OPI April 2015 Issue 248 EU

Office Products International ISSUE NO.2 4 8

The word in office.

magazine

Big Interview Simon Drakeford, CEO, Euroffice p16 April 2015

APRIL 2015

A hive of activity

As consolidation hots up, who are the winners and losers? p20

WWW.OPI.NET

p36 EOPA winners revealed p26 p42 Paper: bull or bear market? p12 3M revises paper policy United Stationers rebrands

Contents April 2015

News

www.opi.net

16

6 Round-up

5 Star price rise at Spicers; ADVEO manages bottom line; leadership change at AOPD

12 News Analysis

All the EOPA winners revealed in Amsterdam – and why they won

The second OPI Partnership event was considered another resounding success

Features

34 OPI Global Forum

A look at what’s coming up at the fifth OPI Global Forum in Chicago

16 Power player

Euroffice CEO Simon Drakeford explains why he can make small dealers more prosperous

36 CORE Live

United Stationers reveals new corporate brand and key operational changes

20 Hive of activity

Category Analysis

Consolidation in the reseller community is hotting up. Will OP vendors have to follow suit?

40 MRO

24 Storming ahead

RTC Proffice reveals the reasons for its double-digit growth

42

Regulars 5 Editor’s comment

MRO is becoming another opportunity for OP resellers wanting to branch out, but it’s still early days for most. Security and safety within MRO are the go-to categories

42 Paper

49 5 minutes with...

Gauging an accurate picture of the paper market is not always straightforward, particularly when looking at it from a global – as opposed to merely from a developed market – perspective

Michael Alfinson

Ricardo Ferreira

26 EOPA

33 OPI Partnership

3M drops SFI label and revises paper policy; Staples’ turnaround gathers momentum

50 Final word

Events

33

“Companies like Smead and ACCO are facing a double whammy. They’re being hit by the serious secular decline in our industry, and then on top of that have to deal with the consolidation that has occurred already and the potential of what might happen between Staples and Depot. These vendors are really feeling the impact of these two things happening simultaneously.”... simultaneously. For the full story, turn to page 20

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w w w.opi.net | OPI Magazine

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Editorial Editor Andy Braithwaite +33 4 32 62 71 07 andy.braithwaite@opi.net

Features & Production Editor Heike Dieckmann

Editor’s comment

+44 (0)20 7841 2950 heike.dieckmann@opi.net

News Editor Michelle Sturman +44 (0)20 7841 2942 michelle.sturman@opi.net

Sales and Marketing VP – Continental Europe, Middle East and Africa Ewan Dickson +44 (0)20 7841 2954 ewan.dickson@opi.net

VP – North America and UK Chris Turness +44 (0)20 7841 2953 chris.turness@opi.net

Director of Growth Services Jeremy Hughes +44 (0)7807 810617 jeremy.hughes@opi.net

Digital Manager India Pride +44 (0)20 7841 2959 india.pride@opi.net

Events Events Manager Lisa Haywood +44 (0)20 7841 2941 events@opi.net

Production and Finance Designer Charlotte Gerhardt +44 (0)20 7841 2943 charlotte.gerhardt@opi.net

Production Assistant Jack Francis +44 (0)20 7841 2950 jack.francis@opi.net

Accountant Dotun Olaniyan +44 (0)20 7841 2956 dotun.olaniyan@opi.net

Publishers CEO Steve Hilleard +44 (0)20 7841 2940 steve.hilleard@opi.net

Director Janet Bell +44 (0)20 7841 2941 janet.bell@opi.net

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No part of this magazine may be reproduced, copied, stored in an electronic retrieval system or transmitted save with written permission or in accordance with provision of the copyright designs and patents act of 1988. Stringent efforts have been made by Office Products International to ensure accuracy.

However, due principally to the fact that data cannot always be verified, it is possible that some errors or omissions may occur.

Office Products International cannot accept responsibility for such errors or omissions. Office Products International accepts no responsibility for comments made by contributing authors or interviewees that may offend.

Adding value in an evolving market I must admit that I have been getting quite a bit of stick from my OPI colleagues in the past month about supposed similarities between my photo below and the one of Independent Stationers’ Tom Ashburn who was featured in our 5 Minutes With… in the March issue. I can’t see it myself and also have absolutely no idea why someone at a US trade show last year who I’d never met would come up to me and give me a massive hug before she realised I was not who she thought I was (sorry, Tom!). Still, it makes a change from the Bill Murray lookalike comments I invariably get when I cross the Atlantic!

Turning to more serious matters, I said in last month’s Editor’s Comment that we could well see accelerated consolidation in the vendor channel following All these changes make the mega consolidation creating and developing taking place on the reseller personal relationships more side. While that hasn’t crucial than ever happened just yet, we have seen two major vendors in the US taking steps to ‘right size’ their operations due to market changes – see News Round-up (page 6) and this month’s Hot Topic (page 20) for more on these developments and on industry consolidation in general.

