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Minerva S.A.
In early December 1995, Theo Grigoris, Managing Director of Minerva S.A., met with Vassili Goudes, the companys newly appointed Commercial Director, to discuss the future direction of the Athens, Greece-based manufacturer of edible oils and margarine. While the company was a leading producer of high quality olive oil and a significant competitor in seed oils and margarine, increasing competition from Unilevers Greek affiliate and changing buying habits were forcing the company to reassess its basic approach to business. Over the past year the company had begun a major overhaul of its operations including the announcement of a new plant and the introduction of new management practices and technologies. However, resistance to change was everywhere. Mr. Goudes presented his assessment of the challenges that lay ahead:
We are far behind where we should be in terms of management depth and market position. Managing the change process has been very difficult. Yet I have no hesitation that we need to change. The big question is setting priorities.

Company History
The name Minerva is steeped in Greek history. The city of Athens was named after Athena, the Greek goddess of wisdom and agriculture in Greek mythology. Athena promised the people of Athens that olive trees would flourish within the city. Athens has been closely associated with olives and olive trees ever since. With the decline of the Greek empire and the arrival of the Romans in 150 BC, the goddess Athena was renamed Minerva, its Latin translation.

Early Days
Minerva branded olive oil was first produced in 1904 through a cottage business managed by Mr. E. Giannakos on the Greek island of Lesvos. Mr. E. Giannakos passed the business to his son Mr. P. Giannakos, who later formed a partnership with another local olive oil producer, Mr. A. Sahpaloglou. The partnership focused on bulk sales of olive oil under the Minerva and Reggina brand names. The business was relatively simple and focused on the purchase of olive oil from area farmers, processing, bottling and distribution throughout Greece. In 1970, Mr. P. Giannakos retired and in 1971 the company was officially renamed Minerva Olive Oil Manufacturing and Commercial S.A.
Copyright 1997 Thunderbird, The American Graduate School of International Management. All rights reserved. This case was prepared by Professor Allen J. Morrison, with assistance from Elpida Frantzeskarou, for the purpose of classroom discussion only, and not to indicate either effective or ineffective management.

Selling branded olive oil was an unusual strategy in Greece where, for millennia, olive oil had been purchased by consumers directly from farmers. Buying habits were age-old and had become ingrained in Greek family traditions. Even with the increasing urbanization of Greek society, family outings to purchase olive oil from select farms were common. By the late 1970s, well over 80% of Greek olive oil was still being purchased directly from farmers.

The Company is Sold

Over the years, Minerva emerged as the leading olive oil brand in Greece. Still, sales and profits were limited. In 1978, Mr. A. Sahpaloglou, old and suffering from cancer, sold the company to UK-based Paterson Zochonis for $1.5 million. Under the Paterson Zochonis Group, the company would experience significant growth. Paterson Zochonis traced its roots to the West African country of Sierra Leone in the 1870s when George Paterson, a Scot, and George Zochonis, a Greek from Sparta, first met and established the trading company Paterson Zochonis & Company. In 1884, Paterson Zochonis established an office in England to import West African productspalm produce, groundnuts, coffee, hides, and timberwhile also managing the sale of European textiles and foodstuffs to Sierra Leone. Despite harsh living conditions the business flourished. In 1929, George Zochonis died and Constantine Zochonis, Georges nephew, took over the reins as chief executive. George Paterson gradually sold his shares to the Zochonis family and for the next 50 years Paterson Zochonis would remain a British registered company, managed by Greeks doing almost all of its business in Africa. From the late 1940s to the early 1970s, Paterson Zochonis invested heavily in subSaharan Africa. The company expanded into the manufacture and sale of soap, toiletries, sewing threads, and proprietary pharmaceuticals. In 1953, Paterson Zochonis became a public company in the UK with its shares quoted on the London Stock Exchange. While the Zochonis family maintained controlling interest in the company, the new infusion of equity fueled further growth in Africa. In 1973, Paterson Zochonis formed a joint venture company that became the largest producer of refrigerators in Africa. With a strong position in Africa, Paterson Zochonis management began to search for growth opportunities in Europe. In 1972, the company purchased Roberts Laboratories Limited of Bolton, England, a manufacturer of proprietary drugs, principally for markets in the Middle East, Africa. and the UK. In 1975, Paterson Zochonis purchased Cussons Group Ltd., a major British soap and toiletries manufacturer. Cussons best-known brands were Imperial Leather soap and toiletries and 1001 household cleaning materials. This move established Paterson Zochonis as a major force in the UK market. With new sources of financing, Cussons constructed soap factories in Australia, Singapore, Malaysia, Indonesia, Thailand, Pakistan, Bangladesh and Kenya. Many managers at Paterson Zochonis regarded the acquisition of Minerva S.A. as a natural move. One long-time Greek national who served as a Paterson Zochonis manager in Africa in 1978 reflected back on the thinking at that time:

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Greece was known worldwide for its olive oil. It was its one main export. Minerva was the top brand in Greece at that time. We bought the company because it was a high profile Greek company that was for sale. We also saw it as an opportunity to expand into other food products. Our ambition was for Minerva to become a major food products company in Greece.

