foods. This explains why the tax authorities were more interested in his shipping dealings than in his delicatessen business. This speculation went well for a long time, until the big stock market crash starting in October 1918. The shipping shares, which had increased six-fold in value since November 1914, fell almost as much until January 1922.21 He sold a number of shares early in the 1920s, but at a great loss. The success turned into a nightmare and, because the company was privately owned and not a limited liability company, along with many other factors, it all ended in bankruptcy on 30 May 1924.

The Grand Hotel in Molde was a magnificent Swiss-style building built in 1885. It was designed for summer tourists; in winter, its corridors were silent. In the hope of increasing its popularity, a major refurbishment was carried out in 1916 and a conservatory was built. Olav Kavli purchased the hotel together with other business associates in 1918. At that time, there were plans to build a railway to Molde, which made the project attractive. Then came the disaster on 15 May 1919, when the hotel burnt down and six people died. Plans were quickly drawn up for a new building. However, due to the recession, the rebuilding project was postponed several times. A few years later, Olav Kavli managed to persuade Andresens Bank and Bergens Privatbank to take over the 10-acre plot. Today, a number of functionalist-style houses stand on the hotelâ&#x20AC;&#x2122;s old foundations.

KAVLI – AN INDUSTRIAL FAIRYTALE

This picture was taken in connection with the completion of the Kavligården building on the corner of Lodin Lepps gate and Rosenkrantzgaten in 1918. It was built for Olav Kavli and merchant Edward Johannesen. The architects were Fredrik Ziegler Kavli (Kavli’s brother) and Lars Krogseth. Fredrik Ziegler Kavli (1878– 1930) studied at Bergen Technical College and Königliche Bauwerkschule in Frankfurt an der Oder. After his studies, he worked in Germany for a few years before heading for Ålesund, one days travel north by boat, in 1904 to participate in the rebuilding project after the city fire in January the same year. He worked in America from 1906–12. On his return to Norway, he founded his own company, from 1915 in partnership with Lars Krogseth. They designed a number of villas and some larger commercial buildings. In addition to Kavligården, the following can be mentioned: Lars Hilles gate 16, (Bergensmeieriet dairy), Strandgaten 7 (Nordbye) and Håkonsgaten 27 (Manger meieri (dairy) – later Hotel Skogen).

Merchant Edward G. Johannesen and Olav Kavli were partners in the Kavligården building. Today, Johannesen is best known for taking the initiative for the Nordnes Park. He headed the committee that turned a barren rocky area into a park in 1887–98, and he also supervised the work. A statue of him, by Ambrosia Tønnessen, was erected in the park on 28 May 1918, on his 70th birthday. In 1868, Edward Johannessen was one of the founders of Vestmannalaget (an association for the promotion of the national language of Norway). He was made Knight of St. Olav for his work on the clearing of marshland in Western Norway.

Kavligården The expansion led to a need for a new office and warehouse. Olav Kavli’s brother, the architect Fredrik Ziegler Kavli, and architect Lars Krogseth were asked to design a large new office building in Lodin Lepps gate 2 in the centre of Bergen. The owners were Olav Kavli and retailer Edward Johannesen. Building work started in 1916. The building clearly took its inspiration from America: modern, spacious, expensive and grand. Both architects had lived in the USA for several years. The objective was to build a business complex that was big enough to both offer commercial rentals and cope with Kavli’s expansion. Technically, it was one of the most modern buildings in Norway and the first ‘fireproof ’ building in Bergen. A shortage of building materials and resultant high inflation during the First World War, in addition to stricter fire regulations after the city fire in 1916, led to costs being considerably higher than expected.22 However, there was great prestige attached to the project and it was believed that the complex itself would be an important marketing tool. The premises were described as follows in O. W. Fasting’s description of business and industry in Bergen in 1918: This property has one of the finest interiors in Bergen. The company has splendid bright offices and large storerooms. Furthermore, the basement has its own salting, smoking and freezing facility for its wholesale dairy and meat products.23

The Kavligården building There is a large illustrated report on Kavligården in Ole Wilhem Fasting’s major work ‘Bergens Nærings- og Forretningsliv’ (commerce & industry in Bergen), which states that the company had 200 employees.

Private office: Olav Kavli

Private office: Knut Kavli

Goods receiving area

Offices

Warehouse

Office

KAVLI – AN INDUSTRIAL FAIRYTALE

The new building was extremely costly for the company, and one of the reasons why it stayed in the company’s hands was that the company was unable to find a buyer who was willing to pay a satisfactory price. All the offers were less than half the building cost.

Knut Kavli gets involved

Knut Kavli came to be something of a celebrity in Bergen. This is how he was portrayed in the magazine ‘Revyen’ by cartoonist, F. Smith-Hald.

It was also at this time that Knut Kavli started to play an active part in running the business. After he had taken his exams at prestigious Bergen Katedralskole, his father sent him to the USA for a year to learn business skills. He then studied in the UK, Germany, France and Spain. Language skills, running a business and business culture were the most important themes. He was initially employed as a personnel and administration manager, as well as being Olav’s right-hand man and colleague. Business operations, production management and sales later became his main areas.24 He also held a controlling hand over the company’s finances and the financial situation.25 In 1924, Knut Kavli became a fully-fledged partner in the company on a par with his father. He would come to play a critical role in the global expansion that started in the 1930s.

Chapter 5

FROM SUCCESS TO FAILURE – AND BACK AGAIN Post-war crisis Most people have heard about the depression years of the 1930s, which started with the Wall Street crash in New York in October 1929. However, when it comes to Norway, there is a lot to indicate that the 1920s were more critical than the 1930s, because it was during the 1920s that Norway experienced its worst ever financial crisis. Investments were almost halved and unemployment rocketed in just a few years. In addition, there was a massive deficit in the Norwegian economy. The bubble burst at the same time as the global economy entered a critical post-war crisis, with dramatic repercussions for the Norwegian export market. As the crisis took effect in autumn 1920, Norges Bank, Norway’s central bank, also decided to tighten its monetary policy. This was because the Norwegian krone had fallen in value compared to its original value in gold. The governor of the central bank, Nicolai Rygg, intended to put everything on the right track again. The central bank was going to restrict credit, less money was to be printed and interest rates were to be increased. The money stock and prices would thereby fall, allowing the value of the Norwegian krone to rise. With less money in circulation, demand would drop, imports would decrease and the economy would calm down.1 The result was a devastating set-back for Norway. In 1921 alone, the combined wealth creation per capita fell by eleven percent, the biggest fall in a single year since the country gained its independence.2 The UK was the only country that experienced a worse crisis than Norway in the early 1920s. In consequence, many companies could not pay their debts. Real interest rates before tax, which had touched -30 percent at their lowest during the war, increased to almost 40 percent in a few years once deflation took effect.3 Hence, it was extremely difficult to repay loans. When the Norwegian krone also increased in value, loans became more expensive, and things became even worse since the crisis made it extremely hard to find work and sell products. The result was mass unemployment and a wave of bankruptcies. On average, the unemployment rate was 7.5 percent from 1921–1939, as opposed to approx. one percent earlier.4 In contrast to most countries, the 1930s were better in Norway than the 1920s, although high unemployment took a permanent grip since emigration to the USA came to a halt. The wave of bankruptcies affected the banks, and more than one hundred Norwegian banks collapsed during the interwar years in what was the worst bank crisis in the history of Norway. The bank crisis at home and abroad made banks very reluctant to lend money, which led to the crisis deepening.

Nicolai Rygg 1872–1957 was appointed governor of Norway’s central bank, Norges Bank, from 1 November 1920. He managed the bank until 1946.

KAVLI – AN INDUSTRIAL FAIRYTALE

The post-war crisis in Bergen The post-war crisis, which struck with full force in autumn 1920, also affected Bergen. The plans for a rapid rebuilding of the city centre following the fire in 1916 had to be scrapped. Strikes, lockouts and demonstrations became phenomena that people had to get used to. This in turn resulted in a breakthrough for the Norwegian Confederation of Trade Unions, but it also divided the labour movement.

◄ A large crowd gathered outside Bergen Sparebank in Nedre Korskirkealmenningen to withdraw their money. The photo is dated 1926. ▼ Mass lay-ups of ships were also a common sight. In addition, the Norwegian merchant navy was affected by a seamen’s strike in 1921. The photo below shows many ships laid up in Skuteviken and at Bontelabo.

5: FROM SUCCESS TO FAILURE – AND BACK AGAIN

Figure Figure 5.15.1

Figure Figure 5.25.2

GrossDomestic DomesticProduct Productper percapita capita Gross NOK2000 2000(scale (scaleon onthe theleft) left) ininNOK ConsumerPrice PriceIndex Index(scale (scaleon onthe theright) right) Consumer

Numberofofpetitioned petitionedbankruptcies bankruptciesand and Number negotiationmeetings meetingsininNorway Norway1918–1940 1918–1940 negotiation 2 500 2 500

000 6060 000

275 275

000 5555 000

250 250

000 5050 000

225 225

000 4545 000

200 200

000 4040 000

175 175

000 3535 000

150 150

000 3030 000

125 125

GNP per inhabitant GNP per inhabitant

000 2525 000 000 2020 000 1915 1915

Consumer price index Consumer price index 1920 1920

1925 1925

1930 1930

1935 1935

Source: Grytten 2004, 92–93 and Grytten 2004, 278–279 Source: Grytten 2004, p. p. 92–93 and Grytten 2004, pp.pp. 278–279

Petitioned negotiation meetings Petitioned negotiation meetings Petitioned bankruptcies Petitioned bankruptcies

2 000 2 000

1 500 1 500

1 000 1 000

500 500

100 100

7575 1940 1940

0 0 19181920 19201922 19221924 19241926 19261928 19281930 19301932 19321934 19341936 19361938 19381940 1940 1918 Source: Statistics Norway (NOS) 1969, 611 Source: Statistics Norway (NOS) 1969, p. p. 611

Ambassador to America Amid all the chaos in Norway during the 1920s, O. Kavli went bankrupt like so many others. During the monetary upturn during the war and the post-war years, the firm had invested heavily and bought many companies. Most of the capital invested was borrowed money, which now had to be repaid. At the same time, demand fell, interest rates went sky-high, and the real value of loans increased in step with the rise in the value of the Norwegian krone. In the spring of 1922, Olav Kavli travelled to the USA to secure increased sales during this period of crisis. The trip was partly financed by dairy producers in Rogaland and partly by the Norwegian Ministry of Agriculture.5 They wanted to see Norwegian cheese promoted on the huge American market, which was sailing through the ‘happy 1920s’ with strong growth and optimism. The offensive was successful. Many new contacts were formed as a result of Kavli’s role as a semi-official representative working on behalf of the Norwegian government. He met senators and governors, and, on his return to Norway, he received thanks from both the dairy producers and the ministry. Rogaland Eksportlag (export association) and Gudbrandsdalen Ysterier (cheese makers) joined forces, with Kavli as their agent. Since the home market was declining, the company focused on exporting more cheese to the American market. At the same time, the woollen mill in Sogn was doing better than expected due to its strategy of producing affordable replacement products. The dairies, however, were struggling with over production in addition to falling prices and profitability. The canning industry lost a large share of its markets.

In 1922, Olav Kavli once again travelled to the USA to promote cheese exports. The trip was later described as a success.

KAVLI – AN INDUSTRIAL FAIRYTALE

Figure 5.3

Bankrupt

Both father and son had to devote more and more energy to keeping creditors happy and renewing their bankloans.6 Based on tax returns, we have estimated just how much this was (annual profit and loss as a percentage of turnover) and financial strength (equity as a percentage of the value of the 35 assets). 30 High profits turned into modest profits during the first two 25 years of the war, and from 1918 to 1923 inclusive, the company Profit ratio Solidity 20 recorded substantial losses. The loss in 1921, the worst year of the crisis, amounted to nine percent of the turnover. The new 15 office building in Lodin Lepps gate contributed strongly to 10 breaking Kavli financially, but personal losses on share specu5 lation also contributed to the strained situation. The company 0 initially had to use its equity, which in 1916 amounted to 34.1 –5 percent of the value of its assets. From 1918, it had constant –10 1915 -16 -17 -18 -19 -20 -21 -22 1923 problems with its equity ratio, which was almost zero, and the Source: O. Kavli Tax assessment forms for 1915–1923. The Kavli Archives, Bergen situation deteriorated further when Kavli’s business partner went bankrupt in autumn 1920. As long as the business was a personal enterprise, it could be saved by the owner’s personal fortune, but the latter had disappeared as a result of large losses on speculative shipping investments. Olav Kavli had borrowed large amounts of money to invest in impressive shareholdings during the First World War. Now the loans had to be repaid just as the shipping industry entered hard times as a result of a lack of assignments during the global financial crisis. The fortune in shipping shares, which, at its peak in 1918, had reached almost half a million Norwegian kroner (gross), had fallen to less than NOK 50,000 in 1923. Despite mass sales, the debt was well over double the value of the stock.7 Combined with overinvestment in the office building, the losses on shipping shares were the main reason for the bankruptcy. On 30 May 1924, they had to acknowledge defeat. Olav Kavli and his company were declared bankrupt. They shared the fate of many other diary companies at that time, which were struggling with overproduction, drastically falling prices and, finally, bankruptcy. Profit Ratio (annual profit & loss before tax as a percentage of the turnover) and Solidity (equity as a percentage of the value of the assets) for O. Kavli 1915–1923

5: FROM SUCCESS TO FAILURE – AND BACK AGAIN

The estate We have found a transcript of the bankruptcy records from Fana District Court in the National Archive in Bergen.8 It gives us a good overview of the assets that comprised the estate. They were certainly not insignificant. Tax returns from the period indicate that the list is not exhaustive.9 The bankruptcy was without doubt a hard blow to both the company and family. Olav could not face being present when the bankruptcy was registered, and this was attended to by his son. Even though there were many valuable assets, there was little in the estate that could be used to pay creditors. Approximately 35 percent of the amount owed to creditors was covered in the initial proceedings. One of the reasons for this was that the company’s assets were difficult to sell. Kavligården was not sold until October 1929, when a newly established property company under the name of Lodin Lepps gate 2 AS took over ownership for NOK 535,000.10 This corresponds to approx. NOK 17 million at today’s (2013) prices. Kavli was one of the stakeholders in the property company and the property kept the name Kavligården. Consequently, the estate was able to cover most of the debts to creditors.

The registration records from Fana police archives. The following properties were registered to the estate on 4 June 1924: – – – – – – –

Villa Kveldsol, Fana Eiendom Nyland, Sogndal Bechtomten, Molde 50 percent of the business complex in Lodin Lepps gate 2, Bergen 50 percent of Kavli and Sæbjørnsens canning factory, Stenshamn 50 percent of Kavli and Jørgensens sawmill, Sogndal Property belonging to Eikrem Farm, Bolsøy

In addition, securities were registered in the amount of NOK 64,548.

KAVLI – AN INDUSTRIAL FAIRYTALE

O. Kavli AS’ shareholders at the time of its formation, 20 June 1924. • • • • • • • •

Olav Kavli (2) Knut Kavli (2) Ingolf Olsen (1) S. Holm Hansen (2) E. Steen-Olsen (4) Hans Askeland (2) Edv. Eriksen (5) I. Myhrer (2)

In all, 20 shares with a face value of NOK 2,500 each resulted in a total sharecapital of NOK 50,000. Source: Minutes of the negotiation meeting for O. Kavli AS, 1924. The Kavli Archives, Bergen, p. 1.

Father and son promised all the creditors that their claims would be paid as soon as the resumption of operations allowed them to do so. They kept their promise. Most of what they owed was paid back during the 1930s. This helped them to maintain both their personal credibility and their creditworthiness. The last repayment was made on 11 July 1945, in the amount of NOK 300. The happy recipient was Thor Canning Factory, which received the last of three cheques for the total sum of NOK 941.62.11

O. Kavli AS established The first thing father and son started working on after the bankruptcy was founding a sustainable new company. They had learnt from their mistakes. Firstly, they were going to focus more on their core expertise, namely cheese. Secondly, they were going to base operations on having as much equity as possible rather than on bank loans in order to improve the company’s financial strength. Thirdly, they were going to form a limited liability company. Of course, they had limited capital following the bankruptcy and were dependent on third parties stepping in as shareholders. In order to achieve this, they had to utilise their goodwill. They also sold their business concept by telling investors that they were about to develop a very exciting product: processed cheese spread. It made cheese spread easier to store and offered many options as regards flavourings. They succeeded in their efforts to raise capital, and, as early as 30 June, just one month after going bankrupt, a statutory general meeting was held for the new company. The memorandum of association is still available in Kavli’s archives. Here are some of the key points from it:12 1.

The company was to be named O. Kavli AS. Its business would be: exports, imports and domestic wholesale trading.

The company’s share capital would be NOK 50,000, divided between 20 shares of NOK 2,500 each.

Olav and Knut Kavli would have an option to buy the other owners’ shares.

Olav Kavli would be managing director of the company for as long as he wished.

The company’s board of directors would consist of only two members.

The costs of establishing the business were to be borne by the company.

NOK 50,000 was a substantial amount at that time. It corresponds to NOK 1.2 million at today’s prices (2013).13 Olav and Knut had only two shares each, i.e. the Kavli Family did not own more than 20 percent of the share capital at the time the company was formed. They soon bought more, however. Despite this being a difficult period for the Norwegian economy, the company flourished. This is evident from the following resolution found in the minutes of a meeting of the board of directors held in March 1925: The managers’ annual salaries shall be NOK 16,000 for O. Kavli and NOK 12,000 for Knut Kavli until otherwise decided.14

The average annual salary in Norway at that time was NOK 3,400.15 Furthermore, they received a 20 percent dividend on their shares, which amounted to NOK 1,000 each.16 While most Norwegian businesses were suffering at this time, the new company was booming. Kavli went from success to failure and from failure back to success again.

Chapter 6

PRIMULA World’s first long-life cheese spread Kavli’s first breakthrough actually came the same year he went bankrupt, in 1924. This was the year Primula was registered as a trademark after years of international competition to become the first to produce a long-life cheese spread. Many people believe that the company was the first in the world to produce cheese spread. But that is not correct. Several types of processed cheese spreads already existed. The oldest was hard processed cheese. The second was the spreadable type and the third was hard or soft processed cheese with other ingredients mixed in, such as ham, prawns, salami, leeks, peppers or other ingredients. A number of foreign cheese spreads were on the market when Kavli launched its type. Their shelf-life was the main problem, especially before refrigerators became widespread. Kavli was the first successful manufacturer of long-life soft processed cheese.1

Origins Processed cheese developed when Swiss dairies wanted to export white cheese to areas with a tropical climate.2 However, shelf-life was a problem with this type of export item. Cheese quickly became hard in hot climates and mould would develop after a short time. The moulding process often set in already before the cheese had reached its final destination. As a result, various measures were taken to increase its shelf-life. As early as 1909, the first Swiss dairies managed to produce processed white cheese by carrying out a chemical process during melting at high temperatures, normally 70–90 degrees.3 The lifetime improved because the bacteria cultures were killed by the additives and by the high temperature. Fatty waste products were also eliminated, which would otherwise produce an unpleasant aftertaste. After an extensive research period, Walter Gerber from Switzerland, finally managed to produce the first processed cheese spread of satisfactory quality in 1911, through his company Gerberkäse AG. Based in Thun, the company was a traditional dairy producer, established in 1836. The cheese (Emmental cheese) lost its softness when it cooled down after melting, which was normal for the first processed cheese spreads.4 The chemical process was kept strictly secret. However the recipes eventually leaked, among other things as a result of employees being bribed. Gerber brought a number of lawsuits in an attempt to keep his monopoly.5 We know that the cheese was melted at a temperature close to 100 degrees and that a chemical process was introduced in the form of phosphates, for example, citric acid.

Walter Gerber 1879–1942 started working in his father Friedrich Gerber’s cheese factory in Thun in Emmental in Switzerland at a young age. In addition to cheese, the company produced condensed milk and flour for baby porridge. Walter Gerber took over as manager of the company Gerberkäse in 1908 and was responsible for the production of processed Emmental cheese. In this photo from 1911, he is seen with his colleague Ted Kennel (right).

KAVLI – AN INDUSTRIAL FAIRYTALE

Liquids were also added to maintain a certain level of softness. In 1913, Gerber launched a creamy, processed cheese spread by adding more liquid and other chemicals. Its shelflife was not satisfactory, however, and the cheese had a strong aftertaste.6 The shelf-life of soft cheeses did not meet the requirements of shops or consumers. International food producers therefore tried to develop a new and tasty soft processed cheese that also had a long shelf-life. The shelf-life could be extended by adding more salt, but the taste was not satisfactory and it lost its softness and moist consistency. Researchers therefore tried to add more copious amounts of liquid in the form of water or skimmed milk, but the cheesy taste of the products was considerably reduced. The liquid content also contributed to reducing its shelf-life. Jamie Lewis Kraft 1874–1853 was the son of a Canadian farmer of German descent. With a small cart drawn by ‘Paddy’ the horse, he started delivering cheese to the shopkeepers of Chicago in 1903. Kraft arrived early in the morning before the cheese melted or turned sour, which was necessary before refrigerators came on the market. Many shopkeepers had previously refused to sell cheese during the summer because it spoiled easily. As sales increased, Kraft found new methods for preserving cheese. He heated cheddar cheese to stop the fermenting process and its shelf life improved. It was a success and sales rocketed when USA started sending tinned cheese to its troops in Europe during the First World War. Today, Kraft Food is a global food group with its head office in Illinois. It employs 127,000 people worldwide.

Kavli joins the race Kavli had been struggling with the shelf-life of its cheeses for a long time, especially in connection with export markets. Consequently, the company was very keen to develop processed cheeses. They had monitored the market for a number of years, but had never found a satisfactory product that tasted nice and had a long enough shelf-life. In 1920, they therefore started experimenting with cheese spreads. Olav Kavli had the following to say about their motivation:7 Whilst travelling abroad, it occurred to me that the delicious cheeses that are so popular due to their composition have a very short shelf-life. As a result, they cannot be exported to countries with a changeable climate or further afield. However, the milk that is used to produce them has very much the same quality as Norwegian milk. Thus, there is nothing to prevent us from producing the same cheeses or equivalent products from Norwegian ingredients. For a Norwegian product to be competitive, it must have a longer shelf-life if it is to lead the field…

The first ideas originally came from the USA, for example from general agent Børge Westergaard.8 He had been in contact with James L. Kraft, the founder of the company that was to become one of the world’s largest international food groups. Kraft was born in Canada, but was of German descent and was familiar with European cheese traditions. He had picked up information about processed cheese from Switzerland and worked hard to be the first producer of processed cheese that both tasted good and had a long shelf-life. In 1916, he took out a patent on processed cheese. Like Gerber’s patent, it was primarily hard cheese and not cheese spread.9 In addition, Kavli found inspiration in the Netherlands and Switzerland. The goal was to be the first in the world to produce soft cheese with a long shelf-life. Thus, this son of a smallholder joined the international race, competing against some of the foremost dairies in the world. Initially, Kavli was at a disadvantage in a number of ways. Firstly, he started later than his competitors. Secondly he came from a country with limited cheese traditions. Thirdly, Kavli’s capital base was limited compared to the competitors. Fourthly, his customer base was much more limited, and, fifthly, his company was smaller and had far fewer employees. He also did not have many specialists and his network was smaller than those of his competitors. Basically, he was almost doomed to fail.

6: PRIMULA

Study trip From the very start, the Norwegian company had least knowledge of them all. After two years of experimenting without making a breakthrough, the obvious choice was to go abroad to study. The aim was to acquire vital information that would enable them to produce soft cheese to which a number of different flavours could be added, but it also had to have a long shelf-life.10 The Netherlands was the first stop and the Dutch proved friendly and welcoming, although extremely secretive about their recipes. Technically, Dutch dairies often had a lower standard than the Norwegian ones, although their production methods were often more rational and they were not afraid of adding large or small amounts of fat to their cheeses. They were also less wary of strong tastes. The Norwegians hoped to benefit as much as possible from the know-how about processed cheese the Dutch had acquired through their own research, as well as research by the Germans and Swiss.11 However, their secrets were well guarded. As a result, there was little to learn except that they were trying to find ways to keep mould levels down. It was hinted that this could be done by giving the products a strong electric shock. Kavli learnt quite a lot about flavourings and how important it is to dare to try out new methods of cheese production based on good traditions, the best ingredients and hygiene.12 He then hurried on to Switzerland via Belgium and France, where he considered the cheese to be too unusual for Norwegian palates. The cheese factories were also very uncooperative. No other country placed as much emphasis on good ingredients and high-quality milk as Switzerland. Swiss milk was delicious and cheese was regarded as both a passion and a science. Precision and local traditions were of paramount importance, and hygiene and control over the bacteria cultures also had a central place. Even the bacteria content of the pastures where the cows grazed was checked. Kavli spent a long time at the Institute of Bacteriology in Bern in the hope of picking up ideas for how to prevent mould formation on cheese. Otherwise, it was the same in Switzerland as in the Netherlands: recipes were kept secret. The competition was to be won at all costs, i.e. only the second-best recipes could be passed on to foreigners. The best recipes remained in Switzerland.13 Kavli did form some close friendships, however, and he tried to find out whether it would actually be worth giving the cheese an electric shock or whether this was just a ruse? Two Swiss experts confirmed that an electric shock might be a good idea. In any case, he learnt how important it was for the Swiss to be involved in the entire dairy food production chain, from the clover fields to the cheese-making process, packaging, storage and sales. Quality was always given top priority, not prices or efficiency.14 He also tasted yoghurt and kefir in Switzerland, and the Bulgarians told him how they produced soft cheese from these products and how successful they were. They believed that kefir grains had a special cleansing effect that kept the bacteria cultures in check. As a result, the trip was extended. Via Italy and a brief period studying Italian cheese production, he continued his journey to Serbia, where he learned how fruit and vegetables could be blended into dairy products.

One of the first Primula boxes made for the global market. The Primula girl is holding a single primrose in her right hand while smiling at the customers.

After just a year Primula cheese and the Primula girl had become household names throughout the country. In this advertisement from 1925, the public learns that the cheese â&#x20AC;&#x2DC;suits everyoneâ&#x20AC;&#x2122;s stomachâ&#x20AC;&#x2122;.

65 5

KAVLI – AN INDUSTRIAL FAIRYTALE

On his trip to Europe in 1922, Olav Kavli visited Serbia, among other places. In the capital Beograd, he saw the national museum (left) and the national theatre (in the middle of the square). The Serbians taught Kavli how fruit and vegetables could be added to dairy products.

Kefir is one of the oldest types of sour milk that we know of. It is a Turkish name that means ‘nice and tasty’. Kefir is normally made of cow’s milk in Norway. In the Caucasus, however, where the recipe comes from, kefir is mainly made from sheep or goats’ milk.

However, one major problem remained: the bacteria cultures in kefir and yoghurt made storage extremely difficult. Yoghurt and kefir could be used to produce creamy cheese spreads with a short shelf-life. If a long shelf-life was desirable, they had to make processed cheese, i.e. melted white cheese that stayed soft and had a long shelflife. The best ideas for this type of production were picked up in the Netherlands and Switzerland.

Experiments in Norway When Olav returned home, the research continued. The experts were very doubtful about whether there was any point trying to give the cheese electric shocks. Most of them concluded that it would not have any effect at all. On the other hand, it was argued that electric shocks could kill both plants and animals, so it was possible they would also kill bacteria cultures and the growth of mould and fungi. It was a matter of killing the fungal spores before they ate up the cheese. All ideas had to be tested. Thus, they hired electrical equipment to conduct experiments, but without any visible results. They went to such lengths that they even took the cheese samples to Oslo for electric shock experiments. They were tested using up to 100,000 volts in the hope that the bacteria cultures would be killed off. Unfortunately, this proved to be a dead end, probably to the amusement of the people who had succeeded in tricking the gullible Norwegians. The structure of the cheese was ruined, the rotting process speeded up and the mould fungus thrived as never before.15 The work on product development was done in secret. Other producers abroad were ten years or more in front. Swift action was required, chances had to be taken and

6: PRIMULA

nothing should be leaked to competitors. Recipes were not to be written down, they had to be memorised, and only the production managers and product developers knew them. All the experiments were carried out under the strictest secrecy. This policy of strict secrecy still applies today.

Breakthrough In 1922, product development was progressing well and the team felt they were on the brink of a solution. However, they received a big shock when a German processed cheese brand called ‘Adler’ was launched.16 Many feared that the race was lost. Perhaps they should concentrate on acquiring production rights for the brand in Norway instead of developing their own? Adler, however, did not meet expectations as regards quality, spreadability or storage life, and the work continued. Early in 1923, they knew they had probably found the solution. They produced highquality processed cheese by breaking up white cheese, then adding water, melting salts in the form of phosphates and flavourings. The cheese mass was stirred and heat treated at approx. 90 degrees and then cooled down again. Striking the correct balance was a challenge, since the salt gave the cheese a strong taste. During the summer of that year, they had experimented with the quality of the product with great success. The cheese kept well for a long period and the salt content was reduced. At the same time, they had made sure the product was not a danger to health. After this, the competition was turned into a contest to balance the salt content in relation to the taste. While it was possible to produce long-life cheese, it proved to be very salty. Unfornately, improving the taste meant a shorter shelf-life.

Launching Kavli’s first processed cheese In September 1923, the cheese was launched in secret at Olav Kavli’s home to a group of 17 specially invited guests.17 It was a success. Everyone was enthusiastic about it and its name was revealed in strict confidentiality – Primula. The word is Latin and means ‘the first one of spring’. It also refers to the primrose family, a family consisting of 300–400 colourful plants that flower early in spring. There are a number of species of the plant in Norway, with the primrose being best known (Latin: Primula vulgaris).18 At that time in Norway, it was commonly believed that primrose flowers had a healing effect, and they often grew in pastures, and were therefore eaten by cows, digested and turned into milk. Consequently, the name of the new product represented healthiness, spring freshness and Norwegian-ness. It was no random choice, and Kavli’s guests liked it. The spread was put in small half-moon shaped containers made of wood shavings that were both tasteless and odourless. The label was very inviting, featuring a smiling, healthy, Norwegian dairymaid with long blonde hair. The label would thereby underline the qualities of the product. The testing on friends went well – until later that night, at least. Three of the guests suffered from sickness and diarrhoea, and panic broke out the following day. Mass production had already started and the cheese was going

Yoghurt, from the Turkish word yogûrt, is fermented milk. Like kefir, it also comes from the Caucasus and is first mentioned in writings from the 12th century. Myths say that people who included yoghurt in their daily diet lived to a very old age. Yoghurt became known over the whole of Europe early in the 1900s, due to promotion by Bulgarian and Russian doctors and biologists.

The primrose plant (Primula vulgaris) belongs to the Primulaceae family. As a family name, Primula means ‘the first one of spring’, which indicates that it is the first spring flowering plant. It has individual yellow-white flowers. The primrose is the official flower of Hordaland, the county where Kavli still has its head office .

KAVLI – AN INDUSTRIAL FAIRYTALE

Haus selvhjelpskontor (self-help office) was founded in Ytre Arna, just north east of Bergen, in 1911. Its main objective was to find a market for local handicrafts from Osterøy and Arna. At one time, many different types of handicrafts were represented: felting, furniture-making, ironwork, wooden toys, rose painting, souvenirs and knitwear. Kavli’s cheese box production comprises one chapter in the history of the self-help office. It started in 1925 and meant a lot at a time when the depression had taken hold and people were put out of work. Initially, eighty boys and men worked on the cheese boxes, which were carved from wood shavings and held together with nails. To begin with, much of the work was done at employees’ homes. In 1930, manufacturing was transferred to the new production building, which the self-help office had built in Arna (photo). Mechanised production was introduced and the workforce was reduced to fifteen men. In 1933, Kavli started to make the boxes itself in Bergen, and the self-help office lost the contract. All in all, several million boxes with a sales value of approx. NOK 210,000 were made in Arna. The self-help office still exists, but under the name Norsk Husflid Engros (Norwegian handicraft wholesaler).

to be presented to the capital’s press in November the same year. There was no time to lose. Because Kavli had experienced cash flow difficulties during the crisis years in the early 1920s, the company wanted to introduce this revolutionary product quickly. Fortunately, it turned out that his guests’ stomach upsets were caused by a sickness bug and were not the result of food poisoning. Work on the product launch could continue. The packaging work was time-consuming, since the cheese was packed manually in tinfoil and then placed in the boxes. They were then fitted with lids and labelled – everything was done by hand.19 The company signed a contract with Haus Selvhjelpskontor in Arna on the outskirts of Bergen, which made the boxes.20

A rocky ride The product launch in Oslo in November 1923 was a success. However, the shelf-life problem had still not been fully solved. This was finally achieved in 1924 by balancing the amounts of melting salt used in the mixture, which both preserved and ensured softness at the same time. Thus, the Norwegian soft white cheese could be manufactured as a spread. Primula rapidly became a success. A new obstacle arose, however – the financial situation was far from good and the bankruptcy in May 1924 was a problem in relation to the competition. The company’s management team had long seen it coming and their first priority was to ensure that production resumed immediately after the bankruptcy. Consequently, they made preparations to transfer all rights and to raise capital for the new company.21 Olav Kavli personally was granted sole rights to Primula. Investors who were close to the family were asked to provide new equity in the event of bankruptcy. All creditors were contacted and given a personal promise that everything would be done to repay debts, even after a possible bankruptcy. This guarantee proved to speed up the breakthrough. As long as the company was first to launch the new product, the

6: PRIMULA

sale of the cheese spread would bring in such high profits that it was in the creditors’ best interests to allow production to continue even after a bankruptcy.22 This was the only way the company would be able to pay off its debts.

Race against the clock It was a race against the clock. The bankruptcy could not be prevented, but, when it finally happened at the end of May 1924, almost everything was in place. A new company was formed just a month later.23 They bought the most important production equipment belonging to the estate and kept the head office. The most important suppliers were still on board, convinced that the processed soft cheese would be a huge success. They were right. In 1925, the problems were largely solved and Primula was launched on the international market with the Norwegian and foreign press in attendance, along with the US General Consul in Norway. The presentation took place during a Christmas lunch organised by one of Norway’s most prominent restaurants at that time, Bristol in Oslo. They originally presented two cheeses, Primula and Rosa, as part of an elegant buffet. According to Kavli, the cheese spread had already won popularity in far-flung countries such as China and Egypt. The trademarks were registered the following year.24 The presentation came at the twelfth hour. The German ‘Adler’ and the Austrian ‘Alma’ were launched on the market only a few months later, although Alma had been making a harder type of processed cheese since 1921. Their image and design of the box was very similar to Primula’s. The box was half-moon shaped and had a drawing of a dairymaid in national costume.25 There was a heated discussion about plagiarism and the Austrians threatened to file a lawsuit. However, in the end no one took the case to court.

Victory! Kavli had won the race to be the first producer of long-life, soft cheese. At least that is what many people believed. However, from the above, we can see that the product was developed in stages with several producers involved. It would therefore be more appropriate to say that Kavli was one of the first to produce a processed soft cheese of satisfactory quality with an adequate shelf-life. It is also possible that Kavli was the first to develop this type of cheese with a mild and good taste. One of the foremost experts on dairy production, Dr Albert Meyer, said in 1961 that Norway laid ‘the foundations for a processed cheese industry’.26 Thus, Kavli could defend its place in the history. The company won both recognition and a big share of the market. Consequently, the door was open for growth, even though competitors soon developed products of competitive quality. Kavli received a number of complaints about the products in the beginning. Most of the feedback was very positive, however. Emphasis was placed on further development, and the product became available in different flavours. But

German ‘Adler’ cheese came on the market just a few months after Primula. This is its label from 1955.

In contrast to the first Primula girl (see page 65), this one is holding a large bouquet of primroses. The national costume with a heart on the front and the smile on the girl’s face are the same, however.

KAVLI – AN INDUSTRIAL FAIRYTALE

Lincoln Ellsworth 1880–1951 was an American adventurer and son of a wealthy coal mine owner, James Ellsworth. With his father’s help, Ellsworth financed Roald Amundsen’s attempt to reach the North Pole in an airship in 1925. Ellsworth was navigator on the expedition. He also joined Amundsen the following year when they flew over the North Pole in the airship ‘Norge’. Ellsworth led four expeditions to the Antarctic between 1933 and 1939. The first expedition was to the Ross Sea on the Norwegian fishing boat ‘Fanafjord’, which was renamed ‘Wyatt Earp’, and the airplane ‘Polar Star’. The explorers had a good supply of Kavli products on board, as can be seen from the letter of thanks shown here.

nothing could match the popularity of the original, pure Primula – except for the baconflavoured cheese. It became a ‘new global product’ especially through Kavli’s use of the daily papers, weekly magazines and unorthodox launching methods as PR. The launching and breakthrough of Primula emphasise both the commitment to research and the unorthordocy of marketing that followed and still follows Kavli.

Primula on first lady Roosevelt’s table Kavli took every opportunity at home and abroad to advertise the processed cheese. In 1926, it was on board the airship ‘Norge’ on its journey to the North Pole, and in 1931 the spread was in the rucksacks of two students who crossed Greenland in Nansen’s footsteps. Many countries were subjected to Kavli’s unusually creative sales campaigns. In 1931, Paul Lehrer, a specialist with a PhD in internal medicine, published an article

6: PRIMULA

in the journal Medizinische und Pharmazeutische Rundschau in Vienna, in which he recommended Primula cheese for health reasons. It was also recommended by Dr Sigge Wikander a few years later. Its benefits for digestion were particularly stressed. However, the acclaim reached new heights in March 1948 when the factory in Bergen received the following letter from general agent Børge Westergaard in New York:27 Today, one of our customers, the proprietor of a business in Greenwich Village, New York, informed us that Mrs President Eleanor Roosevelt was there yesterday and she purchased Primula cheese. Afterwards she said just how much she had enjoyed it.

Exports go sky high Norwegians were not familiar with spreadable processed cheese and it was at the time of introduction a foreign product to them, but this did not stop it from becoming a success. Sales rocketed and production bottlenecks were a problem at times. The factory’s

Eleanore Roosevelt 1884–1962 was married to Franklin D. Roosevelt, President of the United States of America from 1933 to 1945. She was an important social reformer, writer and feminist. It was no surprise that she liked Primula.

In August 1931, doctor of internal medicine Paul Lehrer published an article in the German journal ‘Medizinische und Pharmazeutische Rundschau’, in which Primula was recommended as being good for people’s health. Børge Westergaard had excerpts of the article translated into English, and they were used to market Kavli’s cheese in the US.

KAVLI – AN INDUSTRIAL FAIRYTALE

The airship ‘Norge’ at the start of the expedition to the North Pole in 1926. It was 106 m long, 19 m wide and 24 m high. The hull was made of reinforced aluminium covered with rubber. A balloon filled with 19,500 m3 of hydrogen gas was housed inside the hull. An open keel from which the crew could walk from the gondola to the engines to carry out maintenance work was located underneath the hull. The pilot’s gondola and the three 245 hp engines were mounted under the hull. The airship could travel at 80 km/h.

6: PRIMULA

The airship ‘Norge’ crosses the North Pole with Primula spread sandwiches In 1926, explorers under the leadership of Roald Amundsen flew from Ny-Ålesund on the island of Spitzbergen over the North Pole to Teller in Alaska on the airship ‘Norge’. The North Pole had been crossed for the very first time. In his book about the expedition, Roald Amundsen, wrote that the plan to use an airship to fly over the North Pole first came up in May 1925 in Ny-Ålesund, when Leif Dietrichson, Lincoln Ellsworth, Hjalmar Riiser-Larsen and himself discussed the advantages of using an airship instead of a plane. For example, a plane would have to crash land if engine problems arose, while an airship’s engine could be maintained while airborne. An airship could also carry a heavier load and remain in the air for a longer time. Riiser-Larsen, who had already taken an airship pilot’s course, recommended the Italian airship ‘N-1’ designed by Umberto Nobile. Lincoln Ellsworth contributed 100,000 dollars for the purchase. Amundsen led the expedition, Ellsworth was the sponsor and Nobile was designer and pilot. They were mentioned in the expedition’s name: ‘The Amundsen-Ellsworth-Nobile Transpolar Flight’. On 29 March 1926, the airship was taken over at Ciampino Airport near Rome at a big ceremony and renamed ‘Norge’. A number of Norwegian and Italian VIPs were present under the leadership of Benito Mussolini, who thought the expedition was good publicity for fascist Italy. The trip north to Ny-Ålesund, where ‘Norge’ arrived on 7 May, started from Rome and went via Pulham, Oslo, Leningrad and Vadsø. At 9.55 a.m. on 11 May, the journey to the North Pole began. Sixteen men were on board, with Amundsen as the leader of the expedition, Ellsworth as navigator and Nobile and Riiser-Larsen as pilots. There was an abundance of Primula cheese on board, so sandwich toppings were not a problem. At 1.25 a.m. on 12 May, they found themselves over the North Pole and they lowered the Norwegian, American and Italian flags. The journey continued to Alaska. After a dangerous trip, with fog, wind and ice formation, the airship landed on the 14 May near a small village called Teller. The explorers had been in the air for 72 hours and the crew were welcomed as heroes. After the expedition, Hjalmar Riiser-Larsen wrote a letter to Kavli in which he praised the Primula cheese the crew had eaten on their sandwiches. He emphasised that the foreign participants, the Russians and Italians, particularly liked the taste. Kavli soon used the letter for marketing purposes and the brochure was printed in a number of languages. Interestingly, the year was printed incorrectly, as 1925 instead of 1926.

Roald Amundsen 1872–1928

Lincoln Ellsworth 1880–1951

Umberto Nobile 1885–1978

Hjalmar Riiser-Larsen 1890–1965

KAVLI – AN INDUSTRIAL FAIRYTALE

◄ Primula was presented at a number of big food fairs during the interwar period. Here you can see Børge Westergaard’s stand at the Brooklyn Food Fair on 20 March 1926, with two Primula girls smiling to the public. ▼ Westergaard’s stand at the same fair in 1929.

From The Anuga Fair in Dortmund from 8 – 11 May 1927. Kavli’s agent Heinrich Westenhoff in Bielefeld (sitting on the left) and Ellen Christians, the Primula girl (right). The Anuga Fair, founded in 1922, is the world’s largest food fair. It is now held in Cologne.

6: PRIMULA

management had to enter into agreements for the supply of cheese for melting. There was an period of increasing overproduction in the 1920s, with a subsequent fall in cheese prices. Hence, it was not difficult to get hold of raw ingredients. The factory’s management believed that Norwegian milk was among the best in the world. Heating the cheese to approx. 90 degrees meant that it did not just melt, it also prevented the formation of the right conditions for bacteria and mould to grow in. The machine pool had to be increased and renewed. Equipment was ordered from Germany. It was more common at that time for companies to keep their production processes secret, but when it came to processed cheese, the secretiveness was unusually great. Packaging was another problem. The quality was too poor and wrapping took too long. The solution was cardboard boxes from Germany. Later, in 1932, Kavli opened its own factory in Lars Hilles gate. It churned out 6,000 boxes per day, produced by 20 employees, mostly young women.28

Exports rocketed The first shipment to the USA took place as early as 1925, followed by Canada, Denmark, Finland, Sweden, the UK, Germany, Austria, France, the Netherlands and Switzerland.29 Sales exceeded all expectations. Processed soft cheese’s market share grew throughout the western hemisphere, and of the many producers to emerge, Kavli enjoyed huge success with its mild spreadable produce.30

‘Primula, the perfect cheese that increases the enjoyment of every meal’. This brochure was published in a number of languages in the late 1920s.

KAVLI – AN INDUSTRIAL FAIRYTALE

In the footsteps of the Master with Primula Kavli’s marketing could be both colourful and charming. In 1928, Olav Kavli visited the Holy Land, initially because he wanted to travel and dreamt of being able to market a cheese that would be eaten by holy men from three of the world religions: Christianity, Islam and Judaism, in Jerusalem – the holiest city in the world. Marketing aimed at Muslims and Jews was not very successful, however, since the cheese was not prepared in accordance with their religious customs, and nor did it appeal to their palates.31 Consequently, the trip primarily involved walking in the footsteps of Jesus. It made an indelible impression on him. After walking around Gethsemane and seeing what is believed to have been Mount Calvary in Jerusalem, he could not hold back his tears and began reciting the Bible, both quietly to himself and aloud. On Carmel Mountain in Haifa, he paid tribute to the Prophet Elias’ victory over Baal’s prophets. He associated lonely Elias’ battle against a superior power with his own lonely situation as a young boy in Bergen, and how he had overcome problems, even bankruptcy, and finally emerged victorious in the race to make processed cheese. As he stood there with the superfluous cheese and experienced a new defeat, he emptied the contents of a suitcase full of his own products into the lap of a monk and asked him to pray for Norway, Olav Kavli and the company every time he enjoyed a piece of Primula! 32 This is how the Primula girl was presented to the international market in the late 1920s. In this version she is not holding a primrose in her hands, but a box of cheese.

The world’s first cheese in a tube The following year, in 1929, Kavli launched the world’s first cheese in a tube. It was hermetically sealed with foil and had a screw top, making Primula both manageable and consumer-friendly. Moreover, its shelf-life became even longer. The cheese in a tube was an unconditional success at home and abroad, and it was crucial to the further expansion of the company. It can perhaps be argued that the invention of the cheese tube was as important as the invention of processed cheese. On the other hand, only processed cheese was suitable for tubes. Thus, the two products complemented one another, and together they became a global success. The tube and the cheese spread paved the way for other new innovations, for example caviar spread in a tube. In order to achieve this, they mixed melting salt and tomato purée with the caviar to which extra liquid was added simultaneously. This gave it a consistency that was very similar to that of processed cheese. The result was spreadable caviar suitable for selling in tubes. Kavli was indeed an innovative company.

Chapter 7

SUCCESS DESPITE ECONOMIC MELTDOWN Growth during both upturns and downturns At the end of the 1920s the Norwegian economy was part of a marked global financial upturn. However, during the summer of 1930, it became clear that the period of prosperity would once again be replaced by hard times. The global economy entered into the worst crisis of modern times. Norway coped better than most other countries after having experienced years of hardship in the early and mid-1920s. The crisis hit Norway later than most other countries, and it was less severe and passed more quickly. Retail sales sank significantly during this period, although they quickly picked up again during the recovery years. Kavli did very well after its reestablishment in 1924. However, the company struggled during the economic downturn in the 1930s, but managed to survive the hardest times. This was mainly due to processed cheese, which found a market despite the recession. New products were Celery Cheese, Bacon Cheese, Appetite Cheese, Pultost (a traditional Norwegian soft cheese), Tomato Cheese and Prawn Cheese, as well as firmer cheeses such as Cerva, Rosa, Karvi and many others. They satisfied consumer tastes both at home and abroad. The companyâ&#x20AC;&#x2122;s capable employees also played a major role in the companyâ&#x20AC;&#x2122;s success in weathering the economic storm.

New flavours were launched in the 1930s, for example Cerva, Karvi and Celery Cheese.

KAVLI – AN INDUSTRIAL FAIRYTALE

Kavli, Kavli and Askeland

Hans Askeland 1895–1982

symbolised the company for many people. He was capable, generous and fair. He put the company’s welfare above all else. He was a good middle distance runner in his youth, and he took the initiative to form the Drott Sports Association in Bergen. He was a member of the governing bodies of the sports movement for many years.

Bjarne Fotland 1913–2011 started his long career with Kavli in 1928. He worked his way up and was a central figure in the company for several generations. In 1983, he received the King’s Medal of Merit for his long service for the company.

The annual reports and minutes of board meetings show that, in reality, O. Kavli AS was owned and run by three people following its establishment in 1924, not two as the company’s written history suggests. They were Olav Kavli, Knut Kavli and Hans Askeland, who were the only ones to attend the general meetings from 1925 to 1939. Askeland was the only one who attended all of them. The final step was taken in 1948. At an extraordinary general meeting held on 23 January, it was decided that he would be part of the company’s board of directors, and thus two members became three. Three people had control of the company’s shares, the board of directors, the day-to-day management and general meetings. The company’s name could just as well have been Kavli, Kavli and Askeland rather than O. Kavli. Former employees claim that Askeland was in many ways the company’s real leader when it came to day-to-day operations, administration and not least financial management. For many people, he symbolised the company. He is described as capable and generous, and he had great integrity.1 Olav Jacob Dreyer sums him up as follows: Hans Askeland never talked behind anyone’s back. He was a fantastic leader who cared about his employees. In many ways people saw him has as being synonymous with the Kavli company.2

Another diligent employee was Alf Sjurseth, who was recruited from Haus Selvhjelpskontor (self-help office) in Arna. He was born in 1913, but, despite his young age, he soon became Askeland’s and Knut Kavli’s right-hand man and was later a driving force in the company’s operations abroad. He had originally planned on becoming an engineer, but Olav Kavli persuaded him to go into cheese. Sjurseth played an important role in the enterprises abroad and he became managing director of the British company established in 1936. He was appointed chief executive officer of the Group in 1965. Christian Thornquist from Bergen started working for Kavli in 1930 and demonstrated that he was very talented. He won the complete trust of both Kavli senior and Kavli junior, and later became the company’s export manager, with firm control of foreign markets. He possessed an excellent command of languages, and his great product knowledge and language skills led to his becoming a member of national and international committees responsible for standards for the production of cheese and for the regulation of markets.3 For many people, he was the company’s chief external representative and he is mentioned as one of the company’s most important leaders of all time. Bjarne Fotland was another important figure. He was initially hired in 1928 to maintain the filing system in the purchasing department. He worked his way up and became a central figure in the purchasing department, the manufacturing department and general operations department. While Askeland was responsible for administration at home, Fotland primarily played an important role in the production process. Factory foreman Einar Nilsen and mechanic and workshop manager Fredrik Ankjær-Jensen also became key figures in the day-to-day running of the company and the establishment of production units abroad.4 Sivert Nilsen came from Bergen and started as a messenger at Kavli in 1928, after which he spent some time working in the warehouse. He was given a permanent job in the office and became an important and trusted employee of O. Kavli.5 He was good with figures and, upon completion of his accountancy training, he was given a position

7: SUCCESS DESPITE ECONOMIC MELTDOWN

in the bookkeeping department, where he was made manager in 1948. He was one of the people to whom Knut Kavli gave shares in the company. In 1965, he became finance manager; a position he held until his retirement in 1981. He was musical and often provided the entertainment at the Kavli Club’s gettogethers (see page 118).

Figure 7.1

O. Kavli AS’ turnover from 1924–1942 in current NOK and fixed NOK in 1924 5.0 mill. 4.5 mill. 4.0 mill. 3.5 mill. 3.0 mill.

Perfection – further away than originally thought

2.5 mill. 2.0 mill. 1.5 mill. 1.0 mill.

Turnover at the current price The actual turnover of the limited liability company after its 0.5 mill. Turnover at the fixed price 0 establishment in 1924 was unknown for a long time, but we 1924 -27 -30 -33 -36 -39 -42 have managed to trace the original accounting records from Please note that the 1924 turnover for O. Kavli and O. Kavli AS has been included, the first few years of the company’s operation.6 They reveal but sales linked to the bankrupt estate are not included. Nor do the figures for 1925 and 1926 include turnover linked to the estate. that not everything was perfect. It appears that the company Source: Accounts protocol for O. Kavli AS 1924–1942 experienced problems with both its sales and profitability in the 1930s. Sales measured in fixed prices increased by a total of 160% from 1925 (the first full operating year) until the peak Figure 7.2 years of 1930 and 1931.7 Afterwards, the company’s turnover O. Kavli AS’ profit from 1924–1942 in sank dramatically in the 1930s. It then increased again until the current NOK and fixed NOK in 1924 Second World War started with Germany’s attack on Poland 300 000 on 1 September 1939. The decline in sales was partly due to falling demand for 250 000 Profit at the current price luxury cheeses during the economic crisis. But import restricProfit at the fixed price 200 000 tions that affected exports of cheese to a number of countries in 150 000 the early 1930s were probably more significant. To counteract 100 000 the effects of import restrictions, Kavli responded by estab50 000 lishing independent subsidiaries in Sweden (1933), Austria (1934), Denmark (1935) and the UK (1936). 0 1924 -27 -30 -33 -36 -39 -42 When the home market first started to stagnate, Kavli Source: Accounts protocol for O. Kavli AS 1924–1942 encountered what it perceived as unfair competition from a Stavanger company called the Norwegian Cheese Company. The management believed that Kavli’s products, name, packaging, labelling and marketing were being plagiarised. In August 1931, this was upheld by the Court of Enforcement in Stavanger. The Stavanger company was banned from copying the products and production had to stop. The judgment was largely upheld by a superior court in November the same year. This was an important victory for the Bergen company in a period with a limited home market.8

Fluctuating profits Using the accounting records, we have also managed to reconstruct a series of annual profits for the company, which vary immensely. Even though profits were deeply affected during the downturn, the company managed to stay out of the red. This was largely due to a policy of moderation when it came to expenditure.

KAVLI – AN INDUSTRIAL FAIRYTALE

The results are reflected in the company’s dividend policy. During the period 1924–1932, shareholder dividends were distributed every year except two. After that, no dividend was paid until 1938. In this way, the owners took responsibility and did not spend the company’s capital in times of hardship.

The right market

In the May 1937 price list, Kavli apologised profusely for having to increase its prices. The company was willing to give away free samples of new products, however.

In 1930, Vestfold Flatbrødfabrik (Vestfold flatbread factory) launched Terje Viken bread, a cross between a crispbread and a flatbread. It became popular and achieved large sales in both Norway and abroad. Malti bread was launched in 1939.

With the production of spreadable processed cheese, the company had definitely found the right market. The product sold like wildfire during the short but intense period of economic upturn at the end of the 1920s. When the crisis hit in 1930, the product was already well-known and established. Most people knew what Primula was, and many were proud of this Norwegian make. Additionally, demand for food remained fairly steady during the crisis. In fact, demand for most foods is inelastic in relation to both income and price developments. This means that people eat approximately the same amount of food in good and bad times, irrespective of prices, although people will often choose cheaper foods during times of hardship rather than more expensive products. The spreadable processed cheese was relatively expensive, but falling ingredient prices, an efficient production process, product improvements and the popularity of the cheese kept demand high. The interwar years were a period in which many manufacturers struggled with falling margins. Kavli experienced increased margins, however. This favourable development was largely due to advantageous price agreements with dairies, which enabled the company to buy affordable cheese for melting.9

7: SUCCESS DESPITE ECONOMIC MELTDOWN

The company’s challenge was to keep sales up, especially since import restrictions in other countries led to a decline in exports despite the cheese being sold in an increasing number of countries. The machinery represented a fixed cost despite fluctuations in the turnover of the factory in Bergen. This meant that fixed costs were increasing as a percentage of total costs. Thus, profits fell rapidly in periods of falling turnover.

Partnership with Vestfold Flatbrødfabrik Kavli entered into a very important alliance with Vestfold Flatbrødfabrik in Barkåker near Tønsberg, Eastern Norway, in 1924. The factory was founded by Nils Halvorsen and his two sons Harald and Olaf Norheim on 14 October 1919. Nils Halvorsen’s (1861–1949) background was similar to Olav Kavli’s. He came from the farm Nordheim in Lunde in Telemark and was brought up in the Haugean tradition, a tradition that he carried with him throughout his life. He worked his way up from humble beginnings. His mother was widowed when he was five years old, and she provided for the family by running a smallholding and baking flatbread. Inspired by his mother’s struggle and his own job as a paper machine operator, flattening the paper pulp at Skien Cellulosefabrik (cellulose factory), he made a flatbread machine. When it was finally finished, he was awarded a prize of NOK 3,000 by the Norwegian Public Health Association. The company started manufacturing oat, rye and wheat flatbreads, later known as the Korni brand.10 Processed cheese tasted perfect on these flatbreads and a formal partnership was launched for marketing, distribution, storage and agency activities.

The first flatbread bakery at Barkåker opened in 1919. Several extensions were built as output increased, but the bakery was completely destroyed in a fire in 1934. A new concrete building was completed the same year. It was again partially destroyed by a fire in 1951, but it was rebuilt and a railway track and new, modern machinery were installed. The production of Korni started in 1947. It became the factory’s main product. In 1954, the factory exported 1,3 million packs of flatbread to Sweden.

Barkåker is a railway village linked to the Vestfold railway line. It is in a central location between two busy national roads in Norway. The village had a population of 1,500 in January 2012.

81 6

KAVLI – AN INDUSTRIAL FAIRYTALE

Bergens Blikktrykkeri (BBB) (tin and labelling factory) was founded in 1908 by the German Paul Scholz. The company produced packaging for the canning industry. In 1959, BBB was merged with three companies in the east of Norway and became Noblikk. It later became Noblikk-Sannem. Manufacturing was moved to Fjøsangerveien and later to Moss. The company now belongs to the Skanem Group.

This is what the factory building in Damsgårdsveien looked like immediately after it was taken over from Bergens Blikktrykkeri. According to Bjarne Fotland, the condition of the production premises was satisfactory, but the office was in a terrible state. It had previously been used to make shoe cream. The factory was built in 1913. It had a classical industrial design that was fashionable during that period. Bricks were the predominant material. The architect was Schak Bull, one of Bergen’s most prominent architects at the time.

New building Following the bankruptcy in 1924, Kavli continued to rent premises in Lodin Lepps gate, which later became a wholly owned subsidiary. During the years of expansion from 1924 until 1929, the premises became too small and impractical, and, not least, too expensive. The company would have to build, buy or rent new premises. The management decided that the best option was to build. However, the financial situation during the crisis in the 1930s made this very difficult and the project was put on hold. In 1932, the board of directors decided to purchase new premises instead. Quite a few suitable properties were on the market, one of which was Damsgårdsveien 59. Bergens Blikktrykkeri (a tin and labelling company) was the seller. Upon inspection, it was quickly concluded that the building had potential, although it was in poor condition and the premises were far from luxurious. They were practical for factory purposes, however. Another advantage was that the building had direct access to the sea and its own quay. This would make the transportation of both incoming and outgoing products more efficient and cost-effective. The decision to purchase Damsgårdsveien 59 was made at a board meeting in January 1933, at the very affordable price of NOK 46,000 – a real bargain!11 The premises were just a shell, however. The accounts indicate that, up until 1935, almost as much again was spent on refurbishment and investments in facilities. The total recorded investment amounted to just over NOK 87,000, which is equivalent to NOK 3.1 million at today’s prices (2013).12 This seems very reasonable. If we use a different calculation method, we find that the price was equivalent to the annual pay of 45 industrial workers, or NOK 20 million if we convert it to the equivalent salary levels today – still a real bargain!

7: SUCCESS DESPITE ECONOMIC MELTDOWN

The new premises were ready for operation the same year, and the move to the new premises and the start-up of production took place gradually. It was financed by two loans: NOK 30,000 from Bergens Sparebank and NOK 15,000 from Bergens Skillingsbank.13 The remaining NOK 40,000 was financed from the company’s own capital. Bjarne Fotland says there were quite a few complaints when the company first moved into the new premises. The comfort level was greatly reduced. It was cold and the premises were run down in places. However, the management placed great emphasis on employee satisfaction and they were allowed to decorate and furnish the premises according to their own tastes. In this way, the new premises were largely turned into the employees’ own project. In addition, nearly all the industrial production could be carried out in one place. This saved on costs, which was essential in the 1930s.

The factory in Damsgård in 1947. Despite modest pay levels, Kavli was a safe workplace that offered secure jobs. In certain periods, half the production workers came from the nearby Gyldenpris and Laksevåg areas. Eighty per cent of them were women, most of them unskilled – in-house training was given. The big tower in the background, (known as the ‘IFA tower’ by people from Bergen) was where the tinning/labelling factory dried long reams of metal during the manufacturing of tin cans. It weighed 20 tonnes and was removed in 2012 as part of a large-scale urban redevelopment project.

Reorganisation and an extended range The new premises paved the way for an important extension of the product range and reorganisation of the company. In practice, the company was divided into seven different departments or areas of responsibility: the office, warehouse, workshop, box factory, packaging hall, delicatessen and ‘best room’ where the secret cheese production was carried out. The division into separate areas of responsibility led to the Kavli family relinquishing their influence on day-to-day operations, and Knut Kavli started travelling abroad more, as his father did, to promote the cheese. The staff wore white coats, as was common in dairies and cheese factories at that time, and still is today. Hygiene was given high priority. The central administrative staff, sales managers and finance and accounting staff worked in the office. The warehouse was divided into two parts for incoming and outgoing goods.14

The smoked cheese ‘Smokelet’ was a pioneering product.

KAVLI – AN INDUSTRIAL FAIRYTALE

A worthy anniversary – 1933 A working day of forty years – an honest struggle with courage and good sense. Where Olav travelled, his tracks were laid from the east to the west, from the north to the south. You taught people living in warmer climes that a country near the North Pole has the best aromas and flavours. You made Norway even bigger, you are the Romsdal eagle. Congratulations! Bergljot and Bjørn This is an example of hundreds of congratulatory telegrams that were received at Kavli’s anniversary party at the Grand Hotel Terminus on 29 March 1933. All employees were invited to celebrate the company’s 40th anniversary, which they were clearly happy to do. Today, we understand that the anniversary was a major event because of the massive press coverage it received. Newspapers and publications across Norway praised the pioneer and the pioneering company. ‘Where is Primula being sold now?’ asked a journalist from ‘Norges Næringsveier’. Olav Kavli responded in typical fashion: “Can’t you ask me an easier question, like where is Primula not sold? East of Madagascar lies a small island that belongs to France called La Reunion. Yesterday, I would have told you that we do not sell Primula to Reunion, but I can’t say that today because this morning we received our first order from the island in the mail. Firstly, this product has been received well in all European countries, also cheese-producing countries such as Switzerland, Italy and France. One city alone, Vienna, has taken more than 500,000 boxes a year, but since the import restrictions were implemented, this number has been somewhat reduced. But also outside Europe, we have consumers spread over many countries – Palestine, Turkey, India, Java, Sumatra, Borneo, China, Japan, Northern and Southern Africa, America – basically all five continents. Last year, I visited India and travelled around the country. It looked very interesting and I visited customers and representatives. It made a strong impression on me when a Hindu took hold of my hands, held them between his and assured me that: ‘Your cheese is the best cheese in the world.’

Little Otto and Karen Margrethe congratulated ‘Uncle Kavli’ with a nice drawing.

In honour of the anniversary, the ‘Primula Cheese’ newsletter was published.

7: SUCCESS DESPITE ECONOMIC MELTDOWN

The banquet table was beautifully decorated despite the depression, showing the great esteem in which the employees were held.

KAVLI – AN INDUSTRIAL FAIRYTALE

Caviar was also sold in large tins. The company’s direct access to the sea was very useful when boats loaded with cod roe for caviar production were to be unloaded.

Mayonnaise is a cold, thick sauce – an emulsion of egg yolks and food oil to which vinegar or lemon juice and spices are added. The name comes from the Spanish ‘salsa mahonesa’ sauce from Mahón, the capital of Menorca. Kavli was the first industrial mass producer of mayonnaise in Norway, and the company started producing it at Damsgård in 1938. This was how mayonnaise was presented to consumers. A fish is holding the mayonnaise tube in its mouth, while a smiling crab looks on at the bottom of the box.

Following the bankruptcy in May 1924, the company concentrated on its processed cheese products, since the wider portfolio it had prior to the bankruptcy was not very successful. The new premises made it possible to extend the range, but the management had decided to concentrate exclusively on food products. They established a new delicatessen department, where caviar and mayonnaise were made. Kavli had been producing caviar since 1917, but the production of mayonnaise did not start until December 1938.15 The caviar was made from cod roe and, as always, quality was paramount. Hence, it was purchased fresh from the coastal areas of Møre, Lofoten and Vesterålen, and from Iceland. It was placed in salt brine and then transported to Bergen, where the salt brine was replenished before the roe was stored for a year. In 1935, the company rented an abandoned air raid shelter from the City of Bergen to store the roe. The shelter was under Michael Krohns gate in Solheimsviken near Damsgårdssundet, a central part of Bergen. The secretive production of processed cheese took place in the ‘best room’. Only the most trusted people had access to ‘the kitchen’, as it was also called. It was considered necessary to keep the process a closely guarded secret in order to protect the unique recipe. From the ‘best room’, the cheese went through several stages of production before

7: SUCCESS DESPITE ECONOMIC MELTDOWN

The women in the box factory knew their jobs. The work demanded both effort and precision.

reaching the packing hall, where women sat at a conveyor belt injecting the cheese mass into half-moon shaped boxes. Bases were then fitted and the boxes turned upside down for the lid to be put on before they were packed by the dozen. Following this, the cheese was sent to the storage department and transported by boat or lorry in crates. The box factory was located in a separate wing. The most important product here was the half-moon shaped Primula boxes made from wood shavings, which had been a key factor for a long time. Now they had ample space to carry out their own controlled manufacturing of quality boxes, but the factory burned down in November 1940. After the war, it was decided to use more manageable cardboard boxes instead of wooden ones. They were printed by J. D. Beyer, Ed. B. Giertsen og Bergens Blikktrykkeri and manufactured in a separate factory. This enabled output to be increased to 20,000 boxes a day using just 5–6 employees. In addition, the company had its own workshop that ensured that all machinery was in working order, and it also ran its own maintenance service, which maintained and repaired the company’s vehicles.16

In 1939, a large tube of mayonnaise cost NOK 1 and a small one 65 øre.

Employee welfare The employees were content, although pay levels were below average for big towns and cities, but normal for the food industry. Employees were given free products depending on the size of their families. Employees also received free meals at work, and the company introduced employee sick pay as early as 1929. Initially, this arrangement only applied to family breadwinners. Married men were thereby favoured, but it was later extended to cover all providers in 1937, and thereafter all employees in 1939.17 There are no systematic records of the number of employees before the Second World War, but the anniversary edition of the Primula Post from 1943 gives us a good

KAVLI – AN INDUSTRIAL FAIRYTALE

Full concentration at the box factory.

Out of a total of 60 employees in 1943, 34 were women. Eleven of them worked in packaging, 20 in the box factory and 3 in the administration department. Only men worked in the warehouse and dispatch department. When cardboard packaging was introduced, the boxes had to be folded by hand. The women sat at a long table folding boxes and chattering eagerly among themselves. Ågot Knudsen (pictured) held the record, having folded 10,000 boxes in one day.

► Albert Knutsen (here with his lorry) was a typical Kavli employee. He was initially employed as a messenger boy in 1928, but worked his way up: first as a factory worker, then a driver and salesman, before finally becoming warehouse manager. In all, he served the company for more than 50 years.

idea of the workforce at the Norwegian plant at that time, indicating that female employees were in the majority.18 In difficult times, some of the staff were put on reduced hours, since this saved quite a significant amount of money. Women were also paid significantly less than men (approximately half) at this time. Most of Kavli’s employees were recruited from the Gyldenpris or Laksevåg areas near the factory. With a few exceptions, the production staff were unskilled and were trained by the company. Women worked school hours until the Second World War to take account of fluctuating demand and the demands of family life. Kavli’s employees were well looked after and they enjoyed working for the company.19 Many of them stayed on for many years and held various positions. If we look through the archives, we find several examples of this. One of the best was Albert Knutsen, who started as a messenger boy in 1928. In 1934 he was transferred to the cheese factory, and before the war he spent a brief period working for the company in Newcastle. In 1946, he became a driver, then a salesman and sales representative before becoming warehouse manager in 1971. Knutsen served the company for more than 50 years. By comparison, we have also found people who worked in the same job for their whole working life with the company. Erling Haug was recruited as a sales representative in Oslo in 1935. He remained in this job until he retired 43 years later.20 In general, we find that many people worked for the company for forty or fifty years, a sure indication that people liked working for Kavli.

Chapter 8

AN INTERNATIONAL COMPANY Export success Kavli was one of several leading global producers of spreadable processed cheese, and the company took full advantage of its position. Exports quickly increased, and by the beginning of the Second World War its products were sold in almost every corner of the globe where Olav Kavli had set his foot on a business trip.1 Few cheese producers had done anything similar. In addition, the company must have been one of the most international groups in Norway. The expansion was greater in terms of the number of new countries than in the actual volume of goods. Kavli had still not grown into a large company even though it was represented in many countries. But trust was placed in young people with a head for business. They were tasked with building up a sales organisation abroad. In this way, they gained valuable commercial experience.2 The Great Depression in the 1930s represented a challenge. It was an international phenomenon that resulted in many countries entering a phase of protectionism, particularly as regards food products. While cheese products had previously been subject to 5â&#x20AC;&#x201C;15 percent import duty, the duty now increased to 15â&#x20AC;&#x201C;50 percent. Kavli was therefore forced to establish its own production facilities in a number of countries.

