INTEGRATIVE CASE 1

AGRANA: From a Local Supplier to a Global Player1

Erin Pleggenkuhle-Miles
University of Texas at Dallas

How does the Vienna-based AGRANA grow from having five factories in Austria in 1988 to operating
55 factories around the world in 2007?

Although most readers of this book probably have

never heard of AGRANA, virtually everyone has
heard of Nestlé, Coca-Cola, Danone, PepsiCo, Archer
Daniels Midland (ADM), Tyson Foods, and Hershey
Foods. Headquartered and listed in Vienna, Austria,
AGRANA is one of the leading suppliers to these
multinational brands around the world. With revenues
of US$2.6 billion and capitalization of $1.4 billion,
AGRANA is the world’s leader in fruit preparations
and one of Central Europe’s leading sugar and starch
companies.
AGRANA was formed in 1988 as a holding com-

pany for three sugar factories and two starch factories in
Austria. In the last two decades, it has become a global
player with 55 production plants in 26 countries with
three strategic pillars: sugar, starch, and fruit. AGRANA
supplies most of its fruit preparations and fruit juice
concentrates to the dairy, baked products, ice cream,
and soft drink industries. In other words, you may
not know AGRANA, but you have probably enjoyed
many AGRANA products. How did AGRANA
grow from a local supplier serving primarily the small
Austrian market to a global player?
From Central and Eastern Europe
to the World
In many ways, the growth of AGRANA mirrors
the challenges associated with regional integra-
tion in Europe and then with global integration of
© Map Resources
multinational production in the last two decades.
European integration has two components. First, EU
integration accelerated throughout Western Europe in
the 1990s. This means that firms such as AGRANA,
based in a relatively smaller country, Austria (with a
population of 8.2 million), needed to grow its econo-
mies of scale to fend off the larger rivals from other
European countries blessed with larger home country
markets and hence larger economies of scale. Second,
since 1989, Central and Eastern European (CEE)2
countries, formerly off limits to Western European
firms, have opened their markets. For Austrian firms
such as AGRANA, the timing of the CEE countries’

1
This case was written by Erin Pleggenkuhle-Miles (University of Texas at Dallas) under the supervision of Professor Mike Peng. © Erin
Pleggenkuhle-Miles. Reprinted with permission.
2
Central and Eastern Europe (CEE) typically refers to (1) Central Europe (former Soviet bloc countries such as the Czech Republic,
Hungary, Poland, and Romania and three Baltic states of the former Soviet Union) and (2) Eastern Europe (the European portion of the
12 post-Soviet republics such as Belarus, Russia, and Ukraine).
381
 382 integrative case 1 AGRANA: From a Local Supplier to a Global Player

arrival as potential investment sites was fortunate.
Facing powerful rivals from larger Western European
countries but being constrained by its smaller home
market, AGRANA has aggressively expanded its for-
eign direct investment (FDI) throughout CEE. Most
CEE countries have since become EU members. As
a result, CEE provides a much larger playground for
AGRANA, allowing it to enhance its scale, scope, and
thus its competitiveness.
At the same time, multinational production by
global giants such as Nestlé, ConAgra, Coca-Cola,
PepsiCo, and Danone has been growing by leaps and
bounds, reaching more parts of the world. Emerging
as a strong player not only in Austria and CEE but
also in the EU, AGRANA has further “chased” its
corporate buyers by investing in and locating supplier
operations around the world. This strategy has allowed
AGRANA to better cater to the expanding needs of
its corporate buyers.
Until 1918, Vienna had been the capital of the
Austro-Hungarian Empire, whose territory not only
included today’s Austria and Hungary but also numer-
ous CEE regions. Although formal ties were lost (and
in fact cut during the Cold War), informal ties through
cultural, linguistic, and historical links never disap-
peared. These ties have been reactivated since the end
of the Cold War, thus fueling a rising interest among
Austrian firms to enter CEE.
Overall, from an institution-based view, it seems
natural that Austrian firms would be pushed by pres-
sures arising from the EU integration and pulled by
the attractiveness of CEE. However, among hundreds
of Austrian firms that have invested in CEE, not all
are successful and some have failed miserably. So, how
can AGRANA emerge as a winner from its forays
into CEE? The answer boils down to AGRANA’s
firm-specific resources and capabilities, a topic that we
turn to next.
EXHIBIT 1 AGRANA Plants in Different
Divisions
S EGMENT 1988–1989 2002–2003 2006–2007
Sugar 4 15 13
Starch 2 5 5
Fruit 0 0 37
Total 6 20 55
Source: AGRANA company presentation, June 2007, http://www.
agrana.com.
Product-Related Diversification
AGRANA has long been associated with sugar and
starch production in CEE. Until 2003, AGRANA’s
focus on the sugar and starch industries worked well.
However, the reorganization of the European sugar
market by the European Union (EU) Commission
in recent years motivated AGRANA to look in new
directions for future growth opportunities.3 This new
direction—fruit—has since become the third and larg-
est division at AGRANA (see Exhibit 1).
How to diversify? As a well-known processor in
the sugar and starch industries, AGRANA wanted to
capitalize on its core competence—the refining and
processing of agricultural raw materials (sugar beets,
cereals, and potatoes). To capitalize on its accumulated
knowledge of the refinement process, AGRANA
decided to diversify into the fruit-processing sector
(Exhibit 2 gives a brief description of each of the
three current divisions). First, entry into the fruit
sector ensured additional growth and complemented
AGRANA’s position in the starch sector. Since the
Starch Division was already a supplier to the food and
beverage industry, this allowed AGRANA to benefit
from those relationships previously developed when