In 1982 George Loupos, a native of Sparta, Greece and a member of the Zochonis family, was named the Managing Director of Paterson Zochonis. Turnover at Paterson Zochonis in 1995 was estimated at 287.8 million with profits over 16 million. In late 1995, Loupos was still serving as Managing Director. Despite high ambitions for Minerva, Paterson Zochonis was reluctant to assert itself in the day-to-day operations of its new acquisitions. From 1978 until 1982 Minerva was managed by five brothers from the Athens-based Lazopoulos family. When George Loupos became Managing Director at Paterson Zochonis in 1982 he replaced the Lazopoulos brothers with Nick Foros as Managing Director of Minerva. Foros had recently retired from Paterson Zochonis where he had served in various management capacities in Africa. In 1985, Foros was replaced by Mike Kourtessis, who had also come out of retirement from Paterson Zochonis in Africa. Suffering from ill health, Kourtessis retired a second time and in March 1993 was replaced as Managing Director by Theo Grigoris. Grigoris had worked in Africa for Paterson Zochonis since 1953, rising to Chief Executive for the company's Nigerian operationsits largest and most profitable affiliate in Africa. He was a close personal friend of George Loupos and had retired from Paterson Zochonis in 1990. Grigoris commented:
In Africa we retire at an early age, maybe 53 years old. We are typically offered a job back in England. But many dont want to go. I returned to Greece. Paterson Zochonis always takes care of its people. Those that remain with the company over the years, as I did, get hooked to the company. When they asked me to come back as Managing Director, I agreed. My mission at Minerva was to professionalize the management and move the company forward.

Minervas Key Markets

By the early l990s Minerva had emerged as a major player in the Greek markets for edible oils (which included both olive oil and seed oils), margarine and fats. In these key markets, Minerva faced serious competition from Elais, a Greek company purchased by Unilever in 1962. In 1995 Elais had sales revenues of approximately 60B Gr. Drs., was growing at over 15% per year and employed about 550 people.1

Olive Oil
Two different categories of olive oil were recognized: virgin olive oil and pure olive oil. Each category of olive oil could be further segmented according to a variety of quality factors. The flavor, aroma, and color of virgin olive oils varied significantly from country to country, region to region, and even farm to farm. Factors such as soil and climate conditions, the variety of olive trees used (hundreds of varieties of trees exist), the age of the tree, harvesting methods, timing, and processing methods all impact the characteristics of virgin olive oil.
1

In December 1995, the exchange rate was approximately 235 Greek Drachmas/US$. 3

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Like wine, international standards have been adopted to grade virgin oils. To be considered extra virgin olive oil, for example, the oil has to be produced from the first pressings of olives. Furthermore, the flavor, color, and aroma have to meet certain standards, and acid content cannot exceed 1%. Fine virgin olive oil cannot have an acidity level greater than 1.5%; semi-fine virgin olive oil could not have an acidity level greater than 3%. In contrast, pure olive oil is refined from the remains of pressed olives. These remains often have high levels of acidity, strong aromas and flavors. Refining lowers these levels and standardizes the color consistent with semi-virgin olive oil. Pure olive oil is sold at a slight discount to extra virgin olive oil. World Olive Oil Markets. World production of olive oil amounted to approximately 1.75 million tons in 1995. Spain was the worlds largest producer with 600,000 tons, followed by Italy with 400,000 tons, Greece with 300,000 tons and Tunisia with 200,000 tons. During the early 1990s, olive oil consumption skyrocketed on reports of its positive health benefits. From 1992 to 1995, olive oil consumption increased 20% in the US, 15% in Australia, and 10% in Northern Europe. Growing demand led to rising prices: from 1992 to 1995, world olive oil prices increased almost 40%. Stathis Lempesis, Sales Director for Minerva, commented on the production of olives:
It takes over 20 years for an olive tree seedling to grow to full production. Olive trees can live thousands of years. They recently found an olive tree in Athens that was 2,000 years old. However, as trees grow past about 100 years, the quality and quantity of olives falls. So we are constantly cutting out old trees and planting new ones. The European Union will pay farmers to grow more. However, the EU wont do anything unless the Greek government brings it to their attention. So far the Greek government doesnt have a policy. The good news is that policies applied in Italy and Spain will also be applied here as well. It just takes time to get sorted out.