All these changes make creating and developing personal relationships more crucial than ever, and I’m pleased to report another successful OPI Partnership event and European Office Products Awards evening (see pages 26 & 32), both of which took place in Amsterdam last month. We’re also building on these value-added services by launching a new VIP membership programme for senior level executives.

For more details about this, please scan this QR code.

Andy Braithwaite Editor

Office Products International Ltd (OPI), 2nd Floor, 112 Clerkenwell Road, London, EC1M 5SA, UK Tel: +44 (0)20 7841 2950

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opi.net/ app w w w.opi.net | OPI Magazine

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ADVEO manages News from opi.net the bottom line Wholesalers

Spicers supply woes force price rise UK wholesaler Spicers has once again come under fire, this time for bumping up prices on its 5 Star products due to historical supply chain ‘errors’.

Speaking to OPI, Spicers/OfficeTeam (SPOT) Group CEO Jeff Whiteway confirmed the wholesaler had recently informed its dealers of a retail and trade price increase of 7% for its Asia-sourced 5 Star products.

Around 500 SKUs are affected by the price increase, which was brought about as a result of reviewing and comparing purchasing arrangements between Spicers and OfficeTeam.

OPI was told that the issue was a “complete mishmash” of certain parts of the supply costs being missed – from shipping and port charges to currency exchange rate calculation errors. As a result of these mistakes and other issues, Spicers recorded “unsustainable losses” during 2014.

Whiteway said the problems have now been “completely addressed” and a “very efficient and cost-effective” supply chain is now in place. This in turn, he added, has led to a dramatic improvement in the availability of 5 Star products. Overall availability levels are now at a four-year high, “quite a turnaround from the sub-80% levels last summer”.

While the discovery of these supply chain issues has led to the 7% price rise, Spicers said the actual amount was nearer 12%, but that it did not pass on the full increase to dealers as the wholesaler expects to improve buying and thus restricted the rise.

Whiteway admitted that while he suspected the error had been “going on for some time” and that it was “clear evidence of how poor Spicers’ internal controls were”, he expects that as issues such as this are identified and resolved, it will allow for a sustainable profit performance going forward.

Wholesalers 6

OPI Magazine | April 2015

European distributor ADVEO has reported strong growth for 2014 despite an 11% drop in sales.

Full-year EBITDA of H42 million was a 29% jump on the previous year as ADVEO improved gross profit and slashed operating expenses in a year when sales fell 11.4% to H947.7 million ($1.08 billion).

The sales drop was blamed on the weak EOS market (mainly in Spain) and the SAP implementation and restructuring that took place in Spain in 2014.

Traditional office supplies, on the other hand, grew “across the board”, partially offsetting the EOS declines. Sales of higher margin added-value services also grew, up by almost 28% year on year to H46.7 million.

France is now by some margin ADVEO’s largest market – accounting for 41% of sales in 2014 – followed by Iberia (23%) and Germany (21%).

ADVEO’s largest customer segment remains its independent dealer network, which made up 38% of sales in 2014. This was followed by the retail segment (25%) and ‘scale-driven’ large OP resellers (18%).

Personnel costs were cut 16.5% during the year as ADVEO undertook a major restructuring process, with the bulk of it taking place in the second half of 2014.

Restructuring costs were one of the one-off factors that contributed to negative free cash flow for the year of -H17 million, while ADVEO’s net debt at year end was H108.9 million, up from H91.9 million at the end of 2013. However, a new H115 million syndicated long-term lending facility was agreed in January this year, and this will give the group greater flexibility and operational capacity.

Vendors

Smead reduces production capacity US manufacturer Smead is downsizing production in order to cope with the changing marketplace.

The vendor’s production and distribution facility in Locust Grove, Georgia, will close while the majority of production and distribution activities in Hastings, Minnesota, will be relocated. These actions will lead to the loss of 150 and 100 jobs at each location respectively.

Smead will maintain its current production and distribution operations in Utah, Ohio, South Carolina and Texas.

Smead CEO Sharon Avent said: “We have more capacity than is needed to service today’s marketplace. As a result, we must better align our production footprint with the market. Our new manufacturing and distribution structure will ensure sufficient capacity to meet current and future needs, while maintaining our historically strong levels of customer service.”

The company added that it would work with communities affected by the restructuring to help them Sharon Avent secure new employment.

CCL Industries, parent company of Avery, has announced its first bolt-on acquisition for the label manufacturer’s North American operations with the purchase of pc/ nametag and Meetings Direct.

