Mittelstand

Succession trouble brewing in coffee empire

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Albert Darboven has been left with a bitter aftertaste about his son, Arthur. Source: Lukas Schulze, DPA

The management meeting each Tuesday at 8:30 A.M. is a ritual at the Hamburg-based coffee company J.J. Darboven. Some department heads are already seated at 8:10, according to an insider, because CEO Albert Darboven always arrives early as well. The meeting is usually over after a few minutes; there isn’t much to discuss.

The appointment is utterly superfluous but takes place anyway, because that’s the way things have always been done. The Tuesday meeting started in the 1970s when coffee beans were scarce and the stocks of raw material had to be monitored each week. Now there’s always enough coffee, but the meeting remains on the calendar.

That’s how things are at Darboven. Everything stays as it is, even the elderly boss. A few days after his 81st birthday in April, the head of the company announced that he plans to continue working for a few more years, maybe even a little longer. It seems that Albert Darboven wants to do everything possible to prevent his 53-year-old son, Arthur Ernesto Darboven, from taking over his position. The word on the street is that he is considering a non-dynastic successor for the company with sales of some €330 million ($370 million) per year, but the candidate still has to prove his worth.

Such family feuds are a frequent bane of Germany’s vaunted Mittelstand, the family-owned midsize firms that power the country’s economy. Family ownership gives the Mittelstand the long-term view that is often necessary to become, and remain, the world champion in some specific product, whether ventilators or coffee. But it also exposes the Mittelstand to the the risk of intergenerational conflict. The decline of a family fortune as it passes to heirs, most famously described in Thomas Mann’s novel “Buddenbrooks,” is just as much a staple of German lore about family business as the rise.

In the case of Darboven, the trouble started with a fallout between father and sone nine years ago. Arthur, the son, wanted to appear at an erotic trade fair with a new brand called Coffee-Erotic. Albert, the father, vetoed the project. A little later, the two of them announced they could no longer work together. Albert forced his son to give him back the majority of shares in the company, and he later threatened to seek an adoptive son as a successor.

All was quiet on the family front until March 2016, when the feud erupted once again. Hamburg Mayor Olaf Scholz invited Albert Darboven to city hall to commemorate the 150th anniversary of the family firm. Albert’s son and his two nephews were supposed to participate but backed out at the last moment, much to the patriarch’s chagrin.

Yet he himself had provoked them by announcing shortly before the ceremony that he had no intention of relinquishing control of the company and planned to transfer his shares in the company into a foundation. Albert Darboven holds 57.5 percent of the coffee company, which includes beverage brands such as Idee, Mövenpick, Eilles Tee and Alfredo Espresso. Arthur holds 17.5 percent and would need his father’s shares to assume control. Arndt and Behrendt, the sons of Albert’s brother Herbert Darboven, who died 15 years ago, together hold 25.1 percent.

Deeply disappointed, Arthur sent an email to several employees asking for their understanding for his absence at the celebration. Many of them know him personally – he worked at the firm for almost 14 years before departing in 2008.

Since then little has changed. Albert is picked up every morning from his noble residence on the banks of the Elbe River by his chauffeur of many years in a black S-Class Mercedes and is driven through Hamburg to company headquarters in the industrial district of Billbrook.

After checking the day’s rates for the dollar and commodities on a computer that is carefully hidden in his antique writing desk, he sets off on his rounds, often wearing a white work coat over his pinstripe suit, with a hair net and plastic booties. Sometimes his secretary will hand him a note with the names of employees celebrating a birthday; he congratulates them on his rounds.

“If father and son don’t work things out, there could be an ugly fight over the inheritance.”

a Darboven employee

The senior Darboven’s clinging to power doesn’t signify that the company is stuck in a standstill. Business is good, and the executive and supervisory boards work well together. There are investments in new buildings and more efficient roasting facilities; new employees are being hired.

Few complaints arise about the elderly boss. “Sure, at conferences things sometimes have to be repeated, and he has limited affinity with modern means of communications,” according to someone who has been with the firm for many years. But aside from those quirks, Albert Darboven is held in high esteem by the workforce. Only the dispute between father and son causes them worry. “If father and son don’t work things out, there could be an ugly fight over the inheritance,” one employee said.

People familiar with the firm all agree that Arthur would be the perfect boss. “He has coffee in his blood,” a former colleague said. His mother comes from a large coffee-growing family in El Salvador. The 53-year-old got his start at the coffee retailer Volcafe in Switzerland and starting in 2001 led Burkhof, a subsidiary of J.J. Darboven. But ever since the anniversary disappointment, there seems to be little chance of a transfer of power from father to son.

At least a few insiders think Christian Sayn-Wittgenstein, 38, is likely to take over the company. Mr. Sayn-Wittgenstein is one of five members of J.J. Darboven’s board; previously he was head of marketing at hedge fund RAB Capital.

The senior Mr. Darboven is impressed by the diligence and loyalty of this career changer. Blue blood seems to be an attraction as well: Arthur’s second wife, Edda, was born a princess of Anhalt; Mr. Sayn-Wittgenstein is a prince himself. But the word from company circles is that Mr. Sayn-Wittgenstein must prove himself for a few more years before the patriarch entrusts him with his empire.

Until then, everything will remain as is. That even applies to seating arrangements. When the company moved into a new building, Albert had the managers’ conference room replicated. One of the eight upholstered chairs in the room bears an inconspicuous plaque with the letters A.D. in script. If a visitor inadvertently sits down in it, Mr. Darboven shoos them away with the charming remark: “I can’t expect you to take on that burden.”

It may not be as easy to transfer his company shares into a foundation as the senior Mr. Darboven imagines. There are said to be passages in the shareholders’ agreement permitting a transfer only if the co-shareholders Arthur Darboven and his cousins agree; Albert Darboven is unwilling to say whether that is the case. But they make no secret of their opinion regarding his plans: They said publicly last year that they reject the foundation plan.

 

This article first appeared in business weekly WirtschaftsWoche, a sister publication of Handelsblatt. To contact the authors: mario.brueck@wiwo.de and claudia.toedtmann@wiwo.de

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