Greek Olive Oil Markets. In Greece, olives were harvested from November to the end of March. Farmers typically owned presses and managed the oil extraction process. A farm which produced 1,000 tons of oil per year would be considered large. Farmers generally avoided long-term production/pricing contracts with packaging companies. The custom for most farmers was to promote self-consumption sales while speculating on future prices with packaging companies. Once an agreement was reached to sell to a packaging company, delivery would typically be made within the week. Minerva could store about two months inventory of raw material and typically had no problem finding sellers of olive oil throughout the year. However, by August farm inventories would begin to dry up and prices rise. Some farmers would hold back inventories for several years in order to speculate on prices. (Even when properly stored, olive oil begins to deteriorate in quality after about one year.) After virgin olive oils had been received, packaging companies would clean and purify the supplies, grade and blend the oils and run a bottling operation. Greeks prided themselves as olive oil connoisseurs and would not buy what was perceived to be lower quality Italian, Spanish or Tunisian olive oils. Although Greek olive oil had a superior reputation for quality, Greek olive oil was about 10% more expensive than Italian or Spanish oils. Almost all of the cost difference was made up in manufacturing
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costs. The largest Greek oil plant (run by Elais with a capacity of 60,000 tons) was perhaps one-third the size of Bertolis largest plant in Italy. Greek plants were also used to produce both olive oils and seed oils whereas the large Italian and Spanish plants focused exclusively on olive oils. Despite cost disadvantages, Theo Grigoris asserted that Greeks will never buy an Italian olive oil. As of 1995, olive oil from these countries had not made inroads in the Greek marketplace. Greece exported approximately 150,000 of the 300,000 tons of olive oil it produced annually. Of the amount exported, less than 10,000 tons was branded olive oil. The rest was bulk exports. Minervas branded export sales in 1995 were 500 tons; the company had no bulk export sales. In terms of domestic consumption, about 100,000 tons of the 150,000 tons of olive oil purchased in Greece was sold directly by farmerstypically in 16 liter tinsto either consumers or industrial customers. The remaining 50,000 tons represented pre-packaged consumer sales. Both Minerva and Elais focused their efforts on this segment. It was estimated that Elais held a 6.2% share of the Greek packaged consumer market for virgin olive oil and a 51% share of the pure olive oil market; Elais did not sell pomage. 2 A breakdown of the key market segments and Minervas product focus is shown in Exhibit 1. Three market trends were evident in the Greek olive oil industry. First, Greeks were increasingly shifting towards prepackaged, branded oils. Urbanization, time constraints and the loosening of relationships between farmers and urban consumers were regularly cited for this trend. Second, Greeks were moving from virgin oils to cheaper blended varieties. Increased retail stocking fees and the increased international demand for olive oil had pushed prices substantially higher. Faced with steep annual price increases, many consumers were shifting to more economical blends. Third, the demand for bulk Greek olive oil from Spanish and Italian traders was increasing. Poor harvests in Spain combined with soaring markets in North America pushed large Spanish and Italian traders and bottlers to aggressively seek new supplies of olive oil. In an effort to spur olive oil production the EU in January 1995 transferred subsidies of 400 Gr. Drs. per kilogram to Greek olive growers. However, growers did not cut prices to processors.

Seed Oils
The second major edible oil market where Minerva competed was seed oils. Common seed oils include corn oil, sunflower oils, soybean oil, cottonseed oil, palm oil and various blends. With the exception of cottonseed and some sunflower seed oils, Greece was not a seed oil producing country. Seed oils were imported from a variety of countries: palm oil was imported from Malaysia, corn and soybean oils from France and the U.S., blends from Belgium, the Netherlands and Germany. There were no duties on oils produced within the EU; duties on imports from the U.S. and Malaysia averaged 10%. Seed oils were generally processed by large, integrated manufacturers. To be competitive, processing facilities focused on maximizing volume-based efficiencies; the average capacity of a large seed oil plant in Northern Europe was 150,000 tons/year. Output could be
Pomage is residual oil collected from pure olive oil storage containers. It is used for cooking and frying oils.
2