The deal, worth around $37 million, includes the acquisition of an associated office, light manufacturing and distribution facility.

The privately-owned companies with common shareholders specialise in supplying name badges and meeting registration supplies to professional meeting planners and distributors of promotional material.

The new business will report within CCL’s Avery segment and continue to trade as pc/nametag and Meetings Direct. 2014 sales for the companies were $36 million and they posted adjusted EBITDA of around $6.3 million.

Mergers & Aquisitions

Sustainability/Green

Environmental pressure for Keurig Coffee maker Keurig is likely to face a backlash against its unrecyclable K-Cup pods thanks to widespread mainstream reporting on comments made by pod inventor and Keurig founder John Sylvan.

In a recent interview with The Atlantic, Sylvan said: “I feel bad sometimes that I ever did it,” referring to his creation of the more-or-less completely unrecyclable coffee pod.

In an official response to Sylvan’s interview, Keurig said: “John’s contributions to the company were made in its infancy 18 years ago and Keurig is a fundamentally different company today, in which we partner with the world’s leading brands and are committed to sustainability.”

Keurig clearly knows it has to do something and stated in its recently released 2014 annual report that K-Cups would be 100% recyclable by 2020.

Speaking to OPI, Keurig Green Mountain Director of Community Relations/Corporate Communications Sandy Yusen said: “While Keurig would love to have a solution right now, the company is committed to making headway in the recyclability of its K-Cups

and is doing so through changing incremental portions of the K-Cup packs to a recyclable format between now and 2020.”

Yusen said the company is pursuing multiple avenues to achieve its 2020 goal, with a focus on pack design, materials and the recycling infrastructure. As of mid-March, three out of four K-Cup packs for the Keurig 2.0 system were recyclable, including its Bolt office pack.

For US offices where there is no municipal recycling, Keurig is expanding its take-back programme for brewed K-Cups and grounds which are collected and turned into alternative fuel through a disposal partner. “It’s a tough challenge, but we’re dedicated to solving it,” Yusen added.

News n Round-up

North American acquisition for Avery

News n Round-up

People

Leadership change at AOPD AOPD’s highly respected Executive Director Bud Mundt has announced his retirement, officially stepping down from his role at AOPD at the end of the year.

Mundt has been in the office products industry for more than 45 years, starting out as a sales rep at 3M in 1969, and rising to the role of VP of Sales and Marketing at the vendor before a spell on the reseller side of the industry in the 1990s at Miller Business Systems/BT Office Products.

He joined AOPD in 2004, becoming Executive Director in early 2005, and for the past ten years has led an impressive expansion of the dealer network in terms of members, vendor partners and the number of contracts held.

Succeeding Mundt will be Mark Leazer, a familiar face in the US office products world from his 30-year career at leading dealer FSIoffice of North Carolina. Leazer will be leaving FSI – where he is Director of Sales Technology – to join AOPD on 1 October.

There will then be a three-month transition period, with Leazer taking the reins as full-time Executive Director of AOPD on 1 January 2016. It is a role not totally unfamiliar to him, having held the position on a part-time basis from 2001-2004 prior to Mundt taking on the job, and he is currently a member of AOPD’s board.

Mundt will remain active in his role as full-time Executive Director until the end of the year, and will remain connected to AOPD as a consultant and advisor for the foreseeable future.

Commenting on the leadership change, Mundt said: “I’ve overcome some health issues over the past year, but I’m now strong and well again and realise that I would like to dedicate more time to my family and other interests.”

Bud Mundt and Mark Leazer

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OPI Magazine | April 2015

Manutan makes education sector acquisition European supplies reseller Manutan has agreed to acquire Papeteries Pichon, a major player in the distribution of education supplies in France.

Based in Saint-Étienne, Pichon was founded in 1948 and caters for over 40,000 nursery and primary school customers across France. The company offers more than 12,000 stationery, books and educational products.

Pichon has sales of around H65 million ($72 million), with an operating profit of almost H6.5 million. Manutan said the acquisition would cement its position as one of the leading forces in sales to local authorities in France, building on its acquisitions of Camif Collectivités in 2009 and Casal Sport in 2012.

The deal is being funded by Manutan’s equity capital.

Mergers & Acquisitions

ACCO provides restructuring details In its 2014 annual report, ACCO revealed more details of the restructuring actions it had previously announced in its last earnings conference call.

In the report, ACCO said the 100 jobs that would go as part of the new restructuring plan were mainly associated with its North American school, office and computer products workforce, and the restructuring would be mostly finished during the first half of this year.

With ACCO taking a $40 million hit in sales in 2014 due to the Office Depot/ OfficeMax merger – and a similar amount expected this year – the vendor is understandably concerned about a potential Staples/Office Depot combination.