From economic upturn to crisis At the end of the 1920s, the global economy experienced a strong upturn accompanied by optimism and increased global trade. This was due to high demand from North America, which had increased its purchasing power after many years with a surplus on its balance of payments. It was during this period that Kavli experienced strong growth in exports. The huge amount of money in the USA and France led to an asset bubble, which was funded by affordable credit from the banks. The bubble burst when the Wall Street Stock Exchange crashed on 24 October 1929. The crisis reached Europe in 1930. Growth in trade and industry ground to a halt.3

KAVLI – AN INDUSTRIAL FAIRYTALE

The strong growth in Norway’s foreign trade was replaced by stagnation. Reduced international purchasing power led to a decline in exports, particularly foodstuffs, since most countries protected their home market to support their own producers.4 Kavli struggled with shrinking sales. The Norwegian cheese producer was forced to come up with new ways of getting its products sold abroad. It did not help to have popular products when the depression resulted in high customs barriers.

Kavli’s third trip to America Olav Kavli felt he was almost following in St. Paul’s footsteps when he embarked on what he referred to as ‘Kavli’s third missionary trip to America’.5 The promotion of cheese, which he had faith in, was also a kind of mission. The first stop was Montreal in Canada. During lunch at one of the city’s finest hotels, he heard some ladies complaining about the cheddar cheese they had been served. Ever the entrepreneur, he asked the head waiter if he would let them taste the Primula he had brought along. They did so, and the attractive French-Canadian women fell for the cheese. As a result, he not only acquired the hotel as a customer, but also several VIP customers. He continued westwards across Canada and then down the west coast to the USA. He then travelled eastwards across the prairies to the east coast. He visited Toronto, Countries and regions O. Kavli AS exported to in 1931 Africa

America

Asia

Western-Europa

Other European countries

Egypt

Argentina

Borneo

Belgium

Greece

The Canary Islands

Brazil

India

Denmark

Lithuania

(Spain)

Canada

China

Finland

Malta

Sudan

Cuba

Java

France

Poland

South Africa

Mexico

(Indonesia)

Ireland

Romania

USA

Sumatra

Iceland

Czechoslovakia

(Indonesia)

Italy

Hungary

Turkey

The Netherlands

Austria

(Asia + Europe)

Portugal

The Holy Land

Spain

(UK )

UK Switzerland Sweden Germany

Source: Nationen 29 August 1931.

8: AN INTERNATIONAL COMPANY

Ottawa, Winnipeg, Calgary, Edmonton and Vancouver in Canada, and Seattle, San Francisco, Los Angeles, Salt Lake City, St Paul, Minneapolis, Chicago, Philadelphia, Boston and New York in the USA. He recruited several agents, who tended to be Norwegian-Americans, ranging from pastors and engineers to lawyers and economists. The Americans were surprised that the Norwegian company did not spend more money on advertising. It focused instead on personal contact and direct marketing. The fact that the chief executive travelled around in person with suitcases full of cheese that he offered to people was seen as very charming. He was invited to many places and, after the trip, sales to North America increased significantly. In New York he sought out the world’s largest cheese manufacturer, Kraft & Co. It was the general director himself who suggested that they could be Kavli’s general agent for a while, and afterwards purchase the right to produce the cheese in the USA. It was a tempting offer, but Kavli already had a general agent, Børge Westergaard, and he did not want to give up the exclusive right to produce Primula. The lucrative offer was therefore declined.6

Primula as a global product Primula had won awards for its high quality at international exhibitions in Barcelona in 1929 and Antwerp in 1930, and it would also receive one in Brussels in 1935. In 1936, it won a gold medal in Tel-Aviv. Not only was the cheese a revolutionary product, but the

Olav Kavli’s third trip to America in 1927 started in Montreal, Canada. He arrived there on a passenger ship from England. The huge Atlantic steamers took five days to cross the ocean at that time. They could not go any further as the sluices in the St Lawrence River were not designed for vessels of that size. The population of the city was approx. 700,000 in 1927. Most of them were of English or French descent, and they were familiar with European eating habits. Montreal, including its suburbs, now has 3.3 million inhabitants and is the second largest French-speaking city in the western hemisphere, after Paris.

KAVLI – AN INDUSTRIAL FAIRYTALE

Krakow street (Krakowskie Przedmieście) in Warsaw in 1930. The inhabitants of the Polish capital gradually became familiar with Primula.

Poland was clearly a country that Kavli focused on in the 1930s. This was quite natural. The country had almost 35 million inhabitants in 1938. The finances of the growing middleclass improved during the interwar years, and they could afford to buy imported cheese. This placard hung in all the taxis in Warsaw for a while.

company had exported the world’s first cheese in a tube already in 1929. The Norwegian newspapers could at least report one piece of good news during one of the worst periods of the Great Depression, i.e. that Primula had become ‘A new Norwegian global product’. The newspaper Nationen reported in 1931 that the cheese was being exported to 39 different countries.7 Some exports were of a somewhat symbolic nature, for example those to Borneo, Sumatra, Sudan and the Holy Land, and witty tongues said that Olav Kavli was not primarily a cheese wholesaler, but a wholesaler of countries.8 On the other hand, exports to Sweden, Denmark, the UK, and especially the USA, were substantial. Exports to some countries were so marginal that the tax authorities commented on this. In a tax audit in 1938, it was remarked that some of the business trips seemed to combine personal pleasure with company operations. It was not enough to take a suitcase of cheese to exotic destinations to claim it as a business trip. It was also pointed out that the company had not managed to separate the foreign enterprises from the Norwegian ones. This applied in particular to agents in a number of cities. As far as exports were concerned, the tax authorities were of the opinion that the stock and turnover figures had been manipulated to a certain extent to reduce tax. Otherwise, the accounts were deemed to be in order.9

Barcelona 1929

8: AN INTERNATIONAL COMPANY

Prizes and awards The international exhibition in Barcelona ran from 19 May 1929 to 15 January 1930 in the suburb of Montjucic, which was fully refurbished for the occasion. In addition to Kavli’s cheese, the Norwegian arms factory Kongsberg Våpenfabrikk’s new harpoon gun was also awarded an honorary diploma. In order for a fair to be called an international exhibition, it has to be organised in accordance with the 1928 Paris Convention, which Norway has also signed. The participating countries have to present their cultural, economic and social accomplishments. The ‘Great Exhibition of the Works of Industry of all Nations’ held in the newly built Crystal Palace in London in 1851, is considered to be the first international exhibition. It was followed by an exhibition in Paris in 1855.

Kavli’s stand at the Barcelona exhibition in 1929 was very stylish.

Antwerp 1930

KAVLI – AN INDUSTRIAL FAIRYTALE

Fish products attracted most attention at the Norwegian stand at the Antwerp Exhibition in 1930. However, this did not stop Kavli from running off with a ‘Diplome de Grand Prix’.

At the international exhibition in 1935, the Norwegians had a smaller budget than before. Times were hard. The Norwegian stand, built of iron and glass, was primarily intended as a tourist promotion, with a cinema and a restaurant that served cheese, beer and tinned products. Kavli’s cheeses were clearly popular as they resulted in another ‘Diplome de Grand Prix’.

Brussels 1935

8: AN INTERNATIONAL COMPANY

Tel Aviv 1936

KAVLI â&#x20AC;&#x201C; AN INDUSTRIAL FAIRYTALE

Tel Aviv was founded in 1909 by the 3.000 year old Jewish community in Jaffa. During the interwar years it grew into a centre of trade and light industry. To promote the industrial and commercial development of the thriving Jewish communities in the British mandate area, Palestine, a major international exhibition was held in the city in 1924, 1932 and 1936. Kavli participated in the last exhibition, which resulted in a gold medal.

From the opening of Levant Fair in Tel Aviv on 30 April 1936.

8: AN INTERNATIONAL COMPANY

King’s Gold Medal of Merit, 1933 1933 was an eventful year in many ways. The global crisis hit rock bottom during the year, and the company was struggling with import restrictions in other countries. As a result, it took the first steps to establish permanent production facilities abroad. Olav Kavli was also awarded the King’s Gold Medal of Merit in the same year. It was emphasised in the rationale for the award that he had been responsible for important global innovations within the field of cheese production. Furthermore, he was honoured for his extensive and important work in export markets to make a Norwegian product world famous.10 Thus, Olav Kavli and his capable employees received recognition from the King for their efforts to create jobs and put Norway on the map.

Establishment abroad Hans Askeland was sceptical about starting operations abroad. He preferred to focus on cost-effective methods and increase efficiency at home. Business abroad could take the form of improved exports when the crisis had calmed down and the markets opened up again. He feared that establishing companies abroad would be financially draining and lead to bankruptcy. Olav Kavli, however, was convinced that establishing businesses abroad was the correct policy, while Knut Kavli was somewhat hesitant about his father’s plans. He shared Askeland’s scepticism about his father’s many foreign adventures and feared that costs would rocket. However, they agreed on a good model. As far as possible, the companies abroad would be independent limited liability companies in partnership with foreign producers or distributors.11 Thus, the parent company would bear less risk, while the subsidiaries would have to manage on their own.

In March 1933, Olav Kavli was awarded the King’s Gold Medal of Merit. This was followed by the Order of St. Olav in 1952. In that connection, a photograph was taken of him with his daughter Signe and son Knut. Signe ran an interior decorating business in New York for many years.

97 7

KAVLI – AN INDUSTRIAL FAIRYTALE

Sweden

The factory in Blekinggatan, Stockholm. Swedish advertisements from the interwar period.

The first start-up abroad took place in Sweden, to which a large amount of exports were already being made. In 1933, during the depression, the company built up a separate sales office in Stockholm to secure operations despite hard times. The office was managed by Conrad Ternström. It worked well and local representation led to a higher market share. Despite the economic crisis, sales of cheese, caviar, and later mayonnaise, increased. One problem was nationalism as a result of the global crisis. This was manifested in Swedish consumers’ preference for buying domestic products. Kavli responded by turning its sales office into something resembling a factory under the name ‘delicatessen industry’. It did not make products from scratch, but functioned more as a repacking station and warehouse. The products were adapted and clearly labelled, so that everyone could see that they had been processed by Swedish hands.12 After a few years, the small factory started producing its own coleslaw. Kavli Sweden had around 15 employees in 1939. When the Second World War broke out, dramatic changes took place. The duty on Primula increased fourfold, and it was almost impossible to export it from Norway to Sweden. In order to maintain sales, machines were hastily transferred from Bergen to Stockholm right under the nose of the German occupation forces.13 The board of directors made the following decision dated 30 April 1940: It has been decided that Knut Kavli should travel to Stockholm at the earliest opportunity to run the new factory in Stockholm. This is a crucial trip due to the ban on exports from Norway and the ban on imports to Sweden.14

A Swedish subsidiary was formed already on 1 June 1940. It was called O. Kavli AB Stockholm. Just a month after production started, Hans Askeland and Knut Kavli (who was manager of the Swedish enterprise during the first few years) had taken steps to ensure that operations ran smoothly. Ingredients and cheese were now purchased almost duty free in Sweden. The quality equalled that in Norway, and sales went well. After just a short time, the company became market leader in spreadable processed cheeses in Sweden.

8: AN INTERNATIONAL COMPANY

In 1933, Olav Kavli decided to focus on Austria. This Alpine country with more than six million inhabitants had a long tradition of eating cheese. The company was granted good terms and conditions, and a new factory was built in Vienna in 1933. On 15 March 1934, the first boxes of Primula left the conveyor belt. Alf Sjurseth was the manager in Vienna.

Austria In August of the same year as the sales office was opened in Sweden, Knut Kavli travelled around the European continent, focusing on the Central European countries. The purpose of the trip was to study the possibilities of opening a factory, since customs barriers were rapidly increasing. The two most important candidates were Czechoslovakia and Austria. Unemployment was high in both countries, and the authorities wanted to facilitate investment from abroad. Austria offered the required access to ingredients, as well as several years of tax exemption and help with the financing and preparation of a plot of land in the capital.15 The whole project seemed so lucrative that a new factory was built in Vienna the following year. Father and son travelled with the 21-year-old Alf Sjurseth to start production. They had already entered into a production and sales agreement for Primula with Niederösterreichische Molkereiverband (est. 1898), a large dairy company with its head office in Vienna. They negotiated the purchase of second-hand German machinery from them. As far as we can see, they chose in the end to purchase new machines directly from Germany, in addition to second-hand machines from their Austrian partner and the factory in Norway. Production began on 15 March 1934. The machines were operated by highly qualified staff in a country with long cheese traditions. Sjurseth was the managing director, Einar Nielsen the factory manager and Fredrik Ankjær-Jensen the mechanic. They commuted on a monthly basis between Vienna and Bergen. Sales went well, with the main products being Primula and ‘Kümmelkäse’, or cumin cheese. In an interview in 1934, Sjurseth particularly stressed the advantages of the distribution system and the low production costs.16 Plans for expansion would soon be drawn up.

Niederösterreichishe Molkereiverband (NÖM) in Vienna was founded by Franz von Pirko in 1898. It still exists today. The company produces a number of dairy products, 50 percent of which are exported. Its turnover was approx. 3,320 million euros in 2006.

Kavli’s marketing targeted the German-speaking part of Europe in the interwar years.

KAVLI – AN INDUSTRIAL FAIRYTALE

However, the ban on cheese imports had been lifted in 1936, with Germany as one of the preferred countries. At the same time, there was a great deal of internal unrest, and the Austrian fascists gained tighter control following the coup on 25 July 1934, which made it harder to operate in the country. As a result, the factory was closed after two years of operation, although Kavli continued the collaboration on the sale of cheese spread.17 The machinery was transferred to the UK where the business was far more successful.

Denmark Convalli ham cheese was produced at Kavli’s factory in Nexø on the island of Bornholm.

H. C. Jaster, grocer, wholesaler and retailer of Mejlgade 18, had one of the finer grocery shops in Århus for generations. Right from the start in 1874, it was frequented by ladies from the finest families in town. In October 1936, Kavli’s products were on display in the shop’s classical interior.

100

The first country Kavli exported to was Denmark. When the Danish introduced protectionist measures for cheese, Kavli needed to have its own production facility there as well. However, it was difficult to find suitable premises at an affordable price. Therefore, in consultation with its Danish representatives, Carl Lange & Co., the company decided to establish an enterprise in Nexø, a small town on Bornholm, a lush island in the Baltic Sea. Together, they formed the company AS Dansk O. Kavli with a share capital of DKK 30,000. The company was formed on 4 December 1935,18 and the factory was completed in 1936. It was small and could be described as an experimental factory.

8: AN INTERNATIONAL COMPANY

There were 9,900 German soldiers and 4,500 German civilians on Bornholm on 8 May 1945. In an attempt to get them to safety, the German commander wanted navy captain Gerhard von Kamptz to surrender to the Western powers instead of to the Soviet Union. Of course, the Russians could not accept this and sent bombers from the ‘Red Flag’ Squadron to the island. 50 percent of the buildings in the capital, Rønne, and 70 percent of the buildings in Nexø (including Kavli’s cheese factory) were totally destroyed during the attack. Gerhard von Kamptz was taken prisoner by the Russians after the attack.

The Danish protectionist measures were not very strict, so some cheese exports from Norway were permitted. This was possible, not least, because the two countries exchanged cheese quotas, which meant that both countries permitted duty free or low duty imports of a certain amount of cheese from each other. Thus, there was never a great need to extend the factory or move it to Zealand, which was the original plan. Towards the end of the Second World War, Nexø was bombed in a devastating Russian air raid at the beginning of May 1945 in which 856 of the town’s 900 buildings were either damaged or destroyed. The factory was in ruins, but most of the machinery was saved. The leadership now wanted to establish itself in a more central location in Denmark, and it established contact with a company called Otto Mønsted AS in Copenhagen. The company had provided capital for a large fund that focused on developing Danish trade and industry. The fund was established through the inheritance of a farmer’s son in Jutland, who, despite starting out with no money to his name, became a leading entrepreneur in the Danish food industry. His story was very similar to that of Olav Kavli. Despite the bold plans, a new business was not established until 1948.19

101

KAVLI – AN INDUSTRIAL FAIRYTALE

Team Valley in Newcastle as it looked before the arrival of industry.

The UK

Even though trade barriers to the UK increased in the 1930s, they were still more moderate than in most other countries. From 1929, the country became a significant consumer of processed cheese from Bergen. But during the great depression, which hit the UK at the end of summer 1930, expansion was slower than expected. Import duties on cheese increased and Kavli feared that the market would gradually be lost. Once again, the solution was to establish a subsidiary. The company entered into distribution agreements with major wholesalers in 1935 to secure a certain volume of sales. The UK had emerged from the worst crisis and was on its way to recovery. Demand was on the increase, but, in Figure 8.2 order to ensure competitive prices, the company had to establish a factory in the country. Kavli’s eyes fell on Cramlington, Turnover for Kavli Norway and Kavli UK a small town 14 kilometres north of Newcastle. Situated in an 1936–1941 industrial area in a densely populated region, it was relatively NOK million: easy to access from Norway, and it was also cheap to establish 2.5 Norway the company there. UK 2.0 The factory was completed in 1936 and the subsidiary was 1.5 called Kavli Limited. Alf Sjurseth became the Norwegian management’s representative in the UK and was made managing 1.0 director in 1937 at the tender age of 24.20 Sales soon outgrew 0.5 the factory and a new one had to be built. However, dark clouds were gathering on the horizon. The overproduction of 0 1936 1937 1938 1939 1940 1941 dairy products in the UK led to intervention by the authoriSource: Kavli Ltd., Accounts 1936–1941. The Kavli Archives, Gateshead and ties. Manufacturing and sales were to be controlled in order to O. Kavli AS, Annual accounts for 1936–1941. The Kavli Archives, Bergen ensure that prices did not fall so drastically that farmers were

102

8: AN INTERNATIONAL COMPANY

adversely affected. New stringent hygiene and quality requirements were enforced in all areas, and the cheese had to have a certain texture and specific content to ensure that a minimum amount of fat and milk fat were incorporated in the production process. When these measures were first introduced, Kavli Ltd. had plans to move to modern premises in Team Valley at Gateshead outside Newcastle. Team Valley was a major industrial project that the British authorities were about to implement following an American design. In response to the depression, they made a commitment to build enormous industrial estates with industrial facilities, service companies, shops, cinemas, sports centres and other cultural services. The premises were rented to companies that wanted to start up business there. In this way, it was hoped that the right conditions would be created for the establishment of new enterprises. The premises that were offered to Kavli met the new stringent requirements for cheese production. In addition, the processed cheese was of high quality and had a high cheese content.21 The new premises were ready for operation in summer 1939, and during the first few years of the war, sales increased rapidly and were well on their way to equalling those in Norway. 22 Profitability was also good, and the company made a profit already in its first full year of operation in 1937. Pre-tax profits fluctuated between four and twelve percent during the companyâ&#x20AC;&#x2122;s first five years of operation.23

Cramlington is a town with 39,000 inhabitants in Northumberland, 14 km north of Newcastle. It was founded by Danish Vikings and is mentioned for the first time in written sources in 1135.

The Team Valley industrial estate under development in 1938.

103

Estonia

KAVLI â&#x20AC;&#x201C; AN INDUSTRIAL FAIRYTALE

Primula was everywhere in the 1930s

Norway

England

India

Italy

Poland

Sweden

Hong Kong

Czechoslovakia

104

Austria Austria

8: AN INTERNATIONAL COMPANY

A world citizen through cheese The establishment of companies abroad did not just lead to new opportunities in the countries in which subsidiaries were established. In Gateshead in particular, new doors were opened and the company was able to export to many other countries. The UK was still the centre of a commonwealth of nations with low customs duty between them. This meant that it was not just one door that opened, but many doors, and, as a result, large export orders were received by the British factory. Meanwhile, export orders from the factory in Bergen fell as a result of the establishment of the factories abroad. Jobs were threatened and new markets had to be investigated, but most of the markets remained small. However, Olav Kavli never said â&#x20AC;&#x2DC;noâ&#x20AC;&#x2122; a trip abroad to promote his cheese, and by 1939 the company exported products to a total of 61 countries and regions.24

A modern design and confident tone were used to help the public understand that Primula was a revolutionary product.

105

KAVLI – AN INDUSTRIAL FAIRYTALE

In reality, cheese made Olav Kavli a world citizen. His dream from childhood had come through. Knut Kavli was most involved in Denmark and Sweden. In the latter country, he found his wife, Karin Carlson, one of Swedens most famous actress and later theatre manager. They married in Stockholm on 28 March 1935, and she took the Kavli name. She described herself on several occasions as ‘a traveller in theatre and cheese’.25 She was a member of the Swedish subsidiary’s board of directors, where she was known as a fearless and outspoken businesswoman who focused on profit. The couple always kept the distance between each other, and they were rather considered business partners than husband and wife. Countries and regions O. Kavli AS exported to in 1939

Africa

America

Asia and Oseania

Western Europe

Other European countries

Egypt

Argentina

Australia

Belgium

Estonia

The Canary Islands

Brazil

Borneo

Bulgaria

Greece

(Spain)

Canada

The Philippines

Denmark

Yugoslavia

Sudan

Chile

India

Finland

Cyprus

St. Helena (UK)

Colombia

China

France

Latvia

South Africa

Costa Rica

Japan

Faroe Islands

Lithuania

Rhodesia

Cuba

Java

Ireland

Malta

(Zimbabwe)

Ecuador

(Indonesia)

Iceland

Romania

Guatemala

Mauritius (UK)

Italy

Czechoslovakia

Mexico

Sumatra

The Netherlands

Hungary

Nicaragua

(Indonesia)

Portugal

Austria

Peru

Syria

Spain

Uruguay

Turkey

USA

(Asia and Europe)

Switzerland

Venezuela

The Holy Land (UK)

Sweden Germany

Source: Kavli AS, Export records for 1931–1939. The Kavli Archives, Bergen.

The Primula box designed for the German market (but with English text as well).

106

Chapter 9

WAR AND RECONSTRUCTION Under attack The German invasion forces met little resistance when they attacked Norway on 9 April 1940. The country had pursued a policy of remaining neutral for several years. It had reduced its defences and was in no way prepared for a German invasion, despite a number of warnings from the British. However, the German command ship ‘Blücher’ was sunk in Drøbaksundet sound, and the Royal Family and the Government were taken into hiding, and parts of the armed forces mobilised. In addition, the allied forces came to the rescue. Because of this, it was nearly two months before Norway capitulated on 7 June 1940.

German General Karl Richard Tittel inspects a parade at Torgalmenningen square in Bergen in April 1940.

107

KAVLI – AN INDUSTRIAL FAIRYTALE

Figure 9.1

Annual changes in wealth creation per inhabitant as a percentage (Gross Domestic Product) and inflation (Consumer Price Index) 1940–1945 15 10

GNP per inhabitant Consumer Price Index

5 0 –5

The war led to significant changes in framework conditions for trade and industry. Trade routes were blocked, which meant that the export and import industries were among the biggest losers. However, markets increased in Germancontrolled areas in Europe. A number of important companies, especially publicly owned enterprises, came under new German-friendly management. Kavli coped better than many other companies. This was particularly due to its establishment of subsidiaries abroad. Post-war conditions meant even more expansion – especially for the companies abroad.

The Norwegian wartime economy

–10 –15

1940

1941

1942

1943

1944

The war had an immediate impact on the Norwegian economy. The first rationing systems were introduced already in autumn 1939 following the attack on Poland. Wealth creation fell drastically during the war at the same time as prices rose. Inflation was caused by printing huge amounts of money at the same time as there were product shortages.1 Manufacturing output in Norway fell dramatically and inflation was at its highest during the first two years of the war. Afterwards, from 1942, price controls ensured lower inflation. The most important Norwegian export markets disappeared during the war, and Kavli therefore lost a large proportion of its markets. This loss was partially compensated by the German occupation forces ordering large amounts of processed cheese for its approx. 400,000 men on Norwegian soil. Processed cheese was a popular product among the Germans, and it saved many jobs at the factory in Bergen.

1945

Sources: Grytten 2004, p. 93 and Grytten 2004, p. 279

Figure 9.2

Sales at home and abroad for O. Kavli AS Bergen 1925–1945 in fixed NOK for 1924 5,0 mill. 4,5 mill. 4,0 mill. 3,5 mill. 3,0 mill. 2,5 mill.

Sales abroad

2,0 mill. 1,5 mill. 1,0 mill.

Sales at home

0,5 mill. 0 1925

1930

1935

1940

1945

Selling to the enemy

At the onset of the war, Kavli’s domestic sales held up well, while exports ceased. Statistics from 1942 show that there were no exports except to Germany and its allies. Late in 1943, the supply situation and the risks associated with transportation to Germany became so great that almost all export activity ceased. For 1944, the only note in the accounts was: ‘the supply situation and safety risks have led to the stoppage of all exports to foreign ports’.2 Some of the lost exports were compensated by a big increase in production in Sweden, while the domestic market in the UK was more or less unchanged.3 None of the companies had to implement mass redundancies. This was largely due to natural wastage, the cutting of hours, lower productivity and the management taking the interests of the workforce into consideration.4

Source: O. Kavli AS, Annual accounts 1925–1945. O. Kavli AS, Export protocols 1925–1945 and O. Kavli AS, Export statistics 1925–1945.

108

9: WAR AND RECONSTRUCTION

Fire in the box factory The total destruction of the box factory in a fire was an important event and, according to Christian Thornquist’s notes, it happened on ‘chapel Saturday’ on 2 November 1940. The police speculated that the cause of the fire could be anything from sabotage to a short circuit in the electrical system. They concluded that it was due to spontaneous combustion, although it was not possible to tell with any certainty how it actually started. However, the factory manager was of the opinion that the fire was caused by short circuiting in the ventilator, which had stalled.5 The damage caused by the fire was a huge challenge for the company because emergency solutions had to be found for packing the cheese. The machines had to be repaired and some new ones purchased. In addition, new packing premises were required, so it was actually an advantage that exports had stopped since the demand for durable packaging had been reduced. However, the box factory was relocated in vacant premises in other departments in Damsgårdsveien 59. This was perfect, since there had been a crackdown on production. The production statistics also indicate that large amounts of processed cheese were sold by weight in the first few years after the fire, as was the case for a lot of other cheeses.6

The box factory after the fire on 2 November 1940.

Story about the box factory fire in the newspaper ‘Morgensavisen’.

In the price list dated October 1940, the company apologises for the shortage of ingredients, but promises to make the most of the situation despite hard times.

109

KAVLI – AN INDUSTRIAL FAIRYTALE

Box factory employees, 1943 Back row from the left: Astrid Olsen, Gerd Hetland, Esther Nilsen, Solveig Lian, Elna Hansen, Alfhild Berge, Paul Sivertsen. Middle row from the left: Solveig Ravnestad, Gerd Aase, Ingri Vikebø, Anny Knudsen, Oddny Johannessen, Laila Andresen, Erna Tollefsen, Ågot Knudsen, Borghild Obstfelder. Front row from the left: Borghild Askeland, Inger M. Ravnestad, Malvin Frantzen (foreman) Inger Bertelsen, Erna Hansen.

110

Domestic production During the war it was a challenge to ensure that the factory had a sufficient supply of ingredients, particularly cheese for melting. In 1942, the Ministry of Supply issued regulations setting out rules for the production and delivery of milk. It stated that all milk had to be sold through the dairies and milk collection centres. Through the socalled ‘national settlement’, prices were to be evened out and balanced. The Norwegian Milk Producers’ Federation (NML) was the implementing party in the price balancing scheme, and the Norwegian Ministry of Agriculture had controlling and consenting powers. A general national price was introduced. In addition, a price supplement of 4.6 øre per litre was paid for all milk delivered to the dairies. The price of producing milk was around 30 øre per litre.7 Kavli became even more dependent on agreements with dairies, which were also the company’s competitors in cheese production, and it was forced to expand into other areas to keep the wheels turning. One of these new areas was the production of smoked herring. Herring was a good source of nutrition during the war and it was widely available along the west coast of Norway. The quay at the factory was ideal for deliveries. A makeshift smoking facility was built on the site of the burned down box

9: WAR AND RECONSTRUCTION

Office employees, 1943 Back row from the left: Rigmor Øvre-Eide, Sivert Nilsen, Kåre Røen, Olav Knudsen, Bjarne Fotland, Paul Nordenborg, Sigval Watnedal. Front row from the left: Else Beate Hilland, Olaf Ingv. Nilsen, Christian Thornquist, Peder Andersen, Gudrun Knudsen.

Grethe Karin Fotland started working for O. Kavli as a stenographer and secretary in 1949. She did many jobs for Christian Thornquist, who was export manager at the time. As exports increased, so did the workload. Thornquist had lived in Danzig, London and Antwerp, and he spoke fluent German, English and French. Since Thornquist and Fotland were both competent users of the so-called ‘Gabelsberger’ system, Thornquist became his own stenographer and handed over letters to his typist without dictating them to her first.

▲ Cashier Gudrun Knudsen in the office. Former colleagues describe her as quite a phenomenon – always smiling, organised and tidy.

◄ For many people, Christian Thornquist symbolised the company. His career at Kavli began in 1930. His language skills were impressive and he soon became the company’s export manager or ‘foreign minister’ as his friends called him.

111

KAVLI – AN INDUSTRIAL FAIRYTALE

factory. The building work was delayed, however, due to an insufficient supply of electricity. Work on the facility did not start until a wood-burning boiler was finally installed. At the end of January 1945, the first samples were sent to the health authorities in Oslo for approval. Production for the market started in May the same year, but the war was over by then. The annual accounts indicate that profitability was declining, but, with the exception of 1944, Kavli still managed to make profits.8 Profits were in fact higher during the war than in the last three years before the war. The newspaper ‘Aftenposten’ had some good news to report on 3 June 1940.

All deliveries of ingredients ceased during the war, and from autumn 1941, it was only permitted to produce light cheese. It was called ‘Daisy’, and with down to only ten percent fat, it did not taste very cheesy. Connoisseurs said it reminded them of chalk. However, it still became popular and had a song in its honour: Daisy, Daisy, Kavli’s famous cheese, It’s delicious and tempting, and tastes great every day. And now, just like before, Kavli cheese is just so much more, Lal la lal la la...

112

The first low-fat cheese and mayonnaise The national rationing committee introduced strict cheese quotas, which were drafted in collaboration with the Norwegian Dairies’ Sales Centres. They regulated the quantity of ingredients producers could have and how much cheese wholesalers could sell. There are quota lists in the Kavli Archives in Bergen. They indicate that the situation became increasingly difficult until peace arrived in May 1945.9Since milk fat was one of the products in shortest supply, restrictions were introduced on the fat content of butter, margarine, cheese and milk. From September 1941, Kavli had to reduce the fat content of cheese to 20 percent. This was done by adding less cheese, and more water, soya and starch. Kavli feared that Primula’s reputation as a quality product would be compromised, so the new mixed cheese product was called ‘Daisy’. This was the only cheese produced by the company during the latter half of the war. From May 1942, the fat content was reduced to ten percent on the order of the authorities.10 However, the product became popular and it was regarded as a longed-for ‘exotic’ spread during the war. In fact the episode marked the birth of healthy low-fat cheese in Norway as a substitute of similar whole-fat cheese.

9: WAR AND RECONSTRUCTION

An overzealous cheese seller Fighting broke out in the Hallingdal valley in April 1940 when General Falkenhorst wanted to advance from Eastern Norway to Western Norway via the valley. The Germans placed the Ritzmann combat group, comprising one-and-half infantry battalions, five tanks and a 7.5 cm canon, at Hønefoss. The group reached Gulsvik Bridge on 24 April with the infantry, supported by several tanks. There, they encountered a Norwegian infantry unit led by Captain Arthur Reinhardt Hauge, who normally worked as a teacher at Porsgrunn Upper Secondary School. The unit was an eclectic mix of young men, most of whom did not have any military experience to speak of. One of them was the young artist and sports journalist Frithjof Sælen. Their task was simple – the Ritzmann combat group had to be stopped. Everyone’s eyes were fixed on the point where the railway bridge crosses the national road. An event under that bridge would soon change their lives. They had already been hearing it for several hours – a loud drone and strange rumbling. It was as if a giant mechanical rattlesnake was reticently approaching, hesitating before moving forward again. The waiting was over. The rattlesnake was ready to attack. While the Norwegian soldiers got ready to meet the enemy, Hauge received a message about a suspicious vehicle: A blue van had driven back and forth across the Gulvik bridge several times. “Damn it! Haven’t there been any checkpoints in place?” “Yes, but the car was driving so fast, and then it came back again.” “What? That’s incredible!” Hauge jumped into a car with the unit assistant and they drove as fast as they could towards Flå, where the van had been spotted at a farm called Voll. The driver, who was sitting at Steinar Voll’s dining room table writing in a book, was startled when Hauge and his companion burst into the room. After a quick interrogation it was discovered that he was just an overzealous salesman who worked for the Kavli factory in Bergen – someone who believed in ‘business as usual’. The book he was writing notes in was his order book. Very upset, he promised to stay on the right side of the bridge. Captain Hauge did not place much trust in the promise of Kavli’s travelling salesman, and the vehicle was commandeered by the ambulance service. What happened to the cheese seller afterwards is unknown.

German infantrymen from the ‘Ritzmann’ combat group on the way to Hallingdal on a railway wagon pulled by a locomotive.

Excerpt from the book ‘Tyske tanks var sør i dalen …’ by Frithjof Sælen, J.W. Eide Publishing Company, 1975

Frithjof Sælen 1917–2004

113 8

KAVLI – AN INDUSTRIAL FAIRYTALE

► Knut Kavli’s border crossing permit, issued by the Stavanger Police, allowed him to cross the Swedish border in May 1940.

▼ After war broke out, it did not take long before ration cards were issued for almost everything that could be bought. The cards had fields stating which products they applied to and the name and address of the recipient, as well as the signature of the authorising authority. It was an offence to give or sell cards to others.

A shortage of eggs and oil also meant that the original mayonnaise had to be replaced by a lower-fat product. Experiments were conducted using fish fat in the form of fish oil, as well as rapeseed oil and soya oil as possible replacements. The former had an unfortunate aftertaste of cod liver oil and it was unsuccessful, but experiments with soya oil and rapeseed oil proved successful. Thus, the recipe for one of the world’s first low-fat mayonnaises was born.

Payment – but how? During the war, ration cards were commonplace for most products, including cheese, caviar and mayonnaise. Since Norwegian kroner were in greater abundance than many products, ration cards became currency in many contexts.11 The demand for cheese and mayonnaise exceeded production by a good margin. Processed cheese was considered a rare sandwich topping during the war. Ration cards that included these products were therefore very popular among the general public, and they could be exchanged for other ration cards at a premium, despite it being illegal to sell them. Thus, it could be claimed that dairies and cheese producers were among several food enterprises that, in practice, had money during the war. Kavli certainly ranked high in the currency stakes. The rationing records also indicate that dairy products were to a large extent locally regulated. This means that, relatively speaking, more merchants from Western Norway received quotas from Kavli than merchants in Eastern Norway.12 This created a shift in consumer patterns that persisted for many years after the war. Processed cheese became a more familiar sight on breakfast tables in Western Norway than in Eastern Norway.

114

9: WAR AND RECONSTRUCTION

The Packing Department, 1943 Back row from the left: Gunvor Lohne, Esther Jacobsen, Nelly Klungreseth, Amalie Berge, Elna Wichne, Birgit Andersen (manageress). Front row from the left: Olga Myhrvold, Agnes JĂ¸rgensen, Astri Kvist, Edith Johnson, Alfhild Frostad.

The Cheese Factory, 1943 Ingvald Hatland, Georg Ă&#x2DC;vre-Eide, Einar Nilsen (foreman), Albert Knutsen, Cato Knutsen. Einar Nilsen was a driving force in the company and accompanied Hans Askeland and Olav Kavli on trips to both Vienna and Newcastle.

115

KAVLI – AN INDUSTRIAL FAIRYTALE

The records also indicate that processed cheese was regarded as a luxury product by the German occupation forces, who requisitioned several tonnes of it. In 1943 and 1944, deliveries amounted to almost a fifth of the total production.13 Large volumes of caviar and mayonnaise were also ordered by the Germans. It is also worth noting that the Germans paid the market price for the products. Payments were made regularly in the correct amount and in NOK. The occupation forces also opened an account with Norges Bank, which was settled by using a separate war currency – Reichkreditkassenscheine. However, at the end of the war this money had no value whatsoever. The Nazis’ willingness to pay can therefore best be described as robbery. The Kavli Club’s roots date back to 1937, when the company’s employees organised a football team to participate in a local tournament. The club was formally founded in November 1940. It meant a lot to the employees and their well-being during the occupation when the club organised a number of popular activities in an otherwise difficult period.

116

The Kavli Club Lawful activities in clubs/associations flourished, but illegal activity also thrived within the company, since several employees took part in the resistance in various ways. Both the later accounts manager Sivert Nilsen and Hans Askeland were involved in these activities.14 The Kavli Club was founded at the end of the 1930s to improve the working environment and employee satisfaction. Its roots stem from April 1937, when the company’s sports team was formed to participate in a works football tournament. The first entries in the accounts from 28 August of the same year show a cash balance of NOK 14.25 upon start-up. The membership fee was set at 25 øre per month. This shows that the club had 57 members. In other words, more or less all the employees were members. The participation fee for the works football tournament was NOK 10.15 The Kavli Club was formally founded at a meeting on 5 November 1940. It was not a trade union, but a social club to promote employee well-being. The management accepted the association with open arms and supported it financially.16 Statutes were drafted, and Albert Knutsen was elected as its first leader. Other members of the executive committee were Bjarne Fotland, Edvin Haga, Nelly Klungreseth, Cato Knudsen and Kåre Røen. Christian Thornquist and Gudrun Knutsen were the elected auditors.17

9: WAR AND RECONSTRUCTION

The first meetings were held at premises in the KavligĂĽrden building. However, these premises were taken over by the Germans, and the Kavli Club moved to Hotel Rosenkrantz and Hotel City. The meetings involved activities such as table tennis, bridge, music, singing and occasionally dancing. Speakers were also invited to talk about topical issues. It also formed its own amateur revue theatre under the name The Kavli Club Theatre. Best known, however, is probably the Primula Post published by the Club, which became the internal newsletter for the whole company.

From the Kavli Clubâ&#x20AC;&#x2122;s amateur revue at the Hotel City in Strandkaien on 12 December 1942.

117

KAVLI – AN INDUSTRIAL FAIRYTALE

The Sivert Nilsen Orchestra In 1941, Sivert Nilsen and Hans Askeland became involved in an illegal group led by the later minister of defence and member of parliament, Nils Langhelle. They used Kavli’s premises in Damsgårdsveien as a meeting place. It was discovered that several members of the group could play instruments, so, in order to conceal their activities, they formed an ensemble ‘The Sivert Nilsen Orchestra’. All the members brought along their instruments for ‘music practice’ – a perfect front. They also played some tunes at each meeting as well. To make the subterfuge even more authentic, the ‘orchestra’ started giving performances elsewhere, for example at the tradesmen’s old people’s home in Kaigaten, at Christmas concerts in Sandviken Church and St. Olav’s Church, at the Nursing Home in Kalfaret and, of course, at meetings organised by the Kavli Club. In 1944, one of the members let the cat out the bag, and the ‘orchestra’ had to disband immediately and several of the members had to go into hiding.

Sivert Nilsen 1913–2001

started working for Kavli as a messenger boy in 1928. He gradually worked his way up and was made accounts manager in 1965. He held this position until his retirement in 1981. The reason why he did not start smoking was that at the beginning of his long career he sat at a desk near Hans Askeland. Upon his retirement, he said: ‘I had plenty of opportunity to inhale all the smoke I wanted from the director’s cigars and tobacco.’

118

Independent subsidiaries One of the company’s first priorities was to secure production abroad. As a result of the war, the parent company in Bergen had little contact with its subsidiaries abroad. Hence, it was necessary to ensure independent and loyal units in the countries in question. This was done by transferring almost unlimited authorisation to trusted employees in the subsidiaries, which proved to be a very successful step. This extensive independence has since remained part of the company’s strategy and organisation. Supreme court lawyer, Pål W. Lorentzen summed this up as follows in 1995: The Kavli companies were not run like parent/subsidiaries with a separate group management team, but as parallel companies with extensive autonomy. This precondition was reflected in the employment contract of the managing director of O. Kavli AS – his function was not that of a group CEO.18

Highly capable employees ensured that operations went well in the UK, even during the difficult rationing years. When the war started, there was a shortage of ingredients and the Ministry of Food issued special production licences to six of 24 cream and processed cheese producers in 1940. Following a hygiene, reliability and production capacity assessment, Kavli was chosen as one of the selected companies. In 1941, the six were reduced to five, and Kavli was still standing.19 Thus, they had a supply of cheese and produced in compliance with the special licence from the authorities. Production gradually came to be mainly for the armed forces, for whom tinned processed cheese formed part of their daily war rations. Due to a shortage of ingredients, the largest order would not be delivered until 1951 and 1952. The company’s Danish partner, Carl Lange, secured operations in Denmark. In many ways, the country held a special position among German-occupied countries. It was largely self-sufficient as regards agricultural produce, and dairy products were more available there than in Norway. To a large extent, this resulted in smoother operations in Denmark than at home, even though they were on a much smaller scale. One problem was that Bornholm, where the factory was located, became more or less isolated from the rest of Denmark towards the end of

9: WAR AND RECONSTRUCTION

the war. After the war ended, however, the Danish enterprise became an export leader. This was the result of affordable and sufficient quantities of ingredients, as well as access to global markets.20 Sweden was not occupied. The availability of ingredients was therefore relatively good at the new factory. Production went well and in the space of a few years the subsidiary was making good profits. The war made it impossible for the Norwegians to interfere with British operations, and also harder to interfere with the Danish ones. However, the parent company maintained close contact with the Swedish subsidiary for a surprisingly long time. From the outbreak of the war until May 1942, a total of twelve business trips from Bergen to Stockholm were registered. Some key employees, for example Leonard Almelid, stayed in Stockholm for several months. In this way, they managed to establish a successful factory without German intervention. However, the trips stopped from 1942 onwards because Knut Kavli’s passport was taken away from him while returning from Sweden.21

Adapting to peacetime production Kavli’s employees and management breathed a huge sigh of relief when Germany surrendered on all fronts. It had been a daily struggle to obtain resources, and they now expected free flow in the market and an abundant supply of ingredients. Unfortunately, this took longer than expected, as the last product rationing arrangements were not abolished until 1960. It was a matter of negotiating the best possible arrangements during the first post-war years. In addition, visits had to be paid to the foreign subsidiaries. This gave the management an opportunity to resume one of the activities they liked best, namely travelling. The archives show that both father and son travelled practically all the time from May 1945 and for a number of years. Askeland, Sjurseth and Thornquist also travelled a lot, which produced results. After a week of negotiations in Oslo in August 1945, permission was granted to increase the fat content of the processed cheese replacement product from ten to 30 percent. Rationing was also abolished. A new cheese called ‘Konvall’ was introduced in September 1945, but the product range was still limited to one type of processed cheese, caviar, a limited amount of mayonnaise, and smoked herrings. The latter were never a success and they were quickly phased out as soon as other products became available.

Primula cost 65 øre in Sweden.

Export manager Christian Thornquist (right), was always travelling. Here he is in Luxembourg with Kavli’s agent Marcel Schroeder after the war.

119

KAVLI – AN INDUSTRIAL FAIRYTALE

Production abroad Normalisation went quicker abroad. Production in Sweden, which had increased substantially during the war, quickly picked up. The availability of high quality ingredients was such that cheese imports to Norway were considered. The situation in the UK was also relatively good. Kavli Limited was still a privileged company with adequate access to ingredients. However, its privileged status meant that it could not freely export products outside the British Commonwealth. The sales volumes and profits were sufficient, however, for them to build up a large capital base for future expansion. Because the Danish experimental factory on Bornholm was completely destroyed, it took a long time before production was resumed in Denmark. The British company started exporting to the commonwealth countries already in 1945, and the Swedish company started exporting to Finland and the European continent.22

The domestic market picks up

This advertisement in the Swedish magazine ‘Husmoderen’ (the Housewife) from 1946, shows the range of Kavli cheese that was available to the Swedes a little more than six months after the war was over. Norwegians could only dream of a similar range of products. One of Kavli’s small vans, a Renault, with the Primula brand and business name in a strategic position.

120

Economic growth was strong after the war.23 However, it was going to take a long time before domestic cheese production reached the same level as before the war. The turnover Kavli had in 1939 was not reached until ten years later, in 1949. After five years, production had increased sixfold, and it was necessary to expand both production capacity and the workforce. A large part of the growth was attributable to increased domestic demand, since domestic sales increased almost threefold between 1945 and 1955. The Primula brand was re-introduced with great success (particularly Ham Cheese), and mayonnaise and caviar production were also fully resumed.

9: WAR AND RECONSTRUCTION

Growth strategy during supply crisis The road to success was slippery, however. In the post-war years, a policy for rebuilding the economy was quickly implemented. A number of schemes were retained or established in order to ensure the availability of products, access to foreign currency and balanced foreign trade.24 Kavli started by restoring the factory after the fire in November in 1940. At the board meeting in August 1946, an outline plan costing NOK 177,233 was presented. It included building a new second floor, in addition to full restoration of

People busy at work at DamsgĂĽrd. A page from the company photo album.

121

KAVLI â&#x20AC;&#x201C; AN INDUSTRIAL FAIRYTALE

122

9: first WAR few ANDyears RECONSTRUCTION DamsgÃ¥rd during the after the war.

123

KAVLI – AN INDUSTRIAL FAIRYTALE

▲Rebuilding of the box factory and modernisation of the factory building started soon after the war. The topping-out ceremony was held on Saturday, 29 March 1947. Production started on Monday 10 May. The canteen at Damsgård was decorated by the Norwegian/Finnish artist Jonas Peson (1887–1952). Johan Alfred Petterson, which was his real name, was born in Finland. He was a lithographer by trade. After living in Denmark for a few years, he moved to Norway in 1916 and acquired Norwegian citizenship. Peson was given many artistic commissions over the years. He decorated churches, schools and youth centres, mainly with oil paintings and frescoes.

the fire-damaged box factory and equipping and upgrading the rest of the premises. This was seen as very costly.25 Olav Kavli, with his focus on expansion, supported the investment. He argued it would be partly covered by the insurance settlement after the fire. On the other hand, Askeland pointed out that such a large investment would affect the company’s financial strength. At the same time, there was a shortage of ingredients, which meant the benefits of extra capacity would not be realised for many years. Knut Kavli was eager to have a complete growth strategy in place, and that included upgrading the factory. The box factory was to be rebuilt and new machines purchased. The utilisation of space was to be improved and operations were to be made more efficient, which would create opportunities for expansion within the existing factory area. In this way, production capacity could be increased. At the same time, intense efforts were to be made obtain higher cheese quotas. One of the arguments in favour of this was exports, which generated foreign revenue for both the company and the country.26 To increase capacity, Kavli had to import machinery and other production equipment, but it was difficult to obtain an import licence without arguing that the investment would lead to a beneficial flow of foreign currency.

◄ Sunnmøre Arbeideravis (newspaper), 19 March 1948.

124

9: WAR AND RECONSTRUCTION

Damsgård in 1948 with Kavli’s refurbished factory and Bergen’s Blikktrykkeri. The board of directors decided to add a second floor to the building two years later. The work was completed in 1958. Approx. 150 people worked for the company at that time.

Knut’s proposal was endorsed and this became the company’s strategy until 1956. After many trips to Oslo to meet representatives from the Ministry of Trade and Industry, the company’s views were accepted. Everything possible was done to increase exports, also at the expense of the domestic market. New machines were purchased, the most important of which were melting machines and packing machines. Sales increased rapidly, and in June 1950 the board of directors finally concluded that a second floor would be added to the factory.

125

KAVLI – AN INDUSTRIAL FAIRYTALE

All of Kavli’s employees and their families were offered a week’s winter stay at the company’s cabin at Upsete. A cook and full catering were included. Edvin Haga was the heart and soul of the cabin committee for many years. The cabin was built by Theodor and Marie Fleischer in 1919. They owned Fleischer’s Hotel in Voss. The cabin was at times rented out as a ‘hunters’ cabin’ for the hotel’s guests. Upsete is a station on the Bergen Railway (850 metres above sea level) between Mjølfjell and Myrdal. The station was opened in 1908, but today it is only served by local trains.

126

Company cabin Even though the plans for expansion did not go quite as expected in Norway, more buildings were at least acquired. Both the management and employees knew that insufficient space and a lack of comfort were a problem in the factory buildings in Damsgård, and they wanted to see an improvement in working conditions and employee satisfaction. Because of this, the company decided to purchase its own company cabin at Upsete. The Kavli family and the company’s management used the cabin for recreation purposes, but it was first and foremost intended for the employees and their families. Each year employees were offered a week’s free stay at the cabin, preferably in winter. The company even paid for a cook and full catering. Guests just had to help with the washing-up and potato peeling. The cabin was also frequently used by the Kavli Club for excursions, recreation and social get-togethers. Many people came to associate the cabin with the Kavli Club itself. The company always paid for necessary investments and maintenance, and it became an important retreat for recreation and relation building purposes. Not surprisingly, many employees mention this when they talk about the positive aspects of the working environment at Kavli. 27

9: WAR AND RECONSTRUCTION

Dairy monopoly and plans for outsourcing The addition of a second floor at Damsgård was postponed, however. This was mainly due to strategic plans. The Norwegian Milk Producers’ Federation (NML) had a virtual monopoly on the sale of milk in the 1930s.28 During and after the war, there was a shortage of full fat milk, which was important for the production of cheese. In order to address the imbalance between supply and demand in the market, the NML formalised even more of its power as a monopoly. At the same time, the Norwegian Ministry of Agriculture collaborated more and more closely with the NML.29 Kavli was in no way prioritised. It had to constantly negotiate with the Norwegian Ministry of Agriculture for quotas that would allow it to increase production in step with demand. This was primarily Askeland’s job in both Oslo and Bergen. He quickly noted the tension that existed between the Norwegian Ministry of Agriculture and the Ministry of Trade during the negotiations. The former was primarily concerned with the supply situation in Norway, while the latter was concerned with foreign trade and the generation of foreign currency revenues.30 Askeland knew how to take advantage of this conflict by arguing that Kavli had and still would contribute to foreign currency revenues through their exports. In 1952, the monopoly situation, the shortage of ingredients and high prices forced the company to consider outsourcing its production to other countries. Denmark was a preferred choice. Thus, Kavli was about to become the first Norwegian industrial company of its kind to outsource production. The idea was both a sad and visionary one.

▲ Happy memories from Upsete: Sivert Nilsen and family enjoying the sun.

The Fotland family at the Kavli cabin in August 1965. Seated from the left: Christian, Bjarne, Kari and Bjørn. Standing: Grethe Karin holding Anne Marie in her arms.

127

KAVLI – AN INDUSTRIAL FAIRYTALE

Figure9.3 9.3 Figure

Figure9.4 9.4 Figure

Turnoverfor forO. O.Kavli KavliAS, AS,Bergen Bergen1915–1956 1915–1956 Turnover

Profitmargin marginfor forO. O.Kavli KavliAS, AS,Bergen Bergen1915–1956 1915–1956 Profit inpercentage percentage in

16mill. mill. 16 14mill mill 14

10 10

12mill mill 12

Turnoverat atthe thecurrent currentprice price Turnover Turnoverininfixed fixedNOK NOKfor for1924 1924 Turnover

10mill mill 10 mill 88mill

mill 66mill mill 44mill

Profitmargin marginbefore beforetax tax Profit Profitmargin marginafter aftertax tax Profit

–5 –5

mill 22mill

1955 1955

1950 1950

1945 1945

1940 1940

1935 1935

1930 1930

1925 1925

1920 1920

1955 1955

1950 1950

1945 1945

1940 1940

1935 1935

1930 1930

1925 1925

1920 1920

1915 1915

Sources:O.O.Kavli KavliAS, AS,Annual Annualaccounts accounts1915–1955 1915–1955 Sources:

1915 1915

–10 –10

Sources:O.O.Kavli KavliAS, AS,Annual Annualaccounts accountsfor for1915–1955. 1915–1955.The TheKavli KavliArchives, Archives,Bergen Bergen Sources:

Secret political solution

Erik Brofoss 1908–1978 was Minister of Trade from 1947 to 1954. In 1952, he was contacted by fellow party members, Nils Handal and Knut Tjønneland from Bergen, who explained that Kavli had problems with supplies of raw materials and that the company was considering moving production to Denmark. The issue was resolved in secrecy.

128

The idea of outsourcing production proved to be a wake-up call for politicians in Bergen. Mayor Nils Handal (1945–1953) and his successor Knut Tjønneland (1953–1960), both from the Labour Party, contacted fellow party member and Minister of Trade Erik Brofoss in the hope of finding a solution. According to our sources, talks were held behind closed doors to avoid setting a precedent.31 At the same time, in 1952, Olav Kavli was appointed Knight of the First Order of the Royal Norwegian Order of St. Olav for his involvement “for the betterment of the humanity” through his entrepreneurship and effort in the Norwegian food industry and the export sector. This probably motivated him to continue operations at home. Satisfactory framework conditions were soon granted, and Kavli decided that production would continue in Bergen. In December 1954, the final decision was made to start building the second floor of the factory in Damsgårdsveien. Work began in spring 1955.

Increased profits Costs increased, but so did profits. Profit as a percentage of turnover rose to a permanently higher level than at any other time before. Despite the challenges relating to ingredients, the years from 1945 to 1955 were golden years for O. Kavli AS. One indication of how well things were going was that Olav imported a new car from the USA via Sweden in February 1946. It was a condition for the import licence that the car must be used in connection with the company’s operations, with the focus on exports that would generate foreign currency revenues. A brand new Chrysler arrived in Bergen, which caused such a stir that all the city’s newspapers were present to cover the event. Olav Kavli took the opportunity to thank his staff, who had made this essential purchase possible through their diligent and faithful work. Not all employees were equally enthusiastic about it, however.32

Chapter 10

MORE POPULAR ABROAD New global focus The war had made the Kavli companies abroad even more independent. The company in Bergen was still the owner through its majority shareholding in all the companies except the Danish one, in which it owned 50 percent. Olav and Knut Kavli functioned as global group leaders along with Hans Askeland and Christian Thornquist – an unusually talented and knowledgeable exports manager and group secretary. This independence resulted in the companies moving in different directions, adapting to the markets and frameworks within which they operated. There was considerable expansion in all countries. However, the period of strong growth ended in Norway in the mid-1950s, while it continued a while longer abroad. Kavli’s strategy had always been to focus on growth. Now, more emphasis was to be placed on profitable growth.1 As a result, it was no longer crucial to increase volumes, growth was to generate the highest possible profit. After the war, the company in England quickly became the leading company and the largest in the Kavli Group. From 1956 onwards, Norway stagnated and Denmark and Sweden became relatively more important. The Norwegian company’s proportion of sales went from 100 percent in 1930 to less than 24 percent in 1965. A number of factors caused this trend, but they were primarily country-specific.

A local farmer tastes Kavli’s curry cheese at a trade fair in Bulawayo in the then Rhodesia in 1957. The farmer, Mr H. Rosseau, told the local press that it tasted ‘first class’.

Export renaissance Due to the limited supply of ingredients, exports from Norway remained low until autumn 1947. In 1948, the company exported products worth NOK 750,000. In 1956, exports amounted to NOK nine million, including exports to the companies abroad. Hence, the expansion primarily took place in the foreign markets. To increase profitability, the company consciously cut out low-volume markets, while high-volume markets were given more attention. Thornquist, Askeland and Kavli were behind this new export strategy. Admittedly, the board minutes indicate that Olav Kavli was

129 9

KAVLI – AN INDUSTRIAL FAIRYTALE

You can tell the big names by their cars

◄ Friedrich Kluhsmann, Kavli’s wholesaler in Bielefeld, Germany, had decorated his van in classical style. It announced that Primula was a high quality global cheese (Der Qualitäts Fein-Käse auf dem Weltmarkt).

► Larry’s in Brooklyn, New York proclaimed ‘It’s new, try Primula Spread Cheese.’

130

◄ Holm Bros. in Waltham, Massachusetts were agents for Nordic Imp. Co. Their message to the public was ‘An after dinner cheese – Primula – of rare delicacy flavor”.

10: MORE POPULAR ABROAD

in doubt about this strategy, but he allowed himself to be persuaded by his closest colleagues.2 Their motive was to exploit the advantages of being a large company, while avoiding exporting quantities that were so small that they were unprofitable. Moreover, the tax authorities had problems accepting deductions for frequent trips to countries to which the company only exported symbolic quantities.3 The new strategy proved to be a success. The policy of concentrating exports more on key countries produced indisputable results. Exports increased from zero to 57 percent of the turnover in the eleven years from 1945 to 1956. Most of the sales from the company in Bergen were made to foreign markets. This percentage was an all-time high – an impressive result considering the restrictions on foreign currency transactions and access to ingredients.

From expansion to stagnation

Figure 10.1

Turnover measured in NOK for the Kavli Group 1950–1965 70 mill. 60 mill. 50 mill. 40 mill. 30 mill. 20 mill. 10 mill. 0 1950

1955

1960

1965

Sources: O Kavli AS Annual accounts, O Kavli AS and Cremo AS Annual accounts, O. Kavli AB Annual accounts and Kavli UK Ltd Accounts. The Kavli Archives, Bergen, Stockholm, Copenhagen and Gateshead.

As the new strategy was implemented after the war, the board of directors granted themselves an annual bonus of NOK 10,000 each; father, son and Askeland. This was paid in addition to their salaries. Thus, the company paid each of them NOK 30,000 – 60,000 annually from 1946–1953. This was seven to eight times as much as a factory worker earned.4 It indicates that business was going well and that the Kavli directors were paid very well.

Kavli’s products as they were presented to food critics, newspapers, magazines, the radio and TV in New York, April 1958.

131

KAVLI – AN INDUSTRIAL FAIRYTALE

Exhibitions and campaigns In the mid-1950s, Kavli ran a big advertising campaign on a local radio station in New York. The ‘celebrity couple’ Faye Emersen and Skitch Hendersen, and actor Herb Sheldon, advertised Primula and other Kavli products in primetime broadcasts. The campaign was followed up with posters and brochures. It attracted a lot of attention.

Faye Emerson surrounded by smiling Primula girls.

132

10: MORE POPULAR ABROAD

Herb Sheldon surrounded by smiling Primula girls.

‘Have a taste, I hope you like it.’

133

KAVLI – AN INDUSTRIAL FAIRYTALE

A dream trip to Scandinavia On a July day in 1954, Mrs Evelyn McKeon went for a short walk with her grandchild on the streets of New York. The child was hungry and Mrs McKeon popped into Macy’s, a large department store, to buy a packet of biscuits. A food festival was being held in a separate department at which Scandinavian companies were represented. A competition had been organised in that connection, and the prize was a 14-day round trip to Scandinavia for two people. Mrs McKeon entered the competition, dropped her entry in the box and thought no more of it. On 18 October, Evelyn and Arthur McKeon’s phone rang – it was Macy’s. Out of the 100,000 people who entered the competition, the couple were the lucky winners. On Thursday 3 March 1955, they landed in Oslo and were welcomed by Knut Kavli on behalf of the organisers.

The McKeons met Thor Heyerdahl.

The visit to Oslo was a fairy-tale adventure for the American couple. When they arrived at Hotel Bristol, the entire Oslo press was waiting. ‘Actually, we know what we are looking forward to the most,’ said Arthur McKeon. ‘At the moment we are only concerned with one thing – meeting Thor Heyerdahl. Kon Tiki is famous the world over.’ ‘Not only will we shake the hand of the famous scientist,’ adds Mrs McKeon, ‘but we will also visit his home and see all the strange things he has collected on his many journeys, most recently to the Galapagos.” In addition to visiting Heyerdal’s home, the couple were taken on a 50 km trip in Nordmarka forest in a tracked vehicle. They visited Oslo City Hall, where they were given a private tour by Mayor Brynjulf Bull. Knut Kavli invited them to a dance held in Hotel Bristol’s mirrored ballroom ‘Speilen’. Their stay in Norway ended at Holmenkollen ski arena, where they met the big star skiers of the day, such as Arnfinn Bergmann and Torbjørn Falkanger, as well as ‘some real Russians’.

What is Knut Kavli doing here? Evelyn McKeon does not look very happy.

134

10: MORE POPULAR ABROAD

Figure 10.2

Exports for O. Kavli AS, Bergen, in NOK million

Exports for O. Kavli AS, Bergen, as a percentage of the turnover 1915–1956

10 mill.

8 mill.

Exports Exports in fixed NOK for 1924

6 mill.

40 30

4 mill.

1955

1950

1945

1940

1935

1930

1925

1920

1955

1950

1945

1940

1935

1930

1925

0 1920

0 1915

1915

2 mill.

Sources: O. Kavli AS, exportation protocol 1915–1956, exports protocol 1915–1956 and O. Kavli AS, annual report for 1915-1956. The Kavli Archives, Bergen.

The export strategy was successful up to 1956, and the management decided to increase its focus on the domestic market. This turned out to be a wise move in a domestic market that had to some extent been neglected. Marketing was intense at home and abroad. Thornquist was sent to America, Australia, Africa and Asia to promote sales. In August 1958, it was decided that 20 percent of the turnover would be used for marketing purposes. The company in Norway could not afford such a sum, and Kavli UK was to cover the extra costs.5 This led to some unease in Newcastle, and Sjurseth soon made the journey from Newcastle to Bergen to meet the Norwegian management, as it was believed they had taken liberties they were not entitled to take.6

Great fishing in the Aurland River After trying for many years to catch salmon in the Aurland River, Lady Luck finally smiled on NorwegianBritish Alf Sjurseth the other day – he is managing director of the Kavli factory in Team Valley, Gateshead. Along with director Knut Kavli, he put considerable effort into catching the salmon. Not much was happening, but suddenly Lady Luck smiled, and in a matter of two hours he had caught three impressive fish, weighting seven, eight and ten kilos. ‘Morgenavisen’ 24 June, 1955.

At one time, Kavli tried to sell Norwegian margarine in England under the Peer Gynt brand. Advertisements on vehicles were used in the market campaign.

135

KAVLI – AN INDUSTRIAL FAIRYTALE

Olav Kavli and Børge Westergaard Olav Kavli gradually developed a close friendship with Børge Westergaard and his family in New York. In addition to visiting each other, they also corresponded regularly to keep each other updated about minor and major events. Westergaard’s son John, who was also employed by B. Westergaard & Co, called the company owner from Bergen ‘Uncle Kavli’.

Some of the letters have been preserved and here are some excerpts from their

correspondence in 1952: About relations with his workers: One of my greatest pleasures is that the work we do is excellent in all areas. I look forward to seeing and greeting these capable people in each department. They also seem to appreciate my saying hello to them every morning as I walk by. Obviously, it means a lot to have such good relations between the boss and the workers, and it’s a great advertisement for the company. Olav Kavli, 30 January 1952

About Madeira: I have now been away for four weeks and I have had a very pleasant trip. It is full summer here, with flowers, fruit and more than 20 degrees in the sea, so you realise it’s the height of summer. It reminds me a bit of the West Indies, where I was last year (as you know). I can tell you that the East Indies and West Indies are very similar when it comes to the scenery. Olav Kavli, 9 April, 1952

About meeting King Haakon: I have just arrived home from Oslo where I visited the King and thanked him for the award I received. The King was very amiable and we sat talking about one thing and another for a considerable time. Olav Kavli, 20 June, 1952

About coffee I think I wrote and told you that I wanted a crate of coffee. Please see if you can have one delivered to me when convenient. I am running out of it now. I was told that the restrictions on coffee would be lifted, but even if that happens, the coffee here is so bad that I would still like you to send me some. Olav Kavli, 20 June, 1952

Olav Kavli in Madeira, April 1952

136

10: MORE POPULAR ABROAD

About ham cheese: We will be launching ham cheese in a few days. An excellent product. Knut sent us a sample of the ham cheese they make in Sweden, but I did not like it and I had to make another sample here myself. It is so finely grated in Sweden that it is more like a pâté, but our’s in coarser so that we can taste the ham more. Olav Kavli, 11 June, 1952

About hearing aid batteries: Unfortunately, my hearing aid batteries are starting to run out and I wanted to ask you if you could send me 20 or 30 small batteries? The smallest short ones, not the long ones. I have enough of the long ones. I only have one or two left, so if you could send 3–4 by airmail and the rest by boat, either on the ‘Stavangerfjord’ or ‘Oslofjord’. I am sorry to bother you with this, but I have to ask.

Olav Kavli on an antelope hunt on one of his trips to Africa.

Olav Kavli, 8 August, 1952

About the order of St. Olav: One of the top people in the ministry, who I know, said that it is very rare for the King to give two gold medals to a businessman. The St. Olav order’s medal is also made of pure gold because it is a first class award. The fact that I have been given two is such an extraordinary event, but, of course, it is fantastic. It’s much nicer to be praised than criticised.

Olav Kavli, 13 August, 1952

About his new car: I now have a new car, a Kayser – you know the make. It was made in Israel. A great car to drive and it attracts so much attention due to its beautiful red colour, but then people look at the old man with white hair inside it, who clearly should not have a driving licence anymore! I will drive you around in my snobbish car when you visit. Olav Kavli, 4 October, 1952

About using trace metals: It is nice to see that you received the jar of trace metals. I hope that you and Ellen will now become many years younger and that I will hardly recognise you when we meet. After all, I have become so fit that I will soon pose a risk in the ‘ordinary world’. Olav Kavli, 18 October, 1952

137

KAVLI – AN INDUSTRIAL FAIRYTALE

Olav Kavli enjoyed excellent relations with his employees. Here pictured in Damsgårdsveien talking to Albert Knudsen. The lorry is full of cheese for the American market.

Olav Kavli never forgot anyone who did him a favour. He was very generous that way. When he arrived in Bergen as a young man, he received a lot of help from a tailor, Ludvig Iversen. Olav Kavli remembered this and employed two of Iversen’s sons. Ingolf Iversen became marketing manager at the sales office in Oslo and Leif Iversen was given a good job at the Swedish factory.

138

Olav Kavli dies When Sjurseth arrived in Bergen, he was immediately informed that Olav Kavli was ill, and he suffered a stroke in summer 1953. Thornquist described the event as follows: 1953: Olav Kavli, a stroke on 24/6 (Betanien Hospital) Drove his son to the Sogn boat at 8 am on a very hot morning. On his way back he had a stroke in Sundtsgate. The car hit the curb and crashed into a shop window. Luckily no one was injured. 7

He never fully recovered from the incident and only made one trip in 1954. In addition, he only participated in a handful of board meetings. Christian Thornquist took over many of his day-to-day duties. On 22 September 1958, Olav Kavli died in Bergen aged 86. He was buried just three days later. During 65 adventurous years he had built up a Norwegian multinational food company with production units in four countries. The development of one of the world’s first long-life spreadable cheeses was the foundation on which the company was built. Being a true entrepreneur, he always wanted to achieve that little bit extra when it came to the things he was involved in: more countries, more products, increased turnover, increased exports and increased profits. He had a talent for recruiting the right staff and for showing them trust and allowing them to work independently. He left day-to-day operations to others, allowing him to be the visionary entrepreneur.

10: MORE POPULAR ABROAD

The Ole Bull of processed cheese Olav Kavli was self-taught in most areas, which was common in those days. He had commercial training and held a commercial trading licence. His original capital was only NOK 60, yet he still became a pioneer in cheese production, the Norwegian export sector and the establishment of businesses abroad. With great natural authority, he travelled the world as if he was living an adventure. Incredibly, he visited 80 countries, and this vibrant and charismatic entrepreneur managed to sell cheese in over 60 of them, often by charming his audience. He thus fully deserves to be called the ‘Ole Bull of processed cheese’.8 His heirs were already lined up upon his death: his son was to take over responsibility for running the business and would inherit his father’s shares. Askeland was to continue as head of day-to-day operations.9 Otherwise, Sjurseth was highly rewarded. Olav owned 225 of 500 shares in the Norwegian company. Knut had as many, while Askeland owned 50 shares, each with a nominal value of NOK 100. Moreover, O. Kavli AS had a majority shareholding in the foreign companies, except for the Danish one, where he had a 50 percent share. Knut inherited 150 shares, and his most trusted colleagues and relatives received 75 shares in total.10 He hoped that allocating the company’s shares to colleagues in his will would create a clear line of succession after his demise. However, there was still some unrest after his death. The Danish partners wanted to renegotiate their agreements to allow them to increase their ownership interest. Olav’s death also led to the dismissal of staff and some trouble in Sweden.11 Sjurseth accepted that the company in Norway could milk the more successful British company for a while to increase its focus on marketing. In return, he was met with an unusually friendly and amenable attitude by Knut Kavli and Hans Askeland. His acceptance of this probably helped to boost his position in the corporate group, where he later became group chief executive officer (CEO).

Olav Kavli’s obituary in the newspaper Bergens Tidende, 29 September 1958.

