Handelskammer Hamburg 2008

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Market Leaders

Hidden Champions

"Hidden champions" make sales, not headlines. Many of Europe's small and medium-sized enterprises have been so successful at capturing niche markets that they are now European and even worldwide market leaders. Hamburg has the lion's share of these "quiet achievers".

Hamburg, Istanbul, Johannesburg. At all of these airports, Travel Value and Duty Free shops beckon to international travellers with offers of low-price perfumes, whisky and cigarettes. The operator, Gebr. Heinemann KG, Hamburg, is one of the world's leading duty-free wholesalers and retailers. Surprised to hear that? No wonder. Gebr. Heinemann KG is one of the "hidden champions". Largely unknown by the general public, Gunnar and Claus Heinemann are in fact the fourth generation of Heinemanns to successfully operate and grow this business. Their goal: to become the world leaders in a clearly defined market.

Hamburg has more than its share of "hidden" European and world market leaders. Statistically, the city has 29.4 hidden champions per million residents. That's according to a wide-ranging study of 1,300 businesses in German-speaking Europe conducted by Hermann Simon of management consulting firm Simon-Kucher & Partners. By comparison, Germany as a whole has 14.2 hidden champions per million residents, while in industrially weak Berlin the figure is as low as 9.4. "Obviously, there will be several other businesses that I've not yet come across", concedes Mr. Simon. Which is understandable, given that many of these businesses hardly ever make the headlines.

Gebr. Heinemann supplies 1,000 business customers in 70 countries and has 220 outlets of its own at 38 airports. Others, still, are in the pipeline. "To become a world market leader, you have to venture out into the world", explains Hermann Simon. "Even I was surprised to learn that Hamburg has the most hidden champions." The fact is, Hamburg has only very few truly large-scale companies like Otto and Beiersdorf. Instead, it has a broad-based SME segment that is active in an extremely wide range of markets.

Katharina von Ehren was recently promoted to the directorship of tree nursery and retailer Lorenz von Ehren GmbH & Co. KG. The firm's core business is the cultivation and sale of freestanding shrubs and large trees in Europe. Even the Silver Lindens that adorn Hamburg's prestigious Jungfernstieg shopping precinct come from Lorenz von Ehren. The family firm was founded by Johannes von Ehren in 1865 and was shortly thereafter supplying shrubs and trees to Potsdam, Copenhagen and even the Tsar's palace in St. Petersburg.

According to Hermann Simon, many hidden champions are long-established businesses that have been engaged in the pursuit of their strategies in niche markets for several decades. "These successful businesses are characterized by long-term objectives and perseverance," he explains. He also notes that many are characterised by strong continuity at management level. Katharina von Ehren notes that time is a central factor in her business, as the trees it cultivates can be as much as 60 years old before they are sold. As a rule, market leaders from the SME segment tend to earn market share through superior goods and services rather than aggressive pricing. "Whenever the construction sector in Northern Germany is having a lull we simply undertake more projects in other regions and countries", explains Katharina von Ehren. "We have greatly expanded our international business in Western Europe over the last 20 years and have been building up our sales team in Eastern Europe for several years," she said. The export segment is a key part of her business, accounting for 35 percent of sales.

Typically, many hidden champions are in the business of developing machines or specialized supplies, often working behind the scenes of the finished product. The core business of Körber AG, for example, is tobacco processing machinery and filter and cigarette manufacturing machinery, a segment in which it is a world market leader alongside Hauni Maschinenbau AG. But Körber AG is a holding company for an array of other top-performing companies. One, E.C.H. Will GmbH, makes cutting machines for the paper industry. The pages in about half of world's school exercise books are cut to size by the company's machines. Other Körber subsidiaries develop machine tools and packaging systems for the pharmaceuticals industry. "Körber never ceases to impress me," comments Hermann Simon. "It is a strongly diversified company that clearly has its sights set on the world market leadership in all of its segments."

Globetrotter Ausrüstung Denart und Lechhart GmbH is right at the top of the outdoor equipment game in Germany. In addition to its seven retail outlets, it sells via mail-order catalogue and has an extensive online business. Established in 1979, the company has a time-proven business concept that centres around people, a resource in which it invests heavily. Common to the company's employees and management alike is an enduring passion for travel and the outdoors. "You have to have the right attitude," explains director Andreas Bartmann. Being intrepid travellers themselves, many of the firm's employees have extensive travel industry experience. The equipment they recommend to customers is what they themselves would use on their own travels. Which is why Europe's leading outdoor equipment provider rings so true with its market. And why customers choose to shop there, rewarding the company with steady growth. The company fills its management positions internally wherever possible and provides targeted training for its workforce. "We give our employees responsibility at a very early stage in their careers," says Mr. Bartmann. "The result is a very loyal and stable workforce." According to Hermann Simon, this approach is typical for hidden champions. Globetrotter uses group outings to promote cohesion and communication. It has generously dimensioned staff rooms - "our oases of relaxation", as Bartmann calls them - at its branches and head office. He says staff turnover is extremely low and he is confident that "our company is built on personal responsibility and passion for the job."

Not that all hidden champions are long-established players of many years' standing. SkySails GmbH & Co. KG, for instance, was founded only in 2001, but is just as much a star as the rest of the hidden champions. Director Stephan Wrage and his innovative R&D team have developed a towing-kite auxiliary propulsion system for cargo ships. Mr. Wrage explains that under optimal wind and sea conditions, the system can reduce ship fuel consumption by up to half. The idea first came to Wrage, a passionate sailor and sport kite enthusiast, at the age of 15 "after I was lifted off my feet and pulled along the beach at high speed by a kite". A lot has happened since then. In 2003, SkySails found a financing partner. The first tests with the kite system went well and the pioneers at SkySails gradually gained in credibility and reputation. SkySails now faces its biggest challenge ever: the first heavy freighter to be fitted with the bow-mounted SkySails system is due to set sail this January.

Hamburg's wealth of behind-the-scenes world market leaders puts it in a very strong position. However, the city could be doing more to extend its overall lead in the hidden champions league. It could be promoting a more effective technology transfer between research and business, a course of action of which the Hamburg Chamber of Commerce has long been a strong advocate. Hamburg's business, scientific and government sectors need to jointly develop policies that create cooperation infrastructure for small and medium-sized enterprises. Such an approach will ensure that science has early knowledge of the needs of business.

Katrin Meyer
Telefon 36 13 8 329

Further information

The term "hidden champion" was coined by Hermann Simon of management consulting firm Simon-Kucher & Partners. Over the last 20 years, Professor Simon has undertaken a wealth of research into the hidden champions of business who generally go about their business quietly and unfêted by big headlines. They have steadily built up their market share in the respective niches to become European and even worldwide market leaders. To fit Professor Simon's definition, a "hidden champion" must, in addition, not have sales of more than three billion euros annually. The businesses tracked down and analysed by Professor Simon for his 1996 bestseller "Hidden Winners" numbered just on 500. For his latest book ("Hidden Champions of the 21st Century", 2007, Campus Verlag), this number has grown to over 1,300.

hamburger wirtschaft, Ausgabe Januar 2008