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EXHIBIT 1

Key Greek Olive Oil Market Segments & Minervas Market Focus, 1995
Greek Production (300k tons)

Exports (150k tons)

Domestic Consumption (150k tons)

Bulk (140k)

Branded (10k) Minervas Sales - 500 tons

Packaged Consumer (50k)

Industrial (50k)

SelfConsumption (50k)

Packaged Consumer Market Segments Virgin Pure Pomage Size (tons) 18k 30k 2K Minervas Sales (tons) 1.2k 7.8k 1.1k Minervas Market Share 6.6% 26.0% 55.0%

shipped in two basic forms, bulk or bottles. Bulk oils were usually shipped in 1,000 ton increments in the holds of ocean-going vessels. Upon arrival, the oil would be filtered to remove impurities that were commonly picked up during shipping. The oil would then be bottled for local distribution. Reprocessing and local bottling added costs to the production process. As an alternative, distributors could purchase bottled oileither with a private or manufacturers labeldirectly from one of the large processors in Northern Europe. However, shipping costs for bottled oils were much higher than for bulk oil. As a result, the cost differential for reprocessed versus bottled oil was minimal. One marketing manager at Minerva commented:
Bulk oil has to be filtered. The hold of a ship is never clean enough. We have to make sure the oil meets our standards. Huge plants from Northern Europe are efficient not just from the economies of scale but also because they can make the bottle and fill it on the same line. But when you put a label on it, all the bottles look the same. Maybe they can deliver it in Greece 5% cheaper than we can produce it here from bulk. However, having a custom bottle is also important in the consumers mind.

In 1995, approximately 90% of the corn oil and sunflower oil sold in Greece was bottled in Greece. The Greek Seed Oil Market. In 1995, the total Greek market for seed oils was approximately 110,000 tons. Of this amount, about 50% or 55,000 tons was devoted to consumer markets; the remaining 50% represented industrial sales. Elais was actively developing the industrial market and was by far its single largest supplier. Minerva had generally ignored the industrial segment where it had only about a 2% share.

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The Greek consumer seed oil market was dominated by both Minerva, which had an estimated 20.5% share of the market, and Elais, which had approximately 26.5% market share. Elais focused principally on three seed oil segments: (1) the corn oil segment where its Flora brand enjoyed a 20% market share, (2) the sunflower segment where its Sol brand had an estimated 65% market share, and (3) the blended segment where the company's Friol brand had a 3% share. Minerva did not brand its seed oils separately but promoted its products by using the Minerva name and standard company bottles. Key seed oil segments and Minerva's market share data are provided in Exhibit 2.
EXHIBIT 2 The Greek Seed Oil Market & Minervas Market Focus, 1995
Total Greek Market (110k tons)

Industrial (55k tons)

Consumer (55k tons)

Minervas Sales - 1.15k tons Segments Corn Sunflower Soybean Cottonseed Blends Totals

Size (tons) 19.0k 25.0k 6.0k 2.5k 2.5k 55.0k

Minervas Sales (tons) 7.0k 2.2k 0.6k 0.3k 1.2k 11.3k

Minervas Market Share 36.8% 8.8% 10.0% 12.0% 48.0% 20.5%

From 1990 to 1995. the overall seed oil market had remained largely static. The main trend was a switch from cotton, sunflower and blended oils to corn oil. With olive oil prices soaring, many observers believed that a shift from olive oil to seed oils was likely during the late 1990s.

Cooking Fats and Margarines

The Greek cooking fat market was approximately 10,000 tons in 1995. Of this amount, the consumer segment was about 6,800 tons and the industrial segment was about 3,200 tons. Minerva produced about 1,000 tons (14.7% share) for the consumer cooking fats segment and 350 tons (10.9% share) for the industrial cooking fats segment. The consumer segment had been declining by 5% per year since the early 1990s. The industrial market had remained static. Elais was Minervas only competitor in the cooking fats (industrial and consumer) market. The Greek margarine market totaled approximately 35,000 tons in 1995, split almost evenly between consumer and industrial sales. A breakdown of market segments and Minervas share is shown in Exhibit 3.The consumer market was split between brick (40%) and soft (60%) segments. From 1994 to 1995, the soft margarine segment grew by 2% while the brick segment declined by 6%.

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EXHIBIT 3 Greek Margarine Market and Minervas Market Focus Market Consumer Industrial Size (tons) 17k 18k Minervas Sales (tons) 3.5k 2.1k Minervas Market Share (%) 20.5 11.6

It was estimated that Elais enjoyed an 75% share of the consumer margarine segment and a 40% share of the industrial margarine segment. US-based Kraft was number three in the Greek margarine market with the balance of the market.