Olav Kavli as seen through the eyes of an employee A messenger has brought bad news: yet another chief has fallen, Olav Kavli is dead. Many homes are mourning, for the man who gave our lives more meaning. He was the fighter from Fanøstranden, who came to the city, short of money, but with the will and determination to make dreams happen. He was King of his own Kingdom, and with great courage and boldness, he created a Nordic symbol held dear by the whole world. Walking observantly around the factory and kitchen, lending a hand when required, demanded effort from both himself and his staff. To tell of the company’s progress, he would occasionally hold a speech, because he never forgot those who helped him, those who were his faithful watchers. Although a Knight of the Royal Order of St. Olav, he was always down-to-earth with his feet firmly on the ground. And on the quay he would stand – not above gutting herrings. Since people like him are hard to find, his memory will be remembered all the more, because, whilst living and now in death, his mark is deeply planted in the soil. A messenger has brought bad news: yet another chief has fallen. Frank Olsen

139

KAVLI – AN INDUSTRIAL FAIRYTALE In spring 1963, Kavli took over the marketing of several Norwegian food products in the UK. The plan was to exploit the sales network that was already operating there, as well as the well-known Primula name. The producers in Norway were: Stabburet, Norske Meieriers salgssentraler (Norwegian Dairies’ Sales Centres) and Amalgamated Norway Canneries. Fourteen different products were launched in all: cheddar cheese, blue cheese, Gouda under the Kavli name, various soft cheeses, herrings, prawns and liver pâté. Ham and crispbread were sold under the Primula name. The products were launched at the Norwegian Embassy in London, where three Norwegian chefs spent three days preparing a fantastic buffet.

Samples are a must at exhibitions. From a demonstration in Bulawayo, Rhodesia (present day Zimbabwe) in May 1958. Primula girl, Mrs S. Hiscock, had a Norwegian national costume delivered to her for the food fair. Mrs M. Farley was clearly impressed with both the costume and the cheese sample.

140

◄ A Kavli van in Casablanca.

10: MORE POPULAR ABROAD

The selection of Scandinavian products on show at this trade fair in Boston (1959) speaks for itself.

â&#x2013;ş Presentation of Scandinavian food products in Miami.

â&#x2014;&#x201E; Swedish immigrant Elfrid Backstrom represented Kavli in Massachusetts.

141

KAVLI – AN INDUSTRIAL FAIRYTALE

Denmark – the jewel in the export crown

Kavli’s cheese production in Glamsbjerg on the island of Fyn was carried out in close partnership with the Danish margarine producer, Otto Mønsted. The company’s Danish business activities were later moved to Copenhagen.

142

Denmark was the first country Kavli exported cheese to, in 1905. The company soon built up a customer portfolio and a distribution network, and it turned out that the customers were largely Norwegians living in Denmark or Danish people of Norwegian descent. When Primula was launched on the Danish market in 1924, it did not really take off. During the war, most of the output was requisitioned by the German occupation forces. When the war was over, it was almost impossible to sell Primula on the Danish market, as demand was low. In many ways, Denmark was a lost market. Nevertheless, the country would serve as a stepping stone to Europe. The operations in Denmark were almost exclusively export-related. They were also very profitable.12 It was not viable to rebuild the Bornholm factory and resume production. Carl Lange, a good colleague of Kavli’s and the company’s representative in Denmark, contacted Otto Mønsted AS in Copenhagen. Lange was given the go-ahead from Bergen to investigate the possibility of entering into a production partnership. This would be good since Mønsted was already involved in dairy and margarine production.

10: MORE POPULAR ABROAD

New Danish factory

Figure 10.3

The hope was to gain greater access to the Danish market. It Countries that received cheese became clear during the negotiations that a partnership would manufactured by O. Kavli AS Glamsbjerg mean better access to ingredients, mainly cheese, through according to value Glamsbjerg Mejeri AS. Furthermore, cheese was far cheaper in Denmark than in Norway. In addition, there were fewer comOther countries 7 % mercial obstacles to exporting cheese to the European market. Italy/France 7 % The British market was the main target market for exports, since there was a lack of production capacity and access to Domestic market 4 % 13 ingredients there. The management team negotiated a possible partnership, Germany 14 % and an agreement was signed in June 1947. The parties agreed UK 43 % to form a company under the name of O. Kavli Glamsbjerg AS. Each party was to contribute 50 percent of the total share Belgium 25 % capital of DKK 60,000. Glamsbjerg Mejeri would be leased for the production of Kavli’s cheeses, which would be sold on the Danish market and exported under licence from O. Kavli AS.14 Source: Cremo Cheese IS, turnover statistics 1956–1965, Olav Jacob Dreyer’s private archives. State-of-the-art machinery was purchased from Switzerland. The factory in Denmark was the most modern in the whole Group. Production soon began and a lot of work was done in connection with sales and the export market. Mønsted was responsible for domestic marketing and distribution. Exports rocketed, while domestic Danish sales came to a halt. In Bergen it was believed this was due to the cheese being marketed and distributed along with butter and margarine. Mønsted already produced cheese for the Danish market through its dairy operations, so they were more interested in exports than in domestic sales of Kavli’s products.

Export company The company’s big capacity enabled it to grow at a rapid pace. A new partner company was established in June 1953. It was called Cremo Cheese Company IS, was located in Copenhagen and was owned 50 percent by each company. It was to be responsible for exports, while O. Kavli Glamsbjerg sold to the domestic market. The dairy in Glamsbjerg was still going to produce all the cheese.15 Erik Reinhard became the managing director, which was the position he held at Mønsted for many years. He was an unusually structured leader. Reinhard was later replaced by Richard Gormsen, who became a member of the board of directors, which was chaired by Sjurseth. Exports continued to increase, and, for most of the 1950s and 1960s, nearly all the production was for the foreign market. This meant that their exports were already higher than Kavli Norge’s at the beginning of 1950. Thus, Cremo Cheese became the largest export enterprise within the Kavli Group. The turnover was higher than for any other company Kavli was involved in. The Danish cheese factory, on the other hand, was not very profitable.16 A new cheese spread, Paradiso, was launched around 1960. The name indicates that it was supposed to taste delicious, the reason being that it had a very high cheese

Danish cheese from Glamsbjerg marketed in 1955 under the name Kavli Processed Cheese.

143

KAVLI – AN INDUSTRIAL FAIRYTALE

content – 60 percent, while Danish-produced Primula typically contained around 45 percent fat. Sales of Paradiso grew rapidly in the 1960s.17 In addition, a limited amount of cream cheese was produced. Architect’s drawings for an extension of the factory to include its own cream cheese department were therefore drawn up in July 1958. The hope was to gain greater access to the Danish market with this type of product. However, Mønsted’s representatives, who sat on the board of directors, were against the project, because it would result in competition for cheese production for the domestic market.

Belgian sales office

An exciting competition in Belgium.

144

For a long time, the UK was the main recipient of the Danish-produced cheese. France came second, with the majority of sales going to its Algerian colony. Consequently, plans were made to open a factory in Paris during the first half of the 1950s. It was scheduled for completion in 1955. Unfortunately, Algeria’s war of independence led to a shortage of ingredients, and the focus shifted to Belgium. The initial plan was to open a factory to supply Europe from there. The first step was to open a sales office in Brussels in 1955, where Olav Jacob Dreyer came to play a crucial role as pioneer and manager until 1965. This was only interrupted by a few years as managing director of the Swedish company. At one time, the office also served as a sales office for Mønsted. A factory was never built there, however. Once the office succeeded in getting its products sold by the Fort and Weslandia chains, the sales volume reached 800 tonnes a year. Profits were high, and the sales office considered a huge success. Belgium was also responsible for selling to Luxembourg, where Kavli’s products at their peak were sold in all known food stores. With 100 percent coverage at the retail level, the country had set a remarkable record. The Group received enquiries about opening factories in both the USA and South Africa, but this did not happen because the risks were considered to be too high.18

Belgium: Team Primula 1962 From 1955 onwards, Kavli focused strongly on the Belgian market. Primula and Bacon Cheese were imported from Norway and Denmark, and mushroom cheese and prawn cheese from Sweden. Cycling has always been a popular sport in Belgium. One marketing campaign that attracted a lot of attention took place in 1962. It featured the ‘Primula Kaas’ cycling team, which was organised by Kavli’s agent in Gent. Quizzes were also run in the press for several years. Belgian cities had to be identified with the aid of small drawings of important buildings. These competitions were successful and they ran for several years.

Team Primula’s star cyclist was Maurice de Zutter, here centre picture with the team around him.

◄ 1964: 1st prize a Ford Taunus 2nd prize a Ford Anglia 3rd–12th prize a TV 13th–22nd prize a radio 23rd–32nd prize a portable radio 33rd–82nd prize a man’s bike 83rd–132nd prize a woman’s bike

145 10

KAVLI â&#x20AC;&#x201C; AN INDUSTRIAL FAIRYTALE

Belgium

USA

Sweden

146

Norway

10: MORE POPULAR ABROAD

This little girl with her hair in bunches was used in advertisements by the Swedish company.

Sweden – success on the domestic market Processed cheese was an immediate hit with Norway’s neighbour, and, with its own factory in Södermalm, Kavli had a unique market position in Sweden. At the same time, Sweden’s neutrality during the war led to a greater supply of cheese there than in Norway, a situation that lasted for a long time. At the end of the war, Sweden produced almost the same amount of processed cheese as Norway with 60 employees, which was slightly fewer than the number of employees in Norway.19 Furthermore, the Caviar cream was a typical Swedes were often more advanced when it came to product innovation. In addition to Swedish product. processed cheese, they concentrated on pâtés and caviar adapted to the Swedish palate. They also continued to focus on delicatessen products, and they developed different varieties of mayonnaise, which was sold in both tubes and jars.20 The road to coleslaw spreads was therefore very short. Profits were also good. The pre-tax profit was just above Figure 10.4 ten percent during the early 1960s. However, the company O. Kavli AB, Stockholm’s turnover distributed struggled with increased purchasing costs. It initially tried to according to product type 1960–1967 resolve this by having an efficient logistics system to keep production, warehouse and distribution costs down. The Swedes were also more proactive as regards marketing than both the Norwegians and Danes. Their product development was much more advanced. In the mid-1960s, Mushroom Cheese, Ham Cheese, Herring Pâté, Prawn Coleslaw and Pickles for sandwiches were introduced.21 Processed cheese was by far the most important product, followed by pâtés. Bread from the flatbread factory Vestfold Flatbrødfabrik and caviar and other foods, for example delicatessen foods, came in second place.

Miscellaneous 16% Bread 6% Pâtés 8%

Cheese 64%

Caviar 6%

Source: O. Kavli AB, Annual report, 1967. Olav Jacob Dreyer’s private archive.

147

KAVLI – AN INDUSTRIAL FAIRYTALE

The customer is my employer A significant reason for the growth in Sweden was the focus on consumers. Product development, marketing, brand building and the sales team were important factors in this connection. The idea was that it was the customers who paid the wages of the company’s employees. As result, the main focus was on the customer and the importance of an efficient distribution system. While the Danish factory exported 90–97 percent of its production, an equivalent proportion of the Swedish production went to a growing domestic market.22 Knut Kavli was a central figure on the company’s board of directors, and he was strongly influenced by his wife, Karin, who was chair of the board for many years. The third long-serving member of the board was the highly valued accountant Sixten Rosén.23 With such strong expansion in Sweden, a new factory was needed, and in 1963 the company moved into new and larger premises in Hagsätra. Managing director Conrad Ternström retired in 1962 and Olav Jacob Dreyer succeeded him. Leif Iversen from Bergen took over as managing director in 1965, a position he held until 1974. Ingolf Iversen, his brother, was marketing manager in both Norway and Sweden for a long time. The success on the domestic market led to sales exceeding those in Norway and equalling those in the UK.24

The UK – bigger than Norway Kavli UK was even more independent than the other companies, with little intervention from the Group. Sjurseth was a trusted managing director and industrialist. Along with talented colleagues, he built up a company that became the template for the rest of the Group. Tom Parker was an important administrator who kept a watchful eye on things. He was like Askeland in many ways. He stayed in the background, was quiet and shy, but he was strict when it came to the day-to-day running of the company. James Symons, recruited in 1961, and Kenneth Forster, who started with Primula Crispbread in 1963, were promoted to key managerial positions after working their way up. They describe Sjurseth as a determined, visionary and farsighted leader with great natural authority. His exalted position can be illustrated by the system used to gain an audience with him. A light system was introduced for admittance to the managing director’s office. Green meant ‘enter’ and red meant ‘no entry’.25 At the same time, he was also a very considerate and humble boss for his employees. For example, he acquired a beautiful recreational property in NorthWest England that everyone could use. The current factory manager, Paul Pendelton, says that the managing director carried out a daily unannounced inspection of the production line. He showed up without prior warning to inspect production, which was more advanced in the UK than in the other factories during the 1950s and 1960s.26 Many people say they felt they were part of a big family. Employees were treated well and they were relatively well-paid.

148

10: MORE POPULAR ABROAD

Twenty-fold increase

There was not much space in the Gateshead office.

After 1950, the UK company became the largest in the Group. Sales rocketed between 1948 and 1952. This was because of large orders from the armed forces. Once again, they had decided to commission processed cheese. It was popular as war rations, as well as an ordinary sandwich topping. Large orders, for example, for British troops in Germany, led to Kavli Limited becoming bigger than all the other three factories combined in 1951 and 1952. Orders from the Army eventually decreased, Figure 10.5 and, as a result, the company had less access to ingredients, and production stagnated until the mid-1960s.27 Profit margin before tax for The British company was even more independent than the Kavli Ltd, Gateshead 1936–1970 Danish and Swedish companies. The usual system was that a 15 representative of the Kavli family was managing director while 10 another was a member of the company’s board of directors. 5 This did not apply in the UK, where the board of directors consisted of Sjurseth as chair of the board with valuable partners 0 Robert and John L. Muckle as board members. –5 Ingredients from continental Europe could not be imported during the war, and cheddar or other kinds of white cheese –10 1940 1936 1950 1960 were mostly used, but they were drier than Scandinavian Source: Kavli Ltd., Newcastle, Accounts 1936–1970. The Kavli Archives, cheese. This created some problems as regards quality. HowGateshead 28 ever, they were satisfactory solved by the skilled British staff.

1970

149

KAVLI – AN INDUSTRIAL FAIRYTALE

Primula crispbread was marketed as a health and slimming product.

Newtown Aycliffe is an industrial area. It was developed during the first few years after the war near Durham in the north west of England.

150

Crispbread factory Due to a shortage of ingredients, the British factory decided to look at alternative products. The partnership with the flatbread factory Vestfold Flatbrødfabrik led to a focus on crispbread. Following negotiations, a beneficial agreement was signed for the production of crispbread in the UK. A separate crispbread factory was built in Aycliffe near Durham in the North-West of England in 1952. The products were sold under the names Crispbread and Ryebread, and the new company was called Primula Crispbread Limited.29 However, crispbread never gained a large market in the UK, where food habits are different to those in the Scandinavian countries. Sales or profits were never high. However, some small markets were discovered, for example, the Jewish communities in Europe and North America. The factory had to be inspected by the communities’ own Rabbis, who were also given the privilege of pressing the buttons that started the machines after a special cleansing ritual had been observed.30

10: MORE POPULAR ABROAD

Access to ingredients improved around 1950, and sales agreements with large stores were gradually entered into. They were mainly with Marks & Spencer’s and Tesco, which had stores throughout the country. At the same time, Kavli chose to keep its own brand rather than to produce under the chain brands. The company has always given priority to an integrated branding strategy.31

New factory The cheese factory soon became too small, and in 1952 it reached a production ceiling. Hygiene requirements meant that manufacturing had to be limited. A new and larger factory was therefore planned from 1953 onwards. Crispbread production was moved to the new factory in the winter of 1957–1958, when building work on the new cheese factory started. It was opened by the Norwegian Minister of Trade and Industry Arne Skaug on 20 October 1961. Production was gradually transferred. Most of the moving process was done during the night to prevent secrets leaking out.32 Peter Stuart, who served as a manager for many years, and Maureen Brown, who worked for more than a generation in the administration department, tell us that production took place in ‘The Secret Room’. Only factory workers and top management had access to it. The machines were covered when visitors came, and documents that could reveal secrets were shredded. The management always kept everything strictly to themselves.33

For a brief period Kavli Gateshead produced large volumes of crispbread for Orthodox Jews across Europe and North America. Before the baking process started, the production lines were thoroughly inspected by a rabbi. This Mazon crispbread label tells us that Rabbi B. Rakow Rav has verified that everything is ‘Kosher’, i.e., that it meets the requirements of the Third and Fifth Book of Moses. Mazon was produced for Gateshead Kosher Milk & Food Supplies Ltd.

Norwegian Minister of Trade and Industry Arne Skaug lays the foundation stone in connection with the extension of Kavli Ltd. at Team Valley in Gateshead outside Newcastle (1961).

151

KAVLI â&#x20AC;&#x201C; AN INDUSTRIAL FAIRYTALE

Team Valley From the factory in Team Valley. Between 1948 and 1952, its turnover increased many times over when the British Armed Forces once again decided to include processed cheese in provisions for its troops around the globe.

152

10: MORE POPULAR ABROAD

John L. Muckle

Robert Muckle In the 1960s, John and Robert Muckle were members of the board of Kavli Ltd., as well as being valuable partners.

The Team Valley factory had a number of small vans that promoted Primula.

153

KAVLI â&#x20AC;&#x201C; AN INDUSTRIAL FAIRYTALE

The Team Valley factory near Newcastle in the 1960s. Approx. 200 people worked there at the time.

154

The British company imported many products, especially from Denmark and Norway. In addition, it purchased cheese from the Norwegian Dairiesâ&#x20AC;&#x2122; Sales Centre from 1950 onwards, which was sold on the British market. This applied to cumin cheese, whey cheese and ordinary white cheese. Jarlsberg was gradually introduced and the factory also exported large volumes.34 The customs barriers were low within the British Commonwealth, and the British company had to ensure that products were exported to these countries.35 However, in order to meet the demand at home, it also had to import products from Scandinavia. UK exports were relatively modest immediately after the war, but they reached a high in 1951 and 1952, with a close to 30 percent share of all exports. Following this, the foreign market fell until 1966, when Denmark took over as the producer of export products. Irrespective of this, there was money to be made both at home and abroad. Profits varied, but they were usually between six and twelve percent of the turnover before tax.36 That was a very good result. The UK was the flagship company in the Group for most of the 1950s and 1960s.

Chapter 11

ESTABLISHMENT OF THE KAVLI TRUST The legacy of Olav and Knut Kavli Following the death of Olav Kavli in 1958, Knut and his sister Signe inherited most of his fortune. However, Knut died only seven years later at the age of 69, on 22 October 1965. Three years prior to his death, he established a foundation under the name of O. Kavli og Knut Kavli’s Almennyttige Fond (O. Kavli and Knut Kavli’s Charitable Trust) on 25 April 1962. Most of the share capital was transferred to the trust. This is how he expressed the objective of the new trust: The aim of the trust is to promote research and cultural and humanitarian causes in accordance with the decisions of the board in each individual case.1

A trust is born To donate such a large fortune to charitable causes was, and still is, unusual in Norway. He was probably inspired by a number of sources. His father grew up in a puritan Christian environment in which charity was a virtue. Olav was a generous man and he bequeathed a substantial amount of money to charitable causes before his death in 1958, an attitude he clearly passed on to his son.2 Another source that probably inspired him was the business environment that contributed to Bergen becoming the ‘city of legacies’ in Norway. Bergen has developed a more deep-rooted tradition for donating to private and public causes linked to culture, humanitarian programmes and research than anywhere else in Norway. People like Kristofer Lehmkuhl, C. Sundt, Søren Falch and Oluf Bjørneseth had all contributed generous gifts to charities during the lifetimes of Olav and Knut Kavli. Olav and Knut must also have come across good examples of donors to charitable causes while abroad, such as the Carlsberg Foundation in Copenhagen, and the Andrew Carnegie and Nelson Rockefeller Foundations in the USA. In addition, Knut Kavli had personal financial reasons for establishing the trust.

The Carlsberg Foundation was founded by brewer J. C. Jacobsen in 1876 to support Danish humanitarian work, culture and science.

Andrew Carnegie, 1835–1919, was a Scottish-American industrialist. Today, he is known for his donations to a number of institutions and to the arts.

Nelson Rockefeller, 1908–1979, was an American businessman and politician. He was involved in many things, but is mainly remembered for his donations to art and science.

The Norwegian Dairies’ Sales Centre’s Edam cheeses were marketed under the Kavli name in the UK.

Securing the future of the company Knut Kavli was a shy man who declined virtually all offers that came his way of directorships and other offices. He preferred to cultivate his cultural and humanitarian interests. Otherwise, he was

155

KAVLI – AN INDUSTRIAL FAIRYTALE

known for helping young people when and where this was needed. The local historian Kåre Fasting, who knew him personally, described him as follows: He had strong cultural and artistic interests. He visited art exhibitions at home and abroad and frequently visited the theatre. He was also known for being generous, and in all secrecy he helped young people with their education and careers.3

Knut and his wife Karin lived apart most of the time. They did not have children and therefore had no lineal heirs. When he set up the foundation in 1962, it was the result of several years of contemplation about what would be in the best interests of the company in the future. In a sincere letter to one of his most trusted colleagues, Olav Jacob Dreyer, we get a small glimpse of his thinking. He admits starting to feel old and is concerned about what will happen to the Group after his demise: As I am getting older, I would like to secure the future of the company, as I do not want it to fall into the hands of, or come under the control of, outsiders. By outsiders I mean people who do not hold senior positions within the company. After considerable thought, I have decided to establish a charitable trust…4

Official company photograph of Knut Kavli.

His principal concern was that ownership would be spread between many owners, and the company in Bergen would lose control of it. Hence, the only solution was to intervene in the process through a will or a donation arrangement that would ensure that ownership remained with one or a few owners who came from Bergen. Otherwise, who would be the heir? In the letter, he says that he would keep most of the shares together by donating them to a foundation. Other than that, only a few people would inherit the remaining company shares. An important factor when giving away the shares was to avoid inheritance tax: Furthermore, when considering inheritance tax, I would at the present time prefer to give some of the company shares to a few selected employees, who, as described above, hold senior or managerial positions, instead of bequeathing shares in a will.5

‘A large new Norwegian cultural trust established in Bergen. Director Knut Kavli donates NOK 1 million to research, culture and humanitarian programmes.’ The newspaper ‘Bergens Tidende’, 21 May 1962.

156

11: ESTABLISHMENT OF THE KAVLI TRUST

Karin Kristina Margareta Carlson-Kavli In spring 1933, actress Karin Carlson was contacted by lawyer Elias Sten Olsen from Bergen. Olsen had done some legal and financial work for Karin’s boss, the legendary Gösta Ekman, and through him he had previously met Karin Carlson. He asked her if she would be so kind as to visit a friend from Bergen, Knut Kavli, who had been admitted to the Sophiahjemmet Hospital with a stomach ulcer. He felt like an outsider and was lonely. Karin visited him and one visit turned into many. When Knut was discharged, he went to the Vasa Theatre and watched her perform in ‘Kanskje en diktare’ (Maybe a Poet?). He wrote a letter to her in which he called her his white angel, because she wore a white costume in the play. Karin was quick to inform her Norwegian admirer that she did not appreciate that kind of sentimentality. The couple saw each other a lot during the weeks that followed. In summer 1934, she accompanied him to Bergen to be introduced to his friends and family, and while she was there she performed in a play at Bergen’s main theatre, Den Nationale Scene. She then returned to Stockholm and her roles at the Dramaten, Sweden’s national theatre. On 28 March 1935, Karin and Knut got married at the City Hall in Stockholm, but they were almost too busy to get married. They spent their wedding night and a two-day honeymoon at Hotel Eden. Then he went abroad and she returned to work at the Swedish national theatre. This is how a marriage between two very different people started. Both of them were extremely opinionated about many things and never interfered in each other’s work. He lived abroad much of the time, while she went from theatre success to theatre success in Sweden. In May 1940, Knut went to Stockholm to settle there and build up a Swedish factory, O. Kavli AB. The couple had a very full social life in Stockholm during the Second World War. Knut mainly socialised in Anglophile circles, while Karen socialised just as much in Soviet-friendly circles. When peace came, Knut resumed his old life and Karin stayed in Sweden. In 1954, she was appointed theatre director at Gothenburg City Theatre. The couple did not see much of each other, but, when Knut fell ill in autumn 1965, she went to be by his side during the weeks he had left. Karin Kavli was chair of the board of O. Kavli AB from 1940 to 1980. The square outside the southern facade of the Gothenburg City Theatre is now called ‘Karin Kavlis Plats’. The height of her career came in 1983, when she played the grandmother in the TV series ‘Farmor og Vårherre’ (Grandma and the Lord of Heaven). In 1967, she donated NOK 600,000 to the Kavli Trust.

Karin Kristina Margareta Carlson-Kavli, born in Bromma on 21 June 1906, died in Stockholm on 8 March 1990.

Each holding a glass of healthbringing water, Karin and Knut Kavli take a walk as newly-weds in Marienbad. They were in good company. The Bohemian health spa, now Mariánske Lázne, was popular among almost all European celebrities during the 1800s and 1900s. They all believed in the healing effects of the mineral water.

157

KAVLI â&#x20AC;&#x201C; AN INDUSTRIAL FAIRYTALE

158

11: ESTABLISHMENT OF THE KAVLI TRUST

Bequeath to relatives and friends? The value of the company and of the shares he donated to the trust amounted to approx. NOK 30 million and NOK 20 million, respectively.6 Converted into 2013 values, this equates to NOK 330 million and NOK 215 million. Choosing this solution, however, was more difficult than most people realise. Before Knut Kavli decided to establish a trust, he actually envisaged a different solution. At that point in time, he owned 439 of the 500 shares in the company. The remaining shares were owned by six senior executives. On 4 December 1961, he wrote a will in which he gave 164 of the 439 shares to his wife. Hence, she would own 33 percent of the company’s share capital. These were not to be mortgaged or sold, and they would be returned to the company upon her death.7 Moreover, 210 shares would be given to the most outstanding employees, i.e. Sivert Nilsen (finance manager), Olav Jacob Dreyer (director), Bjarne Fotland (manager), Ingolf Iversen (manager), Christian Thornquist (assistant director) and Hans Askeland (managing director). Three shares were to be given to his second cousin Finn Kavli. The remaining 65 were not allocated.8

A trust is considered Knut Kavli changed his mind during the winter of 1961–1962. What caused him to do this is hard to say, but we do know that, from the end of 1961 until the middle of January 1962, he stayed in Gothenburg with his wife, who managed the theatre there. We also know that he was very concerned with the Christmas message that year, which was manifested in his subsequent actions.9 In addition he had health problems and felt exhausted. After being a chain smoker for his entire adult life and continually battling with his sister and brother-in-law (Signe and Erling Thofte) about his father’s inheritance, things must have begun to take their toll on him. The conflict was resolved in 1960, however, – two years after his father’s death. Knut was generous in the final settlement. He clearly had long-term doubts about what should be done with the company, since he did not have any lineal heirs. Clearly, O. Kavli AS was Knut and Olav’s life’s work. The issue was so hard for him that he wrote at least six new wills between 1958 and 1964.10 Ownership was one thing, but he was also concerned about who would lead the Group in the future. He wanted to leave behind a company that would continue to grow and develop in the future.11 After considering the options, he ended up contacting the well-known Bergen business lawyer Per Brandt-Hansen for advice. He had done so previously in connection with other matters. Brandt-Hansen based his analysis on the core elements of the issue: to find a solution that best resembled the constraints that a lineal heir would represent.12 He believed that the best solution would be to establish a foundation. Through this, strict constraints could be included in the statutes to prevent ownership being spread. Consequently, it was crucial to draft appropriate statutes. During the winter of 1962, this idea developed into a decision that Knut could live with. He finally decided to establish a charitable foundation.

Per Brandt-Hansen 1910–1983 was a business lawyer in Bergen, with a well-developed community spirit. He was contacted by Knut Kavli for advice on the future of the company.

159

KAVLI – AN INDUSTRIAL FAIRYTALE

The Kavli Club was an important part of company’s social life. In the 1960s, a number of events were organised under the auspices of the club. As can be seen from the posters, creativity was not in short supply.

160

11: ESTABLISHMENT OF THE KAVLI TRUST

O. Kavli and Knut Kavli’s Charitable Trust

Figure 11.1

In late winter 1962, Knut and his lawyer had made all the necThe division of shares upon the establishment essary preparations to establish a foundation. They had based of O. Kavli and Knut Kavli’s Trust in 1962 it on the so-called Scheibler Institution in Oslo.13 In a deed of donation, dated 25 April 1962, he transferred title to the comKnut Kavli 11 % pany to a foundation under the name of O. Kavli and Knut Kavli’s Charitable Trust. In the statutes of the foundation, he Colleagues 22 % decided how it would be run and the duties of the board of directors. The board of the trust was established three days The Trust 67 % later. The question of which date should formally be the establishment date is debatable. However, the trust considers 28 April to be its formal start-up date. Source: Knut Kavli, Deed of Donation, 25.04.1962. The Kavli Archives, Bergen The basic capital was established by donating 335 of the shares he owned in O. Kavli AS to the trust, each with a nominal value of NOK 100. This amounted to 67 percent of the share capital and gave the trust a dominant position as owner of Kavli. The remaining 165 shares were divided between himself and his most trusted colleagues. He had 56 shares and they had 109.14 On 12 May the same year, he wrote a new private will in which his wife was to receive most of his shares upon his death. The trust was now the owner of O. Kavli AS, Bergen, which in turn owned the foreign companies. The company in Bergen thus remained the parent company, although it was now owned by a charitable organisation that would function as the company’s general meeting. The company’s articles of association were amended to give the trust an option to acquire shares that were up for sale. This indicates that Knut Kavli wanted the company to be wholly owned by the trust in future. The board of the trust would comprise three individuals, a business lawyer and two senior executives from O. Kavli. But who would be appointed as members? In the first unedited version of the deed of donation, it was stated that the two executives should come from the Kavli Group. However, for some reason, Knut changed this and decided that the executives on the board should preferably be executives of the parent company.15 The new wording ensured that control of the company would remain in Bergen. Right up until his death he stressed that it was important for the companies abroad to remain as independent as possible. Even though it was not expressly specified in the deed of donation or in the statutes, the board would have to be a self-supplementing body, i.e. the three board members would themselves appoint a new member when one of them resigned. This was arranged by appointing a so-called personal successor for each member, who would replace him The Scheibler Foundation was as soon as possible if he left office. How long a member could sit on the board was not formed to support communityrelated and cultural programmes. decided. It became the practice to sit on the board for many years before voluntarily The funds awarded as grants are relinquishing office. Both self-supplementing traditions and long terms of office for the return on assets belonging to the Fabricius Group, which was board members were common in foundations, and these practices were also widespread built up by the Scheibler Family. among a large number of corporate boards at that time.

161 11

KAVLI – AN INDUSTRIAL FAIRYTALE

Knut Kavli dies

– Knut Kavli is dead. Knut Kavli’s obituary in the newspaper ‘Morgenavisen’.

In the deed of donation, Knut Kavli appointed three individuals to sit on the board of directors, i.e. himself as the Chair, Hans Askeland, managing director of O. Kavli AS, Bergen, and Magistrate Arthur Sundt from Bergen. As a result, the first board of directors comprised two executives from the company in Bergen and one commercial lawyer, also from Bergen. This was fully compliant with the statutes. The first few years with the trust as owner of the company did not lead to any significant changes in the day-to-day affairs of the Kavli Group. Knut Kavli was still the indisputable leader, followed by Hans Askeland and thereafter Alf Sjurseth. The change of organisation type had little bearing on the other employees. The trust lived an anonymous life. Beyond Norway’s borders, many of the employees were probably unaware that any changes had taken place.16 The working environment was good, as the companies looked after their employees well. The management stressed that the workforce was the most important input factor in the company, and they treated their employees with great respect. Since the trust was established as early as 1962, most people thought Knut Kavli had ample time to carry out his plans in accordance with his visions. However, due to a serious illness, this was not to be. He died on 22 October 1965. In line with his own wishes, managing director Alf Sjurseth was appointed as the new member of the board of the trust, but, not only that, he was also appointed Chair. Since he was not an executive of the company in Bergen, only one person now held this position in the trust. Thus, Knut had only partly complied with the trust’s statutes, which preferably required two executives from Bergen. However, they chose a generous interpretation of the internal rules. After all, Sjurseth was managing director of one of the foreign subsidiary companies, as well as Chair of the Board of Directors of O. Kavli in Bergen.

The objective and tasks of the foundation The board of the trust was given a threefold task: 1) to donate funds to charitable causes, 2) to manage the capital, and 3) to ensure that the company developed in a way that would lead to a profit and a return on the shares. The management work started on 21 September 1963, when, to their satisfaction, the board members registered that the first deposit of NOK 16,750 had been paid into the trust’s bank account. The deposit was dividend on shares in the primary capital. The

162

11: ESTABLISHMENT OF THE KAVLI TRUST

largest amount that came in during the first few years was transferred in 1966, when Karin Kavli donated NOK 600,000.17 The first grants to charitable causes were made during the first three years after the trust was established. In February 1965, NOK 5,000 was awarded to Rolf Aamot (artist) and Jan Henrik Kayser (concert pianist). The two awards amount to approximately NOK 48,000 each when converted into 2013 values. In 1969, the board of directors handled their first big case, the granting of NOK 50,000, or NOK 413,000 in 2013 kroner, for decoration of the Grieg Hall.18 The third assignment was without doubt the most demanding. The statutes tasked the board of the trust with overseeing that O. Kavli AS was always managed in line with the leadership principles practised by Knut and Olav, principles that would ensure that the company remained financially healthy while internal collaboration was good. In reality, a fourth task also emerged. Because it was a charitable foundation, it was not subject to wealth and revenue tax. It was the board’s job to ensure that this tax exemption was maintained. In the beginning, it was not necessary for the board to concern itself with this issue. However, things soon became more problematic.

Rolf Aamot born 1934

Contradictions between the deed of donation and the statutes The history of the trust is one of innovation and constructive efforts, but it also includes some disputes.19 Ambiguities surrounding the deed of donation and the statutes were the source of disagreement. In the deed of donation, it was clearly stated that the foundation should be charitable and grant funds to important causes. In the trust’s statutes, however, greater emphasis was placed on overseeing the parent company, in other words, on business operations. This caused tension between the board members. On the one hand, the deed of donation and the statutes gave the board members considerable freedom and wide-ranging authority to exercise their wisdom, knowledge and good judgement in most areas. On the other hand, this freedom was limited in two areas: 1) The statutes reserved the seats on the board for individuals with financial or legal expertise. That is, two of them should ‘preferably’ be executives from Bergen.20 2) The statutes stated that the shares that formed the foundation’s core capital could not be sold. The trust’s board would not only manage the capital and award funds to charitable causes, but it would also own the Group and further develop it. That could not be done if they sold the shares. Before they could start awarding money to good causes, they had to build up the capital.21 Ivar Gjelsvik said this had to be done to provide funds for the purchasing of outstanding shares when they came on the market.22 The building up of capital led to the board having little money to award in the first 20 years, which resulted in a certain amount of criticism. In addition, it could give the impression that the only reason for setting up a charitable foundation was to avoid paying tax. Another problem, as previously mentioned, was that the trust had to manage the Group, as instructed by Knut Kavli, something that could easily come into conflict with Norwegian law. Of course, the board had the authority the Norwegian Companies Act gave it as shareholder. But the type of control that was intended for the board went beyond the bounds of the Act. That is, the statutes tasked the trust’s board with ensuring that operations were satisfactory and in line with the principles of the Kavli family. Not

Jan Henrik Kayser born 1933 Artist Rolf Aamot and concert pianist Jan Henrik Kayser were the first artists to receive grants from the Kavli Trust in 1965.

163

KAVLI – AN INDUSTRIAL FAIRYTALE

only did this create problems in relation to legislation relating to the trust, but it also caused disagreement about the way ahead. At times, there were disagreements about how strict the control should be and what Kavli’s principles actually entailed.

Figure 11.2

Trust grants in NOK 1000 for 1962–1980 160 140 120

The trust’s first years

100

The first few years went smoothly and the relations were good between the trust’s board and the companies. The first major 40 challenge came after Knut Kavli’s death, when there was con20 siderable unrest about management and control in Sweden. 0 The matter was largely resolved by drawing on the natural authority Askeland had built up during more than fifty years with the Group. Source: O. Kavli and Knut Kavli’s Charitable Trust, Annual accounts,1962–1980. The Kavli Trust Archives. As mentioned, grants made to charitable causes were modest, since the emphasis was on building up capital, which was necessary to redeem the remaining shares in Kavli and develop a basis for future payments. In addition, the foreign companies wanted to build up their own investment funds and use them as a financial buffer. Thus, dividends were extremely low for a long time. The subsidiaries paid dividends to the parent company in Bergen, which in turn paid dividend to the trust. All in all, this led to few grants being awarded for a long period. However, it helped that the managing director of the UK company chaired the trust’s board. This at least calmed the foreign voices when financial transfers were the topic of conversation. 80

1980

1978

1976

1974

1972

1970

1968

1966

1964

1962

‘Norbo’ cheese came from the Norwegian Dairies’ Sales Centre. Kavli sold it through its marketing organisation.

164

Chapter 12

ALMOST DEVOURED Back home again Despite a period of economic upturn in the 1960s, Kavliâ&#x20AC;&#x2122;s turnover stagnated when the markets for processed cheese reached saturation point. Exports fell drastically and conflicts of interest started to emerge within the Group. In 1966, it was therefore decided that the time had come to close the factory in Denmark. It was replaced by the acquisition of a new Danish company that was primarily engaged in commerce rather than cheese production. This led to more diversity within the Group and, consequently, some of the shared identity that had been built up disappeared. In the mid-1950s, the explosive growth in foreign markets led to O. Kavli AS in Bergen exporting more than half its output in Norway. During the next 15 years, the company changed from being primarily an export company to a company producing for the domestic market, as exports fell to 25 percent of production.1 This development called for a new strategy, which was twofold: firstly, the development of new products and, secondly, the acquisition of Norwegian sales rights for foreign-produced goods. Deliveries to other companies in the Kavli Group accounted for more than 60 percent of exports. This percentage fell to 20 percent in the period up until 1975. Cheese exports collapsed first. However, Kavli enjoyed success as export sales agent for Vestfold FlatbrĂ¸dfabrik AS, and exports of crispbread increased fourfold during the 1970s.

Adapting to the domestic market Via its sales personnel abroad, the company became aware early on that the export markets were about to disappear. There were four main reasons for this: 1) The export market for processed cheese became saturated during the 1950s. 2) The European Economic Community (EEC) introduced tariff barriers for non-member countries. 3) High production costs. 4) Modest market shares that excluded Kavli the big new supermarket chains. Standardisation led to only the biggest brands being given shelf space. Individual businesses with their own special suppliers were on the way out. In summer 1960, Alf Sjurseth drew up an offensive plan in which he proposed that the company should focus strongly on exports to countries where the prospects were best, while phasing out others. However, this initiative was never put into practice.

165

KAVLI – AN INDUSTRIAL FAIRYTALE

It was a huge problem to replace the lost cheese exports with domestic sales. There was only one competitor, and that Percentage of exports in relation to turnover was Norske Meieriers Salgssentral’s cheese factory at Tretten in for O. Kavli AS Norway 1957–1980 Gudsbrandsdalen. It launched a campaign in 1969 to establish 50 itself in the cheese spread market, but was unsuccessful. Never40 theless, Kavli was still struggling at home. Consequently, the company was forced to focus on other products to maintain its 30 position in the market. The most suitable products were caviar 20 and mayonnaise, which were already part of its portfolio. 10 Caviar sales increased moderately, while the production of mayonnaise increased sixfold in nine years! The company also 0 1960 1965 1970 1975 1957 1980 wanted to increase its range. Work on coleslaws began back Source: O. Kavli AS, Bergen. Annual accounts for 1958-1980. in 1959. The company launched a new cheese called ‘LunsjThe Kavli Archives, Bergen bit’ in 1962, and it decided to introduce a new product every year.2 In addition to having its own production lines, it also introduced a new component in its strategy, i.e. to lease its production capacity to other companies. For example, Kavli produced caviar and mayonnaise for the Norwegian Consumer Cooperative. Another element in the new strategy was to expand its range of products on the domestic market. The company therefore began producing dog food in 1968. The sales volume increased Kavli launched the pet food from 251 tonnes in 1971 to 1,070 tonnes in 1980. The factory at Sirevåg in the Jæren area brands ‘Lurifaks’ and ‘Fant’ in produced wet dog food under the Fant brand, while dry food was produced by a Dutch 1968. partner under the brand name Lurifaks.3 Even though large volumes were produced, it proved difficult to make a profit. Kavli became Øtker and Knorr’s sales agent in Norway. Many products were added during the 1980s, and both the volume and turnover of resale goods increased rapidly. Thus, everything was set for a new expansion. Figure 12.1

New factory The Damsgård factory soon became too small, as the workforce grew to more than 130 at the end of the 1950s. This number was slightly reduced in the 1960s, but rose again to almost 160 in 1980. The lack of space became particularly acute in the 1960s, and the situation led to a discussion about extending the factory. The drawings were based on extending the existing building by the addition of two floors at one end. The extension work began in January 1969. The premises were ready for occupation on 12 January the following year.4 The two new floors housed the administration department and laboratory, while the three floors below formed the actual cheese factory. A box factory, packaging hall, warehouse, canteen, and production premises for delicatessen foods, caviar and mayonnaise were also added.5

166

12: ALMOST DEVOURED

The company’s office staff in 1957, all looking very smart in white coats. Back row from the left: Lars Styve, Bendik Jensen, Erik Andersen, Kari Smilden, Hans Askeland, Mary Klementsen, Grethe Hamre, Bjarne Fotland, Johan KrohnHansen, Wollert Jordan and Christian Thornquist. Front row from the left: Unknown, Svanhild Smedsvik, Wenche Larsen, unknown, Laura LemLarsen, Gudrun Knudsen and Aud Nygård.

◄ A new cooling facility and warehouse was built in Damsgård in 1958/59.

▼ This is what the factory looked liked from the sea in the 1960s. The quay was periodically used by barges carrying sand from Matre in Masfjorden to the large sand silos near Damsgårdssundet.

167

KAVLI â&#x20AC;&#x201C; AN INDUSTRIAL FAIRYTALE

Aerial photo of the factory and surroundings from around 1960. The area has been totally transformed since then.

The advantage of having a private quay was that fish roe could be delivered directly to the factory door. The factory was periodically bothered by rats when these boats came in. They did not survive long, however, since Edvin Haga was a good shot and usually dispatched them quickly. The problem was limited to the unloading of the boats, as the production process was clean.

168

12: ALMOST DEVOURED

The company invested heavily in new equipment, especially for cheese production. This was particularly the case after 1965 when, for example, new tube filling machines, packing machines for mayonnaise and mixers for the cheese mass were purchased. However, this was still not a permanent solution. The board of directors saw new opportunities at Midtun, which at that time belonged to the Municipality of Fana (south of Bergen) and they decided to purchase a 30-acre plot of land.6

Difficulties in Denmark

Figure 12.2

Production in tonnes O. Kavli AS, Bergen and Vestfold Flatbrødfabrik AS 1971–1980 3 000 2 500 2 000

Cheese

1 500

Crispbread

1 000

Pet food Caviar

500

Mayonnaise

Ever since its start-up in 1948, processed cheese had been the 0 1974 1976 1978 1971 1972 1980 main product of O. Kavli AS, Glamsbjerg.7 In the 1960s, howSource: O. Kavli AS, Bergen, Production statistics. The Kavli Archives, Bergen ever, the company also started producing dessert cheese and cream cheese. Kavli was responsible for over 20 percent of the cheese exported from Denmark. The two major importing countries were the UK and Belgium. Figure 12.3 Around 2,000 tonnes were produced annually in the early Number of employees at O. Kavli AS, Bergen, 1960s, but this fell drastically later. This was mainly due to a 1957–1980 fall in exports to the UK and the company stopping produc200 tion of Paradiso. 160 Since the Danish factory depended on exports to the UK 140 120 and Belgium, the company eventually came to compete with 100 both the Norwegian and English cheese factories. This also 80 contributed to a conflict of interest with the Danish partner 60 company Otto Mønsted AS, which took over a large share40 20 holding from Kavli to gain control of the firm. The partner0 1975 1980 1957 1960 1965 1970 ship had been strained ever since the death of Olav Kavli. The companies’ managements realised that the conflict Source: O. Kavli AS, Annual accounts 1958–1980 of interest had to be resolved, and Glamsbjerg was discussed at a conference held in Bergen in September 1960.8 Nothing was decided, however. The only thing that resulted from the discussions was a new agreement on brand name use.9 With regret, Knut Kavli wrote the following in a letter to the Danish managing director, Reinhardt, in February 1962. God only knows if it would have been better to have had a short new contract, in addition to the earlier contracts, about the things we agreed on at the big meeting held in Bergen.10

Another issue was that the factory in Newcastle was more cost-efficient than the factory in Denmark. One option was to increase productivity through new investments. Another option was to close the factory in Denmark and transfer production to the UK. In 1960, engineer Oskar Kristensen suggested extending the factory, improving the steaming facility and making production more autmated.11 The two owners were hesitant about this in 1961, but changed their minds the following year. However, the investments did not help, and production costs were still too high in 1966.

After 1884, the village of Glamsbjerg in Fyn grew due to the completion of the Odense – Tommerup – Assens Railway. Today it has a population of approx. 3,300.

169

KAVLI – AN INDUSTRIAL FAIRYTALE

The Primula girl – a pin-up in Korea In January 1951, O. Kavli in Glamsbjerg received an unusual letter:

14185706 CPL R. Frost 7 Royal Tank Regt., British Army Post Office No 3.

22.12.1950

Dear Sir The undersigned and three other members of a tank crew under active service in Korea, were so fortunate to receive a full crate of your delicate cheese for Christmas. In a war-ridden country such as Korea, nothing is more welcome than a flavoursome and proper Danish cheese.

The cheese is as fine as the young beautiful girl adorning the cheese boxes. To

help us remember the cheese and the girl, we would be grateful if you could send us a proper photograph of the young lady, who we have unanimously chosen as our ‘pinup’ for the crusade in Korea.

For your information, we would like to inform you that our previous pin-ups have

been: African war:

Vera Lynn, England

Italian war:

June Alyson, USA

German war:

Jean Simmons, England

It is therefore quite natural for us to contact Denmark to request your contribution to this list.

We hope that you will not disappoint us, and I it gives me pleasure to sign off as Yours respectfully Frost, Tank Commander I. Waddington, Tank Driver I. Grainger, Tank Gunner O. Leston, Tank Wireless Operator

The factory’s management in Glamsbjerg responded quickly to this enquiry. One of the company’s employees, Mrs Jytte Mark-Poulsen, was immediately sent to photographer Sven Türck and dressed up as a Primula pin-up girl. Along with a crate of cheese, four large photographs of her were sent express to the tank crew in Korea.

170

12: ALMOST DEVOURED

There were also other problems relating to the Danish factory, since the maintenance and hygiene procedures were clearly inadequate. Kristensen reported this problem to the board of directors in autumn 1961, after they had requested him to investigate conditions.12 The report concludes that there is serious negligence in relation to maintenance, cleaning and hygiene procedures. This primarily applied to the working and production conditions. Kristensen wrote the following about the canteen: The whole building is in need of repairs and the ventilation could not be worse. A smell of food and tobacco constantly lingers in the air. … It is recommended that the building be brought up to standard.

Figure 12.4

Cheese production at O. Kavli AS Glamsbjerg 1959–1967 in tonnes 2 500 2 000

Total production

1 500

Processed cheese 1 000 500 0 1959

1961

1963

1965

Paradiso Cream cheese

1967

Sources: O. Kavli AS Glamsbjerg and Cremo Cheese Company, Annual report,

1967, Olav Jacob Dreyer’s private archives, Bergen The management drastically improved cleaning procedures. The whole factory smelt fresh and clean when the employees took their Christmas holiday in 1961. In addition, the laboratory introduced checks on finished products in autumn the same year. Improvements in procedures and alterations brought the factory up to an acceptable standard in 1962.

Danish Kavli products on display at a food fair in Utrecht in the Netherlands in 1968.

171

KAVLI – AN INDUSTRIAL FAIRYTALE

Closure and new beginnings In 1966, O. Kavli’s board of directors concluded that the Danish production was to be transferred to the factory in Gateshead, outside Newcastle. In summer 1966, their Danish partner appeared to accept this.14 In order to reach an amicable settlement with its Danish co-owner, they agreed that the gain from extra production in the UK would be divided equally between the two parties for a period of five years.15 Kavli would also pay for the machines that were to be relocated. However, the winding-up process proved more difficult than anticipated. Mønsted changed its mind about winding-up in summer 1967. Consequently, the machines were delayed.16 In addition, Sjurseth had problems transferring the agreed compensation to the Danes due to foreign currency restrictions. The issue was not resolved until spring 1968. On 30 September 1968, the Cremo Cheese Company was formally dissolved and the partnership ended on 1 October 1968.17 Reinhardt commented: ‘The partnership is ending while we’re still friends.’18 When the Danish factory was closed, Kavli did not have any production units within the European Economic Community (EEC), and if Denmark were to become a member of the Community, Kavli needed a connection. An opportunity arose in 1968 when they noted that a food company was for sale in Denmark. Askeland contacted the company, C. Thyge Ludvigsen & Co in Valby, approx. 15 km south of Copenhagen. It was purchased in December 1968 and named O. Kavli AS, Copenhagen. Ove Udesen, managing director of the former company, continued with the new company, and a new strategy was launched in 1969. The sales organisation was expanded and its competence increased, with unprofitable production being discontinued. Udesen retired soon afterwards, in summer 1970. A new managing director had to be found and the management team in Bergen decided to appoint Hans Theis Westermann, who was managing director of a German oil company at the time. He accepted the job and started as managing director of the Danish Kavli company in September, 1970.19

Kavli employees at a community party in Glamsbjerg, June 1964.

172

12: ALMOST DEVOURED

From Stockholm to Sweden The business in Sweden largely consisted of local sales for the Stockholm area during the first few years after the production company started up in 1940. The firm’s development until 1960 was primarily characterised by becoming a nationwide operator, as its products gradually became available throughout the country. While its typical customers were from Stockholm in 1940, they were from the whole of Sweden in 1960. This point was reached as the result of a strategy that was jointly decided by the company’s long-standing managing director Conrad Ternström and Knut Kavli. The factory developed classic Swedish products until 1958. Ternström launched ‘Raketosten’ cheese in 1947, which became a popular product, especially because of its original and fun packaging. Following this, Prawn Cheese, Mushroom Cheese and Ham Cheese were introduced. In addition, Kavli sold incredible eight varieties of caviar, three pâtés (one made with mayonnaise) and two types of mayonnaise-based coleslaw. However, the Swedes were not only good at product innovation. A short while after start-up in 1940, engineer Gunnar Johansson from Svenska Metallverken AB developed a new type of air-tight foil that considerably extended the shelf-life of boxed cheese. This came about after Leif Iversen of O. Kavli AB contacted Johansson to tell him the company needed to find a better solution to the shelf-life problem. Along with the development of the Danish cordial drink ‘Fun Light’ and the Norwegian version of low-fat yoghurt ‘Skyr’, Raketosten was the most successful product since Primula was launched in 1924 and the cheese tubes in 1929. In the 1960s and up until 1974, product development declined. At that time the company’s strategy was based on market consolidation. Things did not go quite according to plan, however, since sales also stagnated in Sweden up until the mid-1960s. Olav Jacob Dreyer was managing director for a few years before Leif Iversen took over in 1966, when the focus shifted to selling established products. This strategy proved to be effective, and the company’s sales rose again. However, with the exception of a ‘golden age’ around 1960, they had long-term problems with profitability. The problem was first solved in the 1970s through a strategic focus on increasing productivity, sales and profits.

 From a St. Lucia celebration in Blekingegaten around 1950. The atmosphere seems to be good.  Raketosten cheese (rocket cheese), launched in Sweden in 1947, was an unconditional success. The cheese is also on display at the museum Nordiska Museet in Stockholm, where it symbolises Sweden in the 1950s.

Only the best is good enough In the late 1950s, the Swedish company had developed a new marketing slogan, ‘Only the best is good enough’.20 Lennart Forslund, delivery driver and salesman for many years, has a story that illustrates this. He remembers managing director Leif Iversen coming up to him once when he was loading his lorry. Iversen opened a half-moon shaped box of cheese and showed him the delicate contents. ‘Look, Lennart’, he said proudly, ‘that’s what soft cheese should be like!’21 The number of production workers increased in the period from 1940 to 1950 before evening out. There was a slight increase in the number of office staff, but the biggest increase came as the result of the expansion of the sales force. The company had 95 employees in 1974 and, given the sales figures, the Swedish factory was already best in the entire Group as regards productivity. A key factor was the focus on a competent

173

KAVLI – AN INDUSTRIAL FAIRYTALE

Figure 12.5

Figur 12.6

Profit margin before tax as a percentage O. Kavli AB, Stockholm, 1940–1975

Number of employees at O. Kavli AB, Stockholm 1946–1975 100

12 10

Total

8 60

Other Production

6 4

0 1940

1945

1950

1955

1960

1965

1970

Sources: O. Kavli AB, Performance report, 1940-2009. The Kavli Archives, Stockholm. O. Kavli AB, Inventory book. The Kavli Archives, Stockholm and O. Kavli AB, Accounts book, 1940-1995. The Kavli Archives, Stockholm.

0 1946

1975

1950

1955

1960

1965

1970

1975

Source: Annual report, 1946–1975. The Kavli Archives, Stockholm

workforce and satisfaction in the workplace. From the accounts, we see that the Swedish company replaced machinery and equipment more frequently than the other companies. Combined with productive workers, this led to big rationalisation gains. The higher profits generated by improving productivity were spent on increasing the sales force. They also put aside capital for a new factory. Despite high profits, dividends to the owners were marginal until 1963. The surplus was ploughed back into the firm. In 1955, Knut Kavli also cancelled a NOK 100,000 debt the Swedish subsidiary had to its parent company in Norway.

New factory at Hagsätra

Hagsätra is a suburb of Stockholm. It was zoned and developed between 1957 and 1967. The suburb has undergone extensive restoration in recent years.

174

The factory in Stockholm outgrew its premises in the 1950s. The raw cheese that was melted in the machines came in rounds weighing 30–40 kilos each. ‘Even though there was a conveyor belt, heavy lifting was necessary,’ according to Lennart Forslund. During his time as a driver, the storage capacity of the finished product warehouse in Bergsunderstrand 31 was always fully utilised.22 Despite the lack of space, a new building was put on hold. The premises were affordable to rent, around three percent of the total annual costs. The heating costs were also reasonable.23 In addition, profits increased, which enabled capital to be put aside for a new building. An opportunity to acquire a suitable plot of land did not arise until the city council developed a new industrial area at Hagsätra (south of Stockholm) in the early 1960s. The board acted quickly – the years in Blekingegatan 63 would soon be over. The factory at Hagsätra had a total floor space of 4,600 square metres, five times as much as the old factory. After a new extension was built to house the administration department around 1970, the total area was just under 5,000 square metres. The building had five floors, two of which were underground. Several veterans from that time remember moving to the new premises in 1962 and 1963. The new building made it easier to transport products into the warehouse. Furthermore, all products would now be stored in one place: raw cheese, melting salt, barrels of

12: ALMOST DEVOURED

roe, prawns, ham, mushrooms and finished products from the factory.24 The new building also led to extensive improvements in the working environment, as well as to hygiene. However, the increase in production at the end of the 1960s was so strong that the new factory became too small after only a few years. Alice Strömberg was one of many employees who had long working days. The factory was only three years old when she was first hired in autumn 1966. The premises were functional and pleasant. However, it was not long before the storage space for fish roe was bursting at the seams, and additional rented premises had to be found. At times, it was necessary for the office staff to move into the corridors to make room for it.25 It did not end there, however. In 1967, the Norwegian board of directors decided to transfer caviar production to Norway in order to create more space for the production of cheese and other delicatessen foods. The new office wing in 1970 helped to alleviate the problem of lack of space.

 In case anyone did not already know, it was announced to the Swedish people in the 1950s that Kavli’s cheese was world famous.  Kavli’s new factory at Hagsätra (south of Stockholm) was formally opened on 28 March 1963, on the 70th anniversary of the founding of the Norwegian company. Seventy-five people worked there and 20 tonnes of cheese were produced per day.

175

KAVLI – AN INDUSTRIAL FAIRYTALE

In the 1930s, there were plans to build an industrial estate in Team Valley near Newcastle (named after the River Team, which runs through the valley). The objective was to develop the area for small and medium-sized companies. The first building phase was completed in 1938. The area has been widely developed since then. Today, 20,000 people are employed by 700 companies at Team Valley Trading Estate.

Britain no longer the flagship The new British factory from 1961 functioned well. Gouda cheese was purchased from the Netherlands and Germany in 20-kilo blocks and melted at approx. 90 degrees Celsius. Then water, melting salt and other ingredients, the most popular being ham and bacon, were added. The machines were so noisy that staff had to wear ear protectors. Cleanliness and hygiene were of the utmost importance.26 Cheese spread was not common on breakfast tables in the UK, but it was often eaten on crackers at lunchtime or as a food flavouring or dip. Sales fluctuated, and they stagnated from 1972. Concern about the future grew, but Primula Crispbread Limited came to the rescue for a period. In the 1970s, their sales increased significantly and the profits were impressive. In terms of profitability, the factory outside Newcastle was still the best in its class, even though profits did fall in the early 1970s.27 Many factors contributed to the problems with the UK sales figures. Firstly, the market for processed cheese spread stagnated due to the introduction of long-lasting cream cheeses and other more exotic sandwich toppings. Secondly, the increase in the standard of living also had to be taken into consideration. When Primula was launched, it was regarded as a luxury cheese product, but it no longer held that position in the 1960s and 1970s. Thirdly, bigger players acquired great market power and outcompeted Kavli for shelf space in the emerging supermarket chains.

New strategy A new three-stage strategy was launched by the British staff in order to turn the situation around. Firstly, they wanted to link processed cheese and crispbread as complementary products. Secondly, the company focused even more on quality. Kavli processed cheeses already had an advantage over the competitors in that they had a higher cheese content, as well as less chemicals and substitute ingredients. Now, the products would have an even higher cheese content (more than 50 percent). Thirdly, they were going to seek strategic alliances.28 None of the measures led to any immediate change in the Figure 12.7 negative trend. When new regulations relating to production Profit margin before tax as a percentage and capital adequacy were introduced in the UK, the manageKavli Ltd, Gateshead 1950–1975 ment doubted whether they would be able to survive on their 20 own in future. Potential partners were more than welcome. 15

Kavli Ltd

10 5 0

Primula Crispbread

–5 –10 –15

1950

1960

1970

Source: Kavli Limited, Accounts 1950–1975. The Kavli Archives, Gateshead

176

1975

12: ALMOST DEVOURED

The family in Gateshead A common feature of all the entities in the Group was high job satisfaction among employees. The environment in the companies in Sweden, Norway and the UK was deemed to be so close-knit and good that the term ‘The Kavli Family’ became widespread. Our interviews indicate that the environment was remarkably good in Newcastle. According to veterans Maureen Brown and James Symons, most of the senior managers started out on the shop floor or in middle management before working their way up. Colleagues became good friends both at work and in their spare time. They felt that they worked as a team long before the term became popular in the literature on work philosophy.29 Kenneth Foster and Peter Stuart describe relations with their superiors as very good. The company took good care of its employees’ welfare. They were even offered holidays at the company’s cabin. Many people met their spouse at work, and several generations of the same family could work for the company. Pay levels were also considered to be good. Primula was a well-know brand and the employees were proud of their workplace.30 After several years with a shortage of ingredients, the situation improved towards the end of the 1960s. Despite sales being only about 20 percent higher than in Sweden, they had 193 employees in 1972. This was almost twice the number in Sweden, and it

Packing Primula at the Kavli factory in Gateshead. A lot of the work was done manually. In 1972, the English company had 193 employees, twice as many as in Sweden. Sales were only 20 percent higher than the Swedish company’s, however.

177 12

KAVLI – AN INDUSTRIAL FAIRYTALE

Ambrose Heath (1891–1969) was a famous food critic and cookery book writer. Along with Kavli Ltd., he published the booklet ‘Good Cooking with Primula Cheese Spread’.

Liviar, of which cod liver was the main ingredient, never became very popular.

178

12: ALMOST DEVOURED

indicates that the production unit that had once been the most efficient, was actually starting to lag behind. At the same time, it should be said that a conscious decision was made to have more labour-intensive production in the UK than in the other countries due to the relatively low labour costs for blue collar workers. In addition, more people worked part-time in Gateshead than in Stockholm.31 The company had few disputes and good labour relations. Both employees and customers saw the company as British – the Norwegian owners were not much in the limelight.

One vote from selling the Group According to the statutes of the trust, the companies could not be sold. It must have come as a shock, therefore, when CEO Alf Sjurseth proposed the unthinkable – to sell the Group. He was heavily criticised for this. The idea was not his, however. After Knut’s death it was important for his sister Signe and her ship-owner husband Erling Thofte to keep the company in the family. Signe saw this as her opportunity to get what was due to her after being kept out of the company by her father. Her husband wrote a letter containing a takeover bid to Sjurseth, dated 14 May 1966: Is it possible that the Olav Kavli and Knut Kavli Trust would consider selling its majority shareholding in O. Kavli AS Bergen? If so, I would like to ask you if we could draw up a contract to purchase the majority shareholding? I have the money and can pay up to NOK 5,000 per share.32

The offer was never considered on its merits, however, and already on 31 May, the parent company rejected it.33 Nevertheless, it would not be long before an even bigger shockwave would hit the organisation. In October, 1966, Sjurseth issued a statement in which he said the Group was in the process of discussing a potential sale to Unilever. The grounds given were business considerations.34 The matter was first considered on its merits at a joint meeting of the trust’s board of directors and the parent company in Bergen in February 1967. Askeland, Thornquist and Sundt were against selling, although they were willing to discuss selling the shares in the British company.35 Business-lawyer Per Brandt-Hansen set out a number of conditions for a possible sale in a memorandum. Unilever estimated the value of the Group to be NOK 43 million. The lawyer concluded that ‘it is clear that the board of directors has the right to sell the shares or liquidate the company’ if competitive conditions change and operations became unprofitable.36 Unilever answered they were not interested in purchasing the British company alone. They would also have to take over the Swedish company, as well as the Primula and Kavli brands. In this way, the brands would be secured. The proposed price for the portfolio under these terms was GBP 1.45 million or NOK 29 million, which is equivalent to NOK 270 million in 2013 values. The argument for selling was that the diminishing sales in the 1960s marked the beginning of the end for Kavli, which was too small to compete for shelf space in the supermarket chains. At the same time, new capital requirements placed constraints on operations and a sale would result in substantial capital base for the trust. This would enable it to make annual grants of around NOK 1 million to good causes at a time when they were awarding very modest grants.37

Alf Sjurseth 1913–1981

came from Haus selvhjelpskontor (self-help office) as a young man and ended up as managing director in Gateshead and later CEO of the Kavli Group. He was active in the ‘Den Norske Klub’ (The Norwegian Club) in London, which benefited the company.

Unilever is a global industrial group formed in 1930 through the merger of the Dutch margarine producer, Margarine Unie, and the British soap manufacturer, Lever Brothers. Today, Unilever is one of the largest grocery producers in the world, with headquarters in Rotterdam and London. The company employs more than 247,000 workers in 80 countries. Unilever’s history in Norway began in the 1930s, when the Norwegian Lilleborg Group took over the Sunlight brand. Its best known brands in Norway today are Knorr, Lipton, Maizena and Slotts.

179

KAVLI – AN INDUSTRIAL FAIRYTALE

Kavli products as they were presented to the British market around 1970.

180

Once again, the aforementioned majority voted against selling, and the matter was concluded. If one of them had changed their mind, the CEO’s casting vote would have led to the opposite conclusion. Thus, they were only one vote away from selling. Export manager Johan Krohn-Hansen remembers the conflict well. He stresses that the staff did not believe a sale would go through: ‘....there were people on the board of directors who would put him (Sjurseth) in his place, so the Group could continue operating on its own.’ At the same time, it was difficult to understand how Sjurseth, a close friend of Knut Kavli, could think of such a thing. In the aftermath, some of the employees in Bergen feared that plans were afoot to transfer more group management functions to Britain.38 This never transpired, however. A photograph of Sjurseth had hung on one of the walls in the factory offices in Damsgård up to that point, but, after this, it was taken down. Regardless of this, he remained popular in the British subsidiary and to this day he is considered an icon for many of the good things that are associated with Kavli. The Kavli Group was almost devoured by bigger competitors – first by being excluded from markets in countries in which they did not have production, then by its market share coming under pressure in the countries in which it did produce and, finally, by takeover bids. However, the last piece of Kavli cheese had not yet been eaten, and the Group is still thriving almost half a centennial later.

CHAPTER 13

BUILDING A CORPORATE GROUP Master of his own domain Because of the Kavli Group’s strong emphasis on corporate autonomy, it did not operate as a unified group. By the 1980s, however, it had become essential to have tighter management and coordination. This would require the company to be run more as a corporate group than previously. The idea was linked to Olav Kavli’s vision of growth as a survival and development strategy to achieve sustainable profitability. Since the Norwegian market was limited, the companies had four main areas in which they could grow. They were: 1. 2. 3. 4.

Increased exports Establishment abroad New business areas The acquisition of new companies

The company’s history shows that the management team used all these strategies to realise their growth philosophy. Expansion started already in 1905 with the first export efforts and continued in 1912 through the acquisition of companies and the establishment of new businesses. The companies were to operate independently of central management in order to be closer to their markets and develop independent responsibility for achieving good results. Olav Kavli built his enterprise around individuals and their talents rather than around structures. It was essential that these individuals had freedom to realise their plans and visions within broad frameworks. At the same time, they were responsible for their own results. The duty to report to management could be demanding. Olav Jacob Dreyer had to send monthly accounts to Knut Kavli when he headed the Brussels sales office. Restraint was required when it came to costs, and high profits were expected.1 Åsta Lone, a long-serving employee, claims that the company culture at that time was good and not particularly hierarchical. Everyone was well looked after and the opportunities employees had to work their way up were unique. The management always looked for ability in their staff, whom were often rewarded when they did a good job.2

181

KAVLI – AN INDUSTRIAL FAIRYTALE

Group management Kavli became a corporate group between 1933 and 1940. During this period, the parent company in Bergen formed three subsidiaries. The Group was family-owned and family-controlled until 1962. From April 1962, it was owned by the trust. The managing directors discussed difficult decisions directly with the Group’s management team in Bergen. But things changed drastically in the 1970s. The Group continued to be managed as before, but a Group Council was introduced in 1977.3 After some adjustments, it took its final form in 1981/1982. The managing directors of the companies held regular council meetings and discussed group-related issues with the board of the trust. Concurrently, the board of directors of the trust increased its influence over the running of operations. This was a new situation that weakened the parent company’s control of the subsidiaries.

Less control in Bergen O. Kavli AS, Bergen was the controlling company within the Group. It owned the other companies and was responsible for joint commercial functions for the companies and the trust. When the trust took over ownership in 1962, the parent company was to maintain its leading role, but by 1981 it had lost most of its power. The process of weakening the authority of the parent company really began when Alf Sjurseth from the British company was appointed group CEO after Knut Kavli in 1965. In addition, the trust’s control of the company seems to have been strengthened after 1971, when Ivar Gjelsvik became a member of the board. From 1977, executives from the parent company could no longer hold a seat on the board of the trust, and in 1982 it also lost its role in commercial operations.4 Veteran Johan Krohn-Hansen was recruited in 1955 and he knew all the most central executives from that period. He firmly believes that the trust was established to keep control in Bergen. He therefore followed developments with increasing concern. Olav

Turnover and results for the Kavli Group, 1980

Turnover

in NOK million

Pre-tax profits

as a percentage

in NOK million

as a percentage of the turnover

as a percentage of the Groups’s results

Norway

86,552

27.6

6,031

7.0

23.0

Sweden

103,929

33.1

8,239

7.9

31.5

Denmark

40,331

12.9

5,445

13.5

20.8

82,723

26.4

6,468

7.8

24.7

In total

313,535

100.0

26,183

8.4

100.0

Source: O. Kavli and Knut Kavli’s Trust, Group accounts 1980, the Kavli Archives, Bergen.

182

13: BULDING A CORPORATE GROUP

and Knut Kavli had always shown great respect for their workers and promoted their welfare and well-being. They considered them to be important success factors, and teamwork had always been part of the company’s recipe for success. Krohn-Hansen’s attitude was one that had been passed down from employee to employee for decades, and he believes that the weakening of the parent company in the 1970s and 1980s was a clear breach of Knut Kavli’s wishes.5

A stronger board of the trust The statutes gave the trust’s board the right to intervene in control of the companies to secure the company’s finances and management. Section 4 of the statutes allowed the trust to act as a kind of group management team. An overall perception gradually emerged of what they should concern themselves with. Until 1965, their role appeared to be limited to exercising the company’s ownership rights.6 More tasks were to come, however.7 In relation to the companies within the Group, the trust’s business-related management responsibilities were on four main levels: 1.