3
One component of the Common Agricultural Policy (CAP) of the EU is the common organization of the markets in the sugar sector
(CMO Sugar). CMO Sugar regulates both the total EU quantity of sugar production and the quantity of sugar production in each sugar-
producing country. It also controls the range of sugar prices, essentially limiting competition by assigning quotas to incumbent firms, such as
AGRANA. In 2006, the EU passed sugar reforms reducing subsidies and price regulation, influencing the competition in the marketplace.
These reforms included a reduction of sugar production by six million tons over a four-year transition period. Sugar reforms such as these
have forced some of AGRANA’s competitors to close a number of sugar facilities. However, AGRANA’s executives are optimistic about
AGRANA’s future due to its investments in the fruit and starch markets.

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integrative case 1 AGRANA: From a Local Supplier to a Global Player 383

EXHIBIT 2 AGRANA Divisions

Sugar: AGRANA Sugar maintains nine sugar factories in five EU countries (Austria, Czech Republic, Slovakia, Hungary,
and Romania) and is one of the leading sugar companies in Central Europe. The sugar AGRANA processes is
sold to both consumers (via the food trade) and manufacturers in the food and beverage industries. Within this
sector, AGRANA maintains customer loyalty by playing off its competitive strengths, which include high product
quality, matching product to customer needs, customer service, and just-in-time logistics.

Starch: AGRANA operates four starch factories in three countries (Austria, Hungary, and Romania). The products are
sold to the food and beverage, paper, textile, construction chemicals, pharmaceutical, and cosmetic indus-
tries. To maintain long-term client relationships, AGRANA works in close collaboration with its customers
and develops “made-to-measure solutions” for its products. As a certified manufacturer of organic products,
AGRANA is Europe’s leading supplier of organic starch.

Fruit: This third segment was added to the core sugar and starch segments to ensure continued growth during a time
when AGRANA reached the limits allowed by competition law in the sugar segment. The Fruit Division oper-
ates 39 production plants across every continent. Like the Starch Division, the Fruit Division does not make any
consumer products, limiting itself to supplying manufacturers of brand-name food products. Its principal focus
is on fruit preparations and the manufacturing of fruit juice concentrates. Fruit preparations are special custom-
ized products made from a combination of high-grade fruits and sold in liquid or lump form. Manufacturing
is done in the immediate vicinity of AGRANA customers to ensure a fresh product. Fruit juice concentrates are
used as the basis for fruit juice drinks and are supplied globally to fruit juice and beverage bottlers and fillers.