Other Businesses
Minerva had minor positions as an importer and distributor of rice, soaps and detergents. Its rice business involved distributing about 260 tons per year of imported boil-in-the-bag rice. Although this represented about a 72% share of the boil-in-the-bag segment, the entire segment accounted for less than 1% of the entire Greek rice market. Minerva also had a 4.7% volume share of the Greek bar soap market. Its sales were based almost exclusively on UK produced Imperial Leather bar soap. Cussons was known to be dissatisfied with the limited marketing effort Minerva was placing on its bar soap sales.

Minerva in the Early 1990s

Operations
Minerva produced all of its oils, fats and margarines in a single plant located in an industrial neighborhood in Athens. Production capacity at the plant was approximately 22,000 tons per year for oils and 4,000 tons per year for margarine. This put the company at capacity in oils and well over capacity in margarine. The plant had been expanded numerous times over the years and covered virtually every available inch of the 5,500 square meter parcel of land it sat on. Further expansion was impossible. Total floor space was 11,000 square meters split over four stories. Raw material inventories were kept on two different floors, packaging on another and finished goods inventories on yet another. Freight elevators were used extensively to move inventory supplies causing serious bottlenecks and inefficiencies. Storage tanks and refining towers were adjacent to the main building. Some were covered from the elements while others were not. Grigoris was troubled by the run-down state of the current factory. A tour in December 1995 revealed water and oil on floors, inconsistent use of sanitary hairnets, uniforms and gloves on the packing lines, and dirty shipping pallets located in the packaging areas. Some of the equipment used in the plant was more than 50 years old. Oil that was returned by customers was held uncovered, unprotected and outdoors for five to seven days. Some of the drums and tins were returned open and leaked oil. (The returned product would eventually be reprocessed as lower grade oil.) The state of the factory prevented the company from providing tours to prospective customers. Grigoris acknowledged that our factory is run with old equipment and methods that are inferior to our methods in Africa.
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In December 1995, the companys Manufacturing Director was P. Tokousbalides who was in his mid-60s and held a Ph.D. in physical chemistry from the University of Toledo. Tokousbalides had been in the olive oil business for over 35 years, the last 15 with Minerva. He was regarded as being technically very strong. The factory employed 132 people in five different departments: refining, packaging, planning, quality control and maintenance. Three shifts a day were used in the factory; two shifts per day manned the packaging operations. The factory ran five days per week, 12 months per year. Over 120 of the employees were represented by a division of the National Workers Union which was described as very active. Salaries at the factory were estimated to be about 40% higher than for comparable jobs in Athens. While absenteeism ran high, essentially no one ever quit. Tokousbalides explained:
Absenteeism is mostly built into the system. In Greece workers get up to three days of full pay with a doctors certificate. Its easy to get a doctor to sign anything here. Workers can get up to 25 days off sick per year with full pay according to the law. They seem to take it and there is nothing we can do. Very few people are fired. Those who are fired want to get fired so they get extra compensation before going on government assistance.

When Grigoris joined Minerva in March 1993, a plan was under way to move the bottling and packaging functions out of the plant to a new site in Aspropyrgos, about 15 kms. away. Grigoris was very uncomfortable with the added complexity this would introduce to operations and argued for an entirely new, integrated plant. In early 1994, he convinced Paterson Zochonis to provide almost $28 million in new funding to expand capacity, purchase state of the art equipment and move the plant. The money plus an additional $9 million from the Greek government would go towards buying a facility in Ritsona, Greece (about 50 kms north of Athens). Generous government incentives were provided to companies that established operations outside crowded and polluted Athens. The facility chosen was an existing yogurt factory that sat on 60,000 square meters of land. The new plant was designed to raise olive and seed oil capacity to 40,000 tons by 1997. With a third shift, capacity could reach 60,000 tons. Margarine capacity was expected to triple to 12,000 tons per year. The move was to be carried out in stages beginning in mid-1996 and ending in March 1997. There was considerable concern that such a move would overwhelm Dr. Tokousbalides, who was planning his retirement within the next two years. To assist with the work, Paterson Zochonis seconded to Minerva Nick Mones for a period of three years starting in January 1996. Mones was in his mid-30s and was an Australian national of Greek ancestry who was running a Paterson Zochonis soap plant in Australia. Moness assignment at Minerva was to help introduce new techniques and production practices to the processing and bottling operations. Mones spoke fluent Greek but had never actually lived in Greece nor was he completely at ease with Greek writing. Peter Dunn, the International Human Resources Director for Paterson Zochonis, commented on Mones's skills:
The important thing is the blend of experience that Nick has. That means he is, first of all, very good at understanding business. He is a quick learner and he understands how we do things. Technically, he's also extremely competent. He also has very good managerial skills. Probably his best skills were developed in Nigeria which is itself quite demanding in terms of managing labor. Unfortunately, he knows nothing about making olive oil.
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In December 1995, Peter Dunn traveled to Athens to assist in interviewing candidates for a new Human Resource Director's position that was being created. An individual with a strong background managing Greek labor unions was being sought. According to Peter Dunn, the new HR Director would have to work very closely with Mones to ensure that there were no surprises in the factory.