To act as administrator of ownership interests and as the general meeting

2. To monitor the finances of the companies 3. To check and quality assure large investments

Ivar Gjelsvik 1929–2009 was a solicitor and supreme court advocate from 1966. During the period 1983– 1990, he was chief judge in Nordhordland, and in 1990 he was appointed appeal court judge at Gulating Court of Appeal. Gjelsvik was chair of the board of the Kavli Trust from 1981 to 1993.

4. To recruit managers The first two tasks were primarily annual supervisory tasks, while the last two were carried out at irregular intervals. The companies’ managers reported regularly to the trust’s board. Company visits were carried out on a regular basis and one of the board members of the trust had a seat on the board of directors of each company. Employees of the foreign companies looked forward to visits from the members of the board. Decisions about operations were made locally. In consequence employees felt that they had significantly stronger ties to their own company than to the Group. The board of directors was involved in investments and they had many critical and constructive points of view from the moment a draft plan was drawn up until projects were finalised. They were involved in the acquisition and sale of companies, as well as in the termination of collaboration with other enterprises.8 In the 1960s, structural changes occurred in the framework conditions in that markets became larger and were less protected by tariff barriers than before. These changes uncovered a structural weakness in the established management model. Obviously, these tasks demanded a lot of work and good insight into problems relating to legislation, markets and company finances. As time passed, the tasks became far too demanding for the board. Consequently, it was necessary to develop new models for the management of both the Group and the individual companies in order to meet the new requirements, as well as clarify the division of roles between the parent company and the trust.

183

KAVLI â&#x20AC;&#x201C; AN INDUSTRIAL FAIRYTALE

The companyâ&#x20AC;&#x2122;s 75th anniversary was celebrated with a banquet at the Hotel Bristol on 30 March 1968. The sales team from Oslo attended with their wives.

Three veterans at the anniversary celebratio n. Manageress of the packing department Birgit Andersen, Hans Askeland and factory manager Einar Nilsen.

184

13: BULDING A CORPORATE GROUP

On 30 January 1978, warehouse foreman Albert Knutsen was awarded the King’s Silver Medal of Merit. The formal ceremony was held at Bellevue Restaurant in Bergen. Albert Knudsen surrounded by two other veterans, Hans Askeland (left) and Bjarne Fotland.

Proposed changes in the management structure Olav and Knut Kavli had attended to the management of the Group since 1934. To help them, they had a small senior staff, which, in addition to working for the parent company, also ran the Group. For a few years after 1965, Sjurseth carried out his group CEO function in much the same way. However, there was a problem in that he was based in England and lacked the natural authority that Olav and Knut had as owners and founders of the company. He soon realised that a new management structure had to be introduced, and a group meeting was held in June 1969. The meeting mainly discussed possible solutions for a more coordinated group operating system. The discussions probably originated in the subsidiaries. The Swedes and Danes also appear to have supported Sjurseth in his attempts to develop a better organisation.9 Two difficult challenges had to be addressed: a body had to be formed to coordinate the enterprise at group level, and the roles of the various units had to be clarified. Irrespective of the model, the board of the trust did not have an administrative support system for a more complicated and in-depth supervisory role. As a first step, solicitor Per Brandt-Hansen was asked to produce a draft plan for a solution in 1974.10 The draft made it possible to strengthen the authority of the parent company. This was to be done in two ways: firstly, through the reorganisation of the boards of the subsidiaries. The chair and deputy chair of the parent company’s board would hold seats on the board, together with a local lawyer and the managing director of the subsidiary. Secondly, they wanted to move the group CEO function back to Bergen. The Group’s management team should consist of the managing director of the parent company, as well as its chair and deputy chair. The draft plan also advocated the inclusion of the four managing directors from the parent company and the subsidiaries on a coordinating body.11

185

KAVLI – AN INDUSTRIAL FAIRYTALE

Group Council The decentralised elements of the management system would continue, however. The discussions would therefore address how the companies could cooperate more closely. A potential solution would be the formation of a new coordinating body. However, there were so many objections to this that the management team put the idea on hold.12 Two years later, in 1976, Sjurseth tried to go in the opposite direction by extending the trust’s board of directors to include the Swedish and Danish managing directors, which would mean that all the producing countries were represented.13 Of course, this proposal was far more controversial, as it would weaken the influence of the company in Bergen even more. In reality, it also meant that the board of the trust would be a body with significantly greater decision-making power, as well as more authority in relation to operations.14 Two members of the board, Gjelsvik and Askeland, were steadfast in their view that the statutes should not be changed.15 As a result, nothing came of the proposal. On behalf of the Swedish company, solicitor Erik Felländer responded by inviting the board to a meeting in Stockholm the following year. The Swedes were very direct

In late 1983, Kavli received an unusual, but nice letter from the shipyard Horten Verft, in addition to 300 tube tops from as many tubes of ham cheese. The tube tops were neatly packed in three boxes with an inscription stating when each new top was added after the contents of the tube had been eaten. Not unnaturally, the person concerned was awarded a diploma and generous amount of Kavli products.

186

13: BULDING A CORPORATE GROUP

Organisational structure of the Kavli Group before 1981.

O. Kavli og Knut Kavlis allmennyttige fond

O. Kavli AS Bergen

Kavli Ltd. Newcastle

O. Kavli AB Stockholm

O. Kavli AS Copenhagen

Primula Crispbread Ltd. Newcastle

in expressing that the Group was poorly coordinated. They were concerned with both rational coordination of operations and the greatest possible autonomy when they believed this to be beneficial: I have had a theory for a long time that the Kavli Group is not rationally organised in a way that allows it to meet the requirements of a group of its size. ... Furthermore, I have maintained that closer collaboration between the different units in the Group is required in order for the entire Group to be structured in a rational and business-minded manner.16

The board listened to the Swedes. Sjurseth was therefore delighted and relieved when he was able to convene the first group council meeting in Bergen on 27 October 1977.18 His idea of establishing a group council comprising the managing directors of the producing companies had won support.17 However, the council’s function was very unclear. The matter was not fully settled until autumn 1980, when it was formally decided that the council would comprise the managing directors, as well as one or more representatives of the board of the trust. From winter 1981, the council discussed group-related affairs. However, it was only an advisory body and had no decision-making powers. It became an arena for exchanging information and opinions, and it served as a discussion forum for managers.19 There has been some discussion about just how much actual influence this body had. It was dissolved in 1994 and replaced by a new group model.

187

KAVLI – AN INDUSTRIAL FAIRYTALE

Askeland’s retirement The final solution for the Group Council may have resulted in Askeland retiring from the position as head of the parent company at the end of 1977. There is no doubt that he was the leading veteran and authority in Kavli. He became office manager before the bankruptcy in 1924, and thereafter became co-owner of the new limited liability company afterwards. He worked his way up through the different management levels, first as operations manager, then assistant manager and finally as managing director of the parent company. He also became part of the group management team in 1934. Even though he was never group CEO, the company had an informal leadership structure and Askeland’s word weighed as much as Sjurseth’s, at least in Bergen. To many people, Askeland was the real head of the Group after Knut Kavli’s death in 1965. Eilert Sundt succeeded him as managing director of the Damsgård company in 1978. Neither Sundt’s experience nor his natural authority within the organisation could compare to his predecessor’s, and there were some doubts about him having too much power as head of the parent company. Most people agreed with this viewpoint, even Sundt himself, who believed that he needed an ‘apprenticeship’ period before being allowed to take on bigger tasks. Since Askeland strongly opposed plans that could reduce the power of the Bergen company within the Group, he chose to prolong his period as a member of the trust’s board to prevent any backsliding. The veteran’s objections to reorganisation were so strong that it must have been hard to work for the development of an integrated group management model. In 1980, the 85-year-old resigned from the trust’s board after serving the company for almost 70 years. At Askeland’s own wish, another veteran, Olav Jacob Dreyer, replaced him.

Hans Askeland, Alf Sjurseth and an unknown person inspect product samples.

188

13: BULDING A CORPORATE GROUP

Sjurseth dies As a result, Sjurseth was left as the definite, but not entirely unchallenged, leader of the Group. Through his fifty years of service, he had also worked his way up through the different management levels in the typical ‘Kavli’ way, i.e. from assistant manager to group CEO. In 1981, however, he fell ill and could not participate in the initial Group Council meetings. It was assumed that he would return to work, but he died suddenly and unexpectedly on 20 February. Thus, one of the most valued figures and leaders in the history of the Group had passed away. Along with Olav Kavli, he was one of two people in the company to be made a Knight, First Class of the Royal Order of St. Olav for his distinguished efforts for Norway abroad. Sjurseth is considered to have played a prominent role in the establishment of Norwegian industry abroad. His death created an uncertain situation. A successor had not been appointed at group level. Consequently, it was largely up to the board of the trust to finalise the management structure. One leadership problem arose, however, that was not fully resolved until the 1990s. The Group needed a well-defined leader, which they did not get.

The Group Council The Group Council was formally established as a permanent body on 29 January 1981 in Bergen. The attendees at the meeting were Ivar Gjelsvik and Olav Jacob Dreyer (members of the board of the trust), Eilert Sundt, Bert Jansson, Hans Theis Westermann (managing directors in Norway, Sweden and Denmark, respectively), in addition to Tore Arildsen (deputy managing director in Norway and company secretary). The UK was not represented due to Sjurseth’s illness, but, with Olav Jacob Dreyer’s extensive knowledge of the production units abroad, they believed their interests were sufficiently represented. The participants discussed how they could best establish an effective council that could assist with coordination and contribute to efficient operations, and thereby increase competitiveness and profitability. At the same time, it was stressed that the final mandate would be adopted by the board of the trust at a later date once the members of the Group Council had expressed their opinions. The main functions of the Council were: 1.

Alf Sjurseth was appointed Knight, First Class of the Royal Order of St. Olav on 2 March 1976 for ‘his work in connection with Norwegian interests abroad’, as it was stated in the letter. Sjurseth died suddenly on 20 February 1981. He was buried in England.

To act as an advisory body for the management of the Group and the individual companies

2. To coordinate operations and strategic plans 3. To exchange information 4. To act as a discussion body in connection with important decisions 5. To act as a centre of excellence

189

KAVLI – AN INDUSTRIAL FAIRYTALE

The Group Council was to mainly have a guiding role. During the 1980s, however, there was a lot of frustration in the parent company, because it felt that the council had become the trust’s extended arm. Hence, it acquired quite a large amount of informal power. Apart from that, the council’s influence appears to have been limited. However, some individuals, particularly the Swedish managing director Bert Jansson and the Danish managing director Hans Theis Westermann, acquired considerable power over group operations – more than the directors in Norway had.

Scepticism Olav Jacob Dreyer was recruited by Kavli as a sales clerk in the export department in 1950. Between 1955 and 1966, he held a number of positions in Kavli’s companies abroad. He was elected deputy member of the board of O. Kavli AS in 1976. He later held a number of offices on the company’s board in addition to the board of the Kavli Trust.

Sjurseth’s original idea was to establish a coordinating body, while also achieving clarification of the role of the parent company in the Group’s management. In a memorandum drafted in 1974, he states that he wanted to strengthen the parent company’s role. However, this was not meant to be, quite the opposite in fact. One possible reason for this may have been his scepticism towards the new managing director, Eilert Sundt, appointed in 1978.20 Thus, the situation was that O. Kavli in Bergen owned the other companies in the Group, but in reality had a very limited controlling function. In 1994, the Bergen company lost the remaining group function it had when O. Kavli Holding AS took over the role of parent company. The view of the trust’s board of directors as regards the role of the parent company gradually changed, which created some ambiguity towards the end of the 1970s. In 1978, they agreed that the parent company should hold the position of leading company. Two years later, that role had become dependent on the situation. Tore Arildsen advocated the parent company becoming the leading company in the Group and, in his capacity as deputy managing director of the company, he prepared two draft plans (one in 1979 and one in 1980) for how the company could be incorporated into the group management team. He presented two models: Model 1: the parent company as head of the Group and leading mercantile unit. Model 2: the trust would act as the group management team. In this model the parent company was almost on the same level as its subsidiaries. Obviously, he was in favour of the first model and was disappointed when the trust’s board of directors decided to oppose his recommendation: The Group Council is controlled and administered by the trust’s board of directors, which prepares the agenda based on reported material, and convenes meetings. The individual companies have a duty to report directly to the trust’s board of directors in accordance with more detailed rules in this regard.21

More power to the trust The board of the trust, chaired by Ivar Gjelsvik, became the management team of the Kavli Group. Gjelsvik was officially appointed to this role on 11 May 1981. In practice, however, Olav Jacob Dreyer was seen by many as the person who actually held the reins as a result of his good contact with the foreign companies. Some employees considered him to be the Group’s leader, and Dreyer eventually sat on all the boards in the Group.22 The trust’s board believed that this solution was a good one. Olav Kavli ran his company based on the vision of profitability through sustainable growth. A decentralised management model was an important element. The model gave the managing directors

190

13: BULDING A CORPORATE GROUP

Organisational structure of the Kavli Group from 1981.

BOARD OF DIRECTORS of the O. Kavli and Knut Kavli’s Trust

Group Council

O. Kavli AS Bergen

Kavli Ltd. Newcastle

O. Kavli AB Sweden

O. Kavli AS Denmark

Primula Crispbread Ltd. Newcastle

of each company a great deal of freedom. How the Group was managed was less important, a solution that was less hierarchical than other alternatives and narrowed the gap between top management and the staff.

Group secretariat However, the tasks of the board of the trust became so demanding that a separate professional group secretariat was soon required. In 1988, Leif Kjær, managing director of Vestfold Flatbrødfabrikk, suggested at a Group Council meeting that Dreyer should be employed full-time as coordinator and head of a secretariat located in Bergen. The board decided to establish an advisory body with the unanimous support of the parent company. The body was to assess new business opportunities and markets, as well working on issues relating to implementation of a single market in the EEC from 1992. Dreyer was employed full-time, and it was stressed that the arrangement was linked to him personally. The work would be financed through a so-called group bank account. All the companies in the Group would pay a contribution to the account.23 Many people believed that the trust thereby gained even more influence over the Group’s management team. Not everyone was happy with that state of affairs.

Wolf and custodian Two of the most prominent and capable figures in Kavli’s history stood on opposite sides in the work on the organisation of the Group’s management. Firstly, there was Askeland, Olav Kavli’s right-hand man, managing director in Norway and member of the board of the trust. He also personified the company for many people. And then there was Sjurseth, managing director in the UK, Chair of the Board of the parent company and Chair of the Board of the trust, in addition to CEO.

191

KAVLI – AN INDUSTRIAL FAIRYTALE

They were very different by nature. Askeland was an administrator and operations man, who ensured that everything was well-organised and that operations ran efficiently. The staff described him as a ‘cautious general’.24 He fought first and foremost for a group management team that had a strong parent company, and for a majority of the members of the trust’s board of directors being from Bergen. Sjurseth was more of a visionary leader who emphasised strategic thinking. He fought for a group management team that would represent the foreign companies. Both parties maintained a reasonable tone in public and talked about one another with respect. They also managed to prevent issues from becoming personal. But, conflicts did arise and the two did not always abstain from making rather barbed comments about each other. Askeland had the following to say about Sjurseth in a letter in February 1978: ... one of the most significant things is that Alf Sjurseth wants to move in a totally different direction, and does not want to establish a strong organisation with the Bergen company as the parent company. He has always wanted – and still wants, the subsidiaries to be ‘liberated’ from Bergen through the restructuring of ownership. Because of this, he has been more of a representative for the subsidiaries in his role in the management team in Bergen – rather than the opposite – which was the original intention. I have to point out … the passive role the Bergen company has had to play in the development of the Group…instead of being a proactive and controlling financial unit.25

He became increasingly doubtful about the plans and started referring to the group CEO as ‘that Sjurseth’ and ‘that group CEO’. In the heat of the moment, he also called his opponent ‘the wolf ’. However, Sjurseth knew what he thought of him. He once phoned Bergen and introduced himself as follows: ‘It’s the big bad wolf from Newcastle.’ At the same time, he expressed how frustrated he was with Askeland. Regretfully, his perception of ‘Olav and Knut Kavli’s spirit’ is that nothing must change. Because of this, he is about to turn the Group into a museum, in which he has appointed himself as head custodian.27

These were the two people who played the main role in the efforts to establish a functional group structure. Both of them suffered the same fate as another great leader, Moses. That is, they were denied entry to the Promised Land.

The ‘Kavli boy’ was used a great deal in advertisements in the 1970s.

192

Chapter 14

NEW INTERNATIONAL MOMENTUM Stable production – increased turnover The turnover of the Bergen company fluctuated after 1975. Exports of crispbread declined strongly from the beginning of the 1980s, while the production of processed cheese, mayonnaise and caviar remained stable.1 The turnover of trade products not produced by the company increased significantly. This range of products contained important products from Øtker, Knorr and Del Monte. Outsourcing also gained new momentum when COOP leased production capacity from Kavli for Galla caviar. Meanwhile, Vaasamills in Finland fermented crispbreads for Kavli, which were sold under the Korni brand in Norway. Moreover, sales of dog food increased following the establishment of Norsk Hundefor AS (a dog food company) in 1968.2 Price increases on traditional products and the company’s expansion into resale products led to an overall increase in turnover in the 1980s despite stagnation in the production of traditional products.3

Figure 14.1

Production figures for O. Kavli AS Bergen 1970–1993 in tonnes 2 500

2 000

Cheese 1 500

Pet food 1 000

Mayonnaise Caviar

500

0 1970

1975

1980

1985

1990

Øtker, miscellaneous

1993

Source: O. Kavli AS, Bergen. Production statistics 1970–1993. The Kavli Archives, Bergen

From Damsgård to Midtun and Barkåker The single most important event during this period was the establishment of the new factory at Midtun in Bergen. The first building phase was completed in summer 1977. It comprised a warehouse for finished products and packaging materials. Phase two was completed in summer 1984, i.e. the new factory was finished. The bill came to NOK 41 million, NOK 4 million less than budgeted. When converted into the current value of Norwegian kroner (2013), this corresponds to NOK 95 million, excluding fixtures and fittings.4 The sale of Kavligården in Lodin Lepps gate for NOK 12 million helped to finance the new factory. Her Royal Highness Crown Princess Sonja officially opened the factory on 21 May 1985. It was fully financed by O. Kavli AS, and the company completed construction work at Midtun in autumn 1987. The last building phase included a warehouse and cooling system for finished products.5 The plant had a total combined area of 12,500 square metres and represented a full renewal of the buildings, machinery and equipment. The premises were modern and built in a way that would ensure that they could be used for many years. Another floor

193 13

KAVLI – AN INDUSTRIAL FAIRYTALE

◄ Managing Director Tore Arildsen, and Factory Manager Dagfinn Omland proudly show off Kavli’s new building at Midtun in Bergen.

▼ Many barrels of sugar-salted cod roe were stacked in the refrigerated warehouse.

This is how the new factory was presented in the newspaper Bergens Tidende just after it opened. It was pointed out in particular that the architects from Halfdan Wiberg had placed great emphasis on employees’ well-being, both in the working environment and in the social context. Managing Director Tore Arildsen went from department to department to check that everything was as it should be.

194

14: NEW INTERNATIONAL MOMENTUM

was also planned. Among others, Bernt Jansson, managing director in Sweden, persuaded the management team to scale down the plans in order to prevent the Group from overinvesting. The new building had the potential to significantly increase productivity, and working conditions for employees were also greatly improved. Several of the veterans point out that the acquisition of larger premises also entailed the loss of the unique environment and intimacy they had enjoyed at Damsgård, although most of them still thought the move was for the best.6 In 1984, Kavli finally aquired its former partner Vestfold Flatbrødfabrik AS at Barkåker outside Tønsberg in competition with Nora Industrier AS. The price was pushed to NOK 36 million, equivalent to NOK 83 million in today’s money. The move showed that the vision of growth was once again to be achieved through the strategic acquisition of new companies.7 However, the acquisition failed to meet expectations as crispbread sales plummeted during the 1980s. Nevertheless, the company made good profits. The crispbread factory was still very active on the market, but it ran into four major problems. Firstly, there was strong competition from actors on the domestic market, and the company also struggled with packaging that led to significant wastage.8 Helge Rolland explains that this was largely due to the thickness of the crispbread, which varied with each batch that was baked, making it difficult to place a certain amount of crispbread in a standard pack.9 Thirdly, according to Anne Haugvik of the export department, sales plummeted in the USA and Australia (which were major markets) because a new product, extruded bread, captured a large market share in a short space of time.10 The fourth and most important reason for the plummeting sales was that eating habits changed quickly from the 1970s. The traditional diet, which crispbread was a part of, was replaced by foreign-inspired fast food and semi-finished products. Crispbreads had no place in many of these new dishes. Traditional Norwegian foods have recently become more fashionable again, although it cannot be said that Korni crispbread has made a huge comeback. Kavli did not manage to turn the smaller companies they acquired into larger and more profitable entities. For example, along with two other investors, Kavli formed Porsvika Fisk AS on the island of Sotra (to the west of Bergen) in 1987. The company

On 21 May 1985, the new factory at Midtun was officially opened by Crown Princess Sonja. She was welcomed by Chair of the Board Olav Jacob Dreyer. Managing Director Tore Arildsen and Factory Manager Dagfinn Omland gave the Crown Princess a guided tour. She was given caviar and cheese samples to take home. The opening ceremony was held in the packing hall in the presence of the company’s 150 employees, in addition to the managing directors of the Norwegian, Danish, English and Swedish subsidiaries. After Managing Director Arildsen had run through the history of the group and why the factory had been built, the opening was concluded by the chair of the board of the Kavli Trust, Ivar Gjelsvik, who presented a donation of NOK 100,000 to Her Royal Highness Princess Märtha Louise’s Trust, which the Crown Princess accepted on its behalf.

195

KAVLI â&#x20AC;&#x201C; AN INDUSTRIAL FAIRYTALE

This is what Norwegian dinner tables looked like for generations. Meat, vegetables and Korni crispbread.

was established as part of a plan to develop processed salmon products. The processing was to be carried out in collaboration with a large food laboratory in the USA, and the they invested a significant amount. However, in the absence of profits, Kavli sold its share at the end of the 1980s. It also sold Norsk Hundefor AS to the large Norwegian food producer Gilde in 1994.

Competition from chains In the 1980s, Kavli managed to maintain a market share of 80 percent for processed cheese in Norway. The company also had a strong grip on the market for caviar. However, the Swedish Kavli company took over the production of caviar for its market in 1989. Consequently, production fell in Norway. One of the reasons for transferring the production was that the packaging was poor, much to the Swedesâ&#x20AC;&#x2122; dissatisfaction.11

196

14: NEW INTERNATIONAL MOMENTUM

Product development focused on new varieties, improvements in packaging, chocolate spread, food dressings, meat and fish products, as well as pet food. Few of these became successful, with the exception of Kaviarmix. It is amazing that we can still go into a shop and buy a product that was developed almost 30 years ago when we know that 70–80 percent of all products are not found in the shops two years after their launch. There were approx. 8,000 grocery stores in Norway in 1980. The chains were small and regional. In just a decade, this situation was totally transformed by big nationwide chains taking over nearly all grocery sales. This development was seen later in Norway than in the other countries Kavli was deeply involved in. Every autumn, the ‘autumn hunt’ would start. This was a period when the chains and suppliers negotiated prices for products that were delivered to hundreds of supermarkets. This was a completely new situation for Kavli. How should they deal with this type of competition? The company chose two directions. One was to be adept and professional during negotiations, while the second was to use the market power the company had already built up through processed cheese and crispbread as a means of getting other products onto the supermarket shelves. Trade products amounted to a tenth of the company’s total turnover and, by making astute use of its negotiating power, the company was able to ensure that these products had access to the supermarkets.12

The Kavli spirit and the working environment When Eilert Sundt retired as managing director in November 1982, the board of directors appointed Tore Arildsen as the new managing director in February 1983.13 Many employees believed he had taken the ‘Kavli spirit’ with him from Damsgård to Midtun in 1984. The way he led the company in its day-to-day operations was very similar to how Olav and Knut Kavli had managed the business. They went on an inspection round of the factory every day, looking at the machinery, production, and, most importantly, talking to each member of staff. They gave praise and showed a sincere interest in their workers’ welfare.14 Good arrangements for employees had led to a good and wellfunctioning company culture for decades. The ‘Kavli spirit’ meant that the welfare of the employees was central, pay was acceptable and pension schemes good. Arildsen implemented a number of welfare measures to promote job satisfaction and motivation, for example: The company had its own company doctor early on. When production moved to Midtun, the doctor was given his own office with a fixed office day once a week. A physiotherapist and a nurse also worked on a permanent basis two to three days a week to prevent strain injuries.15 Another measure was staff excursions. Most of them were in Norway, but sometimes they went abroad. They were very popular and they increased employees’ feeling of belonging. More than 100 people went on the trips to Stockholm and Vaasa. The company also offered nursery school places for employees’ children. The nursery school was situated near Knut Kavli’s former residence. The clocking on and off machines were removed, which was a clear sign that the company culture was intended to be built on trust – not a time clock.

197

KAVLI – AN INDUSTRIAL FAIRYTALE

Transformation in Sweden Figure 14.2

When Bert Jansson took over as managing director of the Swedish subsidiary in 1974, the company had a stable and well-qualified workforce and a well-known brand name. But 3 000 they still had to face three major challenges: 1) the factory Cheese was too small 2) the product range needed renewing, and 3) 2 500 profits were shrinking. 2 000 From the first half of the 1980s until the first half of the 1990s, the production of cheese and sales of crispbread fell, Mayonnaise 1 500 while mayonnaise sales doubled and caviar sales tripled after Caviar 1 000 production for the Swedish market was transferred from Bergen to Stockholm. The positive trends continued and the 500 Crispbreads negative ones were in many ways reversed in the early 1980s. Dessert cheese 0 Sales increased significantly between 1974 and 1997. Never1990 1984 1987 1993 1995 theless, the company still had a major problem to face: how Source: O. Kavli AB, Stockholm, Production statistics 1984-1995. The Kavli Archives, Stockholm could they achieve a pre-tax profit that was reasonable in relation to the turnover? The problem of falling profitability arose around 1960. The new products that were launched after 1974 increased turnover, but did not generate a profit to start with. It was not until the 1980s that the company managed to reverse this trend. Production figures for O. Kavli AB Stockholm 1984–1993 in tonnes

Product development and quality control Not much had been done since the end of the 1950s as regards renewing the product range. Jansson was very clear in his assessment of the situation when he started as the new managing director: Immediate attention must be given to some areas in the Kavli company. Firstly, a complete renewal of the product range and marketing has to be addressed. We also need greater cost awareness.16

From 1974, the strategy was to expand the range, boost marketing and intensify sales efforts. In the years leading up to 1980, the company implemented a product range renewal programme. It also reorganised the marketing department and sales force during the same period. In 1979, Kavli marketed a total of eleven varieties of the cheesebased product ‘frestaren’ and three different dressings. They developed the dressings further and launched a dip, which was a new product on the market in 1980. Now it was about increasing consumer choice, which was achieved by introducing a diverse range of new flavourings, low calorie options, and more size and packaging options. To facilitate product development, Kavli established a new laboratory in spring 1976. This part of the business was strongly boosted when microbiologist and chemist, Maud Lindmark, was appointed quality control manager in 1984. Upon her arrival, she immediately noted that the work was well under way, but not fully developed. To systematise the work, she wrote a quality control manual that was used for 15 years. This work ensured that Kavli’s quality control system was even better than the statutory requirements.17

198

14: NEW INTERNATIONAL MOMENTUM

Adapting to a new framework From the 1970s, the company had to learn to master downturns. It still managed to maintain its leading position in the market, however, despite strong competition from the chains. An important explanation for this was that the board of the trust gave the management team freedom to develop the company in accordance with the basic concepts it had cultivated since 1940. Hence, they kept their own production line and their own brand. Margareta Corsmark maintains that Jansson was an entrepreneur whose vision was growth while ‘maintaining profitability’.18 He used many of the same tactics that Ternström had used 30 years earlier: first product development, then energetic use of marketing, and, finally, a strong sales force. Both leaders categorically refused to produce other brands than Kavli’s own.

Several varieties of caviar were launched in 1974.

199

KAVLI – AN INDUSTRIAL FAIRYTALE

From Hagsätra to Älvsjö This proactive work led to an increase in the number of employees from 95 to 131 between 1974 and 1983. Thus, by the end of the 1970s, the premises had become too small. In 1980, the management team notified the owners that they had to make plans for a new factory: The events of the last few years and the expected expansion require a major rebuilding of Kavli’s production plant.19

Alice Strömberg says that the old building was in poor condition. After a big leak in the office wing following torrential rain, the Swedish management decided that a new one would have to be built as soon as possible.20 The board of directors appointed Staffan Forsberg as technical manager in 1989. His first task was to assist Bert Jansson in obtaining the authorities’ permission to build a new factory in Älvsjö. He put it as follows: ‘Build a new factory or die!’21 Building work started in June 1991 and they moved in already in late summer 1992. The factory had floor space of 12,500 square metres and it cost SEK 170 million.22 The collaboration with the contractor was good and they managed to complete construction work on time and on budget. Jan-Olav Gidevall described the process as very successful, especially as the employees’ attitude was so positive. 23

‘A new Kavli factory costing NOK 150 million’ was the headline in Bergens Tidende, when it presented the opening of Kavli’s new factory in Stockholm in September 1992.

200

14: NEW INTERNATIONAL MOMENTUM

Relocating to Älvsjö led to changes for the better. However, two things cast a shadow over operations when the company moved in. Firstly, the new factory was ultra-modern and streamlined, which instantly improved productivity, but also meant that 30–40 employees were made redundant. Secondly, production became a process where many people had to work on their own. Consequently, some employees felt lonely at work and said they missed the feeling of fellowship they had previously enjoyed in the work teams at the factory in Hagsätra. The management took the staff seriously and introduced more teamwork.

Welcome to Kavli, Sweden. The factory in Älvsjö is a state-ofthe-art production plant. The building also contains several works of art purchased at the initiative of former managing director Bert Jansson.

Art One thing that must be mentioned in connection with the Swedish company is its focus on art. Jansson was very knowledgeable about art, and the company premises were adorned with beautiful works by artists such as Bengt Lindstrøm and Leopold Fare. In this way, the company also supported cultural programmes in the best Kavli spirit. Not only did they use artists to decorate the factory, they also got them to collaborate on market cultivation and consumer contact work. Customers could order art-based hand-outs through the consumer magazine ‘Goda Nyheter’. This was quite unique at the time and produced results. The Swedish company organised its marketing with the aim of making Kavli’s brands leaders in their market segments and at the same time they gained substantial goodwill.24

201

KAVLI – AN INDUSTRIAL FAIRYTALE

From cheese to drinks

Hans Theis Westermann took over the management of Kavli Denmark in 1970. He held this position until 1997. He also chaired the board of directors of O. Kavli AS, Copenhagen between 1973 and 1999.

When Hans Theis Westermann took over the management of Kavli Denmark in 1970, his first task was to stop the company from going bankrupt. After spending the first few years getting the company back on the right track, he set in motion a strategy that enabled the company to sell products for the sum of almost DKK four billion up to 1998. In the same period, the profits amounted to almost half a billion kroner, and in most years the profits were an impressive ten percent of turnover. Since 1968 the company’s head office has been located to Copenhagen, and in 1991 it moved to a new factory in Avedøre Holme, Copenhagen. As a result of its autonomy, the company was able to develop its own strategy. After the discontinuation of cheese production in 1968, it became a production and trading company supplying the Danish domestic market. It sold its own products, such as soya sauce and gravy browning, but the cordial drink ‘Fun’ became its main product. It also sold small volumes of products produced by the Group and was agent for international products. Westermann was immensely talented when it came to negotiating good contracts with suppliers, and 80 percent of the company’s revenues came from the sale of cordials, flatbread, crispbread, dried fruit and tinned fruit.

Fun with ‘Fun’ The company’s business principles were a strong focus on customers and cost consciousness. Former managing director Suhr Andersen maintains that supplier reliability was paramount.25 In its sales work, the company developed a programme that meant that all products were included in at least one campaign over a certain period of time. The sales team came up with exciting ideas such as customer competitions. Humour was important in advertisements.26 One of the best examples is the ‘Fun’ song, which most Danes hummed during the summer of 1991. The most important aspect of cost control was cost consciousness. All employees knew that saving one krone was as important as selling for ten kroner at one krone profit. In the beginning, it was important to have verbal agreements with suppliers and

202

14: NEW INTERNATIONAL MOMENTUM

customers that were sealed with a handshake. Written agreements came later.27 They also organised sales activities in a cost-efficient way, and when travelling on business trips, employees had to choose the cheapest option, taking time and price into consideration. The company was the first in Denmark to introduce a cost-efficient system of pallet sales. Dan Dantved, a sales representative since 1975, particularly remembers quarter pallets as a new innovation. They were handy, time-saving and could be wheeled into the shops with the products on them. The experience was so positive that they also started using them for Sun Maid raisins, Dijon mustard, Del Monte products and crispbread. The company often split marketing costs with suppliers. ‘Fun’ was the company’s most successful sales product of all time. It initially imported the cordial drink ‘Gøy’ from Elfas Gimsøy AS in Norway. Customers liked it, and it became one of the main products in the range already in 1975.28 The company started importing the concentrate in 1976, and it made the diluted cordial drink by leasing available capacity from various bottling plants. Consumers were more focused on health and slimming products in the 1980s, and Kavli Denmark rose to this challenge. In 1984, the company launched its own product ‘Fun Light’, an artificially sweetened cordial drink. The product was developed in all secrecy.29 It was low priced and its production became a huge success. It achieved a 73 percent share of the cordial market in Denmark. Fun Light was the main basis for the company’s profits in the 1990s.30 The company stopped leasing bottling capacity in 2003 and started using its own factory in Avedøre Holme in Copenhagen. In 2009, the company moved production to Ringkøbing as a result of the acquisition of Pebas.

A Danish brochure from 1985 aimed at retailers. Here, the company informs that it has 55 employees and a turnover of more than DKK 125 million. The brands Kavli produced or marketed included: Maille Del Monte Sun Maid Finn Krisp Tate & Lyle Golden Glow Ridgways Kavli Fun Primula Sunsweet Diamond Star-Kist Campbells Barilla

203

KAVLI – AN INDUSTRIAL FAIRYTALE

Cordial drinks are the main product at Kavli’s factory in Ringkøbing in Jutland. Its wellknown brands are Kavli’s fruit drinks: Fun, Grønne Gaarden, Scoop Slush-Ice and Blomberg’s gløgg (mulled wine).

Nutana – a premature acquisition In the 1980s and 1990s, demand for products and competitive conditions changed in a number of areas for the company. Low price supermarket chains grew rapidly in the 1980s, and since Kavli sold high quality resale products, it soon came under pressure from cheaper brands. The competition became even harder in the 1990s, but not much could be done other than adapting to the situation. As for products they produced themselves, soya and gravy browning did well, as the demand was inelastic to price. ‘Fun’, however, was not affected by the competition from cheaper brands as long as the outsourcing of bottling ensured competitive prices. But how long would this last? Both sales and profits started falling as the 1990s progressed.31 In response to the challenges, Kavli endeavoured to gain control over a bigger proportion of the value chain by Figure 14.3 producing products for growth markets, such as fast food, Percentage of turnover catering and organic foods.32 The acquisition of Nutana AS O. Kavli AS, Copenhagen 1971–1990 in 1993 was part of this new strategy. The company, founded 100 Other in 1897, was a traditional producer of tinned and frozen vegDel Monte etables and health foods. Kavli never succeeded in merging 80 Sun Diamond the sales forces of the two companies to form a powerful unit. Bread 60 In addition, prices were too high. A third problem was low reliability as regards deliveries. A fourth problem was that 40 Kavli Denmark did not really have any technical producCordial drinks tion expertise.33 According to finance manager Jacob Chris20 tiansen, Kavli had lost DKK 35 million on operations alone when it sold the company to Urtekram in 2002.34 0 1971

1975

1980

1985

1990

Source: O. Kavli AS, Copenhagen, Annual reports 1971–1994. The Kavli Archives, Copenhagen

204

14: NEW INTERNATIONAL MOMENTUM

Success in the UK After a long period of stagnation, Kavli managed to turn the situation in the UK around. Increased sales and profits were seen once again from 1977. The pre-tax profit was an impressive ten percent of turnover for several years in the 1980s.35 Kavli consolidated its position as the UKâ&#x20AC;&#x2122;s second biggest producer of processed cheese, and a large market survey in 1992 showed that Primula had a market share of 15 percent. Dairylea was biggest with 35 percent, while Cheddarie came third. Processed cheese or cheese spread, which has a somewhat broader meaning, accounted for seven percent of the British cheese market.36 This means that the market was relatively large in the UK. While the company did well with its processed cheese, crispbread sales fell strongly, especially at the beginning of the 1980s when Kavli lost major export contracts. The improvement in the companyâ&#x20AC;&#x2122;s profit performance was the result of increased productivity and good prices for processed cheese. The company introduced dip sauces in 1989. They became popular and generated high profits. Exports did not fare well, however. They were declining and fell to less than your percent in the early 1990s.37 But optimism remained alive in the British company. Tom Parker, who succeeded Sjurseth in 1981, was a Kavli veteran with 40 years of service with the company. He had worked his way up through the ranks and knew the company and its culture and processes inside out. He also had a more relaxed and cautious management style than his predecessor.

Unlike other markets, the UK market kept the Primula name for its products. The brand is also important in relation to the export market.

205

KAVLI – AN INDUSTRIAL FAIRYTALE

Manpower The objective was to win back lost market shares and increase profits. Some staff cutbacks had been made and productivity had also improved. The emphasis was now on the working environment and the key role employees had in achieving success. The company initiated a number of measures to increase job satisfaction. This resulted in greater efficiency, which in turn led to both higher profits and higher pay. Employees were welcome to suggest improvements themselves. Because the employees were content and the company committed to their welfare, only slightly more than half the workforce ever joined a union. Thus, the company was not affected by the big labour disputes in the UK in the 1970s and 1980s. Disputes elsewhere gave in fact rise to market opportunities, which they knew how to take advantage of. On the whole, however, political issues did not play a big role in the company. Some of the key people in the history of Kavli Limited, Paul Pendleton, Kenneth Foster, Peter Stuart, James Symons, Micky Maddison and Maureen Brown, stress that the company experienced very little conflict.38 Figure 14.4

Horsepower

Turnover of Kavli Ltd., Gateshead in GBP million (1975 value) 4

Crispbread 3

Cheese, etc.

3 1 0 1975

1980

1985

1990

Source: Kavli Ltd., Gateshead, Accounts 1975–1990. The Kavli Archives, Gateshead.

Figure 14.5

Result after tax in GBP thousand (1965 value) for Kavli Ltd., Gateshead 200 180

Total Crispbread

160 140 120 100 80 60 40 20

Source: Kavli Ltd. Gateshead, Accounts 1975–1990. The Kavli Archives, Gateshead

206

1990

1989

1988

1987

1986

1985

1984

1983

1982

1981

1980

1979

1978

1977

1976

1975

The focus on marketing increased and important purchasing agreements were signed with the large chains. Meanwhile, the company’s distribution network became more efficient, for example by using the services of big operators, which in turn opened new doors to the supermarkets’ shelves. Another smart move in the marketing context was the investment in four racehorses. Primula Boy was the best known of them, a stallion that was purchased at the end of the 1970s. It was a good horse and won a number of races. The horse was almost as well known in England as English football teams are known in Norway. Many people wondered where the name came from, and it was with great pride that the public was informed that it came from the company and its products. This was how a horse became the most known Primula product in the UK.39 Commercials on Radio Luxembourg were a third effective marketing measure. From the 1970s, the company collaborated with Food Brokers on the distribution and marketing of products to supermarkets. The partnership between Desmond Cracknell and Kavli Ltd. proved constructive for many years and it contributed to Kavli Limited being able to cope with the challenges the chains represented. However, towards the end of the 1990s, trading conditions changed, and the partnership came to an end.

14: NEW INTERNATIONAL MOMENTUM

The Primula racehorses

Primula Boy.

Ayr is the county town of South Ayrshire in south-west Scotland. In 2001. it had a population of more than 45,000. It is best known for being the birthplace of poet Robert Burns (1759 –1796), and for its famous racecourse. The main events held there are the Scottish Grand National in April and the Ayr Gold Cup in September. The latter was first held in 1804 and it has been an annual event ever since, with the exception of the war years 1914 –1918 and 1939 –1945. Primula Boy won many races in his career, but first place in the Ayr Gold Cup in 1979 is ranked highest. Walter Bentley was the jockey. Kavli’s other racehorses, Primula Girl, Say Primula and Primula Again never achieved the same success as Primula Boy. The Primula horses were an important marketing tool in the UK, and they received a lot of coverage in the media. They were also self-financing, i.e. their winnings financed their upkeep. They even participated in horse races in Norway and Sweden.

The trophy from the Ayr Gold Cup in 1979.

Primula Girl in action.

207

KAVLI – AN INDUSTRIAL FAIRYTALE

Closure and acquisitions

Crispbread products as presented in the 1990s.

208

Peter T. Bone took over as managing director in 1987. He pursued a policy of even greater transparency in the organisation. The gap between management and staff narrowed, and he worked with his staff as a team more than his predecessors did. In many ways, however, he still continued the proud traditions of days gone by. The premises were extended in 1986 and the machinery modernised. The distribution network was made more efficient and new contracts were signed with more of the big chains. Product innovation once again became central and the company widened its range of cheese and biscuits – perhaps too much.40 The crispbread factory had never performed particularly well, and it was discussed on several occasions whether it should be closed down. Its last year of ordinary operation was 1990, after which crispbread was then imported from Vestfold Flatbrødfabrik, which had been part of the Bergen company since 1984. The company also decided to increase its focus on new flavours and varieties, and muesli biscuits became popular. One step in this process was the acquisition of Lambourn Scooples Limited, a smaller complementary producer, a year after the crispbread factory had been closed. It produced extruded crispbread, a type of rusk. It was a bread product that was air-treated and dried through a long baking process at low temperature. The bread was shaped according to customer requirements.41 The company lost money to start with, and the accounts show it recorded a loss of 15.5 percent in its first year of operation. Sales were modest and production was soon moved to the cheese factory.42 However, in strategic terms, the acquisition was not a bad idea. Extruded bread has now become finger-shaped dip sticks, sold in the same pack as different types of dips. The concept has contributed significantly to product innovation in recent years. While the Kavli Group partly struggled with stagnating sales and declining profitability in the 1960s and 1970s, new momentum was gained from the mid-1970s onwards, and both the sales figures and profits increased until the mid-1990s. A vital realisation behind this was that it was no longer possible to expand on the basis of processed cheese alone. The company had to have more products than before if its turnover was to exceed the critical level.

Chapter 15

IDENTITY CRISIS Profitability and harmony The period from the end of the 1970s until 1994 was in many ways a positive one for the company. The Group was doing well in a number of areas, better than for a long while. The trust’s charitable contributions were limited at first, but this changed in the 1980s. In addition, the companies abroad reported both increased sales and profits. They were run by a well-qualified workforce, backed up by determined and dynamic chairs of boards: Erik Fällender in Sweden, who was succeeded by Nils Edholm, Robert Dickinson in the UK, and Jacob La Cour in Denmark. Staff were given training to increase their competence, and productivity increased in most areas. The staff were rewarded with higher salaries and greater influence in their respective companies, which also led to an increased sense of belonging and co-ownership. The working environment in all the group companies was regarded as good.1 Pål W. Lorentzen, who sat on the board of O. Kavli AS in Bergen, says that, for the most part, everything looked ‘very harmonious.2 Norway did not make as good progress as the other companies, however, despite fairly high sales and good profitability. In addition, the Group and the parent company in Bergen experienced something of an identity crisis, which the new company and group management would have to address together. That was not to be, however.

A vacuum at the top Around 1980, a number of problems had to be dealt with. They shook both the Group’s management team and the foundations of the Norwegian company. Firstly, the man who was the backbone of the company, Hans Askeland, retired as managing director of the parent company and as a member of the board of the trust. Secondly, group CEO Alf Sjurseth died unexpectedly without a planned successor. Thirdly, the Group was no longer an export company after several years of falling exports. Fourthly, the Group did not have a well-defined management structure. Fifthly, the position of the parent company gradually became more peripheral. It was necessary for the board of the trust, Olav Jacob Dreyer, Ivar Gjelsvik and Erik Bernhard Hjorth, to decide on a direction for the future. This was no easy task. A successful change of leadership was carried out by appointing Tom Parker to take over in the UK. However, the change of managing director in the parent company in Bergen did not work well. Despite clearly having some admirable qualities, Eilert Sundt did not manage to fill the shoes of his strong predecessor Hans Askeland, and there were strong disagreements between the trust and the Bergen company’s next managing director,

Erik Bernhard Hjorth is a business economist and was managing director of the brewery Hansa Bryggeri in Bergen from 1976 to 1987. In addition to being a member of the board of the Kavli Trust from 1981 to 2002, Hjorth held a number of other directorships, including AS Fløibanen (Bergen Funicular), Husfliden in Bergen (traditional handicrafts) and Bergen Diaconal Hospital.

209 14

KAVLI – AN INDUSTRIAL FAIRYTALE

Tore Arildsen. This situation continued for a long time, but all the involved parties were able to live with it. It nevertheless ended in a crisis of confidence that had to be resolved externally. When it was finally resolved in 1994, it resulted in the reformulation of the role of the board of the trust and the reorganisation of the Group’s structure. Most of the involved parties thought the reorganisation was for the better.3 Others saw it as further undermining Knut Kavli’s intentions.4

Someone to fill the vacuum?

 ‘The “Kavli spirit” still the key to success.’ The trade journal ‘Norsk Industri’ wrote a long article about the company in 1984. Factory manager Dagfinn Omland emphasised the ‘Kavli spirit’ as something out of the ordinary.

Pål W. Lorentzen took over as Chair of the Kavli Trust in 1994. He was also a member of the board of directors of Kavli Holding from 1994 to 2010.

210

Tore Arildsen was appointed managing director of the parent company in Bergen in March 1983. He focused on what was typical for Kavli: each individual employee should be seen and treated as a colleague rather than as an anonymous worker. He was a popular leader among the majority of the workforce. They regarded him as a generous and jovial leader who was on their side.5 In addition, he had visions of stronger cooperation, central control and growth. For many employees in Bergen, he was the personification of a caring manager who wanted the best for them: a man of Olav Kavli’s caliber. Trade union work flourished, for example under the leadership of Mathias Turøy, and collaboration between the unions and management was very good. New life was also breathed into the Kavli Club, with extra financial contributions from the company.6

Disagreement about the management model While things were apparently largely peaceful and harmonious in the company, a conflict was brewing in the background. Later, it was clear that there were three factors in particular that were the cause of disagreement and tension: 1) The position of the parent company in relation to group management 2) The managing director of the parent company’s lack of place on the board of the trust 3) Mutual dissatisfaction between both the board of the trust and the company in Bergen. Some of this was due to long-standing issues and personal disagreements about the company’s organisation, profile and culture. The company’s employees became increasingly involved in the disagreements. Keener competition in the markets required more collaboration within the Group on volumes and the coordination of resources. As a result, a Group Council was established in the period 1977–1981. Even though the parent company in Bergen owned the subsidiaries, its managing director did not play a prominent role on the council. This was in line with the management strategy of the board of the trust, which explicitly defined Kavli Bergen as a company at par with the foreign subsidiaries.7 As leader of the parent company, Arildsen believed that this was a regrettable development. He also called for a more professional and centrally controlled group

15: IDENTITY CRISIS

management system. There were some weighty arguments for this in relation to both marketing and coordination. However, his idea was rejected by both the trust and the foreign companies.8 The trust argued that, since the results were good, the management system was satisfactory. In the 1970s, the authorities wanted to increase the monitoring of foundations that awarded grants. As a result, there was an increased need to ensure that the members of the board were impartial, which made it difficult for executives from the companies to be members of the board. Consequently, Kavli Bergen lost its place on the Group’s supreme body. Because the company in Bergen felt ignored, scepticism grew about the board of the trust and it gradually lost confidence in the board’s decisions. The feeling was mutual. Basically, everyone wanted the best for the Group, but they disagreed on how this should be achieved and could not resolve their disagreements on their own.

‘A flourishing cheese.’ Article in the newspaper ‘Dagens Næringsliv’ in 1984.

211

KAVLI – AN INDUSTRIAL FAIRYTALE

Handling ingredients in the best possible way requires precision and ingenuity. Karsten Larsen scrapes the rind off a Gouda cheese. The rind and other leftovers were used to make animal fodder.

Background

Bert Jansson 1932–2009 was managing director of O. Kavli AB from 1974 to 1998. Jansson was a highly respected and capable professional, who was extremely systematic.

212

The developments that led to greater collaboration within the Group at the expense of the parent company, O. Kavli AS, Bergen, began when Sjurseth took over as leader in 1965. The parent company’s managing director played the trump card Knut Kavli had given him, namely section four of the trust’s statutes, which stated that two of the Bergen company’s executives should ‘preferably’ have a place on the board of the trust. However, changes were taking place. Towards the end of the 1970s, it became clear that a revision of the Norwegian Foundations Act would lead to more stringent impartiality rules, and the managing director would perhaps be considered partial in matters relating to the board. When Eilert Sundt was appointed managing director in 1977, he had to waive the right to be a member of the trust’s board.9 Solicitor Per Brandt-Hansen investigated the matter and was clear in his conclusion. There would be many matters that the board could not consider if the managing director of the parent company held a seat on the board. Consequently, the board concluded in 1980 that it would have to find external members to meet the requirements of the new Act.10 However, it was possible that this was in breach of the trust’s own statutes from 1962. The board had two options, one of which was to amend the statutes to bring them into line with the new Act. The other was to continue with a broad interpretation of the statutes, which would allow the appointment of members who were not company executives, if necessary. They chose the latter course. The company in Damsgård wondered just how clear the law actually was in this matter. With the staff behind him, the managing director argued that he should have a seat on the board.11 If Kavli Bergen was not represented, it would lose all control as the owning company.

15: IDENTITY CRISIS

Is there a leader? The Bergen company would soon have another issue to deal with. When Sjurseth died, the managing director of AS Hansa Bryggeri (a brewery), Erik Berhard Hjorth, was appointed as his successor. He knew the food industry well, but had no connection to the Group otherwise. The board of directors consciously omitted appointing Arildsen, the only person with a director title in the Bergen company, since there was a possibility that such an appointment could be in contravention of the new Norwegian Foundations Act. This resulted in strong reactions in Bergen, where Arildsen felt he had been slighted. So, who was now head of the Group after Sjurseth? At its own initiative, the Swedish company proposed Bert Jansson for the position. The situation was so unclear, however, that there is disagreement to this day about whether there actually was a group CEO and, if so, who held the position. In the management strategy from 1983, it was stated that the board of the trust should be the Group’s supreme body. Since Gjelsvik chaired the board, this officially made him the most senior leader of the Group: In accordance with this, the board of the trust reserved the right: A) to itself – or through its Chair … issue instructions and recommendations about the company’s general management or the handling of special issues B) to itself– prior to their implementation – overrule decisions by the boards of directors on these issues when they are of crucial importance to the Group’s or the individual company’s situation.12

Most employees in Bergen were concerned about a structure of this type, although, the trust’s board did not feel there was any great disagreement with employees. They believed that the matter was primarily about the director’s personal ambitions. An important factor for them was that, prior to his appointment, Arildsen was informed in writing that he would not have a prominent role in the group management team and he confirmed his acceptance of this.13 In addition, they believed he did not have sufficient authority, particularly in relation to the production units abroad, to hold a place on the board.

Legal assessments As previously mentioned, solicitor Per Brandt-Hansen believed that the executives would be partial in the board of the Trust pursuant to the more stringent Norwegian Foundations Act from 1980. Both the trust and the parent company initially agreed with this, but in the early 1980s Arildsen gradually became convinced that section four would not lead to disqualification on grounds of partiality. The board was unwilling to embark on a new discussion about an issue that had already been clarified.

213

KAVLI – AN INDUSTRIAL FAIRYTALE

The melting process as demonstrated by Kurt Iversen for a photographer from the newspaper Bergens Tidende.

Thus, in January 1983, Arildsen contacted solicitor Per Brunsvig, for a new assessment. An assessment was carried out without the board’s knowledge, and Brunsvig’s partner, Per Racin Fosmark, came to the opposite conclusion – partiality would not be a problem. Section seven of the Norwegian Foundations Act did not prevent the managing director of the parent company from sitting on the board of the trust. He also pointed out that the main intention of the statutes of the trust was to safeguard the parent company’s controlling rights in the Group.14 On this basis, executives from the parent company could be elected as before. Gjelsvik refused to accept the conclusions after the report had been presented to an astounded board that same autumn.15 They regarded this as a major breach of confidence and disloyalty. They refused to discuss the matter since Arildsen had obtained the report behind their back. Instead, they wanted an independent legal expert to reinvestigate the issue. Nicolay Wiig was assigned the task.16 In addition, they discussed the matter with advocate Erik Martens in autumn 1984.17 His opinion was surprising. He believed that the question of partiality in foundations that were engaged in business should not be handled pursuant to the Norwegian Foundations Act section seven, but pursuant to the Norwegian Limited Liability Companies Act section 8–11, which did not give the board the right it believed it had.18 Wiig discussed whether a member of the parent company’s management was entitled to a seat on the board of the trust pursuant to its memorandum of association. The answer was a loud and clear ‘no’, because the word ‘preferably’ is used in the document. The rule could therefore be waived if there was good reason for doing so.19 He also realised that there was a risk of partiality if executives from the parent company sat on the board of the trust.

The employees get involved The concerns of Brunsvig and Fosmark were discussed in the factory corridors and by the trade unions. This led to employee representative Mathias Turøy taking the initiative to bring the matter before the board of the parent company. The matter was raised twice in 1984. The main points in the discussion were how the board of the trust should be composed and the role that the parent company would play in the Group. Consequently, all the previous arguments were raised again, and at the parent company’s general meeting on 6 June 1984, the employees demanded that the board of directors address the relationship between the units in the Group.20 The reason was that the employee representatives did not feel that they had any real influence, and they wanted the parent company’s position and role in the Group’s management team to be clarified. Turøy had been employee representative when the trust was founded in 1962, at which time he was summoned to Askeland’s office. Askeland stressed that the organisational

214

15: IDENTITY CRISIS

model would ensure that the company in Bergen always controlled the Group.21 The employees also argued that there was no reason for leaving out a talented leader like Arildsen. They also argued that conflicts at this level should be resolved by arbitration.22 The board of the trust rejected that the parent company should have such a leading function, but it was willing to consider meeting the wishes of the employees when recruiting new members of the board. Perhaps an arrangement was possible whereby the parent company’s board could assess candidates in advance?

Figure 15.1

Profit margin before tax O. Kavli AS Bergen 1975–1993 12 10 8 6 4 2

1993

1992

1991

1990

1989

1988

1987

1986

1985

1984

1983

1982

1981

1980

1979

1978

1977

1976

0 1975

Good results

Wiig’s report had supported the trust on all important points. The board of the trust nevertheless regarded Arildsen as a Please note that the figures have been adjusted for the sale of the Damsgård manufacturing premises in 1983. Source: O. Kavli AS, Bergen, Annual accounts capable operations manager for the production company, 1975–1993. The Kavli Archives, Bergen. especially as he treated the staff well in line with the Kavli tradition. Consequently, they gave him a chance to regain their confidence by complying with the legal decisions that had been made.23 He accepted this. However, the employees dealt with the managing director, not with the board of the trust. When the employee representative again enquired about the situation, the board stated that the issue had still not been clarified, only postponed.24 Following this, the situation calmed down in late winter 1985. It had not been resolved, but it had been laid to rest, at least temporarily. The profits of the Bergen company increased almost every year in the 1980s, despite several years of disagreement. Clearly, the employees did a good job.

Waning confidence Tensions remained high despite the calm exterior. Towards the end of the 1980s, some employees started to fear for their jobs, as there was surplus production capacity. Meanwhile, the Swedish company took over caviar production for the Swedish market. In a period of increasing insecurity, many people felt that the parent company had lost its power and influence within the Group, while Sweden and Denmark had gained in influence. Hence, it appeared that jobs in Bergen were no longer safe and the future uncertain.25 There was also a group of veterans who had known Olav and Knut Kavli for decades. They focused on changes that did not comply with Knut Kavli’s intentions as they were laid down in the statutes. ‘The board interpreted them differently to how they were written,’ maintains Johan Krohn-Hansen.26 Several employees also objected when the board of the trust awarded money to causes in which the board’s representatives had special interests. They also believed that the board had been irresponsible in its expenditure for several years to benefit themselves. For example, they objected to an expensive official car, ‘a high consumption of cigars’, expensive trips and what they believed to be beneficial prices for shares sold by private individuals to the trust.27 The car in question was a BMW

215

KAVLI – AN INDUSTRIAL FAIRYTALE

320, which was at the disposal of chair of the trust. However, it was not purchased with trust funds, but by the parent company at Midtun. In addition, the managing directors of both the parent company and the subsidiaries had their own company cars. If that was the case, then why should the chair of the trust not have a company car as well? Statements from both the auditor and a business lawyer conclude that the members of the board had acted correctly, both financially and legally. Shares were not redeemed at a premium, quite the opposite in fact, since they were redeemed at a price within the range recommended by auditors.28 In connection with travelling expenses and hospitality, the auditor’s reports show that the members of the trust’s board were much more careful than the managing director of the Bergen company.29

‘Investing NOK 220 million’. In this article in the newspaper Dagens Næringsliv from 1991, it is stressed that the company had plans to invest NOK 220 million that year. The investments were to be made in Denmark, Sweden and the UK.

216

15: IDENTITY CRISIS

Many employees experienced a gradual waning of confidence in the trust, at the same time as the subsidiaries abroad appeared to increasingly support the board’s way of thinking. Dreyer, in particular, was an important and valued link with the subsidiaries in Denmark and the UK. Bert Jansson in Sweden probably saw the trust as a strategic ally in relation to preserving a decentralised management structure. In the same way, the board of the trust’s lack of confidence in the parent company’s management grew. They believed that Arildsen misinformed his own staff about the conflict. In addition, they were not very satisfied with some of his decisions, of both an administrative and a financial nature.30 Little was done to improve relations. Most people were more interested in winning support for their views than in finding an amicable solution, a sign that the situation was about to become very stormy – and deteriorate from disagreement to conflict.

From disagreement to conflict In late autumn 1992, Finn Bergesen jr. was appointed as Dreyer’s successor on the board of the trust without informing the parent company or the employees.31 Once again, the employees felt that they were being ignored despite, as they saw it, the board having promised to keep them informed. Their spokesman, Roald Bakke, who had many years of service for the company, wrote a letter in January 1993 requesting clarification of the situation. The other employee representative on the board of the parent company, Olav Kjell Dahle, belonged to the sales team. He did not work at Midtun and had more distance to the conflict, but he still supported Bakke in his request. The letter was followed up by discussions between Pål W. Lorentzen on behalf of the trust, and Bakke and Arildsen, respectively.32 The discussions worsened the situation and the conflict escalated. Arildsen claimed that he was twice asked to waive the managing director’s right of first refusal to a seat on the board. He saw this as a threat. Lorentzen, on his part, claimed that it was a way of reaching out a hand to resolve the problem. Since the disagreement had now become an open conflict, most of what was said was misinterpreted further down the line. The board members were not aware of how volatile the situation had become. Because they had lost the good contact that Olav and Knut had enjoyed with the company’s shop floor, they became unaware of how tense the situation at Midtun had become. They suggested that the matter should be investigated by an independent lawyer acceptable to both parties. The task was assigned to Dagfinn Clemetsen from Oslo.33 Each of the parties presented their views on the issue. Wiig acted on behalf of the trust and Christian Mevatne on behalf of the management. They submitted three memorandums in total.34 Clemetsen decided to investigate three main aspects of the matter:

Thorough tests and analyses were carried out in the laboratory. Turid Hansen made sure that nothing was left to the random effects of bacteria.

217

KAVLI – AN INDUSTRIAL FAIRYTALE

1. To what extent could the board of the trust become involved in the running of the Group pursuant to the statutes, and what implications would this have in relation to appointing executives as board members? 2. Did the Group’s decentralised management structure comply with the trust’s statutes? 3. Problems of partiality in connection with executives of the parent company being members of the board of the trust, and whether the members of the board could award funds to institutions of whose boards they were members.

Clemetsen supported the trust on the first point.35 The board could be involved in considering strategic issues. According to the statutes, they could also appoint members of the board who were not executives from Kavli Bergen if there were strong grounds for doing so. Thus, the appointment of Hjorth and Bergesen jr. was not in conflict with the statutes. They were both well qualified for the job. However, pursuant to Norwegian law, having executives from the parent company sitting on the trust’s board would not contravene the rules concerning impartiality. Consequently, the grounds for excluding Arildsen were not legally tenable. That is, the trust had the right to exclude the managing director of the parent company from the board, but not on the legal grounds it had cited. As regards the second point, Clemetsen concluded that, pursuant to the statutes, the board had the right to continue with the decentralised group structure. Hence, the establishment of the Group Council was not in conflict with the statutes. Clemetsen supported the managing director and his supporters when it came to the third point. A member of the trust’s board was deemed to be partial in cases involving the awarding of funds if the person concerned had a special interest in the applicant. On the other hand, ever since 1981, the members of the board had practised a policy of leaving the meeting when partiality existed. However, their critics still believed that the close friendships that existed between the members of the board would lead to partiality in some form or another.

Reidar Lorentzen has been a member of the board of Kavli Holding AS from 1994 and was chair of the board until 2006. He has also been a member of the board of the Kavli Trust since 2000 and has chaired the board since 2008. Lorentzen has carried out many assignments in the field of management and business development, and has written books on management and strategy.

External help Figure 15.2

Charitable grants as a percentage of the transfers to the Kavli Trust 1962–1995 100 90 80 70 60 50 40 30 20 10 1995

1992

1990

1988

1986

1984

1982

1980

1978

1976

1974

1972

1970

1968

1966

1964

1962

Source: O. Kavli and Knut Kavli’s Charitable Trust, Annual accounts 1962–1965. The Kavli Archives, Bergen

218

The report was the result of thorough work by prominent legal experts, but it nevertheless only had a limited effect on the further course of the conflict. The reason was that it was no longer primarily a disagreement about the understanding of the law or the management structure, but about a lack of confidence. The media wrote a number of negative articles about Kavli in a period of 18 months between 1993 and 1994. The trust’s board saw this as a mudslinging campaign against them, orchestrated by Arildsen. He maintains that he never started a campaign of any kind.36 For the uninitiated reader, it must have seemed like a civil war. Two weeks after the legal report had been presented, Mevatne announced that the managing director and employee representatives would continue the fight. On 22 October 1993, he brought a lawsuit against the board, demanding Hjorth’s resignation from the board and the cancelation of the appointment of Bergesen jr. as Dreyer’s successor. A few days later, on

15: IDENTITY CRISIS

28 October 1993, Mevatne filed a petition on behalf of Arildsen demanding an investigation of the trust. This was based, among other things, on the claim that the recruitment of members to the board contravened section four of the statutes. In late autumn 1993, the trust realised that it was not sufficient to deal with the matter through legal channels. Additional expertise was required. In this connection, they approached Reidar Lorentzen. He was a trained business economist with extensive management experience and an expert in business development. He was seen as someone with great integrity, he came from an external environment and had the ability to behave in a neutral manner.37 Lorentzen soon discovered that the conflict had become more a crisis of confidence than a conflict of interests. He was therefore concerned with finding bridge-builders on both sides to enable confidence to be restored.38 And that is what he managed to accomplish. His expertise and high standing were later reflected in his election to the boards of the Group and the trust, first as a member and later as the chair of both boards. Both parties accepted him as impartial and solution-oriented. He won the support of employee representatives Mathias Turøy, Per Mange Syre and Rune Nyheim, who understood that they had to compromise and bury the hatchet. They were all trusted and experienced as a result of their long service with the company in various positions. They played a key role in finding an acceptable solution that would ensure peace in future. The confidence Nyheim enjoyed was demonstrated when he remained employee representative on the board of the holding company even after becoming factory manager.

Rune Nyheim has been a member of the board of Kavli Holding since 1997. He was a member of the board of O. Kavli from 1995 to 2005. Nyheim was factory manager for O. Kavli until October 2011, when he took over as TPM manager (Total Productive Maintenance) for Kavli Norge.

100th anniversary that left a sour taste In 1993, Kavli celebrated its 100th anniversary in style. The trust paid tribute to the Group, its staff, Bergen and itself. Concurrently with the successful celebration, the board of the trust realised that the situation in relation to the Bergen company could

Managing Director Tore Arildsen, County Governor Håkon Randal and member of the board of the trust, Erik B. Hjorth before the unveiling of ‘Den blå stein’ (the Blue Stone) on 27 March 1993.

219

KAVLI – AN INDUSTRIAL FAIRYTALE

Snapshots from the 100th anniversary, 1993

Mayor Bengt Martin Olsen presents a gift from the city of Bergen to Olav Jacob Dreyer, member of the trust’s board of directors.

Pål W. Lorentzen speaks at the presentation of ‘Den blå stein’. Standing in the front row from the left: Mayor Bengt Martin Olsen, Ivar Gjelsvik and Robert Dickinson.

The banquet in the Håkon’s Hall.

Enjoying a cup of coffee in the Håkon’s Hall. From the left: Ruth Thornquist, Christian Thornquist, Edvin Haga and Bjarne Fotland.

Desmond Cracknell, a distributor in England and Jacob la Cour, chair of the board in Denmark.

220

15: IDENTITY CRISIS

not continue, and it was willing to find an amicable solution. But it also felt that the situation was so deadlocked that it asked legal expert Jon R. Gundersen to assess the managing director’s employment relationship with the company. He believed Arildsen had acted disloyally and concluded that negotiations for his dismissal should be started: An amicable arrangement should be in the interests of all parties.39

In the board’s view, his disloyalty was tantamount to a form of mutiny. Firstly, they felt that he had misinformed the press and his own staff about the trust’s decisions and intentions. Secondly, he had gone behind their backs and commissioned a report about the tenability of their decisions. Thirdly, he opposed the Group’s management structure after it had been legally decided. Fourthly, he had filed suit against his own employer for alleged illegal actions.40 On his part, Arildsen and his closest supporters maintained that he had neither misinformed others nor been disloyal, quite the opposite, since he remained true to Knut Kavli’s intentions.41 Following unsuccessful negotiations at the office of Mayor Bengt Martin Olsen, at which Arildsen, according to himself, rejected a proposed NOK two million severance package, he was summarily dismissed at the beginning of November 1993. This resulted in the first strike in Kavli’s history, the very same year the company celebrated its 100th anniversary.

Solution The dispute intensified when the managing director decided to bring a lawsuit for unfair dismissal against the trust in late autumn 1993. At the same time, the matter was referred to the county governor, whom both Arildsen and the employees requested to investigate a number of matters relating to the running of the trust.42 The county governor responded on 28 February 1994 in favour of the board. In brief the decision was, ‘The O. Kavli and Knut Kavli Trust will not be investigated.’43 Thus, they were found not guilty of all the allegations of irregularities made against them. Arildsen decided to withdraw the lawsuit. At the same time, deputy managing director, Gunnar Solheimsnes changed his mind and took the trust’s side. The parties reached a settlement on 9 March 1994. Some work still remained to be done before peace and confidence could be restored. Despite the reduction in the conflict level, the Bergen company was still difficult to manage. During the ensuing years, the company went through a whole series of managing directors, but it was undoubtedly on its way to improving cooperation and confidence. An extensive reorganisation in 1994 proved a success. It resulted in a much more clearly defined division of roles between the parent company and the trust.

A tax issue One matter that received surprisingly little attention was the question of whether the trust could become liable to tax. As a charitable foundation, it qualified for tax exemption. However, there were two matters that could give rise to doubt. One was that its

221

KAVLI – AN INDUSTRIAL FAIRYTALE

awards were too low, which could lead to the conclusion that the foundation was a pro forma arrangement to avoid paying tax. When Hjorth took his seat on the board in 1981, he started a discussion about guidelines, and a significant increase was seen in awards during the 1980s. The move helped the trust to move beyond the tax threshold. This became a deliberate policy after 1985 based on the recommendations of Husebø and Wiig. On the other hand, the policy contained a potential source of conflict between the trust and some of the employees, who regarded this as a drain on the parent company’s capital. At that time, it was less accepted that Kavli’s main task was to fund charitable causes. The other threat was that the parent company and the trust were too closely linked. In brief, the trust could have become liable to tax if it had succumbed to the pressure to allow the managing director of the parent company to have a seat on the trust’s board of directors. In 1981, the Supreme Court concluded that J. E. Isbergs Trust in Oslo was in reality liable to tax, since its central purpose was to engage in business, and not charitable activities.44 This caused some concern. Åge Sundal from the Norwegian Directorate of Taxes concluded that the manner in which the Kavli Trust was structured and operated was very similar to how Isberg was run.45 In 1985, solicitor Rolf Husebø submitted a report that concluded that the trust was in the danger zone as regards tax, despite the increase in awards to charitable causes. He also demonstrated through a calculation that this activity would have to stop if the trust had to pay tax. Thus, my conclusion is that doubts can be raised as to whether O. Kavli and Knut Kavli’s Charitable Trust is a tax exempt institution as of today. The risk of having to pay tax will increase if the members of the board of the trust are recruited from O. Kavli’s management team.46

Everything has a beginning and an end. The last generation of Primula girls aimed at the Norwegian market.