Source: AGRANA International website, http://www.agrana.com.

it entered the fruit sector. Second, because the fruit Acquisitions

sector is closely related to AGRANA’s existing core
sugar and starch businesses, AGRANA could employ
the expertise and market knowledge it has accumu-
lated over time, thus benefiting its new Fruit Division.
AGRANA’s core competence of the refinement
process allowed it to diversify into this new segment
smoothly.
AGRANA’s CEO, Johann Marihart, believes that
growth is an essential requirement for the manufac-
turing of high-grade products at competitive prices.
Economies of scale have become a decisive factor for
manufacturers in an increasingly competitive envi-
ronment. In both the sugar and starch segments,
AGRANA grew from a locally active company to one
of Central Europe’s major manufacturers in a very short
span of time. Extensive restructuring in the Sugar and
Starch divisions has allowed AGRANA to continue to
operate efficiently and competitively in the European
marketplace. Since its decision to diversify into the
fruit-processing industry in 2003, Marihart has pur-
sued a consistent acquisitions policy to exploit strategic
opportunities in the fruit preparations and fruit juice
concentrates sectors.
How does AGRANA implement its expansion strat-
egy? In a word: acquisitions. Between 1990 and 2001,
AGRANA focused on dynamic expansion into CEE
sugar and starch markets by expanding from five plants
to 13 and almost tripling its capacity. As the Sugar
Division reached a ceiling to its growth potential due
to EU sugar reforms, AGRANA began searching for a
new opportunity for growth. Diversifying into the fruit
industry aligned with AGRANA’s goal to be a leader
in the industrial refinement of agricultural raw materi-
als. AGRANA began its diversification into the fruit
segment in 2003 with the acquisitions of Denmark’s
Vallø Saft and Austria’s Steirerobst. By July 2006,
AGRANA’s Fruit Division had acquired three addi-
tional holding firms and was reorganized so all subsid-
iaries were operating under the AGRANA brand.
AGRANA diversified into the fruit segment in
2003 through the acquisition of five firms. With
the acquisition of Denmark’s Vallø Saft Group (fruit
juice concentrates) in April 2003, AGRANA gained
a presence in Denmark and Poland. The acquisition
of an interest (33%) in Austria’s Steirerobst (fruit
 384 integrative case 1
preparations and fruit juice concentrates) in June 2003
gave AGRANA an increased presence in Austria,
Hungary, and Poland, while also establishing a pres-
ence in Romania, Ukraine, and Russia. AGRANA
fully acquired Steirerobst in February 2006, and it first
began acquiring France’s Atys Group (fruit prepara-
tions) in July 2004 (25%). The acquisition of Atys
Group was complete in December 2005 (100%) and
was AGRANA’s largest acquisition, since Atys had
20 plants spread across every continent. In November
2004, AGRANA acquired Belgium’s Dirafrost (fruit
preparations) under the Atys Group, and two months
later (January 2005) acquired Germany’s Wink Group
(fruit juice concentrates) under the Vallø Saft Group.
AGRANA’s most recent expansion was a 50-50 joint
venture under the Vallø Saft Group with Xianyang
Andre Juice Co. Ltd. (fruit juice concentrates) in China.
These acquisitions allowed AGRANA to quickly (within
two years!) become a global player in the fruit segment.
Exhibit 3 provides an overview of AGRANA’s present
locations around the globe.
The strategy of AGRANA is clearly laid out in its
2006–2007 annual report: “AGRANA intends to con-
tinue to strengthen its market position and profitability
in its core business segments . . . and to achieve a sus-
tainable increase in enterprise value. This will be done
by concentrating on growth and efficiency, by means
of investments and acquisitions that add value, with the
help of systematic cost control and through sustainable
enterprise management.” AGRANA’s growth strategy,
consistent improvement in productivity, and value-
added approach have enabled it to provide continual
increases in its enterprise value and dividend distribu-
tions to shareholders. The key to AGRANA’s global
presence in the fruit segment is not only its many
acquisitions but its ability to quickly integrate those
acquired into the group to realize synergistic effects.
In Exhibit 4, the annual revenue is given for each
sector. Although the Sugar Division was the leader
in 2005–2006, contributing 50% of the revenue,
AGRANA’s 2006–2007 annual report announced the
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AGRANA: From a Local Supplier to a Global Player
Fruit Division as the new revenue leader (48%), sur-
passing projected expectations. AGRANA attributes
its growth in the fruit sector to increases in dietary
awareness and per capita income, two trends that are
forecasted to continue to rise in the future.
Diversifying Into Biofuel
In light of further EU sugar reforms, AGRANA has
continually looked for new growth opportunities. On
May 12, 2005, the supervisory board of AGRANA
gave the go-ahead for the construction of an ethanol
facility in Pichelsdorf, Austria. Construction was com-
plete in October 2007. However, due to the surge in
prices for wheat and corn international commodity
markets, it was shut down and is scheduled to com-
mence operation in the spring of 2008. AGRANA first
began making alcohol in 2005, in addition to starch
and isoglucose, at its Hungrana, Hungary, plant in a
preemptive move to accommodate forthcoming EU
biofuel guidelines. This move into ethanol was seen
as a logical step by CEO Marihart. Similar to its move
into the fruit sector, the production of ethanol allows
AGRANA to combine its extensive know-how of pro-
cessing agricultural raw materials with its technological
expertise and opens the door for further growth.
Sources: Based on media publications and company documents. The
following sources were particularly helpful: (1) AGRANA investor
information provided by managing director, Christian Medved, to
Professor Mike Peng at the Strategic Management Society Conference,
Vienna, October 2006; (2) AGRANA Company Profile 2007;
(3) AGRANA Annual Report 2005–2006 and 2006–2007, http://www.
agrana.com (accessed August 1, 2007); (4) Sugar Traders Association,
http://www.sugartraders.co.uk/ (accessed May 4, 2007); (5) N. Merret,
2007, Fruit segment drives Agrana growth, Food Navigator.com
Europe, January 12; (6) N. Merret, 2006, Agrana looks east for com-
petitive EU sugar markets, Confectionery News.com, November 29;
(7) AGRANA Preliminary Results for Financial Year 2006–2007,
press release, May 7, 2007; (8) AGRANA Semi-Annual Report
2007–2008 (accessed February 14, 2008); (9) C. Blume, N. Strang, &
E. Farnstrand, Sweet Fifteen: The Competition on the EU Sugar Markets,
Swedish Competition Authority Report, December 2002.
integrative case 1 AGRANA: From a Local Supplier to a Global Player 385