Marketing and Sales

Not only did Grigoris have to worry about the troubled state of Minerva's operations, but after arriving in 1993 he realized that the companys marketing and sales activities were in a state of disarray. He soon became committed to finding a Commercial Director for the company. A Commercial Director would be someone who could pull together and upgrade the companys marketing, sales and product development groups. One of the first places he looked for references was Sparta. Here, Grigoris met a private school teacher who strongly recommended one of his former students, Vassili Goudes. Goudes, aged 37 and educated at the University of Bath in England, was at the time working as the Market Development Manager for Mars (Trofeklekt) in Greece. Grigoris first approached Goudes in May 1994 and in May 1995 Goudes joined Minerva. Goudes commented:
I had been at Mars for six and a half years. When I first started, Mars was a 600 million Gr. Drs. company. When I left, they were at 10 billion Gr. Drs. I helped set up their sales and marketing infrastructure. I moved up fast. Then I found myself in a position of saying, whats next? Minerva was a good opportunity. I like changing things. Mr. Grigoris was also very open. He knew things needed to change. He told me all the problems. So I knew he was serious about supporting change.

Shortly after arriving, Goudes compiled a report outlining problems in the Commercial Department. The findings included some of the following. Marketing and Sales Culture. Goudes could not find many positive aspects in Minerva's marketing and sales culture.
There is a feeling that Minerva is like a state enterpriseemployment for life with good pensions. .. . . People who hold key positions in the structure are today obstacles to any development in terms of systems and new approaches.

About 50 people worked under Goudes in the Commercial Department. With the exception of Goudes and three others, not a single person in the companys sales and marketing operations had either a university degree or spoke English.
They dont understand the importance of even wearing a necktie when they go visit a store manager. They also question every decision I make. Its not that they will stop me, but they just dont help. The young sales people are with us. The old regional managers are not. . . People here sleep too well at night. They have never worried about deadlines or meeting budgets. We are just not sophisticated enough. [Take, for example] our promotion strategyit too often involves off-invoice promotion or under the table money. It wouldnt be very unfair to say that promotional money was used more to transfer stock than to sell our products.
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The sales group was by far the largest group in the Commercial Department. Sales activities were organized around four regions in Greece: Athens, central Greece including the Greek Isles, Western Greece and Northern Greece. The average regional manager was in his mid-40s, had worked for the company for 15 years and had no computer skills. Regional managers supervised 25 salaried sales representatives and 16 commissioned agents. While regional managers were assessed on tonnage per product category, sales representatives had no specific targets for accounts or brands. Not surprisingly, Goudes worried that his sales representatives were not functioning up to capacity. With the arrival of larger retail chains, computer skills and greater professionalism was clearly needed. Yet according to Goudes, people with computer knowledge could be counted on one hand. Traffic jams in Athens and Salonica also meant that many sales representatives were spending two hours or more each day stuck in traffic. All sales representatives used their own cars. Many were very old, dirty and in disrepair. Goudes worried that this could portray the company in a bad light. In mid-1995, 34 people were interviewed for three marketing management positions; 30 ended up showing no interest in Minerva. Common responses were the company is too traditional, the company is not up to date, Minerva is not a school. Information Systems. During late 1995, timely and accurate information was in short supply throughout the company. Lack of computers and computer skills meant that orders were being processed by hand. Sales forecasts became best guesses with over-stocking a significant concern. Another major problem was how the company handled returns. According to Goudes,
No single department or individual is responsible for handling returns. . . Not surprisingly, mistakes often occur. Returned goods end up lost in the warehouse. The company pays sales commissions on unsold goods. Worse, retailers do not get the credit that they expect, and they become angry, which effectively undoes all our sales and marketing efforts. They . . . delay paying their bill, and often pay only what they think they owe after deducting the value of the returns. This throws Minervas accounts receivable department into turmoil. Eventually, we simply give up.