222

It seems relevant to ask why the trust did not use this argument during the conflict, as the tax issue was in itself sufficient grounds to refuse the managing director a seat on the board. Arildsen points out that the board never made this an issue. As far he can remember, it was never raised by any of the bodies he met with. Dreyer and Hjorth confirm that they never pursued this argument in relation to the critical voices in the company.47 The issue was not seen as important enough to resolve the disagreements that existed.

Chapter 16

NEW HEAD OF THE GROUP Organisational changes After the conflict in 1993 had calmed down, efforts were made to determine the future direction of the company. It was important to deal with the organisational challenges that were behind the problems and to resolve them satisfactorily. The companies abroad were peaceful and the turbulent period in Bergen came to an end after 1993. However, it was still not an easy company to manage. Echoes of the conflict could still be felt in the corridors, at the same time as big workforce cutbacks had to be implemented to improve efficiency. One after the other, five managing directors – Gunnar Solheimsnes (1993–1994), John Ulvestad (1994–1996), Egil Riisnes (1996–1997), Wenche Kjølås (1997–1998) and Andre Patay (2001–2003) – came and went. In addition, Leif Stråtveit twice played the dual role of managing director of Kavli Holding and O. Kavli Bergen between 1998–2001 and 2003–2004. Thus, he was both group CEO and head of the Norwegian company. Developments in both the trust and the Group during the 1990s facilitated a more streamlined management system. Three important events occurred: the establishment of a separate holding company to head the Group, the development of a coordinated strategic plan, and the adoption of new statutes for the trust. Up until 1994, the Group had a very decentralised management model. This model would now be replaced by a model based on greater centralisation.1 The reorganisation was one of the most important and successful restructuring processes in Kavli’s history, and it played an important role in making the Group more efficient and professional. It was easy to change the organisational chart, but changing the company’s culture was a more long-term project. It continued as an informal structure in parallel with the formal organisation, a well-known phenomenon in many companies. The question is how functional this symbiosis was in practice?2 Turnover increased after plummeting in 1993. In Norway, the stagnation in sales volumes between 1987 and 1994 was replaced by strong growth that lasted until 1997. Increased sales formed the basis for a stronger strategic market position and improved profitability in the longer term. On the whole, the 1990s proved to be a fairly successful decade.

223

KAVLI – AN INDUSTRIAL FAIRYTALE

Background for a new management and ownership structure In the wake of the conflict in 1993–1994, something radical had to be done to establish an efficient management structure and remove the source of the conflicts. This was in line with the external advice that had been given. To achieve this, it was necessary to address the unclear management model and introduce overall strategic objectives. Thus, everyone would know where to go and how to get there. At the board meeting in December 1993, the trust put together a group that was to evaluate the management structure and draft a proposal for renewal. Reidar Lorentzen, who had joined the company as an external consultant, was assigned this task. He submitted a report in June 1994 that formed the basis for the reorganisation.3 In September 1994, the general meeting decided to split the Bergen company in two by transferring its assets and production equipment from the old company to a company that would concentrate exclusively on production. This company would still be called O. Kavli AS. Concurrently, it changed from being the parent company to a subsidiary.4 The new holding company, and therefore the parent company, was Kavli Holding AS. The holding company took over the trust’s role as the management of the Group. Both the former parent company and the Kavli Trust relinquished their authority and powers of attorney to the new holding company. The long-term disagreements from the 1980s until 1994 led to the formation of a new, clearer and more efficient management structure. The vast majority could live with this solution.

Now or never

Figure 16.1

Turnover of the Kavli Group in NOK million (2013 value) 1 400 1 200

Disagreements about whether power rested with the parent company or the trust had existed since Knut Kavli’s death in 1965. The disagreements sometimes had a paralysing effect. With the establishment of a spearhead for the Group, the most crucial strategic decisions had been moved from the ‘battle arena’ to a new body. The most important thing was to have clear lines of command that did not allow room for ambiguity. In addition, Kavli was also growing as an international group, and greater coordination was essential. The Group needed a separate professional corporate staff. At the same time, this satisfied the wishes of the companies abroad that none of the production companies would rule over the others. Furthermore, the minutes of the Group Council’s meeting in Bergen in June 1994 make it clear that the tax issue was important: The board believes that the risk of the trust’s tax position being raised is alone sufficient justification for establishing a holding company. If the trust becomes liable to tax, this will affect the entire Group.5

1 000 800 600 400 200 0 1975

1980

1985

1990

1995

2000

Sources: O. Kavli AS, Overviews of turnover 1975–1993. The Kavli Archives, Bergen and O. Kavli Holding AS, Corporate group accounts 1994–2000. The Kavli Archives, Bergen

224

The provisions of tax law could affect the very cornerstone on which the trust was built. It had been a tax-exempt institution since its foundation in 1962.6 The most important task was to prevent the trust from becoming liable to tax.7 In many ways, it was a matter of restructuring the Group while it was still possible to do so: ‘It was a case of now or never.’ 8

16: NEW HEAD OF THE GROUP

Organisation chart following restructuring of the Kavli Corporate Group, 1994.

O. Kavli and Knut Kavli’s Trust

O. Kavli Holding AS

O. Kavli AS Norge

O. Kavli AS Denmark

O. Kavli AB Sweden

Kavli Ltd. UK

Vestfold Flatbrødfabrikk AS

Kavli Holding is established A solution that all parties could live with was to establish a new company as the hub of the Group. This would also free the Kavli Trust from potential tax liability, since the new company ran the business operations, while the trust acted as the owner and as a charitable foundation. Equally important, this was a forward-looking and efficient model for an international group. O. Kavli Holding AS was formally established on 9 September 1994, and it can be regarded as operational from June 1995. The name was later changed to Kavli Holding AS. The trust was the owner of the holding company, which, in turn, became the owner of the other companies. Finn Bergesen jr. was appointed as the first managing director of the holding company, with Wenche Kjølås as finance director, in addition to Eva-Linda Titlestad as company secretary. In 1997, the latter was replaced by Vigdis Hamnes, who has since played a key role in the Group’s secretariat. The organisation was to be slim, competent and efficient. To prevent the contact between the subsidiary at Midtun and the holding company becoming too close, the holding company’s offices were on the 8th floor of C. Sundts gate 37 in Bergen city centre, while ‘Handelens og Sjøfartens Hus’ housed the Kavli Trust. Both of them have since moved to Midtun, as proximity was seen as more important than maintaining neutrality. The new company took over many of the tasks previously attended to by the trust. First and foremost, it was to exercise owner responsibility and oversee that the Group developed well. This included work on strategic plans and their implementation. It was to map synergies and ensure that they could be achieved. Furthermore, it was to set profit targets and oversee that the subsidiaries reached them.9 In its first year, the new company’s work was dominated by the fact that it was newly established as head of the Kavli Group and was responsible for entities that had previously enjoyed considerable autonomy. In the initial stage, joint reporting systems were established for the entities in order to ease budget and accounting processes. The coordination of the insurance policies of the Norwegian companies led to a significant financial gain.

Finn Bergesen jr. 1945–2012 Olav Jacob Dreyer’s successor in the trust and CEO of the Kavli Corporate Group 1995–1999.

225 15

KAVLI – AN INDUSTRIAL FAIRYTALE

However, the work that took most of the management team’s time and resources was the development of an overall strategic plan, in addition to the work of adapting the company culture to the new management structure. In its work on the strategy, there was one element that had to be addressed, namely to realise synergies through improved collaboration between the subsidiaries. It was a sensitive subject that concerned the decentralised management model, and it was met with local opposition from the companies within the Group. The reason for the lack of cooperation between the entities was that their national managements believed that little would be gained from tighter collaboration. They operated under different frameworks and market conditions, which actually meant there was a need for more specialisation rather than more coordination. It was the holding company’s responsibility to challenge these attitudes through the preparation of an overall strategic plan. Each company was challenged to state how it could contribute to realising synergies in specific areas. Thereafter, an overall plan was prepared for the Group as a whole.

Group strategy For the very first time, the management team had authored a complete, overall strategy for the whole Kavli Group. The holding company’s board would push this process through together with the management team. The chair of the board, Reidar Lorentzen, was proactive in this work. This was reflected in several memorandums he wrote in which he set the tone for the process.10 The first draft was presented in 1997. In many ways, it came at a sensitive time, since the company was in the middle of a generational shift in the management of three companies: the flatbread company in Vestfold and Kavli in Sweden and Denmark. In addition, this was just before large resources were invested in the Q-Meieriene dairies. Leif Stråtveit took over as CEO early in 1999, and was thus able to present the final strategic plan. The plan was approved by the board in October 1999, and in March 2000 a separate plan for improved coordination of exports was presented. They were extensive and comprehensive plans. Until then synergies had been identified through voluntary collaboration between the companies. The time was now right to place greater emphasis on finding joint solutions, even if there was opposition from some of the companies. The plans involved products, production, marketing, logo use and the introduction of new production technology. They represented a breakthrough for overall strategic thinking and a more centrally managed group.11

Contents of the strategy plan Leif Stråtveit was the CEO from 1999 to 2004. He concentrated on strategic issues.

226

Originally, Bergesen’s idea that the possibility of engaging in fish processing should be considered was accepted. When he retired, the idea was forgotten.12 One aspect of the strategic plan that made the plan acceptable to the subsidiaries was the emphasis on the positive aspects of decentralisation, for example proximity to staff, the distribution network and consumers.13 The board firmly believed that strong local roots and motivation had contributed to the positive results in recent years. The

16: NEW HEAD OF THE GROUP

companies’ workforces had developed their own identity and valuable competence.14 On the other hand, the plan stressed that minimal contact between the individual companies was a drawback. The task of Kavli Holding must be to create a position from which the company could use local knowledge to generate profits for the Group as a whole. Stråtveit started to supplement the companies’ profitability analyses with profitability analyses of the different products. In this way, improved financial control was attained. The analyses also provided comprehensive information for use when deciding which products should be focused on in future. They also helped to facilitate a speedier and more efficient phasing out of unprofitable products. They showed that several products barely produced a profit. Moreover, they revealed that 70 percent of the total profits came from one product alone – processed cheese. Ninety per cent of the profits came from just two products, processed cheese and the cordial drink Fun!15 Plans were also prepared to organise collaboration between the companies within product groups. The subsidiaries’ management teams were responsible for the running of their respective companies, but they were also given responsibility for collaborating on product development for the whole Group. This would make the exchange of knowledge and coordination easier than before.

Primula tastes good no matter what the situation is. These big posters are used to market Kavli’s products in the UK.

One, two or three cheese factories? The studies of profitability at product level had consequences. The analysis showed that it was a weakness to assess each company’s production separately instead of for the whole Group. In the 1990s, the Group had invested NOK 150 million in new production technology for the three cheese factories in Bergen, Gateshead and Stockholm,

227

KAVLI – AN INDUSTRIAL FAIRYTALE

despite the fact that production had not increased during the same period. As a result, the utilisation of capacity was low. If factors other than production capacity and profitability were not taken into consideration, Kavli could have managed just as well with two factories. The Swedes even claimed that all the processed cheese could be produced in Sweden without any significant increase in costs. However, the management decided to keep all the factories because of their proximity to the markets, brand recognition and agriculture policy considerations, especially with regard to tariff barriers on cheese.

Plummeting exports Ever since its first cheese exports in 1905, Kavli’s export activities had been the company’s flagship. Exports had now been falling strongly for 30 years. Consequently, the management team raised a new question: how should the Group run its export activities? 16 One problem was that the largest markets had fallen most and foreign sales volumes were halved between 1979 and 1993. In addition, exports did not just make a loss in some markets and for some products, they were also losing money overall. The question now was whether exports should be allowing to die a natural death or should attempts be made to reverse the situation? The coordination of exports became part of the new strategy. Kavli would focus on a limited number of profitable markets. The group management team advocated establishing a separate company that would be responsible for all exports. The company’s task would be to coordinate all exports in countries in which Kavli did not have production. Work on this plan began in March 2000, and Kay Evensen completed it Figure 16.2 in just one month. The aim of this strategy was to both increase Exports for O. Kavli AS 1978–1995 the volume of exports and to make export activities more costin NOK million (2013 value) efficient. This, in turn, would make exports profitable again.17 70

Long drawn-out implementation

Czechoslovakia Bahrain

Greece Japan Iceland Canada Australia USA

0 1978 1980

Other

1985

1990

1995

Source: O. Kavli AS, Export statistics 1970–1995. The Kavli Archives, Bergen

228

We have seen that, from the 1990s until spring 1994, the Bergen company experienced what can best be described as a period of unrest. Following this, the Group underwent a reorganisation in which the holding company took over many of the tasks of the trust. However, it still took a long time before the organisation managed to adapt to the new structure. The holding company had a long-term problem with the subsidiaries contacting members of the trust’s board instead of the parent company in connection with a number of issues. At the same time, the CEO argued that the board of the trust had a firmer grip on matters than was originally intended in the new plan. The inherited structure was so deeply embedded in the organisation that there was a culture of informal lines of command. Moreover, the group management team was small and did not

16: NEW HEAD OF THE GROUP

229

KAVLI – AN INDUSTRIAL FAIRYTALE

have enough experience to command the necessary authority.18 Upon his resignation in 1998–1999, Bergesen jr. spoke of what he saw as an imbalance between the formal and actual structure of the Group: Kavli was only partially prepared for changes … we have witnessed unnecessary opposition to O. Kavli Holding and to the implementation of our new structure and procedures … I do hope that we in the future will be more able to work as a team.19

Some employees in Bergen still believed that it was them who should have inherited the company. Despite things being more settled, Pål W. Lorentzen, the chair of the trust at that time, believed that this attitude would encumber the company culture for a while yet. On the other hand, he praises the employees for their commitment to the company and their willingness to inform management if they felt that this was necessary, thereby also giving credit to the unions and the working environment in the company.20

Revising the Trust’s role It was also widely agreed that the time was right to revise the statutes of the Kavli Trust. On demand from the board of the trust Reidar Lorentzen presented two memorandums on the issue in June 1998 and January 1999, respectively. He evaluated the composition of the board of the trust relative to the board of directors of the Holding company, the Group’s management structure, the competitive situation, framework conditions, the charitable activities and the tax position. This formed the basis for an important revision of the trust’s statutes in 2000.21 Finally, six years after the establishment of Kavli Holding it was possible to conclude that the restructuring process was producing positive results at most levels. This paved the way for the Kavli group as it exists today.

The Kavli Trust uses a heart in its marketing in Denmark.

230

Chapter 17

THE Q ADVENTURE A new market for milk? The Kavli Group’s founder, Olav Kavli, was an entrepreneur and a visionary adventurer. He bought dairies in Jæren and Sogn to produce his own cheese and other dairy products. The dairies were sold when the company went bankrupt in 1924. The establishment of the Q-Meieriene (dairies) marked a revival of Kavli’s involvement in the dairy industry. The challenges were many, and substantial financial losses were incurred before it became a success. The objective was not short-term maximum profit, but to penetrate an important market. The company wanted to increase volumes and achieve a better market position to increase profits in the long term. We know the firm from when it was first established – when imagination, persistence and a sense of adventure led to great challenges. In addition, the trust had long taken a long-term and cautious financial approach. Now that the group was ready to commit itself, it was practically debt free. The Q adventure began in 1996 when the Norwegian Parliament decided to take steps to facilitate profitable competition in the dairy industry. This was to take effect from 1 July 1997. It was part of a trend of breaking up public and semi-public monopolies and increasing competition.1 Milk sales, which had been regulated and monopolised since 1930, had a key role in this connection. Initially, the liberalisation paved the way for the reestablishment of the ‘sleeping’ cheese producer Synnøve Finden, a company that was first established in 1928. Cheese production was resumed in the company’s own dairies in Alvdal and Namsos in 1996. The company launched its own white cheese in September the same year and brown cheese the year after. The product range was later expanded to include several types of cheeses, butter and fruit juices.2 For Kavli, the road from the decision by the Norwegian Parliament in 1996 to real market access on competitive terms would take more than a decade. During the spring and summer of 1997, talks were held between Sverre Gjefsen, Director of Meieri1 in Gausdal, and Kavli. Gjefsen had purchased equipment belonging to Østlandsmeieriet dairy, which closed down in 1994, and he now needed investors to start a new venture. The dairy’s strategy was to focus on efficient milk production without unnecessary warehouse capacity, and to concentrate on low costs and fresh daily products. Finn Bergesen jr, group CEO from 1995 to 1998, held the initial talks with Gjefsen. In a memo, he concluded that this could be an interesting and forward-looking investment. He stressed in particular that, in the long term, it would be possible to secure supplies

231

KAVLI – AN INDUSTRIAL FAIRYTALE

Gausdal is a municipality in the County of Oppland, to the north of Lillehammer. The municipality is dominated by two valleys around the River Gausa where the villages of Segalstad bru and Follebu are situated. Follebu is also known for Aulestad Farm, which belonged to the famous Norwegian writer Bjørnstjerne Bjørnson.

of raw materials for processed cheese production without having to enter into tough negotiations with Tine. It could also open the door for the production of cream cheese, which had been discussed previously.3 The board of directors had discussed the possibility of Kavli becoming co-owner and using the dairy as a way of testing the milk market. This would put them in a better position to make the right choices in relation to ingredients and the product range. With limited initial involvement in the dairy industry, they would be able to decide later whether to commit more fully. Furthermore the increased number of products and higher turnover would give them greater negotiating power and facilitate access to the supermarket chains.4 Another dairy that captured the board’s interest was Jæren Gårdsmeieri (a farm dairy). It was established in September 1997, and started operations in February the following year with 35 stakeholders as owners. Trond Weiby was chair of the board. They struggled to raise sufficient capital, not to mention milk and distribution channels. As a result, Møller Finans stepped in as co-owner and investor. Following negotiations, the holding company’s board decided to negotiate with Meieri1 Gausdal first. The result was positive, and both the holding company’s and the trust’s board gave their blessing to Kavli holding becoming co-owner from June 1998. Gjefsen remained as managing director, co-owner and chair of the board. In 1999, Kavli bought 70 percent of the shares in the dairy.

Q-Meieriene established The obstacles turned out to be greater than originally anticipated in connection with the establishment of the two dairies, and they soon entered into a close partnership. In 2000, they decided to merge under one brand name in order to be perceived as a single entity. Kavli took over ownership of both companies under the name Q-Meieriene. They started operations in January 2001. They remained two separate limited liability companies, however. The director of Jæren Gårdsmeieri was Jan Bårdsvik. In 2000, Bent Myrdahl, who had extensive experience from the food industry, was hired as a consultant. He soon became head of operations, initially without a permanent job or fixed salary. In 2005, the two companies were at last fully merged. However, their competitor in the milk market was no small fry. At that time, Tine had around 16,000 milk suppliers and 6,000 employees. For 70 years, it had practically had a monopoly on several dairy products, and it was not willing to give up without a fight. The challenger was a small company that had started from scratch with a few milk suppliers and around 50 employees. This is how Myrdahl put it: It is not possible to describe in words how many obstacles Q-Meieriene has overcome to get to where the company is today.5

The opposition came mainly from the Norwegian Ministry of Agriculture, the farming organisations and Tine. The monopoly on milk sales to consumers was in practice introduced through a system of compulsory milk collection and a price equalisation tax in the early 1930s. The purpose of the equalisation tax was to prevent competition

232

17: THE Q ADVENTURE

and ensure that the same price was paid for milk. Now, the same tax and the same system was going to be used to promote competition. This was not an easy task, whether welcomed or not.6

Mobilisation When the proposal to take over ownership of both Jæren Gårdsmeieri and Gausdalmeieriet came up in 2000, it was clear that it no longer was a case of having a small listening post in the dairy industry, but that it involved a large-scale operation.7 Bert Jansson from the holding company’s board opposed the proposal. His argument was that it would be impossible to compete with the many large European producers that would flood the Norwegian market. He took yoghurt and milk packaging from several of the producers to a board meeting. After emptying the contents on the table, he asked the board whether they really thought they could compete with such giants.8 The argument was met with understanding, but, at the same time, the other board members believed that he took it for granted that the Norwegian dairy market would be similar to the Swedish one, with many foreign companies. This was not certain at all, and they could at least make sure they were established before foreign competitors made their appearance. This move would make it less lucrative for potential competitors to enter into the market. The investment was finally unanimously approved by the board of the trust, while one member of the holding company’s board voted against. Once the decision had been made, everyone stood behind it throughout the process. Even though he was initially against the investment, Jansson came to be an important and loyal supporter. On many occasions, he could have said ‘I told you so!’, but he never did. Instead, he cried with joy when things eventually went well.9

Gausdalsmeieriet dairy is located in Segelstad bru. The village is named after the bridge connecting the two parts of the municipality. The company was formerly known as Gausdal Ysteri (cheese factory).

233

Gausdal Dairy

Every day 5–7 lorries deliver finished products to terminals in Brumunddal, Molde, Ålesund, Trondheim and Oslo.

Things can go wrong even with new and modern machinery. That’s when the mechanic is important.

Dairy Manager Lillian Findalen is a Master of Analytical Chemistry. Her work experience includes substituting on a dairy farm, four years at Lillehammer cheese factory and several years at Q-Meieriene.

Packaging being prepared for production.

234

Most people say that Gausdalsmeieriet dairy is a good place to work. Despite the dairy’s age, new investments are made in production equipment and maintenance every year. There is no other dairy like it in Norway.

ausdalsmeieriet has employees from 11 nationalities, working in a unique building from the interwar years, which, in bygone days, was called Gaudsal Ysteri (Gausdal cheese factory). It was famous for its brown cheese. Today, brown cheese is long forgotten here. Lorries arrive every day with milk from approx. 120 suppliers. In a short space of time, it is turned into delicate dairy products. Fifteen million litres of milk are delivered to the dairy every year. The work force at Gausdalsmeieriet regards the great success of Skyr and Snjo as confirmation that they are doing a good job and they are very proud of that.

Veteran Britt Borgemoen’s working day starts at 6 a.m. She prepares the machines for the start-up of production at 7 a.m. sharp. She spends the rest of the day supervising, planning and problemsolving. No one knows the company better than Britt.

Former dairy farmer Ola Svendsrud now works fulltime as a dairy worker. Skyr is his speciality. Acid (skyris) is added to 8,000 litres of milk. After an eight-hour process, it is turned into 2,300 litres of Skyr. The residual whey is used as animal fodder. Ola likes his job.

Robert Eng began his career as manager of the warehouse and despatch department in 2005. He has an all-round background and now works as the dairy manager’s righthand man.

KAVLI – AN INDUSTRIAL FAIRYTALE

Jæren Gårdsmeieri is located in a modern industrial estate at Øksnevad in Klepp, Jæren. It was established in 1998 by more than 30 private investors as a pilot project that challenged Tine’s monopoly in the Norwegian dairy sector. To attract suppliers, the company offered 14 øre per litre more than its competitor, which was important as a ‘bait’. In the beginning, only a handful of people worked at the dairy. Kavli took over in 2000. The dairy has been extended many times since then.

Klepp is one of Norway’s most important agriculture municipalities, with 72 percent of the land being cultivated. Agriculture in Klepp is intensive and varied, and it produces a good financial return. As of 1 January 2012, the municipality had a population of 18,000.

236

Reidar Lorentzen, who was a keen supporter of the strategy, became chair of the board of Kavli Holding at the time Q was established and developed. It was an unconditional advantage that he and Bert Jansson, despite their disagreement on the issue, respected each other and collaborated well. The trust’s chair, Pål W. Lorentzen, also fully supported the strategy. As a lawyer, the latter was already familiar with the dairy industry. Leif Stråtveit, who was CEO at the time, was also much involved in the project. He points out that there was so much to do that the group management spent more time on Q than on the rest of the Group’s affairs. Thus, the investment had a high ‘opportunity cost’, since a large proportion of their time and resources were spent on seeing the project through satisfactorily. He put it as follows: It was hard being entrepreneur, challenger of a monopoly, politician, lawyer and business leader all rolled into one.10

It was both a disadvantage and an advantage that the road ahead largely went through unploughed ground. No one knew how big the commitment would come to be and how difficult it would be to see it through. If they had known in advance, the board would probably not have voted for it.11

External opposition What Reidar Lorentzen referred to as the ‘Trinity’ – Tine, the Norwegian Ministry of Agriculture and the Norwegian Farmers’ Union – were responsible for the biggest obstacles.12 Pål W. Lorentzen went so far as to call them three conspirators who were ‘almost mafia-like’. No one could have dreamed that they would be so opposed to the company’s establishment. At times, their opposition was so intense that it provided Kavli with the motivation it needed to continue.13 On the political front, competition

17: THE Q ADVENTURE

was probably desirable, but, in practice, there was little will to actually allow it, i.e. the politicians were unwilling to make decisions that would harm Tine or the farming organisations. Dairy operations were also subject to highly complex rules and regulations that the politicians did not have a full overview of.14 Here, we will look at the most challenging obstacles that had to be overcome. Firstly, the dairies had to have enough milk from their own suppliers. Dairy farmers affiliated to Tine usually had contracts with a period of notice of 12–15 months. In addition, they could only give notice of a transfer to another dairy on 1 October each year. This meant that it was hard to find suppliers. Meanwhile, deliveries had to be secured before Q could start selling milk.15 Moreover, it did not help that it had to fight to get Tine to fulfil its duty to deliver milk to competitors when they ran out, which they eventually had to do. Secondly, Tine removed the milk tanks from suppliers who transferred to the new dairies, since Tine owned them. Investments therefore had to be made in new tanks. This was both costly and time consuming. Thirdly, producers who transferred to the competing dairy were often frowned upon by the Norwegian Agriculture Cooperative, since they thereby contributed to breaking up the milk monopoly and helped to promote what was seen as ‘harmful’ competition. Fourthly, there were huge distribution problems. The Norwegian Agriculture Cooperative used its own channels for the distribution of fresh products to the supermarkets, which it did not allow Q-Meieriene to use. As a result, they were forced to find alternative distribution arrangements. As a small supplier, it was not easy to negotiate good distribution agreements with the big chains. A fifth problem was marketing. The new business did not have much of a capital base and could not afford a lot of marketing. Thus, it was difficult to get the products known in the market. The authorities also acted destructively in relation to the new company. The agriculture industry, and the dairy sector in particular, was and still is subject to stringent and complicated regulations, as well as subsidies and indirect taxes. When Q finally managed to overcome the problems relating to deliveries and distribution, it was often faced with obstacles from the authorities. The subsidies were based on Tine’s cost profile for the different products. As long as it could offer a complete product range and other companies only a limited one, the dairy giant could exploit the situation to its benefit. When Q developed new products, Tine presented new cost calculations to demonstrate that they were not eligible for subsidies. The calculations were approved by the Norwegian Ministry of Agriculture. For Tine, this was a zero sum game in which the subsidies were transferred to other products. They operated a system of cross-subsidiation. For the competitor, it meant that it did not get the subsidies it required to compete. Kavli experienced the fight as ‘playing monopoly with loaded dice’.16 Despite these difficulties, however, the new enterprise grew and became a large and serious challenger. However, it took three lawsuits against the state, 117 months of losses, and the mobilisation of substantial financial and legal expertise to get there.17 It was not until May 2007 that satisfactory framework conditions were in place. From then on, the profits rolled in.

237

JĂŚren GĂĽrdsmeieri

In the laboratory, samples are taken of everything that is produced.

The company is certainly well signposted.

3 4

Maintenance is crucial.

Production is fully automated and controlled from the control room.

238

Norway’s best agriculture areas are in the Jæren area. Its good soil and climatic conditions produce milk of extra high quality.

n April 2003, the new extension to Jæren Gårdsmeieri was formally opened. Minister of Agriculture Lars Sponheim opened what is now one of the largest dairies for drinking milk in Norway. The dairy was most recently extended in 2010, when a new building and refrigerated warehouse were added. More than 400 suppliers deliver milk to the dairy. Some of them are run as cooperatives, i.e. several farmers collaborate. Large 20,000-litre tanker lorries deliver to the dairy three times a day. It only takes 30 minutes to empty the tanks using the fully automated equipment. The largest suppliers have 100 milking cows. Along with Gausdalsmeieri, Jæren Gårdsmeieri processes 210,000 litres of milk a day. Most of it is turned into different varieties of drinking milk. One variety that is becoming more popular is semi-skimmed milk in 1.75-litre cartons. Special products for hotels, catering kitchens and North Sea catering are a growth area. To take advantage of the filling equipment, apple juice and orange juice are also produced using ingredients from Brazil and Florida, among other places.

Minister of Agriculture Lars Sponheim and Reidar Lorentzen at the opening at Klepp in 2003.

Karin Aamodt knows all the suppliers who deliver to Jæren Gårdsmeieri. She manages the producer service office.

Olaug Undheim is area production manager. Her working day starts with a ‘corridor meeting’ at 6 a.m., when the company’s key personnel meet to lay a plan for the day. Fifteen people work on Olaug’s shift from 6 a.m. to 2 p.m. They are replaced by the evening shift who work from 1.30 p.m. to 21.15 p.m. Most of them are women. Olaug has a lot of good things to say about her workplace. She believes the opportunity to work one’s way up through in the system is an advantage. It creates loyal employees and a good working environment, and it is a bonus that Q-products are winning a large share of the market. That makes people feel that they are part of a winning team.

KAVLI – AN INDUSTRIAL FAIRYTALE

Production waste is handled in a satisfactory manner. Akershus Miljøfôr, shown here collecting waste in Gausdal, is an Eco Lighthouse-certified company. It meets all the requirements relating to waste disposal.

Access to milk

Initially, Q wanted to focus on processed products, where profits are high. But shelf space is a must to gain access to these markets, and that is basically acquired through volume. It was therefore important to produce drinking milk. To secure deliveries they had to be attractive to the milk suppliers, and to achieve this they had to offer better terms and conditions than their competitor. Secondly, they had to have a significant number of big suppliers in the areas near the dairies if the collection of milk was to be profitable. They therefore focused exclusively on local deliveries, as well as on acquiring as many producers as possible to make it worth collecting the milk. To attract dairy farmers, they offered a producer price that was 20 øre per litre higher than Tine paid. Since most Figure 17.1 of the suppliers in the Jæren area operated on a large scale, Annual result before tax for Q-meieriene AS this had an effect. In Gausdal, where the farms were smaller, 1999–2010 it played a smaller role.18 As a result, Jæren became the main 40 area on which the new company concentrated. In this way, Q Result before tax in NOK million managed to acquire enough suppliers near its dairies. 20 Profit margin as a percentage A distribution network was another necessary prerequisite 0 for success. The idea was to establish contact with one or more –20 existing networks. This proved to be difficult, however, due to –40 fears that Q’s competitor would take counter-measures against –60 potential distributors. It was necessary, therefore, to find a –80 distributor that had a big market share and thereby market 2010 1999 2002 2004 2006 2008 power. On 11 September 2001, Norgesgruppen and Q-MeierSource: Q-Meieriene, Annual accounts 1999–2010, Bergen iene entered into a partnership agreement.19 After one month,

240

17: THE Q ADVENTURE

they were allowed to deliver to all the supermarkets in this group. It also functioned as a marketing measure. Moreover, the Norwegian Agriculture Cooperative’s negative attitude to giving other companies access to its distribution system led to it losing its monopoly, since Q found other channels to use. Another offensive measure was to sell milk one krone cheaper per litre than Tine. Six weeks after the agreement with Norgesgruppen had been signed, monthly production doubled from one to two thousand tonnes of milk. The agreement gave Q access to the market and a distribution network, although it had to pay a high price in the form of accepting the return of unsold products. The agreement was for one year. Norgesgruppen took it for granted that it would be renewed – without negotiation.20 Kavli now dared to invest even more, but capacity was a problem. During a four-month period in 2002 and 2003, Jæren Gårdsmeieri was extended, and it became one of the country’s most modern producers of drinking milk. The factory was built according to the principle that the product should be constantly in motion from the time it left the farm until it reached the dairy and then the consumer. This meant that the goal was zero storage and zero errors. This saved considerable storage costs, while fresh milk was guaranteed. This is how the dairy described it: The dairy is built on the principle that the product shall be constantly in motion until it reaches the consumer’s refrigerator ... The dairy ... is the only four-lane milk motorway in Norway ... the milk delivered to the dairy is delivered to the consumer market the same day as it arrives.21

According to the company, a small streamlined organisation with a strong emphasis on cost control and productivity has made Q-Meieriene approx. 30 percent more efficient than its competitor. It is also a prerequisite for surviving in the market.22

NOK 13 million from the government Lars Sponheim was Minister of Agriculture when the dairy in Jæren opened. He was photographed drinking from a carton of Q milk. This gave a very important signal. More importantly, in 2003 he allocated NOK 13 million for continued operations until the framework conditions were finally decided. This funding came during a stressful period with poor cash flow, and it also gave hope that acceptable framework conditions for the future would soon be in place.23 Of the ministers of agriculture to hold office during the company’s development, Sponheim was most positive to the establishment of the company. He sent out the best signals to bureaucrats, the parliament and the market. However, it was not always possible for him to carry out his intentions and plans, and, at times, his words proved louder than his deeds.24 One problem was that the politicians kept putting off fulfilling their promises about ensuring competition on genuinely equal terms. Group CEO Erik Volden, who was a central figure in the work on Q, points out that another minister of agriculture, Terje Riis Johansen, was probably equally important in relation to ensuring acceptable framework conditions. He at least showed that he had the ability to make important decisions.25 At the same time as Sponheim allocated funds, two reports were published on the market conditions for the sale of milk. They both concluded that Tine benefited from the existing regulations. For example, competitors had an extra capital cost

241 16

KAVLI – AN INDUSTRIAL FAIRYTALE

of around 30 øre per litre, while their suppliers had to pay an additional cost of 33 øre per litre. Cross-subsidisation of Tine’s products also put competitors at a marked disadvantage as regards costs.26 Two important factors enabled Kavli to get through to the politicians: 1) the company was owned by a charitable foundation, and 2) the management team was directly involved in liaising with the authorities. This created trust and had an impact that would probably have not been achieved if this task had been left to professional lobbyists.27

The Tine scandal of 2005

Despatch department team leader Thomas Mong is a colourful guy with a varied professional background, ranging from naval officer, service in Afghanistan, dietary economist, steward in international shipping to car salesman. He gets up at 4 a.m. every morning to get to work in good time before he starts at 6 a.m. He has to get everything ready before the day’s 30 trailers start arriving at the dairy at 6.30 a.m. It’s all about logistics. Ensuring that 25 packers do their job correctly is no easy task. 850 containers of fresh products leave the dairy every day. In principle, milk should only take one day from it arrives at the dairy until it is on the supermarket shelves in processed condition. This is what they mean by ‘fresh’.

242

Q was still a dwarf in the market for dairy products. It was difficult to see how its market share could be increased as long as its marketing budget was very limited. However, a lot of the marketing turned out to be completely free. In its eagerness to maintain its monopoly on the market, Q’s competitor pulled some stunts that discredited it in the eyes of consumers. In February 2005, the so-called Tine scandal came to the surface. The run-up to it was that Tine and supermarket chain Rema 1000 entered into an agreement in autumn 2004 for the delivery of milk and cheese in 2005. This meant that Synnøve Finden would be phased out as a supplier to Rema 1000. This resulted in outrage. ICA’s group CEO Einar Vatne showed Dag Swanstrøm, managing director of Synnøve Finden, a letter that revealed just how far Tine was willing to go to deny its competitor access to the supermarket shelves, offering the supermarkets discounts on specific products in return. The media learned about the letter, and the Norwegian Competition Authority carried out a dawn raid on Tine. Its Managing Director Jan Ove Holmen resigned immediately. The Norwegian Competition Authority concluded that it had used its ‘dominant position for the purpose of limiting competition’. As a result, it was fined NOK 45 million.28

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

The District Court found Tine not guilty in 2009. When Figure 17.2 the judgement was tried before the Court of Appeal the folTurnover for Q-Meieriene AS 1999–2011 lowing year, it was once again found guilty of having violated in NOK million (2011 value) the provision in the Norwegian Competition Act on unrea1 000 sonable exploitation of a dominant market position. However, 800 Tine was found not guilty of entering into a collaboration to 600 limit competition and of breaching the Norwegian Competition Act in relation to ICA. In other words, it was found not 400 guilty on two of three counts. It was still fined NOK 30 million, 200 however.29 0 The case was then brought before the Supreme Court, where Tine was finally acquitted by a majority vote in June 2011. Consequently, it did not have to pay the fine.30 It could Source: Q-Meieriene, annual accounts 1999–2010, Bergen therefore be argued that the dairy giant was too harshly judged by the media. However, the general public was left with the feeling that Tine was Goliath trying to push Synnøve Finden, in David’s role, out of the market. In the end the real punishment was not meted out by the courts, but by the consumers. Many reacted with outrage to what they saw as blackmailing. In the space of a few days, the dairy giant’s sales fell dramatically, while competitors saw an equivalent growth in demand for their products. Some supermarkets even advertised that they sold Q milk.31 The consequence was that they had managed to increase production twofold in the space of a few days. The shortage of milk and its competitor’s unwillingness to admit its mistakes made Q’s milk even more attractive. Afraid of allowing competitors onto the market, Tine had paved the way for them instead. It was truly an own-goal.

2011

17: THE Q ADVENTURE

The ‘Apple’ of the dairy market In order to win market shares, it is important to be perceived as a dynamic and consumer-oriented company with the focus on innovation. In this case, Q’s competitor had behaved like a big unwieldy elephant that demanded privileges. Myrdahl said on television that Q-Meieriene was the dairy industry’s equivalent to Apple.32 Its philosophy was innovation throughout the value chain.33 Its most important innovations were low-fat skimmed milk, cartons with screw tops, Skyr, Snjo and sour cream in tubes. However, it is questionable whether this paints a true picture. Tine has been very proactive as regards product innovation in recent years, although, taking the size of the company into consideration, it has been surpassed by its competitor. At the same time, Q-Meieriene’s emergence has led to the former monopoly concentrating more on its brand strategy, on innovation and productivity and, not least, on reputation-building.

Four lawsuits and four settlements Gausdalmeieriet sued the Ministry of Agriculture already in 1998 for the competition-distorting equalisation taxes that were imposed on dairies. They were intended as transfers to milk producers to even out the costs and prices of producing milk. Gausdalmeieriet believed that the tax had the opposite effect. The case resulted in a settle-

243

KAVLI – AN INDUSTRIAL FAIRYTALE

Figure 17.3

Figure 17.4

Market share of Q-Meieriene 2011 as a percentage

Q-Meierienes’ share of the turnover of the Kavli Group 2000–2011 in percentage terms

20 18 17 16 14 12 10 8 6 4 2 0

Volume Value

40 30 20 10 0

Flavour added milk

Sweet milk

Low-fat sour cream

Skyr/ yoghurt

2000

2002

2004

2006

2008

2011

Source: Kavli Holding AS, Annual report 2000–2011, Bergen

Source: AC Nielsen, Market research 2011

ment. Payment of the tax was postponed until a new settlement in practice resulted in part of the tax being waived.34 In 2001, Q-Meieriene sued Tine for underpayment of milk that was delivered to them. Jæren Gårdsmeieri had not received the quality supplement it was entitled to and the two dairies had been ordered to pay a tax they were not liable to. After a settlement was reached, Tine agreed to pay them NOK 1.1 million in compensation.35 When Kavli signed the contract to buy Gjefsen’s shares in Gausdalmeieriet, they agreed on a price of NOK 13,000 per share. The payment was to be made in instalments. However, the operating results were far worse than expected during the first few years. In addition, the board believed that the company’s strained liquidity situation was under-reported and it therefore withheld payment. The affair ended with Gjefsen’s resignation and a subsequent legal dispute. On the recommendation of Kavli’s lawyers, the parties agreed on a settlement that saw Kavli pay NOK 7.95 million in return for the case being dropped.36 This payment came on top of a huge deficit. However, the outcomes of the fourth lawsuit proved to be excellent for Kavli and Q-Meieriene.

Lawsuit against the government in 2006 The most important lawsuit was brought on 29 June 2006, when the law firm Thommessen Krefting Greve Lund issued a writ against the Ministry of Agriculture and Food on behalf of Q (Kavli). The case was to be heard by Oslo District Court. In Q’s opinion, the tax and subsidy arrangements in the dairy industry favoured Tine. It argued that the competition was so biased that it was not possible to challenge the dominant company in a genuinely competitive way. It demanded compensation in damages for the losses incurred as a result of discrimination by the authorities. The Q-dairies believed that invalid decisions were behind the unfair marketing of milk. In particular, they believed that the price equalisation tax had adversely affected them. The subsidy schemes based on Tine’s calculations led to manipulation of the system at the expense of Tine’s competitors.

244

17: THE Q ADVENTURE

central points of the framework conditions have been designed and practised on Tine’s terms, which in turn has resulted in unlawful and unfair treatment of Q-Meieriene.37

The law firm Mageli & Co. responded in October the same year on behalf of the government, requesting the court to find in its favour. The case was very complicated. However, Myrdahl, was well acquainted with the law and Q argued its case convincingly in a comprehensive 2,000-page document. The case was due to be heard in November 2007. The parties were very interested in reaching a solution, however. The Ministry of Agriculture was already in the middle of a legal dispute with Synnøve Finden. The situation improved greatly after Centre Party politician Svein Sundsbø became the chair of Finden’s board. People had confidence in him, and he knew the both the players in the market and the bureaucrats. He became the catalyst for a solution, according to Finn Jebsen, chair of Kavli’s board. In addition, Tine was willing to make important concessions to its competitors. Norwegian competition could be a good excuse for excluding competitors from abroad.38 Minister of Agriculture Terje Riis Johansen gave the go ahead for direct negotiations. It was not until the Government agreed to a significant redistribution of taxes and subsidies that the parties reached agreement. The outcome was ground-breaking for the

Bent Myrdahl Managing director and member of the board of Q-Meieriene since 2001.

245

KAVLI – AN INDUSTRIAL FAIRYTALE

The newspaper Aftenposten reported that 60 percent of the increase in Q’s turnover was due to its new product ‘Skyr’. Managing Director of Q, Bent Myrdahl (right) and Erik Volden, CEO of the owner company Kavli, are delighted with the sales success. Photo: Svein Erik Furulund Aftenposten, NTB Scanpix

Q-dairies. They could finally compete on reasonable terms. On 24 May, the Ministry of Agriculture and Food issued a press release under the heading ‘Ensuring Competition in the Dairy Industry’. The press release opened as follows: To ensure competition and restore calm in the dairy market, the government is giving Q-Meieriene and Synnøve Finden increased subsidies and reduced taxes. This amounts to NOK 60–65 million annually. ... Furthermore Q-Meieriene and Synnøve Finden ASA will receive an extra annual contribution of NOK 23 million for a period of four years.39

The ministry also reported that the tax and subsidy arrangements would be considerably simplified, which would be better for all parties. It is safe to say that the ministry chose to downplay the matter by focusing on its attempts to facilitate true competition in the dairy industry. For those who knew the ins and outs of the issue, this must have seemed like a highly simplified version of events. On 6 July, Oslo District Court announced that the parties had reached a settlement.40 However, it is worth noting that Q is still a net contributor to dairy transfers.

Skyr – the dairy industry’s Primula Following the settlement in 2007, it was possible to operate on competitive terms. New opportunities arose for both profits and innovative investments. Sales increased, and in 2012 Q milk’s share of the market was almost 18 percent. The Q-dairies produced 210,000 litres of milk in 2010, which was supplied by 530 dairy farms. On average, Gausdal’s suppliers had 20 cows while Jæren’s suppliers had more than 30 cows. Their turnover exceeded NOK 1 billion in 2012 with just 160

246

17: THE Q ADVENTURE

employees. This is the result of impressive productivity and the outsourcing of many services, for example transport and distribution. Primula was undoubtedly Kavli’s greatest production success, as Raketosten has been for Sweden and Fun cordial drink for Denmark. The company’s newest groundbreaking product is Skyr, which, for the Norwegian part of Kavli, is the most important product of all time after Primula. The history of Q-Skyr says a lot about Kavli’s innovation strategy and dynamism. The dairy cooperative in Iceland initially approached Tine to find out if they were interested in a partnership on yoghurt production. Tine declined the offer. The opportunity was therefore available to Kavli, and the Group did not hesitate. Production began in 2009, and it proved an almost immediate success. By 2010, it had captured half of the Norwegian low-fat yoghurt market. It is fat-free, sugar-free, tastes nice and fresh, and is rich in energy and filling. It is considered a good, healthy and simple light meal – especially by students. It was so successful that new milk suppliers had to be found. In 2012, sales reached NOK 130 million. In the same year, a type of curd was launched on the Norwegian market. It was a soft fresh cheese made from sour milk with added fruit. It was given the product name Q-Snjo. With its sour cream consistency and sweet and sour taste, the product is ideal both as a good dessert and as a light meal. Both Skyr and Snjo reflect Kavli’s focus on quality through developing its own products.

247

KAVLI – AN INDUSTRIAL FAIRYTALE

Biggest subsidiary The dairy investment, which started as a way for Kavli to take the temperature of the dairy market, had become the biggest company in the Kavli Group. The dramatic history of Q-Meieriene can fairly be described as a ground-breaking adventure, not entirely unlike the ones the Group’s founder, Olav Kavli, was involved in. Q’s turnover has been more than double that of any of the other subsidiaries since 2007. Furthermore, the Norwegian company has once again become the largest in the group, with more than 56 percent of the total turnover in 2012. It was the first time since the 1930s that the company’s domestic production had had such a dominant position. This development is not just due to the success of the dairy business, but also to the renewed success of processed cheese and the expansion of the product range, where HaPå spread is responsible a considerable volume. We can safely say that Q has been a fairy-tale success, not just for the Kavli Group, but also seen in relation to the history of the Norwegian dairy industry. Against all odds, Tine’s monopoly on milk sales has been broken by a company that started out as a dwarf in the market.

248

Chapter 18

STRATEGIC EXPANSION Expansion and development of the Group The first decade of the new millennium was a strong growth period for Kavli following the turbulent years of limited growth in the 1980s and 1990s. The sales volume doubled between 1994 and 2011, although most of the growth took place after 2001. While profits fell during the resource and capital-draining development of the Q-dairies, they have increased again in recent years. The challenges relating to the implementation of the new structure, manning levels and the company culture following the reorganisation in 1994 also continued for a period. Group development and expansion were central elements in the strategic plan adopted in July 1999. To develop the Group, the holding company had to be strengthened.1 In line with this plan, both the number of staff and their competence were increased. As part of the strategic plan, it was important to appoint executives with management and marketing expertise. It has become common practice to recruit senior executives from outside the Group.

New group management Surprisingly, no members of the current group management team or chairs of the board of the trust or holding company live in the Bergen area. In June 2006, Reidar Lorentzen resigned as chair of the parent company’s board after holding the position throughout the demanding restructuring process after 1994. He continued as a member of the board. Finn Jebsen, former CEO of the Orkla group, became the new chair. With his professionalism, Jebsen brought important management expertise to the group. Today, a seat on the board is attractive and the company can pick and choose among top business leaders.2 The Swedish subsidiary’s successful managing director Bert Jansson was initially sceptical about tight group control being exercised from Norway, and he believed that the Norwegians had little to teach others.3 The board agreed with many of his concerns. He was elected as a member of Kavli Holding’s board, where he was a valuable team player with his experience of operations. The other foreign subsidiaries also participated in the process and are now more integrated in the Group than ever before.4 Leif Stråtveit succeeded Finn Bergesen Jr. as CEO in 1999. Erik Volden later succeeded him, first as executive chair from 2004 and then as CEO from 2005. Both of them had a background in the food industry. They focused on group development, growth and a comprehensive strategy that included ambitious profit targets for the subsidiaries.

Finn Jebsen has been chair of the board of directors of Kavli Holding since 2006. Jebsen has 25 years’ experience from the Orkla Group, where he was group CEO. He is chair of the board of the Kongsberg Group, and is deputy chair of KLP and holds several directorships, for example in Norsk Hydro, A Wilhelmsen Management and the Berner Group.

249

KAVLI – AN INDUSTRIAL FAIRYTALE

Figure 18.1

Profit margin and turnover in NOK million (2013 value) for the Group 1994–2011 2 500

Turnover in fixed prices Profit margin

2 000

1 500

1 000

500

1994

2000

2005

–3

2011

The profit margin is the surplus before tax as a percentage of the turnover Source: Kavli Holding AS, Annual accounts 1994–2011, Bergen

Volden has been in charge during the recent strong period of growth. One of his most important achievements is the development of an expedient and efficient company culture based on competence and Kavli’s core values: ambition, a long-term perspective, improvement and cooperation. He stresses the following: Firstly, we have to make clear what we want – get it down on paper – and then execute it. We have to be clear that our ownership is unique, that we should be proud of it – and we are. The emphasis on preservation had to go. We had to concentrate on our values and move on as a group that is as independent of individuals as possible. Since we are a small company, we have to be smarter than our competitors. In 2005, we were good at producing new varieties of cheese. In 2012 we are also good at complex operations and marketing.5

At first, Volden and his colleagues focused on identifying the areas in which the company made money, and then concentrated on these areas. Then the management model was reviewed. The competence of the corporate staff team and the research department was raised, at the same time as they were significantly expanded. The internal information system, Movex, has been further developed. This helps to facilitate the coordination and management of key tasks, such as budgets, accounts, reporting and the information flow. Everyone had to be informed about what direction the group was heading in and how it would get there. Growth and increased profitability were to be achieved by focusing on core values, which in turn would result in more money being available for good causes.6 To get this values-based strategy down on paper for all employees to see, a booklet, “Vi i Kavli”, was introduced. The booklet presents the company’s ownership structure, objectives, values, management requirements and expectations in a clear way, and it contains information that every employee of the company should know.7 They have succeeded in building a professional organisation in which the board of the holding company has a more withdrawn and less visible role in day-to-day operations. All levels of the organisation have contributed to developing an expedient and positive company culture in which competence-raising has a central place. Kavli has become an attractive employer with highly qualified employees.

The employees – Kavli’s most important capital Erik Volden CEO of the Kavli Group since 2005. He is also chair of the board of O. Kavli AB Stockholm, O. Kavli AS Copenhagen, Kavli Ltd, Gateshead and Q-Meieriene.

250

Kavli has always stressed that its most important resource is its staff. Without success in its operations, a company cannot survive. In line with developments in the labour market, the group has never before focused as strongly on recruiting the right staff with the right skills. Extensive on-the-job training is given in the workplace and employees are encouraged to propose improvements. Surveys indicate that job satisfaction is on the rise, and sickness absence is stable or even decreasing. Identity building has produced positive results, and employees experience a sense of belonging with regard to both their workplace and the Group.

18: STRATEGIC EXPANSION

The conflict in 1993–1994 left scars that took a long time to heal. The general perception in the organisation is that the damage has now been repaired. Opportunities for employees to make a career for themselves within the Group have improved. The gap between employees and bosses is small. Productivity has increased strongly, partly due to the introduction of robots in production. Processed cheese production is technically challenging and the packing process was long very demanding. It was therefore necessary to automate the work in order to cut costs and to save workers having to do tiring routine work. The possibility of using robots in production was first considered in the 1990s. Unsurprisingly, it was the Swedes who pioneered the early transition to computer technology. All employees were offered a home computer in 1998 to enhance their skills. The first robot was introduced in Norway in 1999. It was a tube-packing machine that filled trays of tubes. The robot did the work of five workers.8 Sweden followed suit in 2000 and the UK in 2011, while the first one was installed at Jæren Gårdsmeieri (farm dairy) for Q-Meieriene in 2012 in connection with the production of Skyr. Automation has made employees very efficient operators.

Production Manager Dan Lindstrøm at the Älvsjö factory. He worked for the Scania Group for 18 years before starting his career in Kavli.

TPM In October 2003, Kavli Norway introduced Total Productivity Management (TPM) also called Total Productive Maintenance and Lean Management, which involves continuous improvements at all stages of the production process. Targets are set for development, non-conformities with plans are identified, and endeavours are made to find out how negative gaps can be filled through intelligent thinking and organisation. At the same time, emphasis is placed on cooperation between employees, who have been given more responsibility in the workplace. For example, groups have been established to submit proposals that will improve efficiency. TPM has gradually been introduced in more and more parts of the organisation.9 Core areas are warehouse management, and production and information flow. Big noticeboards showing production plans, current production, sickness absence, wastage, costs, and, in particular, non-conformities, have been erected in several of Kavli’s plants. More than 100 employees have completed the company’s own TPM training programme. The distance between workers and managers has decreased, and the latter have a more coordinating role. Openness and the working environment are given high priority. Rune Nyheim is currently responsible for these areas, after working his way up from assistant to factory worker to line manager and then factory manager.

251

KAVLI â&#x20AC;&#x201C; AN INDUSTRIAL FAIRYTALE

252

The international Kavli Family as of 2013.

18: STRATEGIC EXPANSION

Focus on expansion

Figure 18.2

Cooperation and expansion were seen as the key to improved Turnover according to country 2000–2011 results.10 Chair of the Group board, Finn Jebsen maintains that in NOK million the management’s work had to be done in a certain chronolog2 500 ical order. First, it was necessary to improve the coordination Other countries of the companies. Then it was necessary to focus on quality 2 000 at all levels of the organisation and, once that was in place, it 1 500 was important to grow. This would increase profitability and thereby the basis for charitable donations, while at the same 1 000 time improving job satisfaction and spreading a feeling of success among employees and in the organisation.11 500 Expansion has primarily taken place in relation to three 0 variables: increased sales in core areas, acquisitions and new 2002 2004 2006 2008 2011 2000 businesses. Most of the expansion has come from the investSource: Kavli Holding AS, Group, Annual report 2004–2011, Bergen ment in Q-Meieriene and the acquisition of companies. The sale of processed cheese has not increased as expected, but it is very profitable. From the end of the 1990s, the company was on the look-out for potential merger candidates, both at home and abroad.12 The management team considered several candidates, but only a few companies were acquired.13 One problem with having a trust as owner is that it is not possible to raise equity in the market by issuing shares. However, Kavli has had a large enough capital base, and thereby the financial muscle it has needed. At the same time, however, this has placed limitations on the size of possible merger candidates.

Kavli International From being responsible for more than 50 percent of the Group’s turnover before and after the Second World War, exports fell from the end of the 1950s and dropped to an almost insignificant level as the Group entered the new millennium.14 To exploit economies of scale, the management decided to coordinate exports. This resulted in the formation of Kavli International AS, which was established with just two employees in 2001. It was colocated with O. Kavli and Kavli Holding at Midtun. It coordinates exports of traditional products. The establishment of the company has led to a modest increase in foreign sales.15 The combined exports of Kavli products from all the production units still do not amount to more than five percent of the Group’s turnover during a normal year, however. Kavli is no longer a company with a huge export focus. Rather opposite, it now basically produces for domestic markets in the countries where it has production plants.16

Leif Kjær was managing director of Vestfold Flatbrødfabrik from 1984 to 1997. He was also a member of the board of O. Kavli Bergen from 1981 until 1992, and again in 1995.

253

KAVLI – AN INDUSTRIAL FAIRYTALE

Vestfold no longer part of Norway It is no exaggeration to say that Kavli Norge’s development has been impressive in the period leading up to 2013. The Norwegian operations have once again become the biggest in the Group due to the success of Q-Meieriene. As we have seen, strategic investments and dedicated work on reorganisation, restructuring and improvement of the company culture were important factors in this development. Figure 18.3 The company bought Vestfold Flatbrødfabrik (Korni) in 1984 after sixty years of collaboration. Korni subsequently Production development O. Kavli AS Norge bought the company Siba’s havrekjeks in Kristiansund. Siba 1970–2011 in tonnes is short for Si(vertsens) ba(kery)’s oatmeal biscuits. Produc6 000 tion was transferred to Barkåker. The range has been extended 5 000 to include rye biscuits, spelt biscuits and sea salt wholemeal buiscuits.17 In 1990, the company carried out substantial staff 4 000 cutbacks and it also spent a significant amount on product Processed development.18 3 000 cheese The focus on biscuits in the 1990s was a success, with pro2 000 duction more than doubling after the turn of the millennium. However, the good results could not compensate for the fall in Bread 1 000 the production of crispbread and flatbread, which was halved Crackers Caviar in the period from 2000 to 2011. Profits fell and, in September 0 1970 1980 1990 2000 2011 2012, the board of Kavli Holding decided to transfer producBread = crispbreads and flatbread. Source: Production statistics for Vestfold tion from Vestfold in Norway to Germany and Latvia during Flatbrødfabrikk 1970–2011 and Production statistics for O. Kavli AS 1970–2011 2013.

254

Vestfold Flatbrødfabrikk The brand name Korni stems from 1947. The war was over and things were returning to normal. Vestfold Flatbrødfabrik now had access to ingredients and was going to launch a new product. What should it be called? A competition was announced and the winning name was Korni (corn in). The recipe has remained the same ever since: rye, sugar, salt and water. The yellow and blue packs of flatbread have featured on many Norwegian dining tables since then, although they have become less common in recent years. Younger people probably associate the rectangular flatbread with their grandparents’ generation. The new eating habits in Norway do not include flatbread to the same extent as before. Exports amount to approx. 30 percent of output, but have also fallen in recent years. New varieties of products and flavours have been tried through the years, some successful, others not. The number of employees has also been significantly reduced in step with the decline in production. Now it is over, and the staff of 30 will have to find new jobs. The factory at Barkåker has been put up for sale. However, the products will continue to be sold. The biscuits are now baked by Laima in Riga, Latvia and flatbread and crackers by Brandt in Hannover.

1 2 3

Engineer (sivilingeniør) Terje Uteng, the last manager at Barkåker. Biscuits have accounted for 22 percent of production in recent years.

Anette Lilleås has been a key figure in the company for many years. Her colleagues say that what Anette doesn’t know isn’t worth knowing. Working three shifts has been hard, but also challenging, she says.

TPM Coordinator Dag Henning Fjeld has worked for Vestfold Flatbrødfabrik twice – for 25 years in all. He oversees the workflow. He confirms that Korni has been a good place to work.

255

KAVLI – AN INDUSTRIAL FAIRYTALE

Kavli Norway

Jon Martin Klafstad Managing director of Kavli Norway 2010–2012.  Frode Eide has worked for Kavli in Bergen for 35 years, first at Damsgård and later at Midtun. He is regarded as a veteran in the ‘Kavli family’.

256

The strong expansion in Norway did not start until the emergence of Q-Meieriene in 1997–1998. Along with the increase in milk sales, the production of processed cheese in Norway has increased by more than 50 percent since 2000. It is now back at its former peak level from the end of the 1960s. Productivity has improved significantly during the last 15 years after painful staff cutbacks in the 1990s.19 As regards caviar, it has been a struggle to stay in second place behind Mills. The company has managed to do despite being threatened by cheaper brands. In autumn 2012, Kavli caviar, the original caviar spread from 1917, was taken off the shelves of Rema 1000 supermarkets and replaced by newer brands along with the traditional market leader, Mills caviar, which it advertised as ‘the original’ from 1952. Strictly speaking, they are 35 years off the mark! The Norwegian production units were gathered in one company, Kavli Norway, in 2003. This made it easier to control and to manage operations. The management was located at Midtun, and it was to a large extent coordinated with the holding company. The group CEO also acted as managing director for the new unit, which now has two subsidiaries. One of them is O. Kavli in Bergen, which is responsible for the day-to-day production of processed cheese, caviar and other traditional products. The other subsidiary is Q-Meieriene, which has now become the bigger of the two.20 In June 2010, Jon Martin Klafstad was appointed managing director of Kavli Norway

18: STRATEGIC EXPANSION

◄ From one of the production lines at Midtun. ▼ Hamar Pålegg, best known as HaPå, consists of condensed milk, sugar, salt and citric acid. Production was taken over by Kavli after 7,000 consumers protested on Facebook against Nestlé closing down production in Hamar. Since 2010, HaPå has been made on a new production line at Midtun. The product has also been given a new logo and design, and 250 tonnes are produced annually. The ‘cult product’ pineapple HaPå is now also back on the market for the first time in over 20 years.

after holding senior positions in Rema 1000, Orkla and Procordia Food in Sweden. The CEO could thereby concentrate more on running the Group, at the same time as this shift increased the focus on Norway as a more independent unit. Klafstad returned to Rema in 2012, but commented that few companies provide as many opportunities to be creative as Kavli.21In April 2009, Kavli took over HaPå (Hamar sandwich spread) from Nestlé. This happened after the factory in Hamar had been closed for three months. Production was moved to Bergen, where there was available capacity. Today, they produce 300 tonnes annually. This sandwich spread was commercially produced for the first time in 1949 at the initiative of housewives, who made the spread from boiling sweetened condensed milk during the Second World War. However, its origins date even further back, as sweetened boiled milk has been consumed by Norwegians since before 1800. Volden believed that the investment suited Kavli’s portfolio. HaPå is a national symbol, and it has been a popular product on just about every dining table in Norway.22

257 17

O. Kavli AS, Midtun

1 2 3 4

The production at Midtun is mostly done by robots. Large quantities have to be stacked on the right racks. The production lists are scanned and checked. Are the figures correct?

258

Kavli’s factory at Midtun, approx. 10 km south of Bergen city centre, was opened in 1984. A good working environment was created in the custom-built premises.

heese in tubes, cheese in tubs, cheese slices, mayonnaise, caviar and HaPå spread are produced at Midtun. Cheese is a ‘living’ ingredient and has to be handled with care. The building is horseshoe-shaped: ingredients come in at one end and the finished products go out the other. It takes 12 days from the melting process starts until the finished products are in the shops. Bacon Cheese is the most sold product, followed by Ham Cheese and Prawn Cheese; 2,000 tonnes of cheese in tubes are produced every year compared to 900 tonnes of cheese in boxes. There are large amounts of ingredients in the warehouse at all times, including a month’s supply of cheese (100 tonnes). In addition, warehouse space is rented from Tine, which is the main supplier of raw milk cheese. 3,500 tonnes of cod roe (1 year’s supply) is stored for nine months to mature before oil, sugar and tomato puree can be added to turn it into caviar spread. The workforce at Midtun rotates between tasks. Caviar and HaPå, for example, are only produced two or three days a week.

Roy Eide is a qualified dairy technician, which is a rare occupation in Norway. Before becoming factory manager, he was production manager for seven years.

F.45 cheese arrives at the factory in 10 kilo blocks. It is produced by Tine’s dairies at Klepp and Hå in Rogaland and Storsteinnes in Troms. Suppliers affiliated to the Q system can deliver milk to Tine, which in turn produces the cheese, which is then delivered to Kavli.

Midtun has state-of-the-art production equipment.

259

KAVLI – AN INDUSTRIAL FAIRYTALE

Large quantities of bottles are needed for a day’s production in Ringkøbing.

Finn Høy Houengaard was appointed managing director of Kavli Denmark in 2006.

Mulled wine in Denmark The Danish town of Ringkøbing in West Jutland is the largest town in the municipality of RingkøbingSkjern. (approx. 10,000 inhabitants). It is regarded as one of the best-preserved towns in Denmark.

260

Hans Theis Westermann, the Danish managing director, became a central figure in the group and an important supporter of the board of the trust, as he gradually developed a good and loyal relationship with Olav Jacob Dreyer.23 His resignation caused some unrest in the management team. Henrik Potts took over in November 1998. He was in turn succeeded by Peter Bo Rützou in February 2002. The latter had been in charge of the retail sector for Nestlé in Denmark. Finn Høy Houengaard succeeded him in February 2006. The Danish company had bottled Fun cordial drink at Blomberg’s for several years. The latter company wanted to wind up its bottling business. Kavli therefore needed bottling capacity. It ended up with Kavli Denmark buying out Blomberg in 2003, and a new bottling plant being built in Hvidovre, in south-western Copenhagen.24 The Danish company became a producer of mulled wine, which was made according to a recipe from the 1800s. It was originally a heated liquor with a reduced alcohol content, which was believed to have a preventive health and medicinal effect when herbs and spices were added to it. For example, it was said to help to cure the common cold.25 Production was moved to the Pebas factory in Ringkøbing in West Jutland in 2009. Blomberg has the largest market share in the Danish market, with Luksus and Merlot mulled wine being the most important products. Gløgg Extrakt (mulled wine extract) and Gløgg Mix (mulled wine mix), a mix with almonds and raisins, are also popular.26 However, the acquisition of Blomberg was still not enough to reverse the trend of plummeting sales and profits in Denmark that began in the early 2000s.

Kavli Denmark, Ringkøbing The Pebas cordial drink factory was established in 1973 in Ringkøbing in Jutland. The company was taken over by Kavli in 2008, which relocated its beverage production to Pebas from Hvidovre near Copenhagen. The factory has been refurbished and modernised. Its production system is similar to dairy technology. Using fruit juices, cordial concentrates and dry chemicals that arrive at the factory in large oil drums, the ingredients are mixed together based on various recipes. They are then bottled in different sizes. The ingredients, from a number of European countries, are purchased through agents. Approx. two-thirds of the output is sold in Denmark, under both brand names and private labels. The rest are exported to countries in Northern and Central Europe. The company’s brand names are Kavli Fruit Drink, Fun Grønne Gaarden (organic), Scoop and Blombergs gløgg (mulled wine) in different varieties, e.g. with and without alcohol. This mulled wine has approx. 60 percent of the Danish market. Production takes place in accordance with the most stringent hygiene standards. The company has regular contact with the food inspection authority and has to submit reports to confirm that the organic products are pure. The company in Ringkøbing has a flat structure with approx. 45 permanent employees. Seasonal help comes on top, as production doubles in summer.

Factory Manager Tony Jensen is originally from the Esbjerg area. He followed Kavli when the company moved from Hvidovre after buying Pebas in Ringkøbing in 2008. He has a background from the dairy industry. Jensen has been at the forefront of the work of turning the factory into a proper Kavli company.

Dorte Jensen is a real veteran. She has been in charge of exports and has worked on many contracts with international customers. Pebas products gradually gained great popularity in several European countries. Among the biggest consumers are the Netto chain in Germany and ICA in Sweden.

Jørn Rindom is a ‘local boy’ who has worked for the company since 1977. When he first started, there were only a handful of men and, like the others, Jørn had to turn his hand to everything. He has been warehouse manager for more than 30 years and has full control of the outgoing products.

261

KAVLI – AN INDUSTRIAL FAIRYTALE

Kavli is clearly a part of everyday life in Denmark.

Pebas A critical change came about when Kavli bought Pebas AS in September 2008.27 The name is a contraction of the name of the company’s founder, Poul Erik Bæk. When he formed the limited company, he took his initials and added AS at the end (as in ‘aksjeselskap’, which means limited liability company), and ended up with Pebas. The company dates back to 1973, when Bæk acquired the right to market soda water machines. More than half a million machines were sold in Denmark during a 15-year period, and in 1985 the company entered the hotel, restaurant and catering segment, selling imported juice coolers, mineral water installation and slush machines. The company also produces its own beverage concentrates. The next step, in 1993, was to focus on exports.28 Today, they account for 30 percent of turnover. Pebas now primarily focuses on fruit-based concentrates as a basis for cordials, slush, fizzy mineral water, fizzy soft drinks and alcoholic drinks. They are sold under the Kavli brand and also under private labels. Kavli and Pebas merged in 2009 under Houengaard’s leadership. The production was located in Ringkøbing, while some sales and administration functions remained in Copenhagen. The company has 85 employees.29 This acquisition enabled Kavli Denmark to survive a critical situation and double its turnover, and it was crucial to Kavli Denmark’s continued operation.

262

18: STRATEGIC EXPANSION

Large quantities leave the Älvsjö factory every day. At least 15 big lorries a day arrive to pick up products for distribution all over Sweden. So it’s important to watch what you are doing.