EXHIBIT 3 AGRANA Plant Locations as of 2007

S UGAR S TARCH F RUIT E THANOL

Argentina 1

Australia 1

Austria 4 3 2 1

Belgium 1

Bosnia Herzegovina 1 (50%)*

Brazil 1

Bulgaria 1 (50%)

China 2

Czech Republic 2 1

Denmark 1

Fiji 1

France 2

Germany 1

Hungary 3 1 (50%) 3 X**

Mexico 1

Morocco 2

Poland 4

Romania 2 1 1

Russia 1

Serbia 1

Slovakia 1

South Africa 1

South Korea 1

Turkey 1

Ukraine 2

USA 4

Total Plants 13 5 37 1

* AGRANA’s holding is given in parentheses when not 100%.

** The Hungrana, Hungary, plant also produces some ethanol.
Source: AGRANA 2006–2007 Annual Report.
 386 integrative case 1 AGRANA: From a Local Supplier to a Global Player

EXHIBIT 4 AGRANA by Division

S UGAR S TARCH F RUIT T OTAL

Staff 2723 776 4724 8223

2005–2006 Revenue* 1040.04** (50%) 314.01 (15%) 730.62 (35%) 2084.67

2006–2007 Revenue 1059.34 (41%) 292.27 (11%) 1234.71 (48%) 2586.33

* Reported in USD, May 17, 2007, exchange rate used in calculation (US $1 = €0.74).
** Figures are reported in millions.
Source AGRANA 2006–2007 Annual Report.

Case Discussion Questions 3. From an institution-based view, what opportunities

and challenges have been brought by the integration
1. From an industry-based view, how would you of EU markets in both Western Europe and CEE?
characterize competition in this industry?
4. From an international perspective, what challenges
2. From an resource-based view, what is behind do you foresee AGRANA facing as it continues its
AGRANA’s impressive growth? expansion into other regions, such as East Asia?

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