John Tountas, the 43-year-old Financial Manager who was charged with leading the companys computerization efforts commented on the challenges facing the company:
We are currently changing our computer systems and have just adopted the same UNIXbased system used by Cussons International. The software works fine for manufacturing, sales, and distribution. But it doesnt work well for accounting because of unique Greek accounting and tax laws. So we are in the process of adopting a new Greek program. Overall, accounting and sales have the best computer skills. Production is weakest. We will begin training in the factory in six months. Minerva is very supportive of the new equipment. But there is some resistance to change here.

Product Strategy. Minervas product strategy had evolved over time. Although in its early days Minerva had focused exclusively on olive oil, by 1995 olive oil represented only about 35% of the plants output and 51% of the companys revenues. An overview of Minervas product line revenues and volume is found in Exhibit 4.
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EXHIBIT 4 Minervas Manufactured Product Sales Revenues and Volumes, 1995 Value (billions Gr. Drs.) % 8.610 51 5.177 31 1.839 11 .677 4 423 3 16.726 100 Volume (000s tons) % 9.601 35 11.271 41 4.251 16 1.297 5 .888 3 27.308 100

Olive Oils Seed Oils Margarines Cooking Fats Other Total

Goudes summarized Minerva's product strategy:

No portfolio strategy for new products has ever been applied with the bright exception of packaging alterations. Usually Minerva follows Elais which is considered the safe way to develop. No proper R&D work is taking place. . . No one is in charge.

Exhibit 5 reviews Minervas cost structure for olive oil, seed oils and margarine.
EXHIBIT 5 Proportionate Costs for Minervas Key Manufactured Products, 1995 Raw Materials Packaging Material Production Costs Distribution Costs Marketing Costs Interest Trading Profit TOTAL OLIVE OIL 66% 5% 7% 7% 6% 5% 4% 100% SEED OIL 49% 19% 12% 7% 15% 5% 2% 100% MARGARINE 18% 27% 17% 5% 15% 5% 13% 100%

Future Directions
By the end of 1995 Minerva had grown to a 17.6 billion Gr. Drs. company. (The companys income statements are shown in Appendix A.) Despite what appeared to be steady sales growth, Minerva managers often had different opinions about the future of the company. John Tountas commented:
The big worry, in my opinion, is the decision to build the new factory. I dont know whether the Greek market is big enough for the new factory. This is a very big expense. If we dont have the sales to cover added costs we will have big problems.

Sales Director Lempesis believed that indeed the sales group was up to the task at hand.
We are hiring new people now. In the past we did not actively seek new sales. Many times we turned down orders because of capacity shortages. The new plant will allow us to seek out new markets. I think the best opportunity for us is in the BalkansCAlbania, Bulgaria, Romania, Macadonia. The area faced a lot of problems under Communism. Now they are open and they are close. It is up to them to find hard currency. If they pay up front, we have a sale.
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Manufacturing Director Tokousbalides was worried that the move to the new plant would not go as smoothly as anticipated.
The distance to the new plant is a major issue for our workers. They are worried about the longer hours on the road. For some it will mean two hours of additional travel time. Most dont have cars. Many of our older people would like an early retirement package. I think the majority of our workers will not be able to adapt and develop the new skills required for the new equipment planned. While they know they cant stop technology they feel the company should look after them with guaranteed jobs. Finding a new job is very hard these days in Athens.

In early December 1995, Grigoris and Goudes met to discuss the companys future direction. Although they shared a strong commitment to aggressively move the company forward, they differed in several key areas. Grigoris: The added plant capacity will put a lot of pressure on managers to increase sales. When you are at capacity, managers will always tell you they are selling all we can make. Right now people buy Minerva because they like our brand and are used to our bottles. My big worry is seed oils where we all know competition will increase. Greeks are now paying a premium for seed oils. Over time prices will almost certainly fall off. In margarines I am not that worried. Refrigerated ships add a lot to transportation costs. Goudes: Even though we face rising competition in seed oils, I think we all agree that we do not want to outsource production. Our experience is that we take too much of a quality risk. Also, what are our options? We can bring in seed oils in bulk and bottle them in our plant or we can bring them in already packed in their bottles, put our label on them and sell them in the same bottles as cheaper store brands. Bulk transportation is cheaper than bottle shipping to the point where it about offsets the production efficiencies of the big European plants. In margarine, the good news is that Elais is so big retailers want to support us so they can maintain some leverage over Elais. In olive oils, the good news is that store brands are not that big yet. In Greece the store brands have not had good suppliers. Retailers continue to come to us but I dont think we should ever be a private label supplier to the stores in our major products. Maybe we should look at it for start-up products where the stores could help pay for our learning.