Sweden Bo Lundquist succeeded Bert Jansson in Sweden in 1998. He focused less on product innovation and more on winning market shares and promoting popular products. TV commercials were introduced in 2000. By becoming the largest or second largest company in its segment, it would be far easier for it to gain access to the supermarket shelves. This strategy won support throughout the Group. The chains are almost always interested in giving shelf space to the two most popular products – the others can be excluded.30 By focusing on this strategy, the Swedish company achieved high and stable profitability after the turn of the millennium. Sales volumes remained high, although the relative importance of products changed. Sales of caviar spread and products outside the core area fell, while processed cheese and mayonnaise gained in popularity. Sickness absence fell to 1.8 percent in 2009 and the Swedish company scored highest in employee satisfaction surveys for many years. This was also reflected in the moderate staff turnover figures. In 2010, Lundquist was succeeded as managing director by Gerherd Bley, who had professional experience from the food industry. Today, the focus is once again more on product innovation. In autumn 2011, Skyr was launched on the Swedish market and the company bought two other businesses.

Bo Lundquist was managing director of Kavli Sweden 1998–2010.

Druvan In the 1870s, Dr Per Håkansson travelled to Germany to study how they made vinegar essence. The substance arises when different types of alcoholic liquids are fermented. Fermentation takes place when acetic acid bacteria have a good supply of oxygen. Håkansson learned that the chemical could have medicinal, health and taste-related benefits. Since demand for vinegar was increasing, he decided to start producing biological vinegar in Eslöv in Skåne in 1874.31 Production is still carried out there today. Since grapes were the most important ingredient in the production process, the company was called Druvan (Swedish for

263

Kavli, Ă&#x201E;lvsjĂś

Kavli Mildost (mild cheese), formerly Primula, is the classic product. It still has a large market

Ali adds parsley to matured cheese (blue cheese). It tastes good on ginger biscuits and is exported to Norway. The ingredients come from the dairy giant Arla.

Product development is managed by Mia. She is known for her infectious good humour, which is much appreciated by her colleagues.

Jimmy packs cheese in modules, large cardboard boxes containing six different products that are given a prominent place in the supermarkets.

264

Kavli’s factory in Älvsjö (12,000 sq. m) is located just 700 m from Älvsjö railway station. It was opened in style on 5 September 1992.

n addition to different varieties of processed cheese, the factory in Älvsjö produces dessert cheeses, mayonnaise, dressings, dips and a number of sauces. Kavli AB gets its caviar from the Norwegian factory in Bergen. Approx. 50 employees work in production in a three-shift system from five a.m. to ten p.m. In addition, 50 other employees work in marketing, finance, administration, product development and maintenance. Approx. 20 percent of the workforce are from an immigrant background.

Warehouse Manager Jørgen Månsson has worked for Kavli since 2003. He is responsible for both incoming and outgoing products. There are always hundreds of different products in the warehouse, which should be sold within the space of a month. 70 percent of the products are collected from the pallet warehouse and 30 percent from the picking warehouse.

Director of Production Dan Lindstrøm and union leader Fernando Gonzales. They both believe the factory enjoys good labour relations. The company’s management team and the union meet approx. every two weeks to discuss relevant issues.

Rosa Bruns deserves her nickname of ‘Mother Kavli’ at the factory in Älvsjö. She was born and brought up in Peru, but has lived in Sweden since 1977. That was also when she first started working for the company, first in the evenings and then as a seasonal worker. She has been permanently employed since 1983. She is currently the second oldest person in the production department. Her first job was as a ‘picker’. She had to remove the finished products from the conveyor belt and then carry them to the cheese line. During her first year with the company, there were four permanent employees on this production line while a fifth employee helped to fill the boxes. This process is now fully automated. In 2013, Rosa allocates tasks among the staff. This position is called ‘the head person’.

265

Kavli, EslĂśv

Druvan is Swedenâ&#x20AC;&#x2122;s largest mustard factory, which is reflected in the size of the premises.

Susanne HĂĽkansson (Sussi) began her career at Druvan in 1977, so she can safely be called a veteran. She works in finance and production planning, and is responsible for catering customers.

In the laboratory, Eva ensures that everything is analysed and approved.

Hygiene requirements are high and all employees are dressed in accordance with strict standards. After extensive rationalisation in recent years, the need for manual labour has been significantly reduced.

266

Vinegar is made from grapes etc. (Druva is Swedish for grape, therefore the brand name).

inegar is also the main ingredient in Druvan’s product range: vinegar varieties and essences, mustard, ketchup, mayonnaise and sauces etc. The company also imports various dry foods marketed under its own label. Mustard is the main product made at Eslöv. Of the total annual production volume of 14,000 tonnes, 6,000 tonnes is mustard. Most of the varieties of mustard do not contain preservatives today. The mustard is marketed under 40 different names, both own brands and private labels. ICA, Coop, Lidl and IKEA are large customers. If you buy a hot dog at IKEA, no matter where in the world you are, the mustard will be from Druvan. Work starts at 6.30 a.m. and continues until 1 a.m. The company has 70 employees: 35 in production, 15 in the maintenance department and 20 in the office. The factory is in exactly the same location as when Per Håkansson founded the company in 1874. Each year, donations of up to SEK 1.5 million are made to medical research on behalf of the P. Håkansson Foundation.

Production Director Johnny Strømberg in front of the old oak vats from the 1800s, which are still in use. The vats have a volume of 250,000 litres each. Pure ethanol (96 percent alcohol) is stored in them. Bacteria are added to produce biological vinegar. A pungent vinegar odour that stays in your nose hangs over the factory area.

Dr. P. Håkansson and Salubrin At the end of the 1890s, Doctor Per Håkansson travelled to Germany to see for himself how they produced acetic acid. He started his own vinegar factory in 1874 in the small town of Eslöv, not far from where he came from in Skåne. It was the start of what is now called Druvan. Håkansson experimented with different recipes and came to the conclusion that acetic acid could cure tuberculosis. In 1893 he launched the Salubin brand, a vinegar preparation for medicinal use. It did not cure tuberculosis, but it had many other qualities and became a gold mine for Håkansson and the company. In 2000, Druvan sold the Salubrin brand name to a cosmetics company in Hardford, and it is still sold all over Sweden. Per Håkansson died in 1918 without lineal heirs. Before he died, he established a foundation that would continue to run the vinegar factory and donate money to medical research in addition to an old people’s home in Eslöv. It was the P. Håkansson Foundation that sold Druvan to Kavli in 2011, through the operating company PersFood AB.

Børge Dalsved had an all-round background before starting at Druvan in 1988. As a dairy technician, he helped to build up yoghurt dairies in Israel, Egypt and Saudi Arabia. Today, Børge is Druvan’s ‘mustard expert’. He has full control over the production process.

Johnny’s mustard is Druvan’s best known product. It is sold throughout Sweden. Different regions have their own specialities. Västervik mustard is popular in Central Sweden and Hultbergs mustard in Skåne. Johnny’s mustard cannot be exported to Denmark under that name, because the expression ‘Johnny’ means a slightly retarded person in Denmark.

KAVLI – AN INDUSTRIAL FAIRYTALE

Figure 18.4

Market share of products from Kavli Sweden 1998–2010 90 80

Cheese spread

Dressings in a tube

60 50

Mayonnaise

40 30 20

Salad dressings

10 0 1998

2002

2006

2010

Source: Market research. The Kavli Archives, Stockholm

‘the grape’). Håkansson decided that the profits would be used for research on food and health. He therefore established Dr P. Håkansson’s Foundation in 1919, which became the owner of the company. Today, it makes two of Sweden’s most popular mustards: Johnny’s and Hultbergs, in addition to sauces, dressings, rapeseed oil, soya, relish, pickled vegetables, cereals and pasta. Kavli had looked at Druvan a number of times, and the company was its first choice for acquisition. When the acquisition finally took place in 2011, the company was market leader in a number of areas. It had 90 employees and a turnover of more than SEK 200 million. With a total turnover of more than NOK 600 million in the year Druvan was acquired, Kavli in Sweden could now confirm its position as the second biggest company in the Kavli Group.32 Druvan still continues to produce at the existing plant in Eslöv. The chair of Dr P. Håkansson’s Foundation, Paul Histrup, concluded that the merger was beneficial: Our evaluation is that Kavli is better equipped to strengthen and develop Druvan in the long term. At the same time, the Foundation will have more resources at its disposal to pursue its goals in medical research.33

In February 2012, the Group bought two Swedish yoghurt brands, Tiger and Bärry, from Milko/Arla. They are well-known and market leaders in their niches. Together with the launching of Skyr, Kavli was thereby closer to gaining a foothold in the Swedish dairy product market. Kavli bought the brands following the merger of Arla and Milko in autumn 2011, when the Swedish Competition Authority demanded that parts of the enterprise be sold to other owners to prevent the merged company from becoming too dominant in the market. Kavli does not produce the yoghurt itself, but hires capacity from Milko/Arla.34 Gerhard Bley was appointed managing director of Kavli Sweden in 2010.

Some of the varieties of Druvan’s vinegar products.

268

18: STRATEGIC EXPANSION

Welcome to Castle MacLellan.

UK – Castle MacLellan Queen Elizabeth II visited The British subsidiary became involved in a new success story through the acquisition Castle MacLellan in 2009. of the Scottish pâté producer Castle MacLellan Foods Limited. Management had looked She was welcomed by Elaine at the company back in 1994 to find out whether it had potential. Director Peter Bone McConnell and Paul Lewney. and Olav Jacob Dreyer inspected the factory and negotiated with the owners. They 35 concluded that it would be too costly. However, Castle MacLellan needed capital and a new contract was drawn up. A decision was quickly reached, and Kavli became the owner in 1997. The company’s early history was not unlike Kavli’s. In September 1977, Sarah and Jim Carswell moved from Glasgow to Kirkcudbright in south-west Scotland, where they opened a popular delicatessen. They used surplus products to Figure 18.5 make sandwiches for schoolchildren and pâtés that Sarah made and sold in the shop. The reputation of the pâté spread fast Turnover and operation result for and orders started coming in from businesses and catering Castle MacLellan Foods Ltd 1997–2010 in GBP companies.36Colin Warden, who worked in fish processing, was 9 mill. 400 000 brought in as a partner. In 1981, they decided to start making 8 mill. 350 000 pâté on the side. They borrowed GBP 6,000 for equipment and 7 mill. 300 000 6 mill. rented premises from West Coast Sea Products, where they 250 000 5 mill. made pâté every morning before going to work. In 1982, they 200 000 4 mill. entered into an agreement with delicatessen wholesaler Kent 150 000 3 mill. Food to supply the Safeway and Waitrose supermarket chains. 100 000 2 mill. They recruited Elaine McConnell as an assistant the same year. Turnover 50 000 1 mill. Operation result She later became the manager.37 Carswell became head of pro0 0 1997 2000 2005 2010 duction and Warden became the sales director. Left axis: Turnover. Right axis: Operation result. Source: Castle MacLellan Their products soon went nationwide. They also started Foods Ltd, Annual accounts 1997–2010. The Kavli Archives, Gateshead 38 making soups, sausages and pies. The expansion led to the

269

Kavli Limited

Primula boxes all in a row – 4,800 boxes are produced per hour at the Team Valley factory. The boxes are now made of plastic. Production of the old boxes stopped in 1978. The tube machine produces 7,200 units per hour. Today, sales of cheese in tubes are 50 percent higher than of cheese in boxes.

Rob Thurgood and Mickey Maddison. Like many of his colleagues, Mickey has also worked his way up from the ‘shop floor’ and is now product manager.

Dip is also produced in addition to a diverse range of processed cheeses. It consists of a cheese mass with added vinegar and oils and is sold in individual packs with thin crackers.

Large quantities are always ready to leave the factory.

270

Paul Lewney has been managing director of Kavli Limited since 2008.

Paul Pendleton is the current factory manager at Team Valley.

Kavli’s Team Valley factory currently employs approx. 80 people working a two-shift system. In addition, there is what is called the ‘hygiene shift’ when the production premises are cleaned every night between ten p.m. and six a.m. Hence, there are people in the factory 24 hours a day. Production stops every Friday at approx. twelve p.m. and everything is cleaned and closed down until two p.m. There is not normally any production at weekends. The cheese used in production is primarily from Germany. The company’s management team is in continuous contact with cheese brokers who submit offers. To secure a stable supply of cheese, Kavli likes to purchase enough cheese for three months’ production. Even though it is stored in a cool and dry place, it should not be stored for long. The cheese is stored in two different warehouses on the factory’s ground floor. The ingredients that are added to the cheese – milk proteins, salt, tomato powder, spices, flavour enhancing acids and other chemicals – are also stored there. The ingredients are mixed together in large steel pans according to a recipe and are heated to just under 100 degrees. This is a computercontrolled process. Following the production and filling process, the packaged products pass through a cooling spiral, which cools the product from 85 to 5 degrees in an hour. The next stage consists of packing the products in cardboard boxes for distribution.

Ken Forster worked for Kavli for 44 years. Like most of his generation, he worked his way up through the system from store hand to manager of flatbread production. He has literally earned his living from flatbread his entire life and he even invented a flatbread machine. After production was closed down at Team Valley, it was transferred to Norway. Ken was 19 years old when he first started working for Kavli. He got the job through a friend who also worked at the factory. That’s how it was then. After a few years, his mother, father, two brothers-in-law and an aunt also worked for Kavli. ‘We were a real “Primula family”’, says Ken. If you were an honest person and could operate a machine, opportunities were available. The main ingredient was rye. Then various flavourings, spices, cheese etc. were added. At one time, a ‘chocolate sandwich’ was produced. It was not a success, however and nor was dog food production. Kavli’s flatbread products were marketed under the Primula brand. Large department stores, like Marks & Spencer, used their own packaging. The products were the same. With delicate packaging in the ‘finer’ stores, the flatbread cost twice the price it did in cheaper stores. The world wants to be deceived. The packaging often cost more than the product.

271

Castle MacLellan Pâté producer Castel MacLellan was taken over by Kavli in 1997 after a lengthy process. The owners, Jim Carswell and Colin Warden, needed a substantial amount of capital for further investment. Kavli was willing to invest. Finn Bergesen jr. and Pål W. Lorentzen played a key role in this context. After the takeover, Colin Warden continued to work as managing director and chair of the board for a period. Jim Carswell resigned and started his own food enterprise. Castle MacLellan produces various types of pâté products. Ten per cent of them are sold under the company’s own brand to different types of small shops and restaurants, while 90% go to the supermarket chains, where most of them are sold under the chains’ private labels. Castle MacLellan has 120 different recipes. None of the chains has the same recipe. The pâté mass is mixed in large tanks with a volume of approx. 100 kg. The pâté is baked in ovens for 3.5 hours and then cooled from 72 to 0 degrees in just under four hours. To keep the products as fresh as possible, many of the staff start work as early as 4 a.m. The fresh products are transported to the distribution warehouse in Team Valley and are in the shops in the space of one or two days. From October to December, the workforce increases by almost 100%. Pâté is then produced in a ten-hour, two-shift system, with the last four hours being spent on cleaning the premises. Many of the Christmas products are sold in special packaging (ceramic) and are handdecorated with fruits and berries etc.

1 2 3

Founder Colin Warden.

A presentation of the Castle MacLellan products. Elaine McConnell (right) Large amounts of pâté being prepared.

Founder Jim Carswell.

272

18: STRATEGIC EXPANSION

building of a new factory in 1987, which has been extended Figure 18.6 many times. Because of the focus on high quality products, Production of processed cheese and pâté the factory is actually more like a big catering kitchen. The at Kavli Ltd., and Castle MacLellan Foods Ltd., production tanks can take up to 100 kilos. The pâté is baked in in tonnes the oven for 31/2 hours and then cooled from 72 to 0 degrees in 3 000 four hours. Work starts at four a.m. to keep the product as fresh Cheese 2 500 as possible. The products are then transported to Team Valley 2 000 for distribution and are in the shops in the space of one to two 1 500 days.39 From October to December the workforce increases 1 000 Pâté from 80 to 150 in connection with Christmas sales. They work 500 two 10-hour shifts. Four hours are set aside every day for 0 2000 2005 2011 1998 cleaning the premises.40The company is primarily engaged in Source: Kavli Ltd., Production statistics 1998–2011. The Kavli Archives, Gateshead private labelling, i.e. they produce under other names. 90 percent of the products go to five supermarket chains: Waitrose, Marks & Spencer, Tesco, Sainsbury and Morrisons. Product development is led by the company’s own chef, Laurence Magee. In 2011, they had more than 120 different recipes adapted to meet the chains’ wishes. High quality local ingredients are used, for example, crab from the Orkney Islands and salmon from Scotland.41The acquisition was a success, and the sales volume has more than doubled.42 The company generates a third of Kavli’s turnover in the UK and is the largest domestic pâté producer in the British Isles, with a market share of 18 percent.43

A British snack At the end of 2008, Paul Lewney was appointed managing director of Kavli Limited after Henry Roberts, who had worked on long-term strategic plans and product development. Lewney came from the food industry and he worked his way up through the Kavli system after starting with the company in February 2000. Under his management, the company has concentrated on the production and marketing of fewer products. Production has remained stable at around 2,500 tonnes annually. Kavli now enjoys greater brand recognition in the UK than for a long time, and its customers are younger. This has resulted in increased profits and sales. More focus is now placed on processed cheese as a snack product adapted to the British market, where it is not commonly used as a sandwich topping. It has become popular amongst students as an affordable and tasty product with a long shelf-life that is well-suited to student reading rooms. Dips and light crackers are other important products.

Finn Jebsen and Erik Volden opened the refrigerated warehouse on 29 March 2007.

273 18

KAVLI – AN INDUSTRIAL FAIRYTALE

Kavli Finland A relatively new addition to the Kavli family tree is the Finish subsidiary O. Kavli Oy. Processed cheese was first shipped to Finland back in the 1920s, and by the 1990s Finland was one of the major importers of the Group’s products. Nearly all the imports came from the Swedish company, but there were many challenges as regards sales and distribution networks. Kavli therefore decided to open its own sales office there in 1999. This was a Swedish initiative, and, in many ways, the company became the Swedish company’s extended arm. It started operations in 2000, selling processed cheese, mayonnaise and dressings made in Sweden. Flatbread was made in Norway. Sales have now reached around NOK 25 million and the sales office has six employees. This means that sales are still quite modest. Kavli Oy has a sales and distribution partnership with Lantmännen AXA, which is a food production and marketing company that concentrates on flour, muesli, pasta and other corn products.

Multinational group Kavli’s strategy implementation has proved successful in recent years. The production and sales units function more as a coordinated group than ever before. The employees have made a concerted effort and pulled in the same direction, leading to improvements at all levels in production, organisation and the company culture. Kavli has become a well-functioning, multinational group. Everybody knows where they are going, what they are aiming for and how they will get there. Strategic management, communication and the establishment of a functional company culture have been the key factors in achieving this. The Kavli Trust’s charitable work provides the basis for all this and gives the Group a clear, common overall objective. However, there is still room for improvement in several areas, and a lot of hard work is still being done to define and implement improvements. The expansion strategy and the many new acquisitions have changed the power balance between the subsidiaries in the Kavli Group. The Group in 2013 is very different from what it was like just over a decade ago. Sales have doubled and profits are increasing, and further growth is planned through increased sales and acquisitions in the years ahead.

274

Chapter 19

A RESPONSIBLE BENEFACTOR A changing Trust When the Kavli Trust was established in 1962, the plan was that its board would administer the group’s ownership interests and oversee that grants were awarded to good causes. From 1994, the trust had less control over ongoing operations, after the new holding company became the head of the Group. Consequently, there was greater focus on charitable work, and the number of donations increased. While the statutes functioned well for the first few years, they were not adapted to the Group’s development or to developments in society at large. It was therefore necessary to amend the statutes. This proved to be a complicated process and the authorities did not approve the amendments until 2000, after a long drawn-out and taxing process that lasted for nearly three years. Afterwards, great emphasis was placed on establishing a new long-term strategy for the trust. New important steps were taken in 2008, since when the number of grants awarded has increased considerably. The Kavli Trust is now an important supporter of charitable causes, both in Norway and abroad. A new element is that, every year, employees in all the countries in which Kavli operates are part of the process of selecting worthy candidates to support. If we look at the Kavli Trust’s financial activities from its foundation in 1962 up to 2012, there has been growth in all areas. This growth has provided more money for good causes, and donations have increased. They more than tripled during the three-year period from 2008 to 2011.

The Salvation Army has been a key partner of the Kavli Trust for many years. Photo: The Salvation Army

Who has received support? Knut Kavli selected three areas to support: research, culture and humanitarian causes. Otherwise, the statutes were very general. The grants should be awarded ‘according to the decisions of the board of directors’.1 From 1981, a clearer strategy was developed for which causes were to be supported and the criteria on which grants should be based. It was first put into writing in the minutes of a board meeting in 1994. Erik Berhard Hjorth played an important role in designing the new strategy. During the 50-year period grants have been awarded, we can identify four phases. The first phase was from the foundation of the trust in 1962 until the early 1980s. It was characterised by donations to culture, particularly the fine arts. A modest number of grants were awarded during this period because of the focus on building up the trust’s capital. Three awards – two for the establishment of a legacy in Knut Kavli’s name, which was to be managed by ‘Det Nyttige Selskap’ (the Beneficial Society) in Bergen, and one for the completion of the building of the Grieg Hall – accounted for two-thirds of the

275

KAVLI – AN INDUSTRIAL FAIRYTALE

In 1969, the trust considered its first big donation, NOK 50,000 for the artistic decoration of the Grieg Hall. Photo: Trygve Schønfelder

276

donations made during the period 1965–1980.2 Sjurseth tried to persuade the other two members of the board to support humanitarian projects. At first, there was little support for this, but they came round at the end of the 1970s and supported a rheumatism charity (1978), a charity for the blind (1979) and the St. Markus parish hall in Damsgård, which was located in the same neighbourhood as the Bergen factory (1979). The term ‘culture’ was also given a broader interpretation. Towards the end of the 1970s, the board also supported Bergen Handicrafts Association and Oselverens Bevarelse (a boat preservation project). These grants signalled an intention to focus on the distinctive local culture in Bergen and the surrounding area. This shift emphasised that grants awarded to ‘culture’ should encompass more than just the fine arts, since Bergen was after all a city where imported Viennese art met local rural culture. The second phase lasted until 2000. In 1983, Olav Jacob Dreyer took the initiative to support a major project at Bergen Diaconal Hospital in Bergen, which combined research with humanitarian work. This initiative represented an important break with the past, since it heralded a period in which donations to humanitarian and researchrelated causes would become much more important. The trust also started collaborating with other foundations in Bergen.3 The board also took a more structured approach than before, selecting a few major projects in each of the main areas, in addition to some smaller projects. In particular, it supported local culture projects run by committed enthusiasts.

19: A RESPONSIBLE BENEFACTOR

The term ‘meeting place’ was used more and more often during this phase. It was given physical manifestation when the sculpture ‘Den blå stein’ (the blue stone) at Olav Vs plass in Torgallmenningen square in Bergen, was donated to the city in connection with Kavli’s 100th anniversary in 1993. It has become one of the most popular meeting places in Bergen. In the third phase, which started around 2000, the board changed its grants policy in three areas. It concentrated on fewer projects; humanitarian causes became more important and it extended its geographical reach. Cultural causes have received most support, and up to 1980 nearly all the awards went to cultural projects, while humanitarian causes were awarded a small amount and nothing was awarded to research. From the early 1980s, the amount of funding awarded to cultural causes was drastically reduced and it remained around 50–70 percent until the year 2000. In the last phase from 2008, measures were taken to increase the trust’s capital and the level of grants. At the same time, the organisation was tightened up and made more professional through an even more focused strategy for awarding grants and following up projects.

Geographical considerations Initially, the board seemed to endeavour to avoid awarding grants exclusively to projects in the Bergen area, and a fifth of the grants between 1965 and 1970 were awarded to three applicants from Oslo. In 1981 it was decided to promote initiatives based in the region. In 1998, for example, 82 percent of the grants went to causes in Bergen and 13 percent in the rest of Hordaland. In the 2000s, the proportion of grants awarded to local causes has fallen drastically. The stone sculpture ‘Den blå stein’ (the blue stone) by Asbjørn Andresen (born 1937) stands in Olav Vs plass (formerly part of Ole Bulls plass ). It was unveiled on 27 March 1993. This artwork consists of a nine-metre-long blue rectangular stone (of Brazilian sodalite). It rests on a diagonal block. The sculpture is placed on a larger foundation along with a smaller square sculpture of grey stone. While it was being made, there was a lot of debate about whether the sculpture could be classified as ‘artistic decoration’ or not. The debate was quite heated, at times. However, it was not long before the sculpture became a popular meeting place for the citizens of Bergen, young and old.

277

KAVLI – AN INDUSTRIAL FAIRYTALE

Vibecke and Dick Krommenhoek took over as leaders of the Salvation Army in Norway, Iceland and the Faroe Islands on 1 February 2013. Photo: The Salvation Army

Preference was often given to local institutions with a national responsibility. For example, the national legacy of Ole Bull was supported through Lysøen Museum and Norwegian music through the Bergen International Festival. The West Norway Museum of Decorative Art in Bergen, which has received a large amount of support, clearly has an important regional role. A practical reason for the geographical concentration of donations was the company’s close ties with the Bergen area. The Trust was long very cautious about supporting activities outside Norway. The first donation to a project abroad was made to Solgården in Spain (1978), where rheumatism patients were treated. The institution primarily treated Norwegians abroad. The same can be said of the Norwegian seaman’s churches, which have received support many times since 1980.4 After the turn of the millennium, however, we have seen a permanent shift in this policy. In recent years, the emphasis has been on charitable causes in the countries in which the company has production units. In addition, several causes in developing countries have received support. For example, the Strømmestiftelsen (Strømme Foundation) was given a grant to run a school development project in Burkina Faso in Africa at the beginning of the new millennium.

Popular contributors Up until 1980, few applications were received and few donations were made. After that the volume increased. Awards were made to many small causes, in addition to a few larger ones. The number of approved applications peaked in 1998, at 105. In 2001, the board considered 474 applications, but the number has since stabilized. The development is due to a deliberate policy whereby the trust proactively invites potential partners to apply rather than encouraging applications from far and wide. This has made the election process more focused and efficient. At the same time the trust Awards and rejections by the trust 1962–2012 Year

Approved

Rejected

Total applications

1962

1965

1970

1975

1980

1985

1990

1995

115

2000

379

445

2005

331

358

2011

347

380

2012

403

437

Source: Hjorth, Erik Bernhard, ‘Kavlifondets allmennyttige virksomhet’, memorandum and O. Kavli and Knut Kavli’s Charitable Trust, annual reports 1990–2011, the Kavli Archives, Bergen, and information from Inger Elise Iversen.

278

19: A RESPONSIBLE BENEFACTOR

more often keeps in touch with its chosen projects by visitation and written reports. The recepients, thus, often consider the Kavli Trust more as a partner than a financial aid agency.5

Revisions needed

Figure 19.1

Key figures for The Kavli Trust 1962–2011 in NOK million (2013 value) 45.0 40.0

The trust’s statutes proved to be difficult to comply with in 35,0 practice relatively soon after the death of Knut Kavli in 1965. Revenue The first thing that had to be changed was the rule concerning 30.0 Costs authorisation, which stated that all the members of the board Awards had to sign in connection with financial transactions. Since 25.0 Transfers to capital Sjurseth was based in Newcastle at the time, this was impos20.0 sible to practise. In 1996, the board proposed an age limit of 70 years for board members. This was not approved by the 15.0 ministry until 2000.6 10.0 These small amendments did not fully resolve the problem that the statutes left a considerable room for interpretation. In 5.0 the 1960s, the question of how much weight should be given 0 to the rule prohibiting the sale of the company was a big issue. Sjurseth wanted to sell. Askeland was strongly against it. In –5.0 1970 1980 1990 2011 2000 1962 the 1970s, the question arose of whether the board should be expanded from three to five members to accommodate reprePlease note that amendments to the dividend policy from 2007 caused a jump in the accounts affecting the revenue and transfers to capital. sentation from all the subsidiaries. In the 1980s and 1990s, it Source: O. Kavli and Knut Kavli’s Charitable Trust, Annual accounts,1962–2011 was questioned how much influence the trust should have on group operations, and who should be appointed to the board.7 All these issues had to be addressed. In spring 1994, the County Governor of Rogaland, deputising for the County Governor of Hordaland, who was deemed not to be impartial in the matter, had the job of deciding whether the trust’s activities should be investigated. His conclusion was that there were no grounds to do so. However, he ordered the board to clarify how it intended to recruit new members. It was also ordered to inform the Governor about how the matter progressed. The board neither took the matter any further, nor did it inform the Governor about developments. After 1994, it chose to concentrate on restoring trust between the employees and itself. The board saw little point in starting the job of amending the statutes until confidence had been restored.8 In autumn 1998, County Governor Svein Alsaker came with the following criticism:9 In hindsight it must be said that the board has not kept the promises it made to the County Governor of Rogaland about amending its recruitment practice. Nor can it be said that the promise to keep the County Governor in Hordaland informed about the progress of the matter has been kept. When the County Governor sent a reminder about the matter, four and a half years elapsed before anything was done.10

279

KAVLI â&#x20AC;&#x201C; AN INDUSTRIAL FAIRYTALE

The Kavli Trust supports 50 Speed School centres in Burkina Faso. A Speed School is an intensive education programme for children from 8â&#x20AC;&#x201C;12 years who have dropped out of primary school or have never had the opportunity to attend school. Once they have passed the exam, they can start at an ordinary school in primary three or four.

280

19: A RESPONSIBLE BENEFACTOR

Long awaited changes On 8 September 1998, the case took a new turn, when the newspaper Dagens Næringsliv published an article in which it insinuated that two of the members of the board had been partial in connection with the granting of funds to Stiftelsen Harmonien (the Bergen Philharmonic Orchestra Foundation) and Bergen International Festival. The article also alleged that the trust’s costs were excessively high, and that its recruitment practice had not been clarified. The editor refused to give Pål W. Lorentzen, chair of the trust, space to respond. Dagens Næringsliv was later reprimanded by the Norwegian Press Complaints Committee for the story, which it found imbalanced and misleading. The trust contacted County Governor Alsaker and explained the issues raised by Dagens Næringsliv. Alsaker obtained more information and evaluated the case. On 27 November, his staff concluded that the board neither breached the rules concerning impartiality, nor had excessive costs.11 On the other hand, it was criticised for not ensuring sufficient progress in the work of changing its recruitment practice. The trust’s board was given three months to come up with a concrete proposal.12 The amendments were handled in their entirety by the board and its advisers. During the next three months, they drafted a new application. The work was extremely challenging and it demanded a lot of work. Olav Jacob Dreyer, who was a central figure in Kavli, resigned as a member of the board during this period. As a former managing director, member of the board of the trust and board member of the subsidiaries, he had been group coordinator for a long time and knew it better than anyone else.13 The trust held information and discussion meetings with the companies in the Group, at which the employee representatives participated actively.14 Reidar Lorentzen wrote a memorandum about the background to the matter in which he set out the main views on amending the statutes. The outcome had to be forward-looking and it had to be a long-term solution for the Group.

The Kavli Trust supports the multicultural show ‘Fargespill’ (play of colours). The aim is to spread the project to more towns and cities in Norway. ‘Fargespill’ made its successful debut in Bergen in 2004. Since then, many shows have been produced. They have been seen by thousands of people. Children and youth from all over the world come together in these shows to create musical encounters.

It is paramount that we believe it is a long-term solution for Kavli. And we have to believe that the County Governor will listen to responsible and good arguments.15

Application to amend the statutes Amendments to a trust’s statutes must be approved by the County Governor. In February 1999, the final application was submitted to the County Governor of Hordaland. Solicitor Gunnar Meyer emphasised that endeavours had been made to respect Knut Kavli’s wishes, but, at the same time, the future growth and development of the Group had to be considered and prioritised. It was also crucial to remove any ambiguities in the existing statutes. The board wished to emphasise the trust’s charitable objective more than the 1962 statutes did. The grounds given for the proposed amendments were that, based on experience, they were essential with a view to the growth of the Group and in light of the significant changes that had taken place in society and the way business was conducted since 1962.16 In the application, Meyer pointed out that the provision that stipulates that executives from Kavli should preferably have a seat on the board of directors had to be amended. He stressed that modern management principles, the provisions of the law relating to foundations and companies legislation, in addition to tax issues, had to be taken into account. He believed that the conditions for implementing amendments

281

KAVLI – AN INDUSTRIAL FAIRYTALE

In collaboration with the Strømme Foundation, the Kavli Trust helps girls in Bangladesh to gain control of their own lives. Over a three-year period, 5,400 girls will complete the Strømme Foundation’s Shonglap School. The girls are taught reading and writing, health, hygiene and nutrition. They also learn how to set boundaries and make their own decisions. Photo: Per Fronth

were met. The statutes were no longer possible to ‘live by’. They ‘are no longer compatible with the purpose of the transaction that formed the basis for establishing the trust and they have clearly become unfortunate or unreasonable.17 Despite this, the matter took a different and unexpected turn in spring 1999. The County Governor asked for further information and evaluations. For example, to what extent was the trust actually engaged in running an enterprise? Was it possible that the members of the board were partial? Did the dividend policy benefit charitable causes sufficiently?18 Supreme Court lawyer Nicolay Wiig had the following response: It is sad to see that the County Governor really believes that it is the board of the trust that runs the business. Having said that, it is quite a compliment to the three part-time members that he believes they can run a group with a turnover in billions without any employees! As the County Governor is fully aware, his opinions on this matter can stop the trust from fulfilling its purpose.19

No from the County Governor  – Yes from the ministry The County Governor’s experts concluded their evaluations in November. Seven sections in the statutes were approved in accordance with the proposal, while five could only partly be approved on special conditions or they would not be approved at all.20 This was a setback for Kavli. The County Governor’s office proposed expanding the board from three to five members. The two new members should come from companies within the Group. As regards the issue of the trust possibly losing its tax exemption, the main problem was that the donations to charitable causes were relatively small. The Governor pointed out that, between 1990 and 1994, donations only amounted to ten percent of the Group’s profits, which was a lower percentage that deemed critical by the Supreme Court. On the basis of these observations, it could be questioned what the main purpose of the enterprise was:

282

19: A RESPONSIBLE BENEFACTOR

Given the considerable assets owned by the Kavli Group, the question also arises of whether the trust... has saved more from wealth tax exemption than it has donated to charitable causes. If this were to be the conclusion, it would be difficult to argue that the foundation’s charitable causes have been its most important purpose.21

Erik Hjorth stresses that this conclusion is very oversimplified, because some of the profit has to be put aside as capital for the companies before anything can be donated at all.22 The County Governor completely rejected the idea of removing the prohibition on selling the company. The board decided to appeal the decision. It maintained that the decision would severely harm both the Group and the trust. In January 2000, the County Governor rejected the appeal.23 Several company veterans threw themselves into the discussion at an early stage. They supported the County Governor’s rejection and wrote letters supporting his views. Johan Krohn-Hansen stressed in communication with the ministry that abolishing the prohibition on selling the company and changing the recruitment provisions in the statutes would be in conflict with Knut Kavli’s wishes. He pointed out that, for him, it was the overriding principles that mattered: ...the principle was always that the bequeather should be able to feel secure that his last wishes would be respected, and that no one could come along later and misinterpret or ignore what a will expressly states and intends.24

The group management team and employee representatives supported the board’s appeal. It was the Norwegian Ministry of Justice that had the final say. It fully supported the trust.25 The statutes of 1962 were thereby consigned to history. From that point on, it was the statutes of 2000 that applied. The board of the trust was thereby expanded from three to four members.

In 2003, the Kavli Trust helped to establish a dementia research centre at Haraldsplass Diaconal Hospital in Bergen. Since 2008, the research centre has extended its research field to include ageing, and more partners, for example the University of Bergen and the City of Bergen, have become involved.

283

KAVLI – AN INDUSTRIAL FAIRYTALE

New capital structure Ever since the Kavli Trust was founded in 1962, it has played a crucial role in the Group. Up until 1994, it both administered the ownership interests and had a central place in running the Group. In recent years, the trust has had the role of owner, facilitator and general meeting for the Group. It has not interfered with operations, however. This is in line with the current organisational structure. Its capital is placed in securities funds and real property in accordance with external advice from Gabler. The returns have been good. In 2012, the value of grants reached NOK 25 million for the first time.26 In February 2007, Wassum Investment Consulting presented a proposal for the Group’s capital structure. The main element was to increase the trust’s capital base to enable more stable donations to be made to charitable causes. It also proposed increasing the amount of equity that could be injected into the Group when required. NOK 55 million was to be paid as an extraordinary dividend to the trust through the sale of the Group’s finance portfolio. NOK 125 million of the equity would be converted into a subordinated loan, with the trust as the creditor. It would be redeemed in its entirety after 20 years. Interest was set with reference to corresponding loans on the market, initially approx. eight percent. In addition, a dividend policy was to be adopted that would ensure that 40 percent of the annual profit would be distributed as dividend to the trust. Irrespective of this, the amount would be set to a minimum of NOK 5 million. The proposal was approved and implemented in 2007.27

Harald Schjelderup was the general manager of the Kavli Trust from 2008 to 2011

New strategy

284

2011

2000

1990

1980

1970

1962

Reidar Lorentzen was appointed a member of the board of the trust in 2000. He replaced Pål W. Lorentzen as chair in 2008. That was also the year in which the running of the trust entered into a new modernisation phase. His colleagues were Solfrid Lind, Aksel Mjøs and Kjetil Smørås, who was replaced by Tor Andersen 2010-2012. All of them Inger Elise Iversen had extensive business experience and most of them had been members of the board is the current general manager of Kavli Holding. Lorentzen had also previously cooperated well with former MP and of the Kavli Trust Centre Party Minister Anne Enger Lahnstein, who made important suggestions for renewing the trust. In June 2008, a coherent strategy document was adopted. Figure 19.2 It was intended to contribute to making the trust more proAwards granted as a percentage of the revenue fessional, as well as to more strategic thinking as regards for the Kavli Trust 1962–2011 ownership, management and the awarding of grants. At the 120 same time, dividend payments from the company increased substantially. In the years up to 2008, the trust had business 100 managers on a part-time basis, first Helge Tveit and later Kåre 80 Rommetveit. 60 An important change in 2008 was to appoint a full-time general manager. Harald Schjelderup, who had a background 40 in business and politics, was the first full-time manager. Inger 20 Elise Iversen, who had experience from the food industry, 0 took over in August 2011. Both of them succeeded in maintaining excellent contact with the projects the trust supported, while at the same time giving the trust necessary expertise and Source: O. Kavli and Knut Kavli’s Charitable Trust, Annual accounts,1962–2011 resources in administrative management and communication

SEN

ES IR JOHANN PHOTO: GE

19: A RESPONSIBLE BENEFACTOR

PHOTO: GEIR JOHANNESSEN

N PHOTO: FESTSPILLENE I BERGE

The Kavli Trust supports many projects.

285

KAVLI – AN INDUSTRIAL FAIRYTALE

‘Donating millions from milk to good causes.’ The Kavli Trust receives extensive coverage every year for its charitable work. In this article from the newspaper ‘Vårt Land’ from Wednesday 11 July 2012, the donations are referred to as ‘milk millions’.

Gir melkemillioner til gode formål Hensikten med fondet er «å fremme humanitære formål, forskning og kultur».

Knut Kavli. Den barnløse Kavli var drevet av ønsket om å sikre virksomheten en langsiktig og samfunnsengasjert eier. Etter en god del år med lite overskudd, der penger og krefter ble pløyd tilbake i Kavlikonsernet, er de samfunnsnyttige utdelingene nå trappet opp. Samtidig er profileringen av pengestøtten økt. Både på ostetuber og flatbrødpakker er det nå tydelig merket at overskuddet går til gode formål.

Opptrapping. Vårt Land skrev

Potensial. – Det vi ønsker oss

Geir Ole Bjartvik geir.ole.bjartvik@vl.no

Styreleder Reidar Lorentzen i Kavlifondet ønsker å bruke pengene fra salg av melk og smøreost til å forbedre verden.

22 310 382

Hos en av Norges største dagligvareprodusenter heter eieren god vilje. Kavlifondet er eier av milliardvirksomheten bak Q-melk, Kavli smøreost og Korni flatbrød. Hvert av de siste par årene har fondet delt ut rundt 20 millioner kroner til gode formål. Tilskuddene har gått til vidt ulike ting, fra Frelsesarmeens arbeid i Norge til undervisning av barn som dropper ut av skolen i Burkina Faso.

i går om hvordan norske stiftelsers finansielle styrke er på kraftig fremmarsj, og at dette også gjelder stiftelsene som deler ut penger til allmen-nyttige formål. Kavlifondet er et tradisjonsrikt fond i denne siste kategorien. Bak opprettelsen i 1962 sto daværende eier

er å kunne trå til med støtte til prosjekter som har problemer med å få støtte andre steder, men som har et potensial vi kan forløse, gjerne prosjekter som ikke er kommet så langt, forklarer Reidar Lorentzen, Kavlifondets styreleder. I det humanitære arbeidet betones blant annet støtte til svake og vanskeligstilte i utviklingsland. I forskning skal pengestøtten rettes inn mot bekjempelse av alvorlige sykdommer og skadevirkninger av et moderne levesett. Lorentzen vedgår gjerne at fondets ledelse, satt sammen av fire økonomer, er påvirket av tankegodset som de siste årene har gjort seg gjeldende blant forretningsdrivende i mange

land: ønsket om å ta styringsssystemer og erfaringer fra forretningsdrift og benytte dem i sosialt og humanitært arbeid. – Dette er oppfatninger vi har hatt lenge. Verktøy fra forretningsverdenen kan være svært anvendelige på andre områder. Noen prosjekter kan også ha en økonomisk side, sier Lorentzen.

Investering. Han viser til at noen av fondets investeringer er såkalt impact investingprosjekter, prosjekter der investorer tar sikte på å forene miljøgevinster, finansielt utbytte

«Det ligger en utfordring i at sosiale forbedringer og endringer ikke alltid er lett å måle som økonomiske resultater» Reidar Lorentzen, styreleder i Kavlifondet og positive samfunnsforandringer. I fjor investerte fondet en halv million amerikanske dollar – tre millioner norske kroner – i et fond som investerer i handel med afrikanske småbrukere. Et annet sentralt begrep for fondet er «sosialt entreprenørskap», virksomhet som tar sikte på å utvikle nye og smarte løs-

Stiftelsene er i kraftig vekst, og regnes nå som en ny, potenisell finansieringsmuskel av parayplyorganisasjonen Frivillighet Norge

. Vårt Land 10.07.12

ninger på samfunnsproblemer. – Det ligger en utfordring i at sosiale forbedringer og endringer ikke alltid er like lett å måle som økonomiske resultater, men vi prøver likevel å få det til, sier Lorentzen.

Eierskapet et fortrinn. Styrelederen mener den sosiale profilen til Kavli-eieren også påvirker forretningsdriften positivt. I magasinet Kavlifondet har gitt ut i forbindelse med femtiårsjubileet går han i rette med de som mener bare at bare kommersielt, privat eierskap duger i en tøff konkurransesituasjon. – Jeg har vanskelig for å se at et eierskap som beriker samfunnet, ikke er like motiverende som et eierskap som beriker personlige eiere, skriver Lorentzen der. Han mener eierens samfunnsmessige profil har påvirket bedriftskulturen i Kavli i en positiv retning. Fondets langsiktige eierskap kan ifølge Lorentzen også ha bidratt til at Kavli holdt ut i den lange prosessen for å skaffe konsernets meierier, Q-meieriene, innpass på monopolisten Tines melkemarked. Etter mange års kamp mot det Kavli mener var konkurransevridende rammebetingelser, tjener de to meieriene nå godt med penger. Reidar Lorentzen kan ikke dokumentere at Kavlifondet har en salgsfremmende effekt på produktene fra Kavli. – Først og fremst ønsker vi at forbrukerne skal velge våre produkter ut fra egenskapene de har. Men ved ellers like forhold har vi ikke noe i mot at det allmennyttige formålet vårt spiller inn, sier styrelederen.

Kavlifondet eier både Q-melk, Kavli smøreost og Korni flatbrød. De siste årene har både barn som dropper ut av skolen i Burkina Faso og Frelsesarmeen fått penger fra fondet. Foto: Kai-Otto Melau

side

– VÅRT LAND – onsdag 11. juli 2012

Presentasjon: Pernille Borud og Ingrid H. Storaas

skills. They have also made proactive efforts to develop new projects. In 2011 and 2012, the strategy document was revised and its wording further refined.28 The documents emphasised that the development of an expansive group with a healthy financial foundation would form the basis for increased effort in the charitable field as well. At the same time, the donations would amount to a significant, yet sustainable proportion of the trust’s income and the capital. Large investments resulted in lower profitability for the Group for a period from the end of the 1990s. In the longterm higher turnover has contributed to maintaining the level of funding for charitable causes, and, in recent years, it has actually risen strongly. Moreover, the trust has put aside a significant proportion of the surplus to use as capital in order to increase the diversification of risk and to have funds available to meet new challenges in the future.

286

19: A RESPONSIBLE BENEFACTOR

Individual projects The strategy documents also stated that a long-term perspective should be emphasised in the trust’s grants policy and that some permanent partnerships should be established. Focus on the three areas was again emphasised, and this was quantified in 2008: 50 percent of the donations would go to humanitarian work, 30 percent to research and 20 percent to culture. One important individual project was Kavli’s centre for ageing and dementia research, which has developed from a local project attached to Haraldsplass Diaconal Hospital in Bergen into an international project. Through the organisation CapaCare, the trust has contributed to training surgical health personnel in Sierra Leone, one of the poorest countries in the world. The trust has also participated in building and running schools and educational programmes in several African countries. It has supported the Salvation Army for many years, locally, nationally and internationally, for example, through Sally-Ann, which is a fair trade concept. It has also supported Kids and Media, a Norwegian-international collaboration to protect children using digital media. As regards culture and the arts, we can mention the Risør Chamber Music Festival, Lofoten International Chamber Music Festival, Røros Winter Music Festival, Bergen International Festival, the funding of two three-year professorships at the Centre for Grieg Research, as well as The Young Artist’s Concert, a forum for young talented musicians. Henning Målsnes from Bergen Philharmonic Orchestra puts it as follows:

Culture has always been very important to the Kavli Trust. Among other things, it has supported the ‘Young Artists Concert’ for many years.

The Kavli Trust’s contribution is invaluable in relation to developing talent in the field of classical music in Norway.29

Every year, Kavli employees in all the countries the Group has production nominate a suitable project to support. In 2010, half a million Norwegian kroner was awarded to cancer research in Norway, hospital departments for children and youth in Sweden, women’s shelters in Denmark, and schools for children with learning difficulties and special needs in the UK. In 2011, support was given for the building of a local swimming pool in Kirkcudbright in Scotland, which is the town in which Castle MacLellan makes its pâtés. In addition, a donation was made to a riding school for children and youth with special needs in the Gateshead and Newcastle area.30

287

KAVLI – AN INDUSTRIAL FAIRYTALE

Selected projects supported by the Kavli Fund 2012 Projects

Partner

Location

Speed School

The Strømme Foundation

Burkina Faso

Health Development International

Nigeria

HUMANITARIAN WORK

Training of health personnel

St Olavs Hospital and CapaCare

Sierra Leone

Livsglede for eldre (happiness in old age)

Happiness in old age

Norway

School project

Grønn-Hagen Bjørke Malawi Foundation

Malawi

The Salvation Army

Norway and internationally

Employee-nominated projects

Employees of the Kavli Trust

Norway, Denmark, the UK and Sweden

RESEARCH Kavli Centre for Ageing and Dementia Research

Haraldsplass Diaconal Hospital, etc.

Bergen

International dementia project

International research communities

Europe

CFS patients

Haukeland University Hospital

Bergen

Centre for Grieg Research

Centre for Grieg Research etc.

Bergen

Kids and Media

Denmark

CULTURE Fargespill

Fargespill

Bergen

Asylum centre brass bands

The Norwegian Band Federation (NMF)

Norway

Young Artists Concert

Bergen Philharmonic Orchestra

Bergen

Røros Winter Music Festival

Røros

Bergen International Festival

Bergen

Risør Chamber Music Festival and Lofoten International Chamber Music Festival

Risør and Lofoten

Source, O. Kavli and Knut Kavli’s Charitable Trust, Annual report 2012 The Kavli Archives, Bergen.

The Kavli Trust has become a professional owner and administrator, and an important contributor to humanitarian work, research, and local, national and international culture. From 1962 until 2012, the board has considered almost 6,500 applications. Approx. 1,000 of them have been approved and awarded a combined total of NOK 200 million (2013 value). More than half of this amount has been awarded during the last decade. All this has been made possible by a trust and a group that has both the will and the ability to give.31

PHOTO: PER FRONTH

288

Chapter 20

CHEESE â&#x20AC;&#x201C; NOT FISH 120 years of expansion Norway does not have many multinational companies. Those that we do have are mainly based on access to natural resources: timber, hydroelectric power, oil and gas, and shipping. Except for seafood, Norwegian food industry has been little exposed to international competition. We have a modest production of a limited range of agricultural products and the country has never really been famous as a cheese producer, quite the contrary in fact. It is therefore against all odds that Kavli has grown into a multinational company on the basis of cheese â&#x20AC;&#x201C; not fish. Sales have increased dramatically. The volume is a fairy-tale in itself, having increased more than 3,000 times over from the start-up of the company in 1893 until 2013.1 We also see that the growth in sales has occurred in stages. Naturally, the first stage started in 1893 when the story began. Stage two began with the launching of Primula in 1924, while the third stage started with the international breakthrough after the Second World War, when sales soared almost fivefold in the space of a few hectic years. The fourth stage has come during the last fifteen years. In the post-war years, the company in Norway lost its position as the largest company in the group, and it became one of several companies of roughly equal size. Success was initially greatest in the UK. Then Sweden took over as the foreign production company with the fastest growth, while Denmark led the way in commercial activities. Turnover has increased even more since the turn of the millennium through the renewed focus on international and national expansion. The successful investment in Q-Meieriene (Q-dairies) and the development of a sound corporate management team has once again placed Norway in a leading position. In recent years, growth has been the result of purposeful strategic thinking that has led to more market growth and market power, which is vital in order to survive in the food industry.

Ham cheese in a new and modern design.

A profitable business At the same time, the increase in turnover has made the business profitable. While profits have certainly fluctuated, the pre-tax profit has usually amounted to 5â&#x20AC;&#x201C;10 percent of the turnover. The only times the overall accounts have showed a loss were before 19

289

KAVLI – AN INDUSTRIAL FAIRYTALE

the bankruptcy in 1924, a brief period in the 1930s and during the challenging period when Q-Meieriene was being built up. The British subsidiary gave the Group financial strength for a long time after the war. The establishment of the commercial business in Denmark resulted in excellent profits from the mid-1970s until the mid-1990s. Sweden had good results in the 1990s and after the turn of the millennium. Norway had good profits from its start-up until the early years of the First World War, and then in the 1950s and 1980s. More recently (up to 2013), the profit margin has been on its way up again, and profits have never been as high as in recent years. As regards financial returns, Kavli was and is a success.

Figure 20.1

Turnover in NOK million (2013 value) Kavli Group according to country 2.5

Other countries

2.0

1.5

1.0

Why success?

0.5

2011

2003

1993

1983

1973

1963

1953

1943

1933

1923

1913

1903

1893

A company operates in a market. Hence, it is a precondition for success that its products meet a demand. This is precisely what 0 Kavli achieved by mapping potential demand and meeting it. This has been done by predicting consumers’ needs and satSources: The Kavli companies’ annual accounts 1893–2011. The Kavli Archives, isfying them. In this way the company has helped create new Bergen, Stockholm, Copenhagen and Newcastle markets in which it has sold its products. The company has survived for 120 years because it has made products customers want. At the same time, the Group has managed to adapt to new trends through product innovation. In some periods, the results have been weak, with stagnating sales and low profits, but the company has always managed to turn these trends around and achieve new growth. This is one of Kavli’s strengths.

Increased demand From 1893 until the present, the forces that shape the demand for products have changed fundamentally. Consumer demand has increased considerably, purchasing power has also increased and the population has grown.2 This has resulted in larger markets. Both wealth creation and living standards have increased many times over as the population has soared. In all, the Norwegian economy is more than 50 times bigger in 2012 than it was in 1893, while the total purchasing power of consumers has increased thirty-three-fold.3 Obviously, such growth enables companies to expand.

Response to altered consumer demand Increased wealth has also led to changes in consumer demand. We spend an increasing proportion of our income on luxury products, and less on essential products.4 In Kavli’s case, this is a challenge because the company focuses on producing and selling basic

290

20: CHEESE – NOT FISH

Figure 20.2

Profit margins before tax for the Kavli Group 1900–2011, as percentages 10

GROUP

5 0 –5

2011

2000

1990

1980

1970

1960

1950

1940

1930

1920

1910

1900

–10

MANUFACTURING COUNTRIES

10 5 0 –5

2011

2000

1990

1980

1970

1960

1950

1940

1930

1920

1910

1900

–10

15 10 5

2011

2000

1990

1980

1970

1960

1950

1940

1930

1920

1910

1900

15 10 5 0 –5 –10

1910

1920

1930

1940

1950

1960

1970

1980

1990

2000

1910

1920

1930

1940

1950

1960

1970

1980

1990

2000

2011

1900

–15

1900

foodstuffs. Product innovation is therefore vital, as it ensures that the company has an exciting range at all times. Kavli has managed to do this during its growth periods. When the company was established in 1893, it entered a rapidly growing market for delicatessen products, which was the result of the strong growth in the standard of living. From 1912, the company launched its own tinned fish products and established a canning factory in Steinshamn on the coast of Romsdal. Concurrently, they addressed the strong growth in purchasing power by launching the world’s first caviar spread made from cod roe. The price of this luxury product was affordable for most people. There was also increasing consumer demand for processed cheese spread in the period around the turn of the millennium. Different varieties of cream cheese were already available, but they had a short shelf-life and therefore could not be transported far or stored for long. Kavli wanted to meet this demand by producing cheese with a long shelf-life. Experiments were carried out, but without much success. However, once it decided to focus on spreadable processed cheese, success came with Primula in 1924. Consumers, not just in Norway, but in many other countries, thereby had access to a long-life cheese spread. This led to a strong period of growth for the company. Cheese sales depend to a large extent on trade and industry policies, for example subsidies or protectionist measures. Olav and Knut Kavli understood the importance of establishing the company abroad to ensure access to foreign markets. Consequently, they quickly set about setting up companies in Austria, the UK, Denmark and Sweden in the 1930s and 1940s. The latter three were successful. Sales increased, since they satisfied huge consumer demand in these foreign markets. It was important in this connection that the foreign companies should have as much autonomy as possible in order to adapt to demand in their markets, and also to enable them to hand-pick talented staff, as this resulted in the largest growth and profits.

15 10 5 0 –5

For the first few years, spreadable processed cheese was considered to be a delicacy but at a price that was affordable for most people. Kavli was soon joined by many competitors

–10 2011

From delicacy to staple food

Sources: The Kavli companies’ annual accounts 1893–2011. The Kavli Archives, Bergen, Stockholm, Copenhagen and Gateshead

291

KAVLI – AN INDUSTRIAL FAIRYTALE

Figure 20.3

Key figures for market growth in Norway 1850–2011 (all figures are in millions) 1

6 5

Real wages Population GNP per inhabitant

0.1

3 2 1

0.01 2011

2000

1990

1980

1970

1960

1950

1940

1930

1920

1910

1900

1890

1880

1870

1860

1850

Gross national product and real wages in NOK million (scale on the left and 2013 value) Inhabitants in millions (scale on the right). Source: Statistics Norway and Norges Bank

Figure 20.4

Percentage of household income spent on food and non-alcoholic beverages in Norway 50 45 40 35 30 25 20 15 10 5

Source: Statistics Norway

292

2009

1990

1981

1973

1967

1958

1948

1928

1913

1890

in international markets. The company focused strongly on product innovation, and it was soon making ham, bacon and prawn cheese. Processed cheese nevertheless gradually lost its status as a delicacy and came to be seen more as a basic longlife cheese spread in user-friendly tubes. Production was closed down in Denmark after disagreements with partners and a falling market on the Continent. Demand stagnated in the 1960s and 1970s. This gave rise to new challenges because the Group could no longer grow on the basis of cheese only. The market was saturated with processed cheese, and the EU erected trade barriers. As a result, the firm entered a new phase in which it had to find new opportunities for growth. It came up with two main solutions. Firstly, the company had to focus on alternative products to processed cheese. Secondly, it had to focus on the domestic markets. Sweden chose the former by initiating intensive development of new products, such as dressings and dips. In Denmark, they preferred the second solution, selling cordials and grocery products. Sweden became a pioneering country through its streamlining of the production process and product innovation. Denmark pioneered the development of innovative marketing and sales methods. But this was not sufficient to secure high sales. In the last 15 to 16 years, the solution has been to enter new product areas, such as biscuits, juice, mulled wine, pâtés and, in particular, the dairy sector. The market and thereby potential demand has therefore expanded, at the same time as Kavli has kept within its core business, i.e. the production and sale of food products. While it is true that cheese sales account for less than 30 percent of group turnover, processed cheese production is still the most important and profitable business area. Milk accounts for 26 percent of the turnover, while other dairy products account for more than ten percent, and are growing rapidly.5 The group has run its own marketing school in recent years, which has helped to increase awareness and produced good results.

20: CHEESE – NOT FISH

Kavli was one of the first companies to use roof advertising. It was all about making Primula a big brand name. This photo is from Oslo.

On 15 February 1927, the ship ‘Karmsund’ belonging to Haugesund Dampskipsselskap departed from Bergen destined for Haugesund. Its cargo included approx. 5.8 kilos of Gouda cheese and 3 kilos of ‘gammel ost’ (old cheese) from Kavli for S. Larsen on the island of Bømlo. 293

KAVLI â&#x20AC;&#x201C; AN INDUSTRIAL FAIRYTALE

Kavli has always endeavoured to present its products in attractive packaging. A selection of products sold on the British market is shown here.

294

20: CHEESE – NOT FISH

Marketing Kavli still spends relatively little on marketing. The most important consideration has always been to satisfy the needs of customers. Marketing has therefore been demand driven. In the founders’ day, positive publicity was the most important form of marketing. When Olav Kavli told people that Norwegian cheese was sold in more than sixty countries, that it had been used as provisions on expeditions to the North Pole, Greenland and the Sahara Desert, this was given wide coverage in the press. It did not really matter that the sales volumes were often symbolic. Processed cheese had become a global Norwegian product. However, exports have plummeted since the early 1970s, and they are insignificant today.6 Consumers were familiar with the Primula brand and the Kavli name in any case, and the company succeeded in creating a national identity. In Norway, people are proud that it is Norwegian, in Sweden they are proud that it is Swedish, and in the UK they are proud it is British. In Denmark, they were proud that they exported Danish cheese to the European continent. Kavli definitely succeeded in building its identity with consumers. Packaging and design were also crucial, and products were given an artistic design. The Primula girl, who adorned the processed cheese for decades, was a healthy Norwegian milkmaid in her national costume. Caviar was sold in tins with an artistic design, thereby representing quality. Advertising brochures were produced in more than 30 languages.7 They were so elegant that they became popular as decorations that could be framed and hung on people’s walls. Sweden pioneered the development of their own display cases for use at stands at trade fairs. The strong emphasis on packaging still applies today. It has to reflect good health, quality, a long shelf-life, innovation and seriousness. The reach of marketing has also been expanded to include TV and the internet. The firm has been very cautious about using its charitable activities as an active tool in the marketing of its products. Most people consider this a wise move. Instead, the trust has used its charitable donations to build a positive reputation for the Group. Today, this is done through a well-considered interpretation of what Knut Kavli’s wishes actually were. The result is that the trust supports three types of causes: culture, humanitarian work and research.

295

KAVLI – AN INDUSTRIAL FAIRYTALE

The supply side

Figure 20.5

Composition of exports PRODUCTS (in tonnes)

2 500 2 000 1 500

Caviar 1 000

Cheese

500

Dips

2012

2005

2000

1995

1990

1985

1980

1975

1970

1965

COUNTRY (in NOK million – 2011 value)

In the long run, a company’s ability to meet demand decides its success. Production capacity and the utilisation of capacity are important success factors. Important parameters for a company’s ability to produce are called factors of production. They are manpower, capital, natural resources and the organisation of production. A food production company must be competent in all these areas in order to survive. They often compete on prices and quality, and have to be efficient. They also need to have good access to raw materials and be organised in a functional way. Kavli scores high on all these variables.

Manpower

According to the founder, the employees were the company’s most important resource.8 He was concerned with workers’ Other countries welfare and with raising their competence. This philosophy has 40 Czechoslovakia Bahrein largely been passed down to his successors in the organisation, Greece Japan Iceland although, admittedly, to a varying degree. When the company 30 Canada has focused on raising competence and employees’ welfare, Australia 20 it has been more successful. Generous holiday and pension arrangements and employee participation have led to a great 10 sense of ownership, job satisfaction and high productivity, as USA well as a low rate of sickness absence. 0 With the exception of the problems in the Norwegian company in the 1980s and 1990s, there have been few disputes. Source: O. Kavli AS, Bergen, Export statistics 1965–2011. Strikes have been almost non-existent. Most of the employees The Kavli Archives, Bergen are proud to work for the company. Their pride has increased as the Kavli Trust has become better known as a significant benefactor of charitable causes, and since employees can now nominate candidates for grants every year.9 Pay levels have not been high, but nonetheless relatively good seen in relation to many other food companies. At the same time, moderation and caution have been stressed when it comes to costs. Today, the company often recruits top-drawer candidates to production, marketing, administrative, business and management positions, as well as to directorships.10 The high labour costs in the Nordic countries are a challenge. In 2012, one man-year on Kavli’s production lines in Sweden and Norway cost almost two and three times more, respectively, than in the UK. However, high tariff barriers and brand identity stop the company from moving all its cheese production to Team Valley. Perhaps tariffs protect the food industry more than they protect the farmers? 11

296

2012

2005

2000

1995

1990

1985

1980

1975

20: CHEESE â&#x20AC;&#x201C; NOT FISH

Capital It has been very important to be at the cutting edge in the development of machinery, although the advantages of purchasing new machinery have had to be weighed against the costs. It has also been important to weigh labour costs against capital costs. The factories in the UK were originally more capital-intensive than in the Scandinavian countries, but the opposite has been the case in recent decades. On a few occasions, things have gotten out of control, but this has been the exception to the rule. These periods have been characterised by misguided investments and falling profits, but also discontentment and a higher conflict level. The company has also had the advantage of a strong capital base, which was accumulated quickly after the limited liability company was established in 1924, and later after the Second World War. The companyâ&#x20AC;&#x2122;s substantial equity has allowed investments to be made with little borrowed capital.

On 1 September 2012, Q-Meieriene launched low-fat sour cream in squeezy bottles â&#x20AC;&#x201C; less mess and less waste.

297

KAVLI – AN INDUSTRIAL FAIRYTALE

Quality and innovation

Figure 20.6

Access to quality ingredients has always been a central factor for Kavli. Food companies often compete along two main 160 dimensions to attract consumers: price and quality. Right 140 Kavli processed cheese 120 from the outset, Kavli has primarily concentrated on making Norvegia 100 good products. We never see, or it is rare to see, the company Consumer Price Index 80 emphasising low prices. An exception to this rule has been seen 60 in recent years with the launch of Q milk, which has always 40 been cheaper than milk produced by its competitor. This was 20 0 in order to secure a position in a market in which volume is paramount. Apart from that, Kavli has marketed unique and RELATIVE PRICES IN RELATION TO special high quality products. Processed cheese has never been THE CONSUMER PRICE INDEX 250 cheap, but the product itself is unique. In periods of extensive product innovation in terms of fla200 vours, packaging and product combinations, the company has 150 grown. The most important product innovations have been 100 spreadable caviar, Primula and other spreadable processed cheeses, low-fat mayonnaise, Raketost, Fun light and Q Skyr. 50 Kavli processed cheese The most important packaging innovations have been Norvegia 0 tubes, airtight foil and screw tops on dairy packaging. The firm has been innovative in terms of both products and packaging. Source: The Wedervang Archive, Norwegian School of Economics (NHH), In particular, the combination of processed cheese and tubes The Kavli Archives, Bergen, Statistics Norway made an important contribution to the company’s success. Right from the start, the company advertised that it focused on healthy products, albeit to a varying degree. This philosophy was reinforced after a strategic decision was made in 1978.12 Kavli’s processed cheese has a higher cheese content than most of its competitors and less fat and preservatives than cream cheese. The pâtés are fresher and they have purer ingredients than those of their competitors. Q milk is fresher than any other milk and Q Skyr is healthier and more energy-giving than similar yoghurts. Cordials, muesli and other food products from the factories in Denmark and Sweden are purer and healthier than many equivalent products. During some periods, there has been a shortage of input factors, especially cheese. However, the company has managed to negotiate access to local resources or national quotas that it could live with. The best examples are the establishment of subsidiaries abroad during the period of protectionism in the 1930s, the government privileges the British factory was granted during the Second World War, and the establishment of an export factory in Denmark after the war. Kavli has largely survived by maintaining its reputation as a credible producer of healthy, pure and first-class products within its field. One prerequisite for this was that it had to succeed in obtaining fresh high quality ingredients. This has been an incontrovertible principle, which also formed the basis for the establishment of Q-Meieriene, where the milk arrives at the dairy and is distributed as drinking milk the same day.13 Based on the same principle, the pâtés from Scottish Castle MacLellan are distributed Cheese prices in Norway

298

1890

1900

1910

1920

1930

1940

1950

1960

1970

1980

1990

2000

2011

1890

1900

1910

1920

1930

1940

1950

1960

1970

1980

1990

2000

2011

RUNNING KILO PRICES

20: CHEESE – NOT FISH

to customers the same day as they arrive at the warehouse in Gateshead.14 Group CEO Erik Volden, stresses that health, safety and the environment form the basis for everything they do, followed by quality, service level and cost awareness, and the group has also saved millions of kroner through the appointment of a dedicated director to coordinate purchasing, Øyvind Askevold.15

A strategy based on growth When Knut Kavli gave the company to a charitable foundation, he made it a condition that it would not be sold to anyone else. This condition meant that the company had to be competitive and profitable. If not, it would die out. The food industry has seen a continuously stronger concentration of companies. Small producers have usually been bought by increasingly large conglomerates. Kavli had to expand in order to survive. Olav Kavli understood this in 1893 when he founded the enterprise. Expansion was a goal even then. The focus on growth has largely been maintained up to the present day, albeit with some exceptions. We can split the work on the company’s strategy into several phases. The first lasted until the bankruptcy in 1924. At that time, the focus was on growing in all directions by going into different business areas e.g. the dairy industry, the woollen mill, canning factory, furniture factory, pig breeding, and speculation in stocks and shares. The second phase began when Primula was launched in 1924. Increasing sales of core products on the domestic and foreign markets became paramount. Exports were higher than domestic sales already in the 1930s, and new production units were established in Austria, the UK, Sweden and Denmark. At the end of the 1950s, there were signs that the market was saturated, and the strategy was to keep what the company had. This resulted in stagnation. It was at this time that CEO Alf Sjurseth considered the possibility of selling the group. A third phase began around 1980, with the focus on growth through the Group’s core product – processed cheese – in addition to cautious diversification through strategic acquisitions. Vestfold Flatbrødfabrik was acquired in 1984. At the same, the foreign companies focused more on product innovation, while the Danish company focused on commercial activities. The fourth phase started in the late 1990s, with the drafting of a comprehensive strategic plan for the Group in which growth was emphasised even more. It was about increasing volumes in order to survive and secure profits.16 Since then, expansion in all directions has once again been emphasised. This has been achieved through both product innovation and acquisitions, just like in 1924. The best example of innovation in this phase is the establishment of Q-Meieriene in 1997, which has become the Group’s greatest success since processed cheese. Furthermore, important enterprises were acquired, for example Castle MacLellan in the UK, Pebas in Denmark and Druvan in Sweden. In this way, the Group’s product range has become more diversified, although food products remain central.

299

KAVLI – AN INDUSTRIAL FAIRYTALE

Another important principle that was laid down in 1924 was the sanctity of the brand name. Brand building became more and more important after 1994, when the holding company was formed. In that connection, the use of a joint logo for all business units and products became important. In addition, Kavli or Q is included in the names of most brands. For example, Primula has been replaced by Kavli in all countries except the UK. The company’s dairy business uses product names such as Q-Melk (Q-milk), Q-Skyr and Q-Rømme (sour cream). As part of its focus on branding, endeavours have been made to build a good reputation through ethical and product-related standards and the charitable activities of the trust. At the same time it has been necessary to also accept alternative solutions. Kavli now produces for other companies. For example, pâté production in Scotland is largely done under the brands of other companies. Private labelling, which the company frowned upon for a long time, has been rapidly introduced in recent years, not because it was desirable, but because it had to be accepted when new companies were acquired. The strategy has nonetheless been to focus on building strong and sustainable enterprises, for example, through Castle MacLellan’s high product quality and Pebas’s dominant market position. BioQ – cultured milk with fibre.