Goudes:

Grigoris: My view is that growth will come as consumers buy more olive oil from supermarkets versus farmers. Also, growth will come from restaurant sales. Bulk sales to restaurants will help us fill our capacity. Elais is not very big in this sector. Goudes: I would agree but add a few things. We also have enormous potential for olive oils in Northern Greece. In Greece, Elais is almost twice as big as Minerva in olive oils. However, in Athens we are the same size. Where they really beat us is in Northern Greece, in the provinces. During the 1980s we didnt invest in Northern Greece and
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we didnt advertise. Elais did. Our future growth in olive oils has to be tied much more closely to Northern Greece. I also think there are big opportunities for us in light olive oils. If we went to light oils we could standardize the productsextra virgin looks and tastes different every year. I think we should also consider getting into bottled salad dressings. Kraft is there but it is not very strong. They have never advertised in Greece. In seed oils, our past emphasis on one Minerva brand will, I think, be proven wrong. Lets accept the Minerva brand for olive oil. Its very old and traditional. Elais brands its seed oils. At this point we are still a market leader in corn oil but with a very small difference over Elais. Unless we do something significant we are going to lose market share to Elais. With olive oil prices going up, Greek demand will almost certainly go down. A market shift to seed oils is going to happen. Here we are strong but Elais is stronger. And we have no competitive advantage in seed oils. As a result, the export of olive oil must now become a priority. Yet despite the opportunities, Minerva has no international connections. No ties. We have no people abroad to support the brand. But we have no choice other than to do it now. One approach I have in mind is to go after the tourist market. Greece has 10 million tourists every year. We should advertise in the airports and put Minerva bottles in duty free shops at the airport. We can position ourselves as a super-premium product for tourists. Grigoris: Probably our biggest decision will be setting priorities. International is an area that has got to play a bigger role in the future. For olive oil, I think we can grow through exportsmaybe private label. We can also use Cussons distribution. I think the more we sell their soap in Greece, the more they will be interested in selling our olive oil. Goudes: In many countries, like the U.K., there are no stocking fees at the supermarkets. Other [olive oil] companies from Italy and Spain have developed a position without advertising. Clearly we cant afford an expensive advertising program. But we could do things like sponsor Greek nights at major supermarkets. The only thing we will have to do is buy new bottles. In margarine, our best opportunities come from exports to the Balkans. You can drive to Albania in two hours. Although the duties are 30% they do have hard currency. The potential is huge, in part because the market has been so poorly served in the past and in part because there is essentially no competition.

Grigoris: The Commercial Department needs to be expanded. We should be a food marketing and development companynot just focused on edible oils and fats. Once we get beyond edible oils and think about international sales, we need to consider new plants. We recently learned of a great opportunity to form a joint venture in Romania with another Greek firm and a Romanian government-owned enterprise. The joint venture would make yogurt and margarine. We will have all this yogurt equipment left over when we move to the new plant. Although not the most sophisticated ma14 A07-98-0005

chinery, we could essentially trade it for equity in the JV. The deal would be cheap for usmaybe 2 millionand could provide us easy access to the Romanian market for margarine. Romania is a huge market that is being ignored. We have had other opportunities in Bulgaria to build seed oil plants that would be very good for us. These would be great opportunities for us. But Paterson Zochonis wont approve any of this until we prove ourselves. It is very frustrating. Goudes: I dont fully agree that we should build new factories outside Greece, whether through joint ventures or not. I strongly believe that we must focus on exports. Your views are biased by your background building manufacturing plants. Paterson Zochonis has always built locally.

Grigoris: And your views are biased by your background which is in building brands.

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APPENDIX A

Income Statements for Minerva. S.A 1978-1995 (million Greek Drachmas) 1978 1980 1985 1990 8,194 -6,650 1,544 -151 -707 -57 -335 46 330 -101 229 1995 17,643 -13,556 4,087 -773 -2,433 -5 -812 96 160 -40 120

Overall Sales Cost of Sales Gross Profit Fixed Overhead Selling Expense Depreciation Interest Other Income Profit Before Tax Taxes Profit after Tax

101 16 48 3 14 20 -9 11

131 -15 -70 -3 -40 2

512 -247 -228 -3 -142 (108) (108)

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