Management and business principles Part of the explanation for why Kavli has managed to survive for 120 years can also be found in the management and business principles that Olav and Knut Kavli adopted already in the early 1930s. One is quality consciousness, i.e. the product quality should be so high that customers are aware of it. Secondly, the company has been consumeroriented and has concentrated on discovering changes in people’s tastes at an early stage in order to enable it to adapt to new trends. A third principle has been to secure deliveries, which has enabled them to replenish their customers’ warehouses at short notice. The financial principles have been simple: money should not be spent before it is earned, pay attention to costs and remain independent.17 While these principles are undoubtedly important, we believe that one of Olav and Knut Kavli’s biggest contributions to the success story was that they developed a decentralised management model. It ensured that their managing directors had the trust and freedom they needed to develop and lead the companies. The aim was that the companies in the Group would be built around talented and capable individuals with wide powers. The board of the trust ensured that this autonomy was maintained until the start of the millennium.18 By that time, however, the realisation of synergies and economies of scale was long overdue. The changes around the turn of the millennium, the resignation of central figures, such as Hans Theis Westermann and Bert Jansson, made this a natural transition. More corporate thinking, central control and coordination of operations and financial systems, marketing and purchasing have been a precondition for survival and growth and for ensuring profitability in a market that is increasingly dominated by big global conglomerates. Erik Volden and his staff have been responsible for the implementation of strategies that were partly formulated earlier, but not fully executed.

300

20: CHEESE â&#x20AC;&#x201C; NOT FISH

301

KAVLI – AN INDUSTRIAL FAIRYTALE

In many ways, the years around the turn of the millennium represent a break with the past as regards how the group is managed and the trust is run. In the reorganisation that took place in 1994, the trust stepped down as the Group’s management and gave responsibility to the new holding company. Thereafter, work was done to amend the trust’s statutes. They simplified the management of the Group, at the same time as they clarified a number of unresolved issues. However, the most significant changes to the trust were made in 2008, when a new strategy for its charitable work was implemented, and a full-time, permanent general manager was appointed. From then onwards, donations and professionalism increased considerably.

Active ownership and core values

Kavli on the road – yesterday, today and tomorrow.

302

In practice, the Group was a family-run company until Knut Kavli passed away in 1965. The family exercised active ownership, even though the subsidiaries had great autonomy. From 1965, the trust became involved in operations and in practice acted as the corporate management team, with people like Hans Askeland and Alf Sjurseth, and later Olav Jacob Dreyer and Ivar Gjelsvik, being key figures. After the reorganisation in 1994, when the new holding company became the parent company, its board became very active in relation to operations and work on strategy. Reidar Lorentzen was the chair of Kavli Holding for a long period, and it was not until Erik Volden was appointed CEO in 2005 that his role was normalised as an ordinary chair. As the result of a conscious strategy, the group’s turnover has grown to NOK 2.5 billion. The operating profit for 2012 was NOK 130 million. Dividends amounting to NOK 42 million were transferred to the Kavli Trust, which in the same year donated NOK 25 million to research, culture and humanitarian work. The company has followed the same business concept ever since Olav Kavli, son of a smallholder, started his first cheese shop in Bergen in 1893, namely to develop unique food products that meet consumer requirements. Four core values have crystallised along the way: ambition, a long-term perspective, improvement and cooperation.19 They have formed the basis for successful development. The Kavli Group continues to work in the spirit of its founder, which has resulted in 120 years of success.

NOTES CHAPTER 1: FROM SMALLHOLDING TO MULTINATIONAL COMPANY 1. Kavli Holding AS, Annual Report 2011, Kavli Holding, Bergen. 2. Rydjord, Osvald, Relatives, http://rydjord.slektsweb.no/search.php? action =general&query=kavli&search=+%3E+ 3. Austigard, Bjørn 1986, Kavli – eit slektsnamn og eit fabrikkmerke, Årsskrift 1986, Romsdal Sogelag. 4. Rygh, Oluf and Karl Dithlev Rygg 1908, Norske Gaardnavne: Romsdals Amt, volume XIII, Oslo. 5. Thowsen, Atle 2002, Olav Kavli – utdypning (article by the Norwegian Farmers Association (NBL)),   http://www.snl.no/.nbl_biografi/Olav_Kavli/utdypning. 6. Homboe, Michael Meyer 1996, Stavanger History Guide http://park.org/Guests/Stavanger/michael.htm. 7. Kielland, Morten 2007, Lesja Jernverk, http://morten.bollerogbrus. net/?p=77 8. See Stavem, Anna Nilsdatter 1873, Nogle aandelige Sange, Husmandsenke Anna Nilsdatter Stavem, Ålesund. 9. Hodne, Fritz and Ola Honningdal Grytten 2000, Norsk økonomi i det 19. århundre, Fagbokforlaget, Bergen, pp. 59–74. 10. Kavli, Olav 1946 Med ost i kofferten, John Grieg Forlag, Bergen, pp. 9–16. 11. Kavli 1946, pp. 13–16. 12. Henriksen, Petter (Chief Editor) 1996, Aschehoug og Gyldendals Store Norske Leksikon, Vol. 3, Kunnskapsforlaget, Oslo p. 554. 13. Stavem 1873. 14. Kavli 1946, pp. 12–13. 15. Kavli 1946, p. 23. 16. Grytten, Ola Honningdal 2010, Den undervurderte entreprenøren: Et økonomisk historisk blikk på Hans Nielsen Hauges entreprenørskap, Knudsen, Jon P. and Sigbjørn Sødal (ed.), Økonomi og tid, Fagbokforlaget, Bergen, pp. 51–66. 17. Interview with Grethe Karin Fotland on 7 August 2012. 18. Conversation with Olav Jacob Dreyer on 2 July 2010. 19. Kavli 1946, pp. 108–114. 20. Conversation with Olav Jacob Dreyer on 2 July 2010. 21 Grytten, Ola Honningdal 2007, Norwegian wages 1726–2006 Classified by Industry, Eitrheim, Øyvind. Jan Tore Klovland and Jan F. Qvigstad (ed.), Historical Monetary Statistics – Part II, Norges Bank, Oslo, pp. 366–384.

CHAPTER 2: KAVLI CHEESE 1 Kavli, Olav 1946, Med ost i kofferten, John Griegs Forlag, Bergen, pp. 17–23. 2 Grytten, Ola Honningdal, Purchasing Power of Labour: Norwegian Real Wages, 1726–2006, Scandinavian Economic History Review, 1/2009, pp. 48–87. 3 Kavli 1946, pp. 33–37. 4 http://kavlifondet.no/om-kavlifondet/om-kavlikonsernet/ and the Municipality of Bergen and Bergen Business Register (Bergen kommune og Handelsregister for Bergen 1893) pp. 159–160. 5 Thowsen 2002. 6 Bergen Business Register 1893 pp. 159–160. 7 Ertresvaag, Egil (Editor), The History of Bergen: Et bysamfunn i utvikling 1800–1920, bind 3, Universitetsforlaget, Bergen–Oslo–Tromsø, 1982, pp. 321–488.

8 Hodne and Grytten 2000, pp. 277–290. 9 NOS, Historical Statistics 1994, Statistics Norway, Oslo 1994, pp. 77–80. 10 NOS, Censuses, population tables for towns and rural municipalities, 1855–1910, Statistics Norway, Oslo 1856–1913. 11 Grytten, Ola Honningdal 2004, The Gross Domestic Product for Norway 1830–2003, Eitrheim, Øyvind. Jan Tore Klovland and Jan F. Qvigstad (ed.), Historical Monetary Statistics 1819–2003, Norges Bank, Oslo, pp. 277–280. 12 Grytten 2009, pp. 79–87. 13 Grytten, Ola Honningdal and Kjell Bjørn Minde 1998, The Demand for Consumer Goods in Norway, Scandinavian Economic History Review, 1/1998, pp. 42–58. 14 Hodne and Grytten 2000, pp. 178–180. 15 Ramstad, Jan, Kvinnelønn og pengeøkonomi, Norwegian School of Economics (NHH), Bergen 1982, p. 484 and Grytten 2004, pp. 79–93.

CHAPTER 3: IN BUSINESS 1 Gjerstad, Jo 2007, Spredte glimt fra kjøtthandelen i Bergen, Bodoni Forlag, Bergen, pp. 84–85. 2 Bergen Business Register 1901, pp. 232–233. 3 Bergen Address Directory 1901, Bergen, p. 103. 4 Fasting, Kåre 1971, O. Kavli, unpublished manuscript, Ivar Gjelsvik’s private archives, Bergen, pp. 26–28. 5 Knutsen, Sverre 2007, Kristianiakrisen 1899: en revurdering av den historiske litteraturens årsaksforklaringer, Discussion paper, UiO, Oslo. 6 Eitrheim, Øyvind, Karsten Gerdrup and Jan Tore Klovland 2004, ‘Credit, Banking and Monetary Developments in Norway 1809–2003’, Eitrheim, Øyvind. Jan Tore Klovland and Jan F. Qvigstad (ed.), Historical Monetary Statistics 1819–2003, Norges Bank, Oslo, pp. 377–407. 7 Bergen Address Directory 1905, Bergen. 8 Information from Olav Jakob Dreyer. 9 Kavli, Olav 1946, Med ost i kofferten, John Griegs Forlag, Bergen, pp. 44–46. 10 Kavli 1946, pp. 44–46. 11 Kavli, Olav, private memorandum, dated 26 January 1925, the Kavli Archives, Bergen. 12 Kavli 1946, p. 47. 13 Kavli 1946, pp. 46–48. 14 Business correspondence 1905–1907, the Kavli Archives, Bergen. 15 Med ost i kofferten, O. Kavli AS, Bergen, pp. 12–14. 16 Holøs, Bjørn 1984, Bergen Railway (Bergensbanen) 75, Gyldendal, Oslo. 17 Kavli 1946, p. 47. 18 Mørkhagen, Sverre 2010, Farvel Norge. Utvandringen til Amerika – 1825–1975. Gyldendal, Oslo. 19 Memorandum, dated 12 June 1912, of unknown origin, the Kavli Archives, Bergen. 20 Fasting 1971, p. 29. 21 Fasting 1971, p. 33. 22 Kavli 1946, pp. 52–53. 23 Agreement between B Westergaard & Co, Brooklyn, NY and O. Kavli, Bergen, Norway, New York, 27 April 1922, the Kavli Archives, Bergen. 24 Bergen Register of Business Enterprises, p. 284. 25 The Primula Post (Primulaposten) 1983, pp. 23–24.

303

KAVLI – AN INDUSTRIAL FAIRYTALE

CHAPTER 4: EXPANCION IN ALL DIRECTIONS 1912–1920 1 Fasting, O.W. (1918), Bergens nærings- og forretningsliv i tekst og billeder, Hanche, A.M. (ed.), Norges handel, sjøfart og industri i billeder, Kristiania, pp. 43–44. 2 Hodne, Fritz and Ola Honningdal Grytten 2002, Norsk økonomi i det 20. århundre, Fagbokforlaget, Bergen, pp. 25–76. 3 http://www.nndb.com/people/150/000089880/ 4 Kavli, Olav 1946, Med ost i kofferten, John Griegs Forlag, Bergen pp. 56–58. 5 Bergen Register of Business Enterprises, p. 284. 6 Sandøysoga, p. 529 and p. 613. 7 Thowsen 2002. 8 Os, Edward, 1961, Bygdesamfunnet bd. 1, Sandøysoga, Sandøy, p. 529. 9 Information from Aasrun Sæbjørnsen and Nils Sebjørn Hansen, relatives of Andreas Sæbjørnsen, during an interview on 20 October 2010. 10 Thowsen 2002 and http://www.erlingjensen.net/ Rogaland/ Sandnes-1900.htm 11 Kavli 1946, pp. 61–63. 12 Registration Records, Fana District Court, 4 June 1924. 13 Grytten, Ola Honningdal, A consumer price index for Norway 1516–2003, Eitrheim, Øyvind. Jan Tore Klovland and Jan F. Qvigstad (ed.), Historical Monetary Statistics 1819–2003, Norges Bank, Oslo 2004, pp. 92–93. 14 Grytten, Ola Honningdal, «Norwegian wages 1726–2006 classified by industry», Eitrheim, Øyvind. Jan Tore Klovland and Jan F. Qvigstad (ed.), Historical Monetary Statistics – Part II, Norges Bank, Oslo 2007, pp. 378–383. 15 Encyclopaedia of the County of Sogn og Fjordane, http://www.nrk.no/ nyheter/distrikt/nrk_sogn_og_fjordane/fylkesleksikon/ 2469577.html 16 Hodne and Grytten 2002, pp. 77–92. 17 The Municipality of Sogndal 2003, Historical walks along the Sogndal Fjord, folder, Sogndal. 18 http://en.wikipedia.org/wiki/Hans_Rasmus_Astrup 19 Kavli 1946, pp. 62–63. 20 Tax assessments for Olav Kavli 1915–1923, the Kavli Archives, Bergen. 21 Klovland, Jan Tore, Historical stock price indices in Norway 1914–2003, Eitrheim, Øyvind, Jan T Klovland and Jan F Qvigstad (ed.), Historical Monetary Statistics for Norway 1819–2003, Norges Bank, Oslo 2004, pp. 329–348. 22 Primulaposten (The Primula Post), 28 March 1943, Kavli, Bergen and Primulaposten – 90th anniversary 1893–1983, Kavli, Bergen 1983, p. 18. 23 Fasting 1918, p. 43. 24 Ericson, Uno Myggan and Karin Kavli 1984, Karin Kavli: Från Kassandra till Farmor, Bonniers, Stockholm, pp. 89–105. 25 Interview with Olav Jacob Dreyer on 20 September 2011.

CHAPTER 5: FROM SUCCESS TO FAILURE – AND BACK AGAIN 1 Hanisch, Tore Jørgen 1979, Om virkninger av paripolitikken, Historisk tidsskrift 3/1979, pp. 244–247. 2 Grytten, Ola Honningdal 2004, The Gross Domestic Product for Norway 1830–2003, Eitrheim, Øyvind. Jan Tore Klovland and Jan F. Qvigstad (ed.), Historical Monetary Statistics 1819–2003, Norges Bank, Oslo, pp. 277–280. 3 Hodne and Grytten 2002, pp. 103–116. 4 Grytten, Ola Honningdal 1995, The Scale of Norwegian Interwar Unemployment in an International Perspective, Scandinavian Economic History Review, 2/1995, pp. 226–250. 5 Kavli, Olav 1946, Med ost i kofferten, John Griegs Forlag, Bergen, pp. 64–80. 6 Tax returns for Olav Kavli, 1915–1953, the Kavli Archives, Bergen. 7 Tax assessment for Olav Kavli 1923, the Kavli Archives, Bergen.

304

8 Transcript of the Registration Records, Fana District Court, dated, 4 June 1924, the State Archives, Bergen. 9 Tax returns for Olav Kavli 1923 and 1924, the Kavli Archives, Bergen. 10 Registration in the Bergen Land Registry, dated 4 October 1929, Olav Jacob Dreyer’s private archive, Bergen. 11 Old debt. Acknowledgements 1942–1945 and thank you letters for debt repayments after the bankruptcy in 1924, the Kavli Archives, Bergen. 12 O. Kavli AS 1924, Minutes of Negotiations, the Kavli Archives, Bergen, pp. 1–3. 13 Converted using Norges Bank’s price calculator: http://www.norges-bank. no/templates/pricecalculation.aspx?id=66897 14 O. Kavli AS 1925, Minutes of Negotiations, the Kavli Archives, Bergen, pp. 5. 15 Grytten 2009, pp. 75. 16 O. Kavli AS 1926, Minutes of Negotiations, the Kavli Archives, Bergen, pp. 5.

CHAPTER 6: PRIMULA 1 Bjarne Fotland, Johan-Krohn Hansen and Roald Bakke 2010, O. Kavli, Bergen, Stenhjem, Birthe Brattli, Anders Bjarne Fossen and Jo Gjerstad (ed.) 2010, Bydelen ved Damsgårdssundet, Bodoni forlag, Bergen, pp. 82–83. 2 Henriksen, Petter (ed.), Aschehoug og Gyldendals Store Norske Leksikon, Kunnskapsforlaget, Oslo 1998, Vol. 13, p. 386 and http://www. denstoredanske.dk/Mad_og_drikke/Gastronomi/Mejerivarer/smelteost. 3 http://arla.dk/Produkter/Artikler/smelteost/ 4 http://www.emmi-gerber.ch/de/gerber/geschichte/ 5 Kieferle, F and J Umbrecht 1939, Die Schmelzkäse-Industrie, Deutsche Molkerei-Zeitung, Kempten, pp. 7–26. 6 Memorandum from Gerberkäse AG, January 2011. 7 Oslo Illustrerte, no 33, 12 August 1933, pp. 12–13. 8 Agreement between B Westergaard & Co, Brooklyn, NY and O. Kavli AS, Bergen, Norway 1920–1922, the Kavli Archives, Bergen. 9 http://en.wikipedia.org/wiki/Processed_cheese. 10 Kavli, Olav 1946, Med ost i kofferten, John Griegs Forlag, Bergen, pp. 89–98. 11 Meyer, Albert 1970, Joha Schmelzkäse Buch, Benckiser-Knapsack GMBH, Ludwigshafen, pp. 31–65 and pp. 101–214. 12 Kavli 1946, pp. 90–91. 13 Hodne, Fritz 1981, Norges økonomiske historie 1815–1970, Cappelen, Oslo, pp. 242–248. 14 Kavli 1946, pp. 84–87. 15 Kavli 1946, pp. 90–91. 16 http://www.bel-deutschland.de/page/complex_basic.php?NSID=292 17 Askeland, Hans 1929, Memos, the Kavli Archives, Bergen. 18 Ward, Peter 2003, Primroses and Auriculas, RHS Wisley Handbooks, Cassell Illustrated, Octopus Publishing Company, London. 19 Fotland 2010, p. 82. 20 Kavli 1946, pp. 96–98. 21 Record of proceedings from O. Kavli’s bankruptcy, Fana 18 June 1924, the State Archives, Bergen. 22 Askeland, Hans 1929, Memos, the Kavli Archives, Bergen. 23 Record of Proceedings for O. Kavli AS 1924, pp. 1–3. 24 Omland, Dagfinn, Kavli 1893–1993: Kvalitet i 100 år, Kavli, Bergen 1993, pp. 3–4. 25 http://www.alma.at/Alma/index.php?kat=2&id=17 26 Meyer 1961 and Primulaposten (The Primula Post) – 90th anniversary 1893–1983, the Kavli Club 1983, p. 18. 27 Fasting 1971, p. 141–142. 28 Kavli 1946, pp. 96–97. 29 Sætherskar, Johannes (ed.) 1945, Kavli, O, A/S, Det norske næringsliv. Bergen fylke, pp. 296–297.

NOTES

30 Kieferle und Umbrecht 1939, pp. 7–26. 31 Kavli 1946, pp. 108–114. 32 O. Kavli, unpublished manuscript, private archive of Ivar Gjelsvik, Bergen, and Dreyer Farstad, Torbjørn 2000, Mannen som fikk norsk ost ut på verdensmarkedet. Ostekongen fra Molde, i Nordmørsnett, 13 July 2000.

CHAPTER 7: SUCCESS DESPITE ECONOMIC MELTDOWN 1 Information from Johan Krohn-Hansen and interview with Åsta Lone on 7 July 2012 and Grethe Karin Fotland on 7 August 2012. 2 Conversation with Olav Jacob Dreyer on 28 February 2011. 3 Interview with Grethe Karin Fotland on 7 August 2012. 4 Primulaposten (The Primula Post) 1983, p. 24. 5 Information from Elsa Larsen 16 March 2011, interview with Grethe Karin Fotland on 27 September 2012, information from the private archives of Sivert Nilsen c/o Siren Lovise Ryland on 12 September 2012. 6 O. Kavli AS Bergen, Accounting Records 1924–1952, the Kavli Archives, Bergen. 7 O. Kavli AS Bergen, Accounting Records 1924–1942, the O. Kavli Archives, Bergen. 8 Bergen Court of Appeal, Minutes no 31/1931, Bergen, 9 November 1931, the State Archive, Bergen. 9 Hovland, Edgar 1979, Smør og margarin blir ett fett, Historisk tidsskrift, no 1, 1979, pp. 305–325 and Benterud, Olav 1978, Norske Meieriers Salgssentral 50 år 1928–1978, Oslo, pp. 22–29. 10 http://www-bib.hive.no/tekster/sem_slagen/kulturhistorie2_2/handverk. html#VESTFOLDFLATBRDFABRIK 11 O. Kavli AS Bergen, Board Minutes, 15 January 1932, the Kavli Archives, Bergen. 12 O. Kavli AS Bergen, Accounting Records 1924–1955, the Kavli Archives, Bergen, pp. 49–50. 13 O. Kavli AS Bergen, Accounting Records 1924–1955, the Kavli Archives, Bergen, pp. 51–52. 14 Fotland, Bjarne 2010, O. Kavli, Bergen, Stenhjem, Birthe Brattli, Anders Bjarne Fossen and Jo Gjerstad (ed.) 2010, Bydelen ved Damsgårdssundet, Bodoni forlag, Bergen, pp. 82–86. 15 Thornquist, Christian 1977, Den sorte boken: Kavli – Memoranda, Bergen 1932–1977, pp. 1–3. 16 Fotland 2010, pp. 84–86. 17 Askeland, Hans, Information for employees of O. Kavli AS about company sick pay, dated 4 June 1929, the State Archive Bergen. 18 Primulaposten (The Primula Post), anniversary edition 1943, Bergen. 19 Information from interviews with Johan Krohn-Hansen 9 July 2012 and Åsta Lone on 7 July 2012. 20 Primulaposten, (The Primula Post) no 1, 1978, O. Kavli AS, Bergen, p. 13.

CHAPTER 8: AN INTERNATIONAL COMPANY 1 Kavli, Olav 1946, Med ost i kofferten, John Griegs Forlag, Bergen, pp. 128– 148. 2 Conversation with Olav Jakob Dreyer on 22 December 2010. 3 Kindleberger, Charles P 1987, The World in Depression 1929–1939, Penguin Books, London, pp. 158–164. 4 Hodne, Fritz and Ola Honningdal Grytten 2002, Norsk økonomi i det 20. århundre, Fagbokforlaget, Bergen, pp. 117–130. 5 Olav Kavli, undated memorandum, the Kavli Archives, Bergen. 6 Kavli 1946, pp. 99–107. 7 Nationen 29 August 1931, p. 5. 8 Comment from Hans Askeland in connection with a board meeting on 6 January 1933, the Kavli Archives, Bergen. 9 Tax audit of O. Kavli AS, Damsgårdsveien 59, Bergen Tax Office, Bergen 1938, Olav Jacob Dreyer’s private archive, Bergen.

10 The Royal Family, The King’s Medal of Merit, 100 years, http://www.kongehuset.no/c26951/nyhet/vis.html?tid=35767 11 O. Kavli AS, Board Minutes 1932–1938, the Kavli Archives, Bergen. 12 Thornquist, Christian 1977, Den sorte boken: Kavli – Memoranda, Bergen 1932–1977, pp. 2–3. 13 O. Kavli AS Bergen, Board Minutes, 20 February 1940, 19 March 1940, 20 March 1940 and 30 April 1940, the Kavli Archives, Bergen. 14 O. Kavli AS Bergen, Board Minutes, 30 April 1940, the Kavli Archives, Bergen. 15 Kavli, Knut, Memos for Askeland and Løvås-Svendsen about Knut Kavli’s trip to Europe August 1933, dated 4 September 1933, Olav Jacob Dreyer’s private archive, Bergen. 16 Interview with Alf Sjurseth, 1934, Olav Jacob Dreyer’s private archive, Bergen. 17 Omland, Dagfinn 1993, Kavli 1893–1993: Kvalitet i 100 år, Kavli, Bergen, p. 30. 18 Memorandum of Association for AS Dansk O. Kavli, Copenhagen, dated 4 December 1935, Olav Jacob Dreyer’s private archive. 19 Kavli’s operations in Denmark, archive file, Olav Jacob Dreyer’s private archive, Bergen. 20 Hans Askeland’s memos on establishing the company in England, 1935–1939, the Kavli Archives, Bergen. 21 Thornquist, Christian 1986, Start and Expansion in Great Britain, manuscript, the Kavli Archives, Newcastle, pp. 1–17. 22 Kavli Ltd., Annual Report 1940, the Kavli Archives, Newcastle. 23 Kavli Ltd., Financial Accounts 1936–1941, the Kavli Archives, Newcastle. 24 O. Kavli AS Bergen, Export Records for 1931–1939, the Kavli Archives, Bergen. 25 Ericson, Uno Myggan and Karin Kavli 1984, Karin Kavli: Från Kassandra till Farmor, Bonnier, Stockholm, pp. 89–105.

CHAPTER 9: WAR AND RECONSTRUCTION 1 Millward, Alan 1980, War, Economy and Society, 1939–1945, University of California Press, Berkley/Los Angeles and Hodne, Fritz 1981, The Norwegian Economy 1920–1980, Croom Helm, London. 2 O. Kavli AS Bergen, Export Records 1935–1945, the Kavli Archives, Bergen. 3 Sjurseth, Alf 1950, The Market Situation during the War, the Kavli Archives, Newcastle. 4 Askeland, Hans, Memo to Knut Kavli, 21 April 1945, the Kavli Archives, Bergen. 5 Letter to O. Kavli AS from Bergen Police, dated 24 May 1941, the Kavli Archives, Bergen and Nilsen, Sivert 1997, Fra min dagbok (From My Diary), Primulaposten, (The Primula Post) Easter 1997, p. 8. 6 O. Kavli AS, Statistics Book 1939–1952, the Kavli Archives, Bergen. 7 Sagelvmo, Almar, et al. 1996, New Marketing Scheme for Milk, working group report, Norwegian Ministry of Agriculture, Oslo, pp. 6–7. 8 O. Kavli AS, Annual Accounts 1940–1945, the Kavli Archives, Bergen. 9 Cheese quotas, folder, the Kavli Archives, Bergen. 10 The Rationing Board, folder, the National Archives, Oslo. 11 Keilhau, Wilhelm 1952, Den norske pengehistorie, Aschehoug, Oslo. 12 Rationing Records, folder, the Kavli Archives, Bergen. 13 Rationing Records, folder, the National Archives, Oslo. 14 Nilsen 1997, pp. 9–10. 15 Kavli Club Accounts Book 1937–1952, the Kavli Archives, Bergen. 16 Dahl, K. 1990, The Kavli Club 50-years-old – looking back, Primulaposten (The Primula Post) Christmas 1990, pp. 8–10. 17 The Kavli Club Meeting Book 1940–1952, the Kavli Archives, Bergen. 18 Lorentzen, Pål W, memo dated 13 December 1995, the Kavli Archives, Bergen. 19 Thornquist, Christian 1986, Start and Expansion in Great Britain, manuscript, the Kavli Archives, Bergen pp. 1–8.

305 20

KAVLI – AN INDUSTRIAL FAIRYTALE

20 Information from conversations with Bjarne Fotland on 10 November 2010 and Olav Jacob Dreyer on 16 January 2011. 21 Conversation with Bjarne Fotland on 10 November 2010. 22 Cheese quotas, folder, the Kavli Archives, Bergen. Sweden also had import cheese quotas. 23 Hodne, Fritz and Ola Honningdal Grytten 2002, Norsk økonomi i det 20. århundre, Fagbokforlaget, Bergen, pp. 134–139. 24 Hodne and Grytten 2002, pp. 188–194. 25 O. Kavli, Board Minutes, 20 August 1946, the Kavli Archives, Bergen. 26 Bjerve, Peter Jacob 1959, Planning in Norway 1947–1956, Amsterdam, pp. 8–37. 27 Fotland, Bjarne, Johan-Krohn Hansen and Roald Bakke, O. Kavli, Bergen, Stenhjem, Birthe Brattli, Anders Bjarne Fossen and Jo Gjerstad (ed.) 2010, Bydelen ved Damsgårdssundet, Bodoni forlag, Bergen, p. 85. 28 Hovland, Edgar 1979, Smør og margarin blir ett fett, Historisk tidsskrift, no 1, 1979, pp. 305–325, and Benterud. 29 Benterud, Olav 1978, Norske Meieriers Salgssentral 50 år 1928–1978, Oslo, 22–29. 30 Letter to Knut Kavli from Hans Askeland, dated 6 January 1947, the Kavli Archives, Bergen. 31 Memo from Hans Askeland, October 1954, the Kavli Archives, Bergen. 32 Thornquist, Christian 1977, Den sorte boken: Kavli – Memoranda, Bergen 1932–1977, p. 4.

CHAPTER 10: MORE POPULAR ABROAD 1 Thornquist, Christian 1977, Den sorte boken: Kavli – Memoranda, Bergen 1932–1977, pp. 4–14. 2 O. Kavli AS, Board Minutes, 17 June 1947, the Kavli Archives, Bergen. 3 Bergen Tax Office, tax audit of O. Kavli AS 1938 and 1946, the City Archives, Bergen. 4 O. Kavli AS Bergen, Board Minutes, 1946–1953, the Kavli Archives, Bergen. 5 O. Kavli AS, Board Minutes, 1946–1953, 18 August 1958, the Kavli Archives, Bergen. 6 Thornquist 1977, p. 15. 7 Thornquist 1977, p. 10. 8 Interview with Reidar Lorentzen on 20 October 2011. 9 Statement to the Board of Directors of O. Kavli, dated 22 April 1958, the Kavli Archives, Bergen. 10 Share Register for O. Kavli AS, the Kavli Archives, Bergen. 11 Correspondence between O. Kavli AS and Otto Mønsted AS, autumn 1958 and spring 1959, Olav Jacob Dreyer’s private archive and letter to the Board of Directors of O. Kavli AS from Alf Sjurseth, dated 18 March 1960, the Kavli Archives, Bergen. 12 O. Kavli Glamsbjerg AS, Annual Reports 1956–1965, the Kavli Archives, Denmark. 13 O. Kavli Glambjerg AS, Strategy Memo 1960, the Kavli Archives, Denmark. 14 Partnership agreement between O. Kavli AS, Otto Mønsted AS and O. Kavli AS Glambjerg, Copenhagen, dated 24 June 1947, the Kavli Archives, Denmark. 15 Agreement between O. Kavli AS, O. Kavli Glambjerg AS and Otto Mønsted AS about the organisation of the Cremo Cheese Company IS, Olav Jacob Dreyer’s private archive. 16 Cremo Cheese Company IS, Annual Accounts 1956–1966, Olav Jacob Dreyer’s archive. 17 O. Kavli Glamsbjerg AS, Production Statistics 1960–1966, Olav Jacob Dreyer’s archive. 18 O. Kavli AS, Board Minutes 1955, the Kavli Archives, Bergen. 19 O. Kavli AB, Annual Accounts 1956–1967, Olav Jacob Dreyer’s private archive.

306

20 O. Kavli AB, Production Statistics 1960–1966, the Kavli Archives, Stockholm. 21 O. Kavli AB Stockholm, Marketing Plan 1965, the Kavli Archives, Stockholm. 22 O. Kavli AB, Export Statistics for 1960–1967, the Kavli Archives, Stockholm. 23 Ericson Uno Myggan and Karin Kavli 1984, Karin Kavli: Från Kassandra till Farmor, Bonnier, Stockholm, pp. 89–105. 24 O. Kavli AS, Group Balance Sheet, the Kavli Archives, Bergen. 25 Interview with James Symons and Ken Forster on 13 October 2011. 26 Interview with Paul Pendleton on 12 October 2011. 27 Interview with Peter Stuart on 13 October 2011. 28 O. Kavli, unpublished manuscript, private archive of Ivar Gjelsvik, Bergen, pp. 148–171. 29 Omland, Dagfinn 1993, Kavli 1893–1993: Kvalitet i 100 år, Kavli, Bergen, pp. 30–33. 30 Kavli Crispbread Ltd, Financial Accounts 1953–1978, Kavli Ltd’s archives, Gateshead and interview with Ken Forster on 13 October 2011. 31 Baren, Maurice 1999, How it all began: The stories behind our favourite shops and brands, Marks & Spencer, London, pp. 189–190. 32 Thornquist, Christian 1986, Start and Expansion in Great Britain, manuscript, the Kavli Archives, Newcastle pp. 9–12. 33 Interview with Peter Stuart and Maureen Brown on 13 October 2011. 34 O. Kavli AS, Group Report 1969, the Kavli Archives, Bergen, Thornquist 1986, pp. 8–11 and interview with James Symons on 13 October 2011. 35 Floud, Roderick & Paul Johnson 2004, The Cambridge Economic History of Modern Britain, Cambridge. 36 O. Kavli Ltd Newcastle, Financial Accounts 1946–1966, the Kavli Archives, Newcastle.

CHAPTER 11: ESTABLISHMENT OF THE KAVLI TRUST 1 Minutes of Negotiations for O. Kavli’s and Knut Kavli’s Trust, Deed of Donation, the Kavli Archives, Bergen. 2 Notification of inheritance, Olav Kavli, Olav Jacob Dreyer’s private archives, folder marked ’O. Kavlis bo’. 3 Fasting, Kåre 1971, O. Kavli, unpublished manuscript, private archive of Ivar Gjelsvik, Bergen, p. 176. 4 Letter to Olav Jacob Dreyer from Knut Kavli, dated 11 May 1962, the Kavli Archives, Bergen. 5 Letter to Olav Jacob Dreyer from Knut Kavli, dated 11 May 1962, the Kavli Archives, Bergen. 6 Brandt-Hansen, Per 1967, memo, February 1967, the Kavli Trust Archives, Bergen. 7 Knut Kavli’s will dated 4 December 1961, Olav Jacob Dreyer’s private archive, folder marked ’O. Kavlis bo’. 8 Letter to Alf Sjurseth from Per Brandt-Hansen, dated 24 February 1967, the Kavli Archives, Bergen. 9 Thornquist, Christian 1962, memo, the Kavli Archives, Bergen. 10 Wills dated 24 January 1958, 29 October 1960, 4 December 1961, 10 May 1962, 4 July 1963 and 12 May 1964, Olav Jacob Dreyer’s private archive, Bergen. 11 Knut Kavli’s will dated 28 December 1960, folder marked ’Arthur Sundt’s archive’, Olav Jacob Dreyer’s private archive, Bergen. 12 Brandt-Hansen, 1967. 13 Interview with Erik Bernhard Hjorth on 29 June 2011. 14 Knut Kavli’s will dated 12 May 1964. 15 Knut Kavli’s Deed of Donation, dated 25 April 1962, the Kavli Archives, Bergen. 16 Interviews with colleagues in the UK, 12–13 October 2011. 17 O. Kavli’s and Knut Kavli’s Trust, Minutes of Negotiations 1966, the Kavli Archives, Bergen.

NOTES

18 O. Kavli’s and Knut Kavli’s Trust, Minutes of Negotiations 1965 and 1969, the Kavli Archives, Bergen. 19 Interview with Olav Jacob Dreyer on 29 June 2011. 20 Brandt-Hansen, 1967. 21 O. Kavli and Knut Kavli’s Trust, Minutes of Negotiations, the Kavli Archives, Bergen. 22 Comments from Erik Bernhard Hjorth on 20 September 2012.

CHAPTER 12: ALMOST DEVOURED 1 O. Kavli AS Bergen, Annual Report 1958, the Kavli Archives, Bergen. 2 O. Kavli AS, Board of Directors’ Protocol, dated 7 June 1962, the Kavli Archives, Bergen. 3 Forberg, Bjarne Ingvar, Norsk Hundefor AS, Memo, Sirevåg 2012. 4 Thornquist, Christian 1977, Den sorte boken: Kavli – Memoranda, Bergen 1932–1977, p. 4 and p. 27. 5 Interview with Aud Nordgaard on 4 July 2012. 6 Thornquist 1977, p. 33. 7 Thornquist, Christian 1965, memo, folder marked ’Kavli Glamsbjerg’, the Kavli Archives, Bergen. 8 Reinhardt, Erik, O. Kavli AS Glamsbjerg. Some thoughts about the future. Memo July/August 1960 and Sjurseth, Alf, ‘Opinion’, strategic memo, dated 21 September 1960, the Kavli Archives, Bergen. 9 Letter to Alf Sjurseth from Erik Reinhardt, dated 2 November 1966, the Kavli Archives, Bergen. 10 Letter to Erik Reinhardt from Knut Kavli, dated 15 February 1962, p. 3, the Kavli Archives, Bergen. 11 Hofgaard, Knud, O. Kavli AS, Glamsbjerg; minutes of the meetings held in Copenhagen on 23 and 26 January 1961, Olav Jacob Dreyer’s private archive, Bergen. 12 Kristensen, Oskar 1961, Investigation of some questions about factory hygiene at O. Kavli AS Glamsbjerg, the Kavli Archives, Bergen. 13 Kristensen 1961, 2–6. 14 Letter to Alf Sjurseth from Erik Reinhardt, dated 4 November 1966, the Kavli Archives, Bergen. 15 Letter to Christian Thornquist from Alf Sjurseth, dated 23 November 1968, the Kavli Archives, Bergen. 16 Letter to Alf Sjurseth from Ebbe Tuxen, dated 6 July 1967, the Kavli Archives, Bergen. 17 O. Kavli AS Glamsbjerg, Annual Report and Cremo Cheese Company AS, Annual Report, Olav Jacob Dreyer’s private archive, Bergen. 18 Agreement between O. Kavli AS Bergen and Otto Mønsted AS, Copenhagen and endorsement from O. Kavli AS, Glamsbjerg, dated 26 September 1968 and letter to Alf Sjurseth from Erik Reinhardt, dated 4 November 1966, the Kavli Archives, Bergen. 19 Interview with Hans Theis Westermann 22 December 2011. 20 O. Kavli AB, Description of Assortment 1958, the Kavli’s Archives, Stockholm. 21 Interview with Lennart Forslund on 9 February 2012. 22 Interview with Lennart Forslund on 9 February 2012. 23 O. Kavli AB, Annual Accounts 1940–1963, the Kavli Archives, Stockholm. 24 Interview with Lennart Forslund and Jan-Olov Gidevall on 9 February 2012. 25 Interview with Alice Strömberg on 9 February 2012. 26 Interview with Paul Pendleton on 12 October 2011. 27 O. Kavli Ltd., Newcastle, Financial Accounts 1950–1975, the Kavli Archives, Newcastle. 28 Sjurseth, Alf 1970, Strategy Plan for O. Kavli Ltd., Newcastle, memo, the Kavli Archives, Newcastle. 29 Interview with Maureen Brown on 13 October 2011 and interview with James Symons on 13 October 2011.

30 Interview with Ken Foster on 12 October 2011, Paul Pendleton on 12 October 2011, and Peter Stuart on 12 October 2011 and 13 October 2011. 31 O. Kavli Ltd., Annual Report 1972, the Kavli Archives, Newcastle. 32 Letter to Alf Sjurseth from Erling Thofte, dated 14 May 1966, Olav Jacob Dreyer’s private archives, Bergen. 33 Draft of a letter to Erling Thofte form the Board of Directors of O. Kavli AS Bergen, dated 31 May 1966. 34 Letter to Alf Sjurseth from Erik Reinhardt, dated 4 November 1966, the Kavli Archives, Copenhagen. O. Kavli AS, Board Minutes, dated 12 May 1967, the Kavli Archives, Bergen. 35 O. Kavli AS, Board Minutes, 28 February 1967, the Kavli Archives, Bergen. 36 Brandt-Hansen, Per 1967, Query about selling Kavli Group shares, memo, folder marked O. Kavli AS – abroad, the Kavli Archives, Bergen. 37 O. Kavli AS Bergen, Board Minutes, 6 April 1967, the Kavli Archives, Bergen. 38 Interview with Johan Krohn-Hansen on 9 July 2012.

CHAPTER 13: BUILDING A CORPORATE GROUP 1 2 3 4 5 6 7 8 9 10 11 12 13

14 15 16 17 18 19 20 21

22 23 24 25

Conversation with Olav Jacob Dreyer on 28 August 2012. Interview with Åsta Lone on 4 June 2012. Interview with Tore Arildsen on 16 March 2012. Board Minutes, 14 January 1982, the Kavli Archives, Bergen. Conversation with Johan Krohn-Hansen on 26 June 2012. Interview with Olav Jacob Dreyer on 29 June 2011. Board of directors of the Trust 1962–1983, the Kavli Archives, Bergen. Interview with Olav Jacob Dreyer on 29 June 2011. Interview with Hans Theis Westermann 22 December 2011. Letter to Alf Sjurseth from Per Brandt-Hansen, dated 4 September 1974, the Kavli Archives, Bergen, Box 2, 1962–1994. Letter to Alf Sjurseth from Per Brandt-Hansen, dated 4 September 1974, the Kavli Archives, Bergen, Box 2, 1962–1994. Letter to Hans Askeland from Alf Sjurseth, dated 9 February 1978, the Kavli Archives, Bergen, Box 5, 1962–1994. Letter to the Trust’s Board of Directors from Alf Sjurseth, dated 19 November 1976, the Kavli Archives, Bergen, Box 2, 1962–1994 and the Trust’s Board of Directors’, Board Minutes, 22 June 1977, the Kavli Archives, Bergen. Letter to Erik Felländer from Ivar Gjelsvik, dated 29 June 1978, the Kavli Archives, Bergen, Box 2, 1962–1994. Letter to Hans Askeland from Ivar Gjelsvik, dated 25 November 1978, the Kavli Archives, Bergen, Box 5, 1962–1994. Letter to Ivar Gjelsvik from Erik Felländer, dated 16 September 1977, the Kavli Archives, Bergen, Box 2, 1962–1994. Group Council, Minutes of Meeting, dated 22 September 1977, the Kavli Archives, Bergen. Letter to Ivar Gjelsvik from Alf Sjurseth, dated 23 September 1977. the Kavli Archives, Box 5, 1962–1994. Group Council, Constitutive Meeting, dated 29 January 1981, the Kavli Archives, Bergen, Box 8B, 1962–1994. Letter to Olav Jacob Dreyer from Hans Askeland, dated 26 February 1980, the Kavli Archives, Bergen. Board of Directors of the Trust, Board Minutes, dated 14 January 1982, Guidelines for the work of the Board of Directors of the Trust, the Kavli Archives, Bergen. Information from Rune Nyheim on 5 June 2012. Copy of O. Kavli AS’ Board Minutes, dated 19 December 1988, Erik Bernhard Hjorth’s private archive, Bergen. Interview with Tore Arildsen on 16 March 2012. Letter to Olav Jacob Dreyer from Hans Askeland, dated 22 February 1978, Olav Jacob Dreyer’s private archive, Bergen.

307

KAVLI – AN INDUSTRIAL FAIRYTALE

26 Interview with Åsta Lone on 4 June 2012. 27 Letter to Olav Jacob Dreyer from Alf Sjurseth, dated 21 March 1978, Olav Jacob Dreyer’s private archive, Bergen.

CHAPTER 14: NEW INTERNATIONAL MOMENTUM 1 O. Kavli AS, Production Statistics 1979 and 1990, the Kavli Archives, Bergen, and interviews with Tore Arildsen on 9 January 2012 and 27 January 2012. 2 Forberg, Bjarne Ingvar, Norsk Hundefor AS, Memo, Sirevåg 2012. 3 O. Kavli AS, Annual Accounts 1975–1994, the Kavli Archives, Bergen. 4 Arildsen, Tore 1985, «Thank you for the year that has gone», The Primula Post (Primulaposten), Christmas edition, p. 3. 5 Omland, Dagfinn 1986, Information, The Primula Post (Primulaposten), Christmas 1986. 6 Interview with Åsta Lone on 7 July 2012, Aud Nordgaard on 4 July 2012 and Johan Krohn-Hansen on 9 July 2012. 7 Board of Directors of the Trust, Board Minutes 1984, the Kavli Archives, Bergen. 8 Interview with Hans Theis Westermann on 20 December 2011. 9 Interview with Helge Rolland on 4 October 2011. 10 Interview with Anne Haugvik on 3 May 2012. 11 O. Kavli AS, Bergen, Production Statistics 1980–1994, the Kavli Archives, Bergen. Interview with Tore Arildsen on 9 January 2012 and interview with Per Magne Syre on 18 May 2012. 12 Interview with Tore Arildsen on 14 May 2012. 13 O. Kavli AS, Bergen, Board Minutes, 7 November 1982 and 24 February 1983, the Kavli Archives, Bergen. 14 Interview with Johan Krohn-Hansen on 9 July 2012 and Per Magne Syre on 18 May 2012. 15 Interview with Per Magne Syre on 18 May 2012. 16 O. Kavli AB Stockholm, Directors’ Report 1974, the Kavli Archives, Stockholm. 17 Interview with Maud Lindmark, on 9 February 2012. 18 Interview with Margareta Corsmark on 22 November 2011. 19 O. Kavli AB, Annual Accounts 1974–1986, the Kavli Archives, Stockholm and O. Kavli AB, Directors’ Report 1980, the Kavli Archives, Stockholm. 20 Interview with Alice Strömberg on 9 February 2012. 21 Interview with Staffan Forsberg on 9 February 2012. 22 Søder om Søder, 4 June 1991, p. 5. 23 Interview with Jan-Olov Gidevall on 9 February 2012. 24 Interview with Erik Bernhard Hjorth on 20 September 2012. 25 Interview with Bjarne Suhr Andersen on 9 February 2012. 26 Interview with Dan Dantved on 29 February 2012. 27 Interview with Hans Theis Westermann on 20 December 2011. 28 Interview with Dan Dantvedt on 29 February 2012 and Hans Theis Westermann on 20 December 2011. 29 Interview with Bjarne Suhr Andersen on 28 February 2012 and Hans Theis Westermann on 20 December 2011. 30 O. Kavli AS, Annual Report for 1988, the Kavli Archives, Copenhagen 1989, p. 9 and O. Kavli AS, Annual Report for 1989, the Kavli Archives, Copenhagen 1989, p. 9. 31 O. Kavli AS, Annual Accounts 1970–1998, the Kavli Archives, Bergen. 32 Interview with Hans Theis Westermann on 20 December 2012. 33 Interview with Dan Dantvedt on 29 February 2012 and conversation with Reidar Lorentzen on 23 October 2012. 34 Interview with Jacob Christiansen on 28 February 2012. 35 O. Kavli Ltd., Annual Report and Financial Statement 1976–1991, the Kavli Archives, Newcastle. 36 Market Intelligence, Cheese Report, March 1992, the Kavli Archives, Newcastle. 37 Kavli Ltd, Production Statistics 1976–1991, the Kavli Archives, Newcastle.

308

38 Interviews with Paul Pendleton, Kenneth Foster, Peter Stuart, James Symons, Micky Maddison and Maureen Brown on 12 October 2011 and 13 October 2011. 39 Interview with Paul Lewney on 13 October 2011. 40 Interview with Peter Stuart on 13 October 2012. 41 Interview with Kenneth Foster on 12 October 2012. 42 Lambourn Scooples Ltd, Annual Report 1991, the Kavli Archives, Newcastle.

CHAPTER 15: IDENTITY CRISIS 1 O. Kavli AS, Board Minutes, 1981, 1983, 1986 and 1989, the Kavli Archives, Bergen. 2 Interview with Pål W. Lorentzen on 27 June 2012. 3 Interview with Olav Jacob Dreyer and Erik Bernhard Hjorth on 20 September 2011. Interview with Rune Nyheim on 6 February 2012. 4 Interview with Johan Krohn-Hansen on 9 July 2012. 5 Conversation with Rune Nyheim on 12 May 2012 and interview with Johan Krohn-Hansen on 9 July 2012. 6 Interview with Per Magne Syre on 18 May 2012. 7 Gjelsvik, Ivar 1983, Policy on the relationship between the Board of Directors of the Trust and the operative companies owned by the Trust, O. Kavli and Knut Kavli’s Trust, Bergen, pp. 5–7. 8 Interview with Hans Theis Westermann on 20 December 2011 and letter to Bert Jansson from Tore Arildsen, dated 4 February 1983, the Kavli Archives, Stockholm. 9 Letter to Olav Jacob Dreyer from Hans Askeland, dated 26 March 1980, Olav Jacob Dreyer’s private archive, Bergen. 10 O. Kavli and Knut Kavli’s Trust, Board Minutes 1980, the Kavli Archives, Bergen. 11 Conversation with Tore Arildsen on 3 May 2012. 12 Gjelsvik 1983, p. 3. 13 O. Kavli and Knut Kavli’s Trust, Board Minutes, 24 February 1983, the Kavli Archives, Bergen. 14 Supreme Court Lawyer Per Brunsvig, represented by Per Racin Fosmark: Legal opinion concerning practical and formal adjustments to the statutes of O. Kavli’s Trust pursuant to the Norwegian Foundations Act of 23 May 1980, no 11, the Kavli Archives, Box 1, 1962–1994. 15 Gjelsvik, Ivar 1983, RE Supreme Court Lawyer Per Brunsvig’s opinion of 20 October 1983 concerning the Trust and its statutes pursuant to the Norwegian Act of 23 May 1980 relating to Foundations, etc., the Kavli Archives, Box 1, 1962–1994. 16 Letter to Ivar Gjelsvik from Nicolay Wiig, dated 16 January 1985, the Kavli Archives, Bergen, Box 1, 1962–1994. 17 Memorandum. Conversation between Erik M. Martens and Ivar Gjelsvik, dated 1 October 1984. the Kavli Archives, Bergen, Box 1, 1962–1994. 18 Letter to Ivar Gjelsvik from Erik M. Martens, dated 18 October 1984. The Kavli Archives, Bergen, Box 1, 1962–1994. 19 Letter to Ivar Gjelsvik from Nicolay Wiig, dated 16 January 1985.The Kavli Archives, Bergen, Box 1, 1962–1994. 5–6. 20 Minutes of general meeting of O. Kavli AS, Bergen, dated 6 June 1984, the Kavli Archives, Bergen. 21 Conversation with Mathias Turøy, December 2010. 22 Interview with Johan Krohn-Hansen on 9 July 2012. 23 Letter to Tore Arildsen from Ivar Gjelsvik, dated 21 February 1985, the Kavli Archives, Bergen, Box 1, 1962–1994. 24 O. Kavli AS Bergen, Minutes of a Board Meeting, item 5/85, the Kavli Archives, Bergen. 25 Interview with Per Magne Syre on 18 May 2012. 26 Interview with Johan Krohn-Hansen on 9 July 2012. 27 Interview with Per Magne Syre on 18 May 2012.

NOTES

28 Statement from state authorised auditor, Sverre Grimstad, and statement from Advocate Rolf Husebø in connection with a meeting of the Board of Directors of the Trust on 26 November 1991, the Kavli Archives, Bergen. 29 List from KPMG Peat Marwick, dated 17 January 1994. Erik Bernhard Hjorth’s private archive, Bergen. 30 Conversation with Tore Arildsen on 3 May 2012 and conversation with Olav Jacob Dreyer and Erik Bernhard Hjorth on 28 August 2012. 31 O. Kavli AS Bergen, Board Minutes, dated 30 November 1992, the Kavli Archives, Bergen. See also item 2/93. 32 Letter to the Board of Directors of the Trust from Roald Bakke, dated 9 January 1993. Conversation between Roald Bakke and Pål W. Lorentzen, dated 24 January 1993 and conversation with Tore Arildsen on 2 November 2012. 33 Letter to Dagfinn Clemetsen from Pål W. Lorentzen, dated 2 April 1993, ’Request for Legal opinion’, the Kavli Archives, Bergen, Box 20, 1962–1994. 34 Nicolay Wiig, ’Statement on behalf of O. Kavli and Knut Kavli’s Trust’, dated 24 May 1993, the Kavli Archives, Bergen, folders marked ’Saken 1993’ (case 1993) and Christian Mevatne ’Hovedinnlegg’ (main statement). Dispute between the Board of Directors of the O. Kavli and Knut Kavli’s Trust and management and employees of O. Kavli AS, the Kavli Archives, Bergen, Box 2A, 1962–1994. 35 Dagfinn Clemetsen, O. Kavli and Knut Kavli’s Trust, the Kavli Archives, Box ’Saken 1993’ (case 1993), dated 21 September 1993. 36 Comments from Tore Arildsen on 12 September 2012. 37 Interview with Olav Jacob Dreyer on 20 September 2011, interview with Erik Bernhard Hjorth on 20 September 2011 and interview with Rune Nyheim on 6 February 2012. 38 Interview with Reidar Lorentzen on 20 October 2011. 39 Letter to Olav Jacob Dreyer from Jon R. Gundersen, dated 18 October 1993, O. Kavli AS, Board Minutes, dated 25 October 1993, the Kavli Archives, Bergen. 40 Interview with Olav Jacob Dreyer and Erik Bernhard Hjorth on 2 October 2012 and 3 October 2012. 41 Interview with Tore Arildsen on 16 March 2012. Interview with Johan Krohn-Hansen on 9 July 2012. 42 Petition to Bergen City Court from Christian Mevatne, dated 15 November 1993, the Kavli Trust Archives, Bergen, folder marked ’Saken – 1993’ (case 1993). 43 Statement from the County Governor of Rogaland, dated 28 February 1994, the Kavli Archives, Bergen, folder marked ’Saken 1993 (case 1993). 44 Letter to Ivar Gjelsvik from Rolf Husebø, dated 12 April 1985, the Kavli Archives, Bergen, Box 8B, 1962–1994, p. 4. 45 Sundal, Åge, Interim report following the tax audit of O. Kavli and Knut Kavli’s Trust, dated 31 January 1995, the Kavli Archives, Bergen, folder marked ’Restruktuering selskap 93–94’ (restructuring company) Box 5. 46 Letter to Ivar Gjelsvik from Rolf Husebø, dated 12 April 1985, the Kavli Archives, Bergen, Box 8B, 1962–1994. 47 Conversation with Tore Arildsen on 3 May 2012 and interview with Erik Bernhard Hjorth on 20 September 2012.

CHAPTER 16: NEW HEAD OF THE GROUP 1 Interview with Åsta Lone on 4 June 2012 and comments from Rune Nyheim on 5 June 2012. 2 Interview with Finn Bergesen jr on 8 March 2012 and interview with Pål W. Lorentzen on 13 December 2011. 3 Reidar Lorentzen, ’Group structure and Management’, Memo, Oslo 8 June 1994, the Kavli Archives, Bergen, folder marked ’Fondet’ (the Trust). 4 In terms of company law, O. Kavli Holding AS became the former parent company O. Kavli AS, while the new O. Kavli AS became the new company according to Erik Berhard Hjorth, dated 2 October 2012.

5 O. Kavli AS, Minutes of the group management team meeting in Bergen, 17 June 1994, folder marked ’Restrukturering selskap 93–94’ (restructuring company), Boxes 1 and 2, the Kavli Archives, Bergen. 6 Klubben, L. Statement regarding tax exemption for O. Kavli’s and Knut Kavli’s Trust, Bergen Tax Office, dated 21 October 1975, submitted to O. Kavli AB, the Kavli’s Archives, Stockholm. 7 The Norwegian Tax Act of 13 June 1980, Section 26 i) and Section 26 k). 8 Interview with Reidar Lorentzen on 20 October 2011. The same view was argued by Olav Jacob Dreyer on 27 June 2010. 9 Interview with Reidar Lorentzen on 20 October 2011. 10 Lorentzen, Reidar 1997, ’Group Development’, memo dated 16 May 1997, Lorentzen, Reidar 1998, ’Strategy Memo’, memo dated 12 October 1998, and Lorentzen, Reidar 2003, ’Strategy Development’, memo to Leif Stråtveit, dated 16 May 2003, the Kavli Archives, Bergen. 11 Interview with Leif Stråtveit on 9 June 2011. 12 O. Kavli AS, Strategy Plan, Bergen 1999, the Kavli Archives, Bergen. 13 O. Kavli Holding AS, Minutes of Management Meetings, item 12/2/99, the Kavli Archives, Bergen. 14 Stråtveit, Leif, memo, 15–16 June 1999, the Kavli Archives, Bergen. 15 O. Kavli Holding AS 1999, ’Analysis of Profits’, memo, the Kavli Archives, Bergen. 16 O. Kavli AS, Export Statistics 1970–1995, the Kavli Archives, Bergen. 17 Evensen, Kay 2000, ‘Kavli International Strategy Plan 2000–2003’, the Kavli Archives, Bergen. 18 Opinions of Finn Bergesen jr, 3 August 2012 and Reidar Lorentzen 1 August 2012. 19 Statement from Finn Bergesen jr, dated, 9 July 1998, The Kavli Archives, Bergen. 20 Interview with Pål W. Lorentzen on 27 June 2012. 21 Lorentzen, Reidar 2008, ’Development of the Kavli Trust’, memo dated 14 June 2008 and Lorentzen, Reidar, 1999, ’Amendments to the Trust’s Statutes’, Memo dated, 21 January 1999, the Kavli Archives, Bergen.

CHAPTER 17: THE Q ADVENTURE 1 Sagelvmo, Almar, and others 1996, ’New Market Scheme for Milk’, investigation of a joint working group, Norwegian Ministry of Agriculture, Oslo, and Bjørnenak, Trond et al. 2005, ‘On what terms?’ An Analysis of Public and Private Enterprises, No 1/2005, the Norwegian Competition Authority, Oslo, Kavli Holding AS Archives, Bergen. 2 http://www.synnove.no/om-oss/historien/nyere-historie/67/0/ 3 Bergesen jr., Finn, management memo, Kavli Holding AS, dated 4 September 1997, the Kavli Archives, Bergen. 4 Interview with Reidar Lorentzen on 22 August 2011. 5 Myrdahl, Bent 2009, Kavli & Q – et historisk tilbakeblikk, Primulaposten (The Primula Post), summer 2009, pp. 11–12. 6 Interview with Reidar Lorentzen on 20 October 2011. 7 Bergesen jr, Finn, Management Memo, Kavli Holding AS, dated 4 September 1997, the Kavli Archives, Bergen. 8 Interview with Rune Nyheim on 16 June 2011. 9 Interview with Reidar Lorentzen on 22 August 2011. 10 Interview with Leif Stråtveit on 18 November 2011. 11 Interview with Rune Nyheim on 16 June 2011, and an interview with Bent Myrdahl on 16 June 2011. 12 Interview with Reidar Lorentzen on 21 October 2011. 13 Interview with Pål W. Lorentzen on 24 October 2011. 14 Interview with Leif Stråtveit on 18 November 2011. 15 Myrdahl, Bent 2009, Kavli & Q – et historisk tilbakeblikk, Primulaposten, summer 2009, pp. 11–12. 16 Myrdahl 2009, p. 12. 17 Gausdal Meieri, Annual Accounts, 1998–2002 and Jæren Gårdsmeieri, Annual Accounts, 1998–2002, the Kavli Archives, Bergen. 18 Interview with Bent Myrdahl on 16 June 2011.

309 21

KAVLI – AN INDUSTRIAL FAIRYTALE

19 Selle, Kari Mette 2009, «Et Q-intervju med Bent Myrdahl», Primulaposten, pp. 13–14. 20 Interview with Reidar Lorentzen on 20 October 2011 and Pål W. Lorentzen on 24 October 2011. 21 Myrdahl 2009, p. 12. 22 Tine AS, Annual Accounts, 2008–2010 and Q-Meieriene AS, Annual Accounts, 2008–2010, the Kavli Archives, Bergen. 23 Selle 2009, p. 14. 24 Interview with Pål W. Lorentzen on 24 October 2011. 25 Interview with Erik Volden on 9 November 2011. 26 Econ Analyse AS 2003, Capital profits in a new marketing scheme for milk: ’Calculations after a Consultation’, prepared for the Norwegian Ministry of Agriculture, ECON report, no 2003-053, 18 June 2003, and Econ Analyse AS and Trond Bjørnenak 2003, ’Intellectual Capital in a New Marketing Scheme for Milk’: a memo based on the discussions of the parties in groups with experts, Memo dated 30 October 2003. 27 Interview with Leif Stråtveit on 18 November 2011. 28 Gultvedt, Bård 2005, The Tine Scandal, method report, SKUP award 2005. 29 Dagens Næringsliv newspaper, 5 April 2005: http://www.dn.no/forsiden/ article44955.ece 30 www.nrk.no/okonomi/tine-slipper-bot-pa-30-millioner-1.7686141 and Nationen, 14 Sept. 2010. 31 Facsimile of Aftenposten newspaper February 2005 reproduced in The Primula Post (Primulaposten), summer 2009. 32 Bent Myrdahl, TV2, 19 November 2011. 33 The Kavli Post (Kavliposten), summer 2009, pp. 15–18. 34 Gausdalsmeieriet, Annual Report 1999, the Kavli Archives, Bergen. 35 Letter to Kavli Holding AS from Lawyer, Eivind Bjøralt, dated 22 March 2002, the Kavli Archives, Bergen. 36 Thommesen Krefting Greve Lund, response to Bergen City Court, dated 30 November.2001 and Bergen District Court case no 01-3093 Sverre Gjefsen – Kavli Holding AS, the Kavli Archives, Bergen. 37 Petition to Oslo District Court c/o Thommesen, 29 June 2006, p. 5, the Kavli Archives, Bergen. 38 Interview with Erik Volden on 9 November 2011 and an interview with Finn Jebsen on 26 January 2012. 39 Norwegian Ministry of Agriculture and Food, ’Safeguard Competition in the Dairy Industry’ – TV news bulletin on 25 May 2007. 40 Oslo District Court, judgement, dated 6 July 2007, the Kavli Archives, Bergen.

CHAPTER 18: STRATEGIC EXPANSION 1 Kavli Holding AS 2011, Strategy Plan for the Kavli Group 2011–2014, the Kavli Archives, Bergen. 2 Interview with Reidar Lorentzen on 23 October 2012 and interview with Erik Volden on 24 October 2012. 3 Memo from Finn Bergesen jr. to the board of directors of Kavli Holding AS, dated April 1997, the Kavli Archives, Bergen. 4 Interview with Paul Lewney on 13 October 2011. 5 Interview with Erik Volden on 24 October 2012 6 Volden, Erik, ’Kavli Group Organisation’, presentation, Kavli Holding AS Bergen. 7 O. Kavli AS, The Staff at Kavli, Bergen 2011. 8 Conversation from Nina O. Larsen 24 January 2012. 9 Interview with Rune Nyheim on 8 February 2012. 10 Interview with Erik Volden on 9 November 2011, interview with Leif Stråtveit on 18 November 2011 and interview with Bo Lundquist on 22.11.2011. 11 Interview with Finn Jebsen on 26 January 2012. 12 Strategy Plan for Kavli Holding 2011, the Kavli Archives, Bergen. 13 Comments from Pål W. Lorentzen, 7 July 2012.

310

14 O. Kavli AS, Export Statistics 1950–2000, the Kavli Archives, Bergen, O. Kavli Ltd, export tables, 1950–2000, the Kavli Archives, Newcastle, O. Kavli AB, Export Statistics, 1950–2000, the Kavli Archives, Stockholm. 15 Kavli International AS, Board of Directors’ Annual Report 2010 and Annual Accounts 2010, the Kavli Archives, Bergen. 16 Kavli International AS, Board of Directors’ Annual Report 2010 and Annual Accounts 2010, the Kavli Archives, Bergen. 17 URL: http:///www.kavli.no/produkter/kjeksogflatbrod/Pages/ SibasHavrekjeks.aspx 18 Conversation with Terje Uteng on 4 October 2011, interview with Endre Skotte on 5 October 2011 and Helge Rolland on 4 October 2011. 19 Interview with Nina O. Larsen on 24 January 2012 and interviews with Roland Nordgaard on 13 April 2012 and 7 June.2012. 20 Kavli Norge AS, Annual Report and Annual Accounts 2011, the Kavli Archives, Bergen. 21 Information from Martin Klafstad on 28 January 2012. 22 Østlendingen newspaper, 31 March.2009. 23 Lokalavisen.dk (local newspaper) 15 February 2011. Interview with Pål W. Lorentzen on 22 August 2011 and Hans Theis Westermann on 20 December 2011. 24 O. Kavli AS Danmark, Board of Directors’ Annual Report 2004, Hvidovre, the Kavli Archives, Copenhagen. 25 URL: http://www.historie-online.dk/special/jul/glog.htm. 26 URL: http://www.kavli.dk/produkter/Pages/products.aspx. 27 Horecanytt, 26 September 2008. 28 Kavli Holding AS, ’Kavli Buys Pebas AS’, press release, 25 September 2008. 29 URL: http://www.pebas.dk/about_pebas/Pages/OmPebas.aspx. 30 Interview with Finn Jebsen on 26 January 2012. 31 URL: http://www.dr-persfood.com/page.asp?id=15 32 Kavli Holding AS, ’Kavli Buys Swedish Company’, press release, 8 June 2011 and Kavli AB, Kavli, ’Kavli and Druvan Merge’, press release, 30 August 2011. 33 Kavli Holding AS, ’Kavli buys Pebas AS’, press release 8 June 2011. 34 Press release from Kavli AB Sweden c/o Gerhard Bley, 14 February 2012. 35 Report from Olav Jacob Dreyer concerning the project to buy out Castle MacLellan Foods Ltd, dated 16 January 1995, the Kavli Archives, Bergen. 36 Interview with Jim Carswell on 12 October 2011. 37 Interview with Colin Warden on 12 October 2011. 38 Interview with Elaine McConnell on 12 October 2011. 39 Interview with Jim Carswell and Colin Warden on 12 October 2011. 40 Interview with Elaine McConnell and Pendleton on 12 October 2011. 41 Interview with Laurence Magee on 12 October 2011. 42 Castle MacLellan Foods Ltd, Annual Accounts 1997–2010, the Kavli Archives, Newcastle. 43 Castle MacLellan Foods Ltd, Annual Report and Financial Statements for the Year Ended 31 December 2010, the Kavli Archives, Newcastle and Kavli Ltd., Annual Report and Financial Statements for the Year Ended 31 December 2010, the Kavli Archives, Newcastle.

CHAPTER 19: A RESPONSIBLE BENEFACTOR 1 Statutes of O. Kavli and Knut Kavli’s Trust. 2 O. Kavli og Knut Kavli’s Trust, Minutes of Negotiations 1965–1980, the Kavli Archives, Bergen. 3 Conversation with Erik Bernhard Hjorth on 3 September 2012. 4 O. Kavli og Knut Kavli’s Trust, Annual Reports 1978–1989, the Kavli Archives, Bergen. 5 O. Kavli and Knut Kavli’s Trust, annual reports 1962–2011, the Kavli Archives, Bergen. 6 O. Kavli and Knut Kavli’s Trust, Minutes of the information meeting and hearing about the Kavli Trust, dated 25 January 1999, p. 2, the Kavli Archives, Bergen. Letter to the County Governor of Hordaland from Pål

NOTES

7 8 9

10 11

12 13 14

15 16

17 18

19 20 21

22 23

W. Lorentzen, dated 23 September 1998, p. 4, Erik Bernhard Hjorth’s private archive, Bergen. O. Kavli and Knut Kavli’s Trust, Board Minutes 1984, items 32/84 and 34/84, the Kavli Archives, Bergen. Comments from Pål W. Lorentzen on 29 September 2012. Letter to O. Kavli’s and Knut Kavli’s Trust from the County Governor of Hordaland, dated 27 November 1998, the Kavli Archives, Bergen. O. Kavli and Knut Kavli’s Trust, ’The Kavli Trust is satisfied with the County Governor’s statement’, press release, dated 27 November 1998, the Kavli Archives, Bergen. Letter to O. Kavli’s and Knut Kavli’s Trust from the County Governor of Hordaland, dated 27 November 1998, p. 13, the Kavli Archives, Bergen. O. Kavli and Knut Kavli’s Trust, ’The Kavli Trust is satisfied with the County Governor’s statement’, press release, dated 27 November 1998, the Kavli Archives, Bergen and letter to O. Kavli’s and Knut Kavli’s Trust from the County Governor of Hordaland, dated 27 November 1998, the Kavli Archives, Bergen, pp. 2–4. Minutes of information meeting and hearing about the Kavli Trust, dated 25 January 1999, p. 2, the Kavli Archives, Bergen. Interview with Pål W. Lorentzen on 27 June 2012. Letter to the County Governor of Hordaland from Pål W. Lorentzen, dated 23 September 1998, letter to O. Kavli’s and Knut Kavli’s Trust from Nicolay Wiig dated 23 September1998, letter to the County Governor of Hordaland from Per Henrik Gillesvik, PriceWaterhouseCoopers, dated 25 November 1998, and letter to O. Kavli’s and Knut Kavli’s Trust from the County Governor of Hordaland, dated 27 November 1998, RE: Query on impartiality and recruiting members to the Board of Directors of Kavli and Knut Kavli’s Trust, pp. 5–7, the Kavli Archives, Bergen. Lorentzen, Reidar ’Amendments to the Trust’s Statutes’, memo dated 21 January 1999, the Kavli Archives, Bergen. Meyer 1999, ’Application to reformulate/amend the statutes (articles of association) of O. Kavli and Knut Kavli’s Trust’, dated 26 Feb. 1999, the Kavli Archives, Bergen. Meyer 1999, pp. 1–7 and 18–20. County Governor of Hordaland 1999, ’RE: Application to reformulate/ amend the statutes (articles of association) of O. Kavli’s and Knut Kavli’s Trust’, dated 4 May 1999, Erik Bernhard Hjorth’s private archive, Bergen. Wiig, Nicolay, Memo, dated 3 June 1999, Wiig 1999, p. 2, Erik Bernhard Hjorth’s private archive, Bergen. County Governor of Hordaland 1999. Letter to O. Kavli’s and Knut Kavli’s Trust from the County Governor of Hordaland, dated 10 November 1999, pp. 13–16, the Kavli Archives, Bergen. Comments from Erik Bernhard Hjorth on 11 September 2012. Meyer, Gunnar 1999, ’Appeal against the rejection of the application to reformulate/amend the statutes (articles of association) of O. Kavli and Knut Kavli’s Trust’, dated 1 December 1999, the Kavli Archives, Bergen, and the County Governor of Hordaland’s decision, dated 31 January 2000 and correspondence regarding the Kavli Trust’s appeal against the County Governor’s decision, folders, the Kavli Archives, Bergen and Erik Berhard Hjorth’s archive, Bergen.

24 Interview with Johan Krohn-Hansen on 9 July 2012. 25 Statement from Henning Brath, the Royal Norwegian Ministry of Justice and the Police, dated 2 May 2000, the Kavli Trust Archives, Bergen. Brath 2000, p. 22. 26 O. Kavli og Knut Kavli’s Trust, Annual Report 2010, Bergen, pp. 3–6, the Kavli Archives, Bergen. 27 Wassum Investment Consulting AS, ’Presentation of the Capital Structure of Kavli Holding AS Project, Bergen 15 February 2007’, the Kavli Archives. Bergen 28 O. Kavli and Knut Kavli’s Trust, ’Development of the Kavli Trust’, dated 14 June 2008 and O. Kavli and Knut Kavli’s Trust, ’Management and Development of the Kavli Trust’, dated 14 April 2011, the Kavli Archives, Bergen. 29 URL: http://kavlifondet.no/2011/08/de-unges-konsert 30 O. Kavli og Knut Kavli’s Trust, Annual Report 2010, Bergen, pp. 5–7, the Kavli Archives, Bergen. 31 O. Kavli and Knut Kavli’s Trust, Annual Reports 1962–2011, the Kavli Archives, Bergen, and information from Inger Elise Iversen.

CHAPTER 20: CHEESE – NOT FISH 1 The Kavli companies, Annual Reports 1893–2011, the Kavli Archives, Bergen, Stockholm, Copenhagen and Newcastle. 2 http://www.ssb.no/histstat/tabeller/3-13.html 3 Grytten 2004, pp. 241–288, Grytten 2007, pp. 343–384. 4 Grytten and Minde 1998, pp. 42–58. 5 Kavli Holding AS, Production Statistics 2010, the Kavli Archives, Bergen. 6 O. Kavli AS Bergen, Export Statistics 1965–2011, the Kavli Archives, Bergen. 7 O. Kavli AS Bergen, Annual Report 1960, the Kavli Archives, Bergen. 8 Interview with Grethe Karin Fotland on 7 August 2012. 9 Interview with Erik Volden on 9 November 2011. 10 Interview with Finn Jebsen on 26 January 2012. 11 Interview with Erik Volden 24 October 2012. 12 Primulaposten (The Primula Post) no 1 1978, O. Kavli AS, Bergen, p. 12. 13 Interview with Bent Myrdahl on 2 August 2011. 14 Interviews with Paul Pendleton and Paul Lewney on 12 October 2011 and 13 October 2011. 15 Interview with Erik Volden on 24 October 2012. 16 Kavli Holding AS, Agenda 2011, Strategy Plan 2011–2015, the Kavli Archives, Bergen. 17 Dreyer, Olav Jacob 1993, ’The Kavli Trust, memo, p. 5, Erik Bernhard Hjorth’s archive, and interview with Erik Bernhard Hjorth on 3 September 2012. 18 Interview with Olav Jacob Dreyer and Erik Bernhard Hjorth on 28 August 2012. 19 The Staff at Kavli, Manual, O. Kavli AS, Bergen 2012, the Kavli Archives, Bergen.

311

SOURCES AND LITERATURE Books and chapters in books Baren, Maurice 1999, How it all began: The stories behind our favourite shops and brands, Marks & Spencer, London. Benterud, Olav 1978, Norske Meieriers Salgssentral 50 år 1928–1978, Oslo. Bjerve, Peter Jacob 1959, Planning in Norway 1947–1956, Amsterdam. Ericson, Uno Myggan and Karin Kavli 1984, Karin Kavli: Från Kassandra till Farmor, Bonniers, Stockholm. Ertresvaag, Egil (ed.) 1982, Bergen bys historie: Et bysamfunn i utvikling 1800–1920, vol. 3, Universitetsforlaget, Bergen-Oslo-Tromsø. Fasting, Kåre 1971, O. Kavli, unpublished manuscript Part I, Ivar Gjelsvik’s private archive, Bergen. Fasting, O.W. 1918, Bergens nærings- og forretningsliv i tekst og billeder, Hanche, A.M. (ed.), Norges handel, sjøfart og industri i billeder, Kristiania. Floud, Roderick & Paul Johnson 2004, The Cambridge Economic History of Modern Britain, Cambridge. Fotland, Bjarne, Johan Krohn-Hansen and Roald Bakke, «O. Kavli, Bergen», i Stenhjem, Birthe Brattli, Anders Bjarne Fossen and Jo Gjerstad (ed.) 2010, Bydelen ved Damsgårdsundet, Bodoni forlag, Bergen. Gjerstad, Jo 2007, Spredte glimt fra kjøtthandelen i Bergen, Bodoni forlag, Bergen. Grytten, Ola Honningdal 2010, Den undervurderte entreprenøren: Et økonomisk historisk blikk på Hans Nielsen Hauges entreprenørskap», in Knudsen, Jon P. and Sigbjørn Sødal (ed.), Økonomi og tid, Fagbokforlaget, Bergen. Henriksen, Petter (chief editor), Aschehoug og Gyldendals Store Norske Leksikon, Kunnskapsforlaget, Oslo 1998, vol. 13. Hodne, Fritz 1981, Norges økonomiske historie 1815– 1970, Cappelen, Oslo. Hodne, Fritz and Ola Honningdal Grytten 2000, Norsk økonomi i det 19. århundre, Fagbokforlaget, Bergen. Hodne, Fritz and Ola Honningdal Grytten 2002, Norsk økonomi i det 20. århundre, Fagbokforlaget, Bergen. Holøs, Bjørn 1984, Bergensbanen 75, Gyldendal, Oslo. Kavli, Olav 1946, Med ost i kofferten, John Grieg, Bergen. Keilhau, Wilhelm 1952, Den norske pengehistorie, Aschehoug, Oslo. Kindleberger, Charles P 1987, The World in Depression 1929–1939, Penguin Books, London. Meyer, Albert 1970, Joha Schmelzkäse Buch, Benckiser – Knapsack GMBH, Ludwigshafen. Millward, Alan 1980, War, Economy and Society, 1939–1945, University of California Press, Berkley/ Los Angeles Mørkhagen, Sverre 2010, Farvel Norge. Utvandringen til Amerika 1825–1975. Gyldendal, Oslo. Omland, Dagfinn 1993, Kavli 1893–1993: Kvalitet i 100 år, Kavli, Bergen. Os, Edward 1961, Bygdesamfunnet, vol. 1, Sandøysoga, Sandøy. Rygh, Oluf and Karl Dithlev Rygg 1908, Norske Gaardnavne: Romsdals Amt, volume XIII, Oslo. Sætherskar, Johannes (ed.) 1945, Kavli, O, A/S, Det norske næringsliv. Bergen fylke, Hefte no 2, Bergen. Stavem, Anna Nilsdatter 1873, Nogle aandelige Sange, Husmandsenke Anna Nilsdatter Stavem, Ålesund. Ward, Peter 2003, Primroses and Auriculas, RHS Wisley Handbooks, Cassell Illustrated, Octopus Publishing Company, London.

312

Journal articles Austigard, Bjørn 1986, «Kavli – eit slektsnamn og eit fabrikkmerke», Årsskrift 1986, Romsdal Sogelag. Dreyer Farstad, Torbjørn 2000, «Mannen som fikk norsk ost ut på verdensmarkedet. Ostekongen fra Molde», i Nordmørsnett, 13.7.2000. Grytten, Ola Honningdal 1995, «The Scale of Norwegian Interwar Unemployment in an International Perspective», Scandinavian Economic History Review, 2/1995, pp. 226–250. Grytten, Ola Honningdal 2007, Norwegian wages 1726–2006 classified by Industry, Eitrheim, Øyvind. Jan Tore Klovland and Jan F. Qvigstad (ed.), Historical Monetary Statistics – part II, Norges Bank, Oslo, pp. 366–384. Grytten, Ola Honningdal and Kjell Bjørn Minde 1998, The Demand for Consumer Goods in Norway, Scandinavian Economic History Review, 1/1998, pp. 42–58. Grytten, Ola Honningdal, A consumer price index for Norway 1516–2003, Eitrheim, Øyvind, Jan Tore Klovland and Jan F. Qvigstad (ed.), Historical Monetary Statistics 1819–2003, Norges Bank, Oslo 2004, pp. 92–93. Grytten, Ola Honningdal, Norwegian wages 1726–2006 by industry, Eitrheim, Øyvind, Jan Tore Klovland and Jan F Qvigstad (ed.), Historical Monetary Statistics for Norway, part II, Norges Bank, Oslo 2007, pp. 343–384. Grytten, Ola Honningdal, Norwegian wages 1726–2006 classified by industry, in Eitrheim, Øyvind. Jan Tore Klovland and Jan F. Qvigstad (ed.), Historical Monetary Statistics – Part II, Norges Bank, Oslo 2007, pp. 378–383. Grytten, Ola Honningdal, Purchasing Power of Labour: Norwegian Real Wages, 1726–2006, Scandinavian Economic History Review, 1/2009, pp. 48–87. Grytten, Ola Honningdal, The gross domestic product for Norway 1830–2003, Eitrheim, Øyvind, Jan T Klovland and Jan F Qvigstad (ed.), Historical Monetary Statistics for Norway 1819–2003, Norges Bank, Oslo 2004, pp. 241–288. Hanisch, Tore Jørgen 1979, «Om virkninger av paripolitikken», Historisk tidsskrift 3/1979, pp. 244–247. Hovland, Edgar 1979, «Smør og margarin blir ett fett», Historisk tidsskrift, no 1, 1979, pp. 305–325. Kieferle, F. and J. Umbrecht 1939, Die Schmelzkäse-Industrie, Deutche Molkerei-Zeitung, Kempten, pp. 7–26. Klovland, Jan Tore, Historical stock price indices in Norway 1914–2003, Eitrheim, Øyvind, Jan Tore Klovland and Jan F Qvigstad (ed.), Historical Monetary Statistics for Norway 1819–2003, Norges Bank, Oslo 2004, pp. 329–348. Klovland, Jan Tore, 2004, Credit, Banking and Monetary Developments in Norway 1809–2003, Eitrheim, Øyvind, Jan Tore Klovland and Jan F. Qvigstad (eds.), Historical Monetary Statistics 1819–2003, Norges Bank, Oslo, pp. 377–407. Knutsen, Sverre 2007, «Kristianiakrisen 1899: en revurdering av den historiske litteraturens årsaksforklaringer», Discussion paper, UiO, Oslo. Meyer, Albert, Deutsche Molkerei-Zeitung, no 46, 1961. Letters Letter from Lawyer Eivind Bjøralt to Kavli Holding A/S, dated 22 March 2002, the Kavli Archives, Bergen. Letter from Alf Sjurseth to the board of directors of O Kavli AS, Bergen, dated 18 March 1960, the Kavli Archives, Bergen.

Letter from Bergen police to O Kavli AS, dated 24 March 1941, the Kavli Archives, Bergen. Letter from Finn Bergesen jr dated 9 July 1998, the Kavli Archives, Bergen. Letter from Hans Askeland to Knut Kavli, dated 6 Jan. 1947, the Kavli Archives, Bergen. Letter from Hans Askeland to Olav Jacob Dreyer, dated 26 March 1980, Olav Jacob Dreyer’s private archive, Bergen. Letter from Hans Theis Westermann to Bert Jansson, dated 4 Feb. 1983, the Kavli Archives, Stockholm. Letter from Ivar Gjelsvik to Tore Arildsen, dated 21 Feb. 1985, Box 1, 1962–1994, the Kavli Archives, Bergen. Letter from Jon R. Gundersen to Olav Jacob Dreyer, dated 18 Oct. 1993, the Kavli Archives, Bergen,. Letter from Knut Kavli to Olav Jacob Dreyer, dated 11 May 1962, the Kavli Archives, Bergen. Letter from Knut Kavli to Bjarne Fotland, dated 12 May 1962, Johan Krohn-Hansen’s private archive, Bergen. Letter from L. Klubben, Statement regarding tax exemption for O. Kavli’s and Knut Kavli’s Trust, Bergen Tax Office, dated 21 Oct. 1975, submitted to O. Kavli AB, Stockholm, the Kavli Archives, Bergen. Letter from Per Brandt-Hansen to Alf Sjurseth, dated 24 Feb. 1967, the Kavli Archives, Bergen. Letter from Pål Lorentzen to Dagfinn Clemetsen, dated 2 April 1993, Request for legal opinion, Box 20, 1962–1994, the Kavli Archives, Bergen, Letter from Roald Bakke to the Trust’s board of directors, dated 9 Jan. 1993 and a summary of a conversation between Roald Bakke and Pål W. Lorentzen, dated 24 Jan. 1993, the Kavli Archives, Bergen. Letter from Rolf Husebø to Ivar Gjelsvik, dated 12 April 1985, Box 8B, 1962–1994, the Kavli Archives, Bergen. Letter to Ivar Gjelsvik from Erik M. Martens, dated 18 Oct. 1984, Box 1, 1962–1994, the Kavli Archives. Letter to Ivar Gjelsvik from Nicolay Wiig, dated 16 Jan. 1985, Box 1, 1962–1994, the Kavli Archives, Bergen, Letter from the County Governor of Hordaland to O. Kavli’s and Knut Kavli’s Trust, dated 27 November 1999, the Kavli Archives, Bergen. Letter from Pål W. Lorentzen to the County Governor of Hordaland dated 23 September 1998. Letter from Nicolay Wiig to O. Kavli and Knut Kavli’s Charitable Trust of 23 September 1998. Letter from Per Henrik Gillesvik, PricewaterhouseCoopers to the County Governor of Hordaland, dated 25 November 1998. Letter from the County Governor of Hordaland to O. Kavli’s and Knut Kavli’s Trust, dated 27 November 1998. Letter from the County Governor of Hordaland, ‘RE: Application…’, dated 4 May 1999, Erik Bernhard Hjorth’s private archive, Bergen. Letter from the County Governor of Hordaland to O. Kavli’s and Knut Kavli’s Trust, dated 10 November 1999, the Kavli Archives, Bergen

Interviews etc. Interview with Aasrun Sæbjørnsen on 20 Oct. 2010. Interview with Nils Sebjørn Hansen on 20 Oct. 2010. Interview with Jim Carswell on 20 Oct. 2010. Interview with Leif Stråtveit, on 9 June 2011. Interview with Rune Nyheim on16 June 2011. Interview with Bent Myrdahl on 16 June 2011. Interview with Olav Jacob Dreyer on 29 June 2011. Interview with Erik Bernhard Hjorth on 29 June 2011.

SOURCES AND LITERATURE

Interview with Bent Myrdahl on 2 Aug. 2011. Interview with Pål W. Lorentzen on 22 Aug. 2011. Interview with Reidar Lorentzen on 22 Aug. 2011. Interview with Olav Jacob Dreyer on 20 Sep. 2011. Interview with Erik Hjorth on 20 Sep. 2011. Interview with Helge Rolland on 4 Oct. 2011. Interview with Endre Skotte on 5 Oct. 2011 Interview with James Symons on 12 Oct. 2011. Interview with Paul Pendleton on 12 Oct. 2011. Interview with Kenneth Foster on 12 Oct. 2011. Interview with Peter Stuart on 12 Oct. 2011. Interview with Micky Maddison on 12 Oct. 2011. Interview with Jim Carswell on 12 Oct. 2011. Interview with Colin Warden on 12 Oct. 2011. Interview with Elaine McConnell on 12 Oct. 2011. Interview with Colin Warden on 12 Oct. 2011. Interview with Paul Pendleton on 12 Oct. 2011. Interview with Laurence Magee on 12 Oct. 2011. Interview with Paul Pendleton on 12 Oct. 2011. Interview with Kenneth Foster on 12 Oct. 2011 Interview with Paul Lewney on 12 Oct. 2011. Interview with James Symons on 13 Oct. 2011 Interview with Ken Forster on 13 Oct. 2011. Interview with Peter Stuart on 13 Oct. 2011. Interview with Maureen Brown on 13 Oct. 2011. Interview with Paul Lewney on 13 Oct. 2011. Interview with Maureen Brown on 13 Oct. 2011. Interview with Reidar Lorentzen on 20 Oct. 2011. Interview with Reidar Lorentzen on 21 Oct. 2011 Interview with Pål Lorentzen on 24 Oct. 2011. Interview with Erik Volden on 9 Nov. 2011. Interview with Leif Stråtveit on 18 Nov. 2011. Interview with Margareta Corsmark on 22 Nov. 2011. Interview with Bo Lundquist on 22 Nov. 2011. Interview with Olav Jacob Dreyer on 15 Dec. 2011. Interview with Hans Theis Westermann on 20 Dec. 2011. Interview with Tore Arildsen on 9 Jan. 2012. Interview with Finn Jebsen on 26 Jan. 2012. Interview with Rune Nyheim on 6 Feb. 2012. Interview with Rune Nyheim on 8 Feb. 2012. Interview with Lennart Forslund on 9 Feb. 2012. Interview with Maud Lindmark on 9 Feb. 2012 Interview with Alice Strömberg on 9 Feb. 2012. Interview with Staffan Forsberg on 23 Feb. 2012. Interview with Jan-Olov Gidevall on 9 Feb. 2012. Interview with Jacob Christiansen on 27 Feb. 2012. Interview with Bjarne Suhr Andersen on 28 Feb. 2012. Interview with Dan Dantved on 29 Feb. 2012. Interview with Tore Arildsen on 16 March 2012. Interview with Roland Nordgaard on 13 April 2012. Interview with Anne Haugvik on 3 May 2012. Interview with Tore Arildsen on 14 May 2012. Interview with Per Magne Syre on 18 May 2012. Interview with Åsta Lone on 4 June 2012. Interview with Pål W Lorentzen on 27 June 2012. Interview with Aud Nordgaard on 4 July 2012. Interview with Åsta Lone on 7 July 2012. Interview with Johan Krohn-Hansen on 9 July 2012. Interview with Grethe Karin Fotland on 7 Aug. 2012. Interview with Erik Bernhard Hjorth on 11 Sep. 2012. Interview with Erik Bernhard Hjorth on 20 Sep. 2012. Interview with Reidar Lorentzen on 23 Oct. 2012. Interview with Erik Volden on 24 Oct. 2012. Interview with Erik Bernhard Hjorth on 2 and 3 Oct. 2012. Interview with Olav Jacob Dreyer on 2 and 3 Oct. 2012. Conversation with Olav Jacob Dreyer on 2 July 2010. Conversation with Bjarne Fotland in November 2010. Conversation with Mathias Turøy in December 2010. Conversation with Olav Jacob Dreyer on 22 Dec. 2010. Conversation with Olav Jacob Dreyer in January 2011. Conversation with Olav Jacob Dreyer on 28 Feb. 2011. Conversation with Erik Bernhard Hjorth on 5 Sep. 2011. Conversation with Terje Uteng on 4 Oct. 2011.

Conversation with Erik Bernhard Hjorth on 18 Oct. 2011. Conversation with Olav Jakob Dreyer on 22 Dec. 2011. Conversation with Pål W. Lorentzen on 13 Dec. 2011. Conversation with Nina O. Larsen on 24 Jan. 2012. Conversation with Tore Arildsen on 27 Jan. 2012. Conversation with Tore Arildsen on 3 May 2012 Conversation with Rune Nyheim on 12 May 2012. Conversation with Johan Krohn-Hansen on 26 June 2012. Conversation with Pål W Lorentzen on 7 July 2012. Conversation with Erik Bernhard Hjorth on 28 Aug. 2012. Conversation with Olav Jacob Dreyer on 28 Aug. 2012. Conversation with Erik Bernhard Hjorth on 3 Sep. 2012. Conversation with Tore Arildsen on 9 Sep. 2012. Conversation with Grethe Karin Fotland on 27 Sep. 2012. Conversation with Reidar Lorentzen on 23 Oct. 2012. Conversation with Tore Arildsen on 2 Nov. 2012. Information from Elsa Larsen on 16 March 2011. Information from Pål W. Lorentzen in December 2011. Information from Martin Klafstad on 28 Jan. 2012. Information from Finn Bergesen jr on 8 March 2012. Information from Sivert Nilsen’s private archive, c/o Siren Ryland, on 12 Sep. 2012. Information from Inger-Elise Iversen in December 2012. Comments from Olav Jacob Dreyer on 27 June 2010. Comments from Rune Nyheimon 5 June 2012. Comments from Pål W. Lorentzen on 7 July 2012. Comments from Erik Bernhard Hjorth on 3 Sep. 2012 Comments from Erik Bernhard Hjorth on 11 Sep. 2012 Comments from Tore Arildsen on 12 Sep. 2012. Comments from Erik Bernhard Hjorth on 20 Sep. 2012 Comments from Pål W. Lorentzen on 29 Sep. 2012 Comments from Erik Bernhard Hjorth on 2 Oct. 2012 Comments from Olav Jacob Dreyer on 3 Oct. 2012 Opinions of Reidar Lorentzen 1 Aug. 2012. Opinions of Finn Bergesen jr 3 Aug. 2012. Press releases «Kavli and Druvan Merge», press release by Gerhard Bley on 14 Feb. 2012. Kavli Holding AS, «Kavli Buys Pebas AS», press release on 25 Sep. 2008. Kavli Holding AS, «Kavli Buys Swedish Company», press release on 8 June 2011. O. Kavli and Knut Kavli’s Trust ’The Kavli Trust is satisfied with the County Governor’s Statement’, dated 27 Nov. 1999. Urls http:///www.kavli.no/produkter/kjeksogflatbrod/Pages/ SibasHavrekjeks.a px http://arla.dk/Produkter/Artikler/smelteost/ http://en.wikipedia.org/wiki/Hans_Rasmus_Astrup http://en.wikipedia.org/wiki/Processed_cheese http://kavlifondet.no/om-kavlifondet/om-kavlikonsernet/ http://morten.bollerogbrus.net/?p=77; (Kielland, Morten 2007, «Lesja Jernverk»). http://park.org/Guests/Stavanger/michael.htm (Homboe, Michael Meyer 1996, «Stavanger History Guide», Stavanger 1996), http://rydjord.slektsweb.no/search.php?action=general& query=kavli&search=+% 3E http://www.alma.at/Alma/index.php?kat=2&id=17 http://www.bel-deutschland.de/page/complex_basic. php?NSID=292 http://www.denstoredanske.dk/Mad_og_drikke/ Gastronomi/Mejerivarer/smelteost http://www.dn.no/forsiden/article44955.ece http://www.dr-persfood.com/page.asp?id=15

http://www.emmi-gerber.ch/de/gerber/geschichte/ http://www.erlingjensen.net/Rogaland/Sandnes-1900. htm http://www.historie-online.dk/special/jul/glog.htm http://www.kavli.dk/produkter/Pages/products.aspx http://www.kongehuset.no/c26951/nyhet/vis. html?tid=35767, (Kongehuset, Kongens fortjenestemedalje 100 år). http://www.nndb.com/people/150/000089880/ http://www.nrk.no/nyheter/distrikt/nrk_sogn_og_ fjordane/fylkesleksikon/2469577.html http://www.pebas.dk/about_pebas/Pages/OmPebas.aspx http://www.snl.no/.nbl_biografi/Olav_Kavli/utdypning (Atle Thowsen 2002) http://www.ssb.no/histstat/tabeller/3-13.html http://www.synnove.no/om-oss/historien/nyerehistorie/67/0/ http://www.bib.hive.no/tekster/sem_slagen/kulturhistorie2_2/handverk.html#VESTFOLDFLATBRDFABRIK www.nrk.no/okonomi/tine-slipper-bot-pa-30-millioner-1.7686141 Reports Bjørnenak, Trond et al., 2005, On what terms? An Analysis of Public and Private Enterprises, memo, no 1/2005, Norwegian Competition Authority, Oslo. Bjørnenak, Trond, Econ Analyse AS 2003, Intellectual Capital in a New Marketing Scheme for Milk: memo based on discussions in groups made up of the parties and experts, memo 30 Oct. 2003. Econ Analyse AS 2003, Capital Profits in a new marketing scheme for milk: Calculations after a consultation. Prepared for the Norwegian Ministry of Agriculture, ECON report no 2003-053, 18 June 2003. Gultvedt, Bård 2005, The Tine Scandal, Method Report, SKUP Award 2005. Ramstad, Jan, Women’s Pay and Monetary Finances, thesis, the Norwegian School of Economics (NHH), Bergen 1982. Vol I and II. Sagelvmo, Almar and others. 1996, new marketing scheme for milk, Investigation of Joint Working Groups, Norwegian Ministry of Agriculture, Oslo. Annual reports, annual accounts, etc. Castle MacLellan Foods Ltd, Annual Accounts 1997–2010, the Kavli Archives, Newcastle. Castle MacLellan Foods Ltd, Annual Report and Financial Statements for the Year Ended 31 December 2010, Kavli, Newcastle. Cremo Cheese Company IS, Annual Accounts 1956–1966, Olav Jacob Dreyer’s archive. Gausdal Meieri, Annual Accounts, 1998–2002, the Kavli Archives, Bergen. Gausdal Meieri, Annual Report 1999, the Kavli Archives, Bergen. Jæren Gårdsmeieri, Annual Accounts, 1998–2002, the Kavli Archives, Bergen. Kavli Crispbread Ltd, Financial Accounts 1953–1978, Kavli Ltd’s Archives, Gateshead. Kavli Holding AS Group Annual Accounts 2010, the Kavli Archives, Bergen. Kavli Holding AS Group, Board of Directors’ Annual Report 2010, the Kavli Archives, Bergen. Kavli Holding AS, Annual Report 2011, the Kavli Archives, Bergen. Kavli International AS, Board of Directors’ Annual Report 2010, the Kavli Archives, Bergen. Kavli International AS, Annual Accounts 2010, the Kavli Archives Bergen. Kavli Ltd, Annual Report 1940, the Kavli Archives, Gateshead. Kavli Ltd, Financial Accounts 1936–1941, the Kavli Archives, Gateshead.

313

KAVLI – AN INDUSTRIAL FAIRYTALE

Kavli AS, Annual Accounts 1893–2011, the Kavli Archives, Bergen, Stockholm, Copenhagen and Gateshead. Lambourn Scooples Ltd, Annual Report 1991, the Kavli Archives, Newcastle. O. Kavli AB Stockholm, Directors’ Report 1974, the Kavli Archives, Stockholm. O. Kavli AB Stockholm, Annual Accounts 1974–1986, the Kavli Archives, Stockholm. O. Kavli AB, Annual Accounts 1956–1967, Olav Jacob Dreyer’s private archive. O. Kavli AS Bergen, Annual Accounts 1975–1994, the Kavli Archives, Bergen. O. Kavli AS Copenhagen, Annual Report 1988, Copenhagen 1989, the Kavli Archives, Denmark. O. Kavli AS Copenhagen, Annual Report 1989, Copenhagen 1990, the Kavli Archives, Denmark. O. Kavli AS, Bergen, Annual Report 1960, the Kavli Archives, Bergen. O. Kavli AS, Bergen, Annual Accounts 1940–1945, the Kavli Archives, Bergen. O. Kavli Glamsbjerg AS, Annual Report 1956–1965, the Kavli Archives, Denmark. O. Kavli Ltd., Newcastle, Financial Accounts 1946–1966, the Kavli Archives, Gateshead O. Kavli AB Stockholm, Directors’ Report 1980, the Kavli Archives Stockholm. O. Kavli AS Copenhagen, Annual Accounts 1970–1998, the Kavli Archives, Copenhagen. O. Kavli Ltd., Newcastle, Annual Report and Financial Statements 1976–1991, the Kavli Archives, Newcastle. O. Kavli Ltd., Annual Report and Financial Statements for the Year Ended 31 December 2010, the Kavli Archives, Gateshead. O. Kavli Norge AS Annual Accounts, the Kavli Archives, Bergen. O. Kavli Norge AS, Annual Report, Annual Accounts, Kavli Archives, Bergen. Miscellaneous public sources Bergen Tax Office, tax audit of O Kavli AS 1938, the City Archives, Bergen. Bergen Tax Office, tax audit of O Kavli AS 1946, the City Archives, Bergen. Bergen Court of Appeal, Judgment no 31/1931, Bergen 909.11.1931, the City Archives, Bergen. Record of proceedings of O Kavli’s bankruptcy, Fana, 18 June 1924, the City Archives, Bergen. Rationing Board, folder, the National Archives, Oslo. Registration records for Fana District Court, 4 June 1924, the National Archives, Bergen. Memos and background material Agreement between B. Westergaard & Co, Brooklyn, NY and O. Kavli, Bergen, Norway, New York, 27. April 1922, memo, the Kavli Archives, Bergen. Askeland, Hans 1929, Memos, the Kavli Archives, Bergen. Askeland, Hans, Information for the employees of O Kavli AS about company sick pay, memo, dated 4 June 1929, the City Archive, Bergen. Askeland, Hans, Memo from Hans Askeland to Olav and Knut Kavli, October 1954, the Kavli Archives, Bergen. Askeland, Hans, Memo about the establishment of the company in England, 1935–1939, the Kavli Archives, Bergen. Askeland, Hans, Memo to Knut Kavli, dated 21 April 1945, the Kavli Archives, Bergen. Bergesen jr, Finn, Memo to the Board of Directors of Kavli Holding A/S, dated April 1997, the Kavli Archives, Bergen. Bergesen jr, Finn, Memo from the Board of Directors, Kavli Holding AS, dated 4 Sep. 97, the Kavli Archives, Bergen. Brandt-Hansen, Per, Memo on selling the Group to a foreign buyer, the Kavli Archives, Bergen 1967.

314

Brunsvig, Per, repr. by Per Racin Fosmark, Legal opinion regarding practical and formal adjustments to the statutes of O. Kavli’s Trust pursuant to the Norwegian Foundations Act of 23 May 1980, No 11, and other Acts. Box 1, 1962–1994, the Kavli Archives, Bergen. Dreyer, Olav Jacob, Memo regarding the acquisition of Castle MacLellan Foods Ltd., project, dated 16 Jan. 1995, the Kavli Archives, Bergen. Forberg, Bjarne Ingvar, Norsk Hundefor AS, memo, Sirevåg 2012. County Governor of Rogaland, Statement, dated 28 Feb. 1994, folder marked «Saken 1993» (case 1993), the Kavli Archives, Bergen. Gjelsvik, Ivar, «RE: Supreme Court Lawyer Per Brunsvig’s opinion of 20 Oct. 1983 regarding the Trust and its views on its statutes and Norwegian Act of 23 May 1980 relating to Foundations, etc., Box 1, 1962–1994, the Kavli Archives, Bergen. Gjelsvik, Ivar, Memorandum. Summary of a conversation between Erik M. Martens and Ivar Gjelsvik, dated 1 Oct. 1984, Box 1, 1962–1994, the Kavli Archives, Bergen. Grimstad, Sverre, Statement in connection with a meeting of the Board of Directors of the Trust, dated 26 Nov. 1991, the Kavli Archives, Bergen. Husebø, Rolf, Statement in connection with a meeting of the Board of Directors of the Trust, dated 26 Nov. 1991, the Kavli Archives, Bergen. Kavli, Knut, Memos for Askeland and Løvås-Svendsen about Knut Kavli’s trip to Europe in August 1933, dated 4 Sep. 1933, Olav Jacob Dreyer’s private archive, Bergen. Kavli, Olav, Private memo, dated 26 January 1925, the Kavli Archives, Bergen. Kavli, Olav, Undated memo, the Kavli Archives, Bergen. Kavli’s operations in Denmark, memo, Olav Jacob Dreyer’s private archive, Bergen. Lorentzen, Pål W, Memo, dated 13 Dec. 1995, the Kavli Archives, Bergen. Market Intelligence, Cheese Report, March 1992, the Kavli Archives, Newcastle. O. Kavli Holding AS, Analysis of profits, memo, 2001, the Kavli Archives, Bergen. Olav Jacob Dreyer, The Kavli Foundation, memo, 5 pp, Erik Bernhard Hjorth’s archive. Report to the Board of Directors of O Kavli, Bergen, dated 22 April 1958, the Kavli Archives, Bergen. Reinhardt, Erik, O. Kavli AS Glamsbjerg. Some thoughts about the future. Memo July/August 1960, Olav Jacob Dreyer’s archive. Sjurseth, Alf, Opinion, Strategic memo, dated 21 Sep. 1960, Olav Jacob Dreyer’s archive. Sjurseth, Alf, Undated memo, O Kavli Ltd’s., archives, Newcastle. Stråtveit, Leif, Memo to the board meeting on 15 –16 June 1999, the Kavli Archives, Bergen. Sundal, Åge Interim report following the tax audit of O. Kavli and Knut Kavli’s Trust, dated 31 Jan. 1995. Folder marked «Restrukturering selskap 93–94» (restructuring company). Thornquist, Christian 1986, Start and Expansion in Great Britain, manuscript, the Kavli Archives, Bergen. Thornquist, Christian, Memo, March 1962, the Kavli Archives, Bergen. Strategy plans and strategy memos Bergesen jr., Finn, Board memo, Kavli Holding AS, dated 4 Sep. 97, the Kavli Archives, Bergen. Evensen, Kay, Kavli International Strategy Plan 2000– 2003, Bergen, March 2000, Kavli Holding AS, the Kavli Archives, Bergen. Kavli Holding AS, Agenda 2011, Strategy Plan 2011– 2015, Bergen 2011, the Kavli Archives, Bergen. Kavli Holding AS, Strategy Plan for Kavli Holding 2011, the Kavli Archives, Bergen.

Kavli Holding AS, Strategy Plan for the Kavli Group 2011–2014, Bergen, 2011, the Kavli Archives, Bergen. Kavli Holding AS, Strategy Plan, Bergen 1999, the Kavli Archives, Bergen. Lorentzen, Reidar, Amendments to the Trust’s Statutes, memo dated 21 Jan. 1999, the Kavli Archives, Bergen. Lorentzen, Reidar, Group Development, memo dated 16 May 1997, the Kavli Archives, Bergen. Lorentzen, Reidar, Strategy Memo, memo dated 12 Oct. 1998, the Kavli Archives, Bergen. Lorentzen, Reidar, Strategy Development, memo to Leif Stråtveit dated 16 May 2003, the Kavli Archives, Bergen. Lorentzen, Reidar, Development of the Kavli Trust, memo dated 14 June 2008, the Kavli Archives, Bergen. Lorentzen, Reidar, Group Structure and Management, memo, Oslo 8 June 1994, the Kavli Archives, Bergen. O Kavli A/S, Glamsbjerg, Strategy Memo 1960, the Kavli Archives, Denmark. O Kavli AB, Stockholm, Marketing Plan 1965, the Kavli Archives, Stockholm. O. Kavli and Knut Kavli’s Trust, ’Management and Development of the Kavli Trust’, dated 14 April 2011, the Kavli Archives, Bergen. In-house newspapers and other internal information Primulaposten – 90th anniversary 1893–1983, O Kavli AS, Bergen 1983. Primulaposten 1983, O Kavli AS, Bergen Primulaposten, anniversary edition 28 March 1943, O Kavli AS, Bergen 1943. Primulaposten, Christmas edition 1990, Konrad Dahl, 1990, the Kavli Club 50-years-old – looking back. Primulaposten, Christmas edition, 1985; Tore Arildsen, «Thank you for the year that has gone», O Kavli AS, Bergen Primulaposten, Christmas edition, 1986; Dagfinn Omland, Information, O Kavli AS, Bergen. Primulaposten, no 1, 1978, O Kavli AS, Bergen. Primulaposten, Easter edition 1997, Nilsen, Sivert, From my diary, pp. 9–10. O Kavli AS, Bergen Primulaposten, summer edition 2009; Bent Myrdahl, Kavli & Q – looking back at history. Primulaposten, summer edition 2009; Kari Mette Selle, A Q interview with Bent Myrdahl. Vi i Kavli (The Staff at Kavli) Manual, O. Kavli AS, Bergen 2011. Vi i Kavli (The Staff at Kavli) Manual, O Kavli AS, Bergen 2012. Accounts etc. Kavli Holding AS, Production Statistics 2010, the Kavli Archives, Bergen. Kavli Ltd., Newcastle, Production Statistics 1976–1991, the Kavli Archives, Newcastle. Kavli Norge, AS, Bergen Q-Meieriene AS, Annual Accounts, 2008–2010, the Kavli Archives, Bergen. O. Kavli AB, Stockholm, Annual Export Statistics 1960– 1967, the Kavli Archives, Stockholm. O. Kavli AB, Stockholm, Production Statistics 1960–1966, the Kavli Archives, Stockholm. O. Kavli AS, Bergen, Export Records for 1931–1939, the Kavli Archives, Bergen. O. Kavli AS, Bergen, Export Statistics 1965–2011, the Kavli Archives, Bergen. O. Kavli AS, Bergen, Minutes of Negotiations for O. Kavli AS 1924–1926, the Kavli Archives, Bergen. O. Kavli AS, Bergen, Group Balance Sheet, the Kavli Archives, Bergen. O. Kavli AS, Bergen, Group Report 1969, the Kavli Archives, Bergen. O. Kavli AS, Bergen, Production Statistics 1980–1994, the Kavli Archives, Bergen. O. Kavli AS, Bergen, Accounting Records 1924–1942, the Kavli Archives, Bergen.

SOURCES AND LITERATURE

O. Kavli AS, Bergen, Accounting Records 1924–1955, the Kavli Archives, Bergen. O. Kavli AS, Bergen, Accounting Records 1924–1955, the Kavli Archives, Bergen. O. Kavli AS, Bergen, Book of Statistics 1939–1952, the Kavli Archives, Bergen. O. Kavli AS, Bergen, Board Minutes 1932–1938, the Kavli Archives, Bergen. O. Kavli AS, Bergen, Board Minutes 1955, the Kavli Archives, Bergen. O. Kavli AS, Bergen, Board Minutes for O Kavli AS, Bergen, 1940, the Kavli Archives, Bergen. O. Kavli AS, Bergen, Board Minutes for O. Kavli A/S, Bergen, 1993, the Kavli Archives, Bergen. O. Kavli AS, Bergen, Board Minutes, 1940, the Kavli Archives, Bergen. O. Kavli AS, Bergen, Board Minutes, 1946–1953, the Kavli Archives, Bergen. O. Kavli AS, Bergen, Board Minutes, 1958, the Kavli Archives, Bergen. O. Kavli AS, Bergen, Export Records 1935–1945, the Kavli Archives, Bergen. O. Kavli AS, Denmark, Board of Directors’ Annual Report 2004, Hvidovre, Copenhagen. O. Kavli Glamsbjerg AS, Copenhagen, Production Statistics 1960–1966, Olav Jacob Dreyer’s private archive. O. Kavli Holding AS, Board Minutes 1996, the Kavli Trust Archive, Bergen. O. Kavli Ltd., Newcastle, Export Tables, 1950–2000, the Kavli Archives, Newcastle, O. Kavli AB, Stockholm, Export Statistics, 1950–2000, the Kavli Archives, Stockholm. O. Kavli AS, Bergen, Share Register for O Kavli AS, the Kavli Archives, Bergen. O. Kavli AS, Bergen, Export Statistics 1970–1995, the Kavli Archives, Bergen. O. Kavli AS, Bergen, Minutes of General Meeting of O Kavli AS Bergen, 1984, the Kavli Archives, Bergen. O. Kavli AS, Bergen, Production Statistics 1979 and 1990, the Kavli Archives, Bergen. O. Kavli AS, Bergen, Minutes of the Group Management Meeting held in Bergen on 17 June 1994, folder marked «Restrukturering selskap 93–94» (restructuring company 93–94) The Kavli Archives, Bergen. O. Kavli AS, Bergen, Accounts Book for the Kavli Club 1937–1952, the Kavli Archives, Bergen O. Kavli AS, Bergen, Accounting Records 1924–1952, the Kavli Archives, Bergen. O. Kavli AS, Bergen, Board Minutes, 1981, 1982, 1983, 1984, 1985, 1986, 1989 and 1993, the Kavli Archives, Bergen. O. Kavli AS, Bergen, Export Statistics, 1950–2000, the Kavli Archives, Bergen, O. Kavli’s and Knut Kavli’s Trust, Minutes of Negotiations 1962–2012, the Kavli Archive, Bergen. Tine AS, Annual Accounts, 2008–2010, the Kavli Archives, Bergen Miscellaneous internal archive material Agreement between O Kavli AS, O Kavli Glambjerg AS and Otto Mønsted AS concerning the organisation of Cremo Cheese Company IS, Olav Jacob Dreyer’s private archive. Business correspondence, 1905–1907, the Kavli Archives, Bergen. Old debt. Acknowledgements 1942–1945 and thank you letters for debt repayments after the bankruptcy in 1924, the Kavli Archives, Bergen. Correspondence between B. Westergaard & Co, Brooklyn, NY and O. Kavli, Bergen, Norway 1920–1922, the Kavli Archives, Bergen. Tax assessments for Olav Kavli 1915–1923, the Kavli Archives, Bergen.

Memo about Gerberkäse AG, Thun, January 2011. Memos, 12 June 1912, of unknown origin, the Kavli Archives, Bergen. Cheese quotas, folder in The Kavli Archives, Bergen. List from KPMG Peat Marwick, dated 17 Jan. 1994, Erik Bernhard Hjorth’s private archive, Bergen. Rationing Records, folder, the Kavli Archives, Bergen. Rationing Records, folder, the National Archives, Oslo. Partnership agreement between O Kavli AS, Otto Mønsted AS and O Kavli AS Glambjerg, Copenhagen 24 June 1947, the Kavli Archives, Denmark. Memorandum of Association for AS Dansk O Kavli, Copenhagen 4 December 1935, Olav Jacob Dreyer’s private archive. Thornquist, Christian, memo, March 1962, the Kavli Archives, Bergen. Registration in the Bergen Land Registry 4 October 1929, Olav Jacob Dreyer’s private archive, Bergen. Newspapers etc. Nationen 29 August 1931. Oslo Illustrerte, no 33, 12 August 1933. Søder om Søder, 4 June 1991. Dagens Næringsliv, 5 April 2005. Horecanytt, 26 Sep. 2008. Østlendingen, 31 March 2009. Nationen, 14 Sep. 2010. Lokalavisen.dk, 15 Feb. 2011. Norwegian Ministry of Agriculture and Food, «Safeguard Competition in the Dairy Industry», the news on 25 May 2007. Bent Myrdahl, TV2, 19 Oct. 2011. Legal sources etc. Bergen District Court case no 01-3093 Sverre Gjefsen – Kavli Holding AS, the Kavli Archives, Bergen. Brath, Henning, the Royal Norwegian Ministry of Justice and the Police, Statement, 2 May 2000, the Kavli Archives, Bergen. Clemetsen, Dagfinn, O. Kavli og Knut Kavli’s Trust, the Kavli Trust Archive, Box «Saken 1993» (case 1993), dated 21 Sep. 1993. Mevatne, Christian, Main report: The Dispute between the Board of Directors of the Trust – management and employees of O. Kavli AS, the Kavli Trust Archives, Bergen, Box 2A, 1962–1994. Mevatne, Christian, Petition to Bergen City Court, dated 15 November 1993, the Kavli Trust Archives, Bergen, folder marked “Saken 1993” (case 1993). Meyer, Gunnar, Application to reformulate/amend the statutes (articles of association) of O. Kavli and Knut Kavli’s Trust, dated 4 May 1999, the Kavli Archives, Bergen. Meyer, Gunnar, ’Appeal over the rejection of the application to reformulate/amend the statutes…, dated 1 Dec. 1999, the Kavli Archives, Bergen. Oslo District Court, Judgement, dated 6 July 2007, the Kavli Archives, Bergen. Thommesen Krefting Greve Lund, Petition to Oslo District Court, dated 29 June 2006, the Kavli Archives, Bergen. Thommesen Krefting Greve Lund, Response to Bergen City Court, dated 30 Nov. 2001, the Kavli Archives, Bergen. Wiig, Nicolay, Report on behalf of O. Kavli og Knut Kavli’s Trust, dated 24 May 1993, folder marked «Saken 1993» (case 1993), the Kavli Archives, Bergen. Wiig, Nicolay, Memo 3 June 1999, Erik Bernhard Hjorth’s private archive, Bergen. Other printed sources Bergen Address Directory 1901, Bergen. Bergen Address Directory 1905, Bergen.

Bergen Register of Business Enterprises 1901. Bergen Business Register 1893, pp. 159–160. Henriksen, Petter (chief editor) 1996, Aschehoug og Gyldendals Store Norske Leksikon (encyclopaedia), vol. 3, Kunnskapsforlaget, Oslo. Encyclopaedia of the County of Sogn og Fjordane, the Municipality of Sogndal 2003. The Municipality of Sogndal, Folder, «Historisk vandring i Sogndalsfjøra» (historic walks along Sogndal Fjord), Sogndal. Official statistics NOS, Population tables for towns and rural municipalities, 1855–1910, Statistics Norway, Oslo 1856–1913. NOS, Historical statistics 1994, Statistics Norway, Oslo 1994.

Other written sources Cheese quotas, folder, the Kavli Archives, Bergen Tax audit of O Kavli AS, Damsgårdsveien 59, Bergen Tax Office, Bergen 1938, Olav Jacob Dreyer’s private archives, Bergen. Interview with Alf Sjurseth, 1934. Kavli, Knut, Deed of Donation, dated 25 April 1962, the Kavli Trust Archives, Bergen. Kavli, Knut, Will dated 28 Dec. 1960, folder marked ‘Arthur Sundts arkiv’, Olav Jacob Dreyer’s private archive, Bergen. Kavli, Knut, Wills dated 24 Jan. 1958, 29 Oct. 1960, 4 Dec. 1961, 10 May 1962, 4 July 1963 and 12 May 1964, folder marked ‘O. Kavlis bo’ (estate), Olav Jacob Dreyer’s private archive, Bergen. Kavli Club, Kavli Club Meeting Book 1940–1952, the Kavli Archives, Bergen. Correspondence between O Kavli AS, Bergen and Otto Mønsted AS, Copenhagen, autumn 1958 and spring 1959, Olav Jacob Dreyer’s private archive. Notification of inheritance, Olav Kavli, Olav Jacob Dreyer’s private archive, folder marked ‘O. Kavlis bo’ (estate). Tax returns for O Kavli 1923 and 1924, the Kavli Archives, Bergen. Tax returns for O Kavli 1915–1923, the Kavli Archives, Bergen. Thornquist, Christian, Den sorte boken: Kavli – Memoranda, 1932–1977, Olav Jacob Dreyer’s private archive, Bergen. We have cited this material in the text, although we have read and studied considerably more material than we have cited. This material has greatly assisted in painting a picture portraying the different aspects of the Group’s activities. A large proportion of the material has also been peripheral in relation to our intention for the book, i.e. to present a story about the vision that has permeated the Group through 120 years: a vision of growth. During the year that it has taken to write this book, it is estimated that we have read a minimum of 25,000 pages of printed text.

Images and illustrations

This book contains approx. 640 illustrations, most of which come from Kavli’s own archives. New photographs have primarily been taken by Magnus Vabø. In addition, a number of historical photographs have been collected from various sources, for example, Romsdal Museum, the photographic collection at Bergen University Library and the newspaper Bergens Tidende.

315

KAVLI – AN INDUSTRIAL FAIRYTALE

GROUP EXECUTIVE COMMITEE The Kavli Group is led by Erik Volden. The Group Executive Committee consists of the CEO, the CFO and the local managing directors. Erik Volden CEO

Kavli Group turnover by country 2011 UK 10 %

3 % other countries

Denmark 12 % Norway 56 %

Sweden 19 %

Frode Sagen CFO

Kavli Group employees by country, 2011 Denmark 10 %

Gerhard Bley Managing Dir. Kavli Sweden

Finland 1 %

UK 23 %

Norway 41 %

Sweden 25 %

Paul Lewney Managing Dir. Kavli UK

Kavli Group turnover according to product category 2011

Pâté, bread 6 % Mayonnaise, caviar, dressing 8 % Grocery products, crackers, industrial sales 10 % Finn Høy Houengaard Managing Dir. Kavli Denmark

Cheese 30 %

Dairy products 10 %

Cordials, juices 10 %

Milk 26 %

Sources: Kavli Holding AS, Group Annual Report 2011 and Production Statistics 2010

316

APPENDIX

ORGANISATION OF THE KAVLI GROUP 2013 The Kavli Trust

(O. Kavli & Knut Kavli’s Trust)

Kavli Holding AS

Kavli Norge AS

O. Kavli AB (Sweden)

O. Kavli AS

Druvan AB

O. Kavli A/S (Denmark)

Kavli Oy (Finland)

Kavli Ltd. (UK)

Kavli International AS

Castle MacLellan Foods Ltd.

Q-Meieriene AS

THE KAVLI TRUST YEAR

CHAIR

BOARD MEMBERS

1962–1964

Knut Kavli

Hans Askeland

Arthur Sundt

1965–1967

Alf Sjurseth

Hans Askeland

Arthur Sundt

1968–1971

Arthur Sundt

Hans Askeland

Alf Sjurseth

1972–1979

Alf Sjurseth

Hans Askeland

Ivar Gjelsvik

1980–1980

Alf Sjurseth

Olav Jacob Dreyer

Ivar Gjelsvik

1981–1993

Ivar Gjelsvik

Olav Jacob Dreyer

Erik Bernhard Hjorth

1994–1999

Pål W Lorentzen

Olav Jacob Dreyer

Erik Bernhard Hjorth

2000–2000

Pål W Lorentzen

Reidar Lorentzen

Erik Bernhard Hjorth

2001–2002

Pål W Lorentzen

Reidar Lorentzen

Erik Bernhard Hjorth

Anne Enger Lahnstein

2003–2004

Pål W Lorentzen

Reidar Lorentzen

Aksel Mjøs

Anne Enger Lahnstein

2005–2007

Pål W Lorentzen

Reidar Lorentzen

Aksel Mjøs

Solfrid Lind

2008–2009

Reidar Lorentzen

Kjetil Smørås

Aksel Mjøs

Solfrid Lind

2010–2012

Reidar Lorentzen

Tor Andersen

Aksel Mjøs

Solfrid Lind

Reidar Lorentzen

Aksel Mjøs

Sources: Management Protocols,1962–2012, The Kavli Trust, The Kavli Archives, Bergen

Solfrid Lind

317

KAVLI – AN INDUSTRIAL FAIRYTALE

KAVLI HOLDING AS YEAR

CHAIR

BOARD MEMBER

1994

Reidar Lorentzen

Olav Jacob Dreyer

Pål W Lorentzen

1995

Reidar Lorentzen

Olav Jacob Dreyer

Pål W Lorentzen

Mathias Turøy

Per Magne Syre

1996

Reidar Lorentzen

Paul C Rieber

Pål W Lorentzen

Mathias Turøy

Per Magne Syre

1997

Reidar Lorentzen

Paul C Rieber

Pål W Lorentzen

Rune Nyheim

Per Magne Syre

1998

Reidar Lorentzen

Paul C Rieber

Pål W Lorentzen

Rune Nyheim

Per Magne Syre

1999

Reidar Lorentzen

Paul C Rieber

Pål W Lorentzen

Rune Nyheim

Kjell Kåre Gjertsen Bert Jansson

2000

Reidar Lorentzen

Elisabeth Berge

Pål W Lorentzen

Rune Nyheim

Kjell Kåre Gjertsen Bert Jansson

2001

Reidar Lorentzen

Elisabeth Berge

Pål W Lorentzen

Rune Nyheim

Per Magne Syre

Bert Jansson

2002

Reidar Lorentzen

Elisabeth Berge

Pål W Lorentzen

Rune Nyheim

Per Magne Syre

Aksel Mjøs

Jan W Rolland*

2003

Reidar Lorentzen

Elisabeth Berge

Pål W Lorentzen

Rune Nyheim

Terje Hansen

Aksel Mjøs

Jan W Rolland

2004

Reidar Lorentzen

Elisabeth Berge

Pål W Lorentzen

Rune Nyheim

Terje Hansen

Tor Andersen

Jan W Rolland

2005

Reidar Lorentzen

Tor Andersen

Pål W Lorentzen

Rune Nyheim

Asta Kvalbein

Jan W Rolland

2006

Finn Jebsen

Tor Andersen

Pål W Lorentzen

Rune Nyheim

Asta Kvalbein

Reidar Lorentzen

Jan W Rolland

Kathrine Mo

2007

Finn Jebsen

Tor Andersen

Pål W Lorentzen

Rune Nyheim

Rune Austdal

Reidar Lorentzen

Aksel Mjøs

Kathrine Mo

Jan W Rolland

2008

Finn Jebsen

Tor Andersen

Pål W Lorentzen

Rune Nyheim

Rune Austdal

Reidar Lorentzen

Aksel Mjøs

Kathrine Mo

Jan W Rolland

2009

Finn Jebsen

Tor Andersen

Pål W Lorentzen

Rune Nyheim

Eli Kverneland

Reidar Lorentzen

Aksel Mjøs

Kathrine Mo

Jan W Rolland

2010

Finn Jebsen

Tor Andersen

Pål W Lorentzen

Rune Nyheim

Eli Kverneland

Reidar Lorentzen

Aksel Mjøs

Kathrine Mo

Jan W Rolland

2011

Finn Jebsen

Kim Wahl

Aksel Mjøs

Rune Nyheim

Eli Kverneland

Reidar Lorentzen

Stefan Granlund

Kathrine Mo

2012 Finn Jebsen

Kim Wahl

Aksel Mjøs

Rune Nyheim

Eli Kverneland

Reidar Lorentzen Stefan Granlund

* Bert Jansson until 1 July, 2002.

BOARD MEMBER BOARD MEMBER

BOARD MEMBER

Bert Jansson

Kathrine Mo

Sources: Management Protocols, Kavli Holding AS, 1995–2012, Vigdis Hamnes, Memo 2012

CEOs OF THE KAVLI CORPORATE GROUP YEAR

GROUP MANAGER

1994 –1994

Olav Jacob Dreyer (Constitutive)

1995 –1999

Finn Bergesen jr.

1999 –2004

Leif Stråtveit

2005 –2012

Erik Volden

318

Finn Jebsen

Kim Wahl

Aksel Mjøs

Rune Nyheim

Eli Kverneland

Reidar Lorentzen

Stefan Granlund

Kathrine Mo

APPENDIX

O. KAVLI AS, BERGEN (THE ’OLD’ KAVLI) YEAR

CHAIR

BOARD MEMBER

1924–1947

Olav Kavli

Knut Kavli

1948–1957

Olav Kavli

Knut Kavli

Hans Askeland

1958–1965

Knut Kavli

Hans Askeland

Alf Sjurseth

1966–1968

Alf Sjurseth

Hans Askeland

Chr. Thornquist

1969–1971

Alf Sjurseth

Hans Askeland

Chr. Thornquist

Arthur Sundt

Eilert Sundt

1972–1972

Alf Sjurseth

Hans Askeland

Chr. Thornquist

Eilert Sundt

1973–1976

Alf Sjurseth

Hans Askeland

Chr. Thornquist

1977–1977

Alf Sjurseth

Hans Askeland

1978–1978

Alf Sjurseth

1979–1979

BOARD MEMBER

Per Brandt-Hansen Eilert Sundt

Mathias Turøy

Bendik Jensen

Chr. Thornquist

Olav Jacob Dreyer Eilert Sundt

Mathias Turøy

Bendik Jensen

Hans Askeland

Chr. Thornquist

Olav Jacob Dreyer Eilert Sundt

Ivar Gjelsvik

Mathias Turøy

Bendik Jensen

Alf Sjurseth

Hans Askeland

Chr. Thornquist

Olav Jacob Dreyer Eilert Sundt

Ivar Gjelsvik

Mathias Turøy

Roald Bakke

1980–1980

Olav Jacob Dreyer

Chr. Thornquist

Alf Sjurseth

Eilert Sundt

Mathias Turøy

Roald Bakke

1981–1981

Olav Jacob Dreyer

Chr. Thornquist

Leif Kjær

Eilert Sundt

Mathias Turøy

Roald Bakke

1982–1984

Olav Jacob Dreyer

Chr. Thornquist

Leif Kjær

Tore Arildsen

Mathias Turøy

Roald Bakke

1985–1986

Olav Jacob Dreyer

Pål W Lorentzen

Leif Kjær

Tore Arildsen

Mathias Turøy

Bendik Jensen

1987–1992

Olav Jacob Dreyer

Pål W Lorentzen

Leif Kjær

Tore Arildsen

Olav Kjell Dale

Roald Bakke

1993–1993

Olav Jacob Dreyer

Pål W Lorentzen

Leif Kjær

Mathias Turøy

Per Magne Syre

Sources: Management Protocols,1962–1993, The Kavli Trust, The Kavli Archives, Bergen

YEAR

MANAGING DIRECTOR

YEAR

GROUP CEO

1924–1958

Olav Kavli

1933–1958

Olav Kavli

1958–1965

Knut Kavli

1958–1965

Knut Kavli

1965–1977

Hans Askeland

1965–1981

Alf Sjurseth

1978–1982

Eilert Sundt 1981–1993

No one was appointed CEO. However, the board of the trust with Ivar Gjelsvik as chair functioned as the group management team.

1993–1994

Olav Jacob Dreyer, CEO

1982–1993

Tore Arildsen

1993–1994

Gunnar Solheimsnes

319

KAVLI – AN INDUSTRIAL FAIRYTALE

O. KAVLI AS, BERGEN (THE ’NEW’ KAVLI) YEAR

CHAIR

BOARD MEMBER

1994–1994

Olav Jacob Dreyer

Leif Kjær

Reidar Lorentzen

Mathias Turøy

Per Magne Syre

1995–1995

Finn Bergesen jr.

Olav Jacob Dreyer

Leif Kjær

Reidar Lorentzen

Kjell Arne Pedersen

1996–1998

Finn Bergesen jr.

Øyvind Kårbø

Øyvind Nitter

Kjell Arne Pedersen

Rune Nyheim

1999–1999

Reidar Lorentzen

Øyvind Nitter

Jan W Rolland

Bert Jansson

Kjell Arne Pedersen

Rune Nyheim

2000–2001

Reidar Lorentzen

Øyvind Nitter

Jan W Rolland

Anne Britt Berentsen

Kjell Arne Pedersen

Rune Nyheim

2002–2002

Leif Stråtveit

Øyvind Nitter

Jan W Rolland

Anne Britt Berentsen

Frank Dankertsen

Rune Nyheim

2003–2005

Reidar Lorentzen

Øyvind Nitter

Jan W Rolland

Anne Britt Berentsen

Frank Dankertsen

Rune Nyheim

2006–2007

Tone Kvåle

Erik Volden

Dagfinn Trohjell

2008–2009

Frode Sagen

Erik Volden

Dagfinn Trohjell

2010–2012

Erik Volden

Jon Martin Klafstad

Dagfinn Trohjell

Rune Nyheim

Source: Vigdis Hamnes, Memo, 2012

YEAR

MANAGING DIRECTOR

1994–1996

John Ulvestad

1996–1997

Egil Riisnes

1997–1998

Wenche Kjølås

1998–2001

Leif Stråtveit

2001–2003

Andre S. Patay

2003–2004

Leif Stråtveit

2005–2010

Erik Volden

2010–2012

Jon Martin Klafstad

320

APPENDIX

O. KAVLI AB, STOCKHOLM YEAR

CHAIR

BOARD MEMBER

1940–1953

Karin Kavli

Conrad Ternström

1954–1962

Karin Kavli

Knut Kavli

Conrad Ternström

1963–1964

Karin Kavli

Knut Kavli

Sixten Rosen

1965–1965

Karin Kavli

Knut Kavli

Sixten Rosen

H. H. Engström

1966–1973

Karin Kavli

Erik Felländer

Sixten Rosen

Alf Sjurseth

1974–1980

Karin Kavli

Erik Felländer

Alf Sjurseth

Bert Jansson

1981–1983

Erik Felländer

Nils Edholm

Olav J Dreyer

Bert Jansson

1984–1994

Nils Edholm

Bert Jansson

Olav J Dreyer

Claes Felländer

1995–1997

Nils Edholm

Bert Jansson

Olav J Dreyer

Claes Felländer

Finn Bergesen jr.

1998–1998

Finn Bergesen jr.

Bert Jansson

Göran Nord

Claes Felländer

Bo Lundquist

1999–1999

Leif Stråtveit

Bert Jansson

Bo Lundquist

Claes Felländer

2000

Leif Stråtveit

Katarina Knutz

Bo Lundquist

Claes Felländer

2001–2004

Leif Stråtveit

Bo Lundquist

2005–2010

Erik Volden

Bo Lundquist

2010–2012

Erik Volden

Gerhard Bley

Sources: Management reports 1941–1961, General Meetings, Protocols, 1941–1962, Management Protocols, 1962–2012, The Kavli Trust, The Kavli Archives, Bergen, Vigdis Hamnes, Memo, 2012

YEAR

MANAGING DIRECTOR

1933–1939

Knut Kavli

1940–1961

Conrad Ternström

1962–1964

Olav Jacob Dreyer

1965–1965

Hans-Hugo Engström

1966–1974

Leif Iversen

1974–1998

Bert Jansson

1998–2010

Bo Lundquist

2010 –2012

Gerhard Bley

321

KAVLI – AN INDUSTRIAL FAIRYTALE

O. KAVLI AS, COPENHAGEN YEAR

CHAIR

BOARD MEMBER

1967–1967

Alf Sjurseth

Chr. Thornquist

Ebbe Tuxen

Erik Gisselbæk

Hans Stoltenberg

1968–1972

Alf Sjurseth

Chr. Thornquist

Jacob la Cour

Robert Koch–Nielsen

Erik Overgaard

1973–1982

Jacob la Cour

Erik Overgaard

Hans Westermann

Eilert Sundt

1983–1986

Jacob la Cour

Erik Overgaard

Hans Westermann

Olav J Dreyer

1987–1994

Olav J Dreyer

Erik Overgaard

Hans Westermann

1995–1995

Olav J Dreyer

Erik Overgaard

Hans Westermann

Finn Bergesen jr.

1996–1997

Finn Bergesen jr.

Erik Overgaard

Hans Westermann

Olav J Dreyer

1998–1998

Finn Bergesen jr.

Erik Overgaard

Hans Westermann

Pål W Lorentzen

Christian Søgård

1999–1999

Leif Stråtveit

Erik Overgaard

Hans Westermann

Henrik Potts

Bjarne Suhr Andersen

2000–2001

Leif Stråtveit

Erik Overgaard

Hans Riisager Holst

Henrik Potts

Bjarne Suhr Andersen

2002–2003

Leif Stråtveit

Peter Bo Rützou

Hans Riisager Holst

Casper Munther

Bjarne Suhr Andersen

2004

Leif Stråtveit

Peter Bo Rützou

Stig Kongsfjell

2005

Erik Volden

Børre Opsahl

Peter Bo Rützou

2006

Erik Volden

Børre Opsahl

Finn Høy Houengaard

2007–2012

Erik Volden

Frode Sagen

Finn Høy Houengaard

BOARD MEMBER

Christian Søgård

Sources: Management Protocols,1962–2012, The Kavli Trust, The Kavli Archives, Bergen, Vigdis Hamnes, Memo, 2012 and Jacob Christiansen, Kavli Denmark

YEAR

MANAGING DIRECTOR

1968–1970

Ove Udesen

1970 –1998

Hans Theis Westermann

1998–2001

Henrik Potts

2001–2001

Bjarne Suhr Andersen (Constitutive Director)

2002–2005

Peter Bo Rützoe

2006–2012

Finn Høy Houengaard

322

APPENDIX

KAVLI LTD, GATESHEAD YEAR

CHAIR

BOARD MEMBER

1962–1970

Alf Sjurseth

Robert Muckle

John L Muckle

1971–1972

Alf Sjurseth

Sadler Forster

Robert Hall

1973–1976

Alf Sjurseth

Robert Hall

Eilert Sundt

1977–1980

Alf Sjurseth

Robert Hall

Eilert Sundt

1981–1982

Robert Dickinson

Thomas Parker

Eilert Sundt

1983–1986

Robert Dickinson

Thomas Parker

Olav J Dreyer

1987–1989

Robert Dickinson

Thomas Parker

Olav J Dreyer

Michael Bagnall

1990–1991

Robert Dickinson

Peter Bone

Olav J Dreyer

Michael Bagnall

1992

Robert Dickinson

Peter Bone

Olav J Dreyer

Michael Bagnall

1993–1994

Robert Dickinson

Peter Bone

Olav J Dreyer

David Smith

1995–1995

Robert Dickinson

Finn Bergesen jr.

Olav J Dreyer

David Smith

Peter Bone

1996–1998

Finn Bergesen jr.

Robert Dickinson

David Smith

Peter Bone

Henry Roberts

1999–1999

Leif Stråtveit

Robert Dickinson

David Smith

Peter Bone

Henry Roberts

2000–2001

Leif Stråtveit

Robert Dickinson

Henry Roberts

A R Cunningham

2002–2004

Leif Stråtveit

Henry Roberts

2005–2009

Erik Volden

Henry Roberts

2010–2012

Erik Volden

Paul Lewney

Eilert Sundt

Thomas Parker

Peter Bone

David Smith

Sources: Memos, The Kavli Trust, The Kavli Archives, Bergen, Management Protocols and Vigdis Hamnes, Memo, 2012

YEAR

MANAGING DIRECTOR

1936–1981

Alf Sjurseth

1981–1987

Thomas Parker

1987–2003

Peter Bone

2003–2008

Henry Roberts

2008–2012

Paul Lewney

323

BOARD OF DIRECTORS OF Q–MEIERIENE AS YEAR

CHAIR

BOARD MEMBER

GENERAL MANAGER

2000

Leif Stråtveit

Jørn H. Eriksen

Kjetil Lisland

Reidar Lorentzen

Sverre Gjefsen

2001

Leif Stråtveit

Jørn H. Eriksen

Jan Rolland

Reidar Lorentzen

Bent Myrdahl

2002

Leif Stråtveit

Jørn H. Eriksen

Jan Rolland

Reidar Lorentzen

Bent Myrdahl

2003

Leif Stråtveit

Bent Myrdahl

Wenche Kjølås

Bent Myrdahl

2004

Leif Stråtveit

Bent Myrdahl

Wenche Kjølås

Bent Myrdahl

2005

Leif Stråtveit

Bent Myrdahl

Wenche Kjølås

Bent Myrdahl

2006

Erik Volden

Atle Nordby

Bent Myrdahl

2007

Erik Volden

Atle Nordby

Bent Myrdahl

2008

Erik Volden

Atle Nordby

Bent Myrdahl

2009

Erik Volden

Dagfinn Trohjell

Bent Myrdahl

2010

Jon Martin Klafstad

Dagfinn Trohjell

Bent Myrdahl

2011

Jon Martin Klafstad

Dagfinn Trohjell

Bent Myrdahl

2012

Erik Volden

Dagfinn Trohjell

Bent Myrdahl

Bent Myrdahl Sources: Vigdis Hamnes, Memo 2012

YEAR

MANAGING DIRECTOR

2000 – 2001

Sverre Gjefsen

2001 – 2012

Bent Myrdahl

VESTFOLD FLATBRØDFABRIK AS (MERGER IN 2003) YEAR

CHAIR

BOARD MEMBER

1984–1992

Olav J Dreyer

Leif Kjær

Tore Arildsen

1993–1994

Olav J Dreyer

Leif Kjær

Pål W Lorentzen

1995–1995

Finn Bergesen jr.

Leif Kjær

Olav J Dreyer

1996–1998

Finn Bergesen jr.

Jan W Rolland

Per Sveistrup

1999–1999

Leif Stråtveit

Jan W Rolland

Per Sveistrup

2000–2000

Leif Stråtveit

Jan W Rolland

Per Sveistrup

Kay Evensen

2001–2002

Leif Stråtveit

Sverre Semb

Dag Tønjum

Stig Kongsfjell Sources: Annual Reports 1984–2002

YEAR

MANAGING DIRECTOR

1984–1997

Leif Kjær

1998–2002 (2007)

Lars Petter Bjelland

324