Staples and Depot, its first and second largest customers respectively, account for around 25% of its overall sales, the annual report revealed.

ACCO said it also made the decision in 2014 to “lose” some low-margin retail binder business with a large US customer [Office Depot], and it repositioned its Computer Products Group to move away from commoditised tablet accessories due to “increased competition and a degradation in sales and margins”. The repositioning of this division is expected to be completed by the end of 2015.

ACCO is looking to emerging markets such as Latin America, the Middle East and Eastern Europe for growth, through both organic investment and acquisitions, and developing these regions will be an important factor in its long-term growth plan, the company stated.

Vendors

Jean Sweeney

ForestEthics moves from conflict to collaboration with the global vendor

IN

a move which was welcomed by environmental groups ForestEthics and Greenpeace, 3M announced a new pulp and paper sourcing policy in March designed to ensure all the virgin wood fibre going into 3M’s paper-based products and packaging comes from sources that protect forests and respect human rights.

The release of the new sourcing policy brings to an end a confrontation between 3M and ForestEthics that goes back to April 2009 when the environmental group first wrote to then-CEO George Buckley asking 3M to drop the Sustainable Forestry Initiative (SFI) label.

“We found out that we weren’t so different,” said ForestEthics Executive Director Todd Paglia during a joint conference call with 3M to explain the new policy. “We learned a lot about 3M and realised that change is not that simple.”

Paglia called the new policy “an audacious move” by 3M and said that it was the largest manufacturer to adopt such a stringent policy. “Nothing of this scale and scope has been done before,” he added.

Jean Sweeney, 3M’s VP of Environmental, Health, Safety and Sustainability Operations, said the company would take “decisive actions” to ensure that suppliers meet the new sourcing standards, but recognised that it would be “a long and challenging process” given the complexities of 3M’s huge supply chain footprint.

Implementation of the policy throughout 3M’s global operations will certainly be a substantial undertaking, as it will involve more than 70 countries and 5,000 pulp and paper suppliers, each with its own manufacturing facilities and supply chain.

“Nothing of this scale and scope has been done before”

Policy falling short Things between ForestEthics and 3M really began to heat up after February 2013 when the vendor published a paper sourcing policy that the environmental group said “fell far short of acceptable standards”. ForestEthics was also disappointed that it was not asked to review or comment on the sourcing policy before it was released.

This led to a public campaign against 3M beginning in late 2013 that included some high-profile demonstrations at 3M-sponsored events, a protest at 3M’s annual shareholder meeting in May 2014 and a banner bearing the message “3M do the right thing for forests” towed by an aircraft that flew over a baseball game in 3M’s home town of Minneapolis.

In August 2014, the two parties met for the first time since the launch of the public campaign and 3M then collaborated with a number of environmental organisations – including ForestEthics, Greenpeace and The Forest Trust – as it drew up a revised paper sourcing policy.

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OPI Magazine | April 2015

3M has already cut ties with Indonesian paper company April Group, and has put Resolute Forest Products “on notice” over some of its logging practices. Although 3M doesn’t buy directly from Resolute, it is aware that suppliers do source pulp from the Canada-based firm, noted Sweeney.

The new policy also sees ForestEthics’ original 2009 wish for 3M to drop the SFI label granted.

ForestEthics has been highly critical of what it sees as a “fake eco-label” that is “funded by the logging industry”, and the decision by 3M is another victory in ForestEthics’ anti-SFI campaign.

Now it will be interesting to see what kind of ripple effect the new 3M paper policy will have throughout the paper and pulp supply chain.

Key elements of the new 3M paper policy 3M will work with suppliers to trace the origin of all of the wood, paper and pulp it buys and will not source fibre that was obtained in a manner that threatens high-conservation value forests, as defined by guidance developed by the High Conservation Value Resource Network.

3M will ensure that its suppliers are granted free, prior and informed consent by indigenous peoples and local communities before logging operations occur.

3M will no longer promote or use the Sustainable Forestry Initiative (SFI) label.

3M has hired additional staff to implement its policy worldwide, and has already begun training in the implementation of its updated policy.

3M will publish semi-annual updates of its progress on implementing its policy.

These updates will be available on the 3M and The Forest Trust websites.

3M will cease doing business with suppliers that do not adhere to its principles, and has already taken action to sever business with suppliers out of compliance with its new standards.

Source: ForestEthics

News ■ Analysis

3M dumps SFI label in revised paper policy

New categories drive solid growth in North American Commercial division

Putting

the pending acquisition of Office Depot to one side for the time being – after all, there is no guarantee that the deal will be approved – Staples’ full-year earnings released in March showed that the global reseller is making progress with its reinvention plan of moving beyond office supplies.

Staples’ sales for the 12 months to the end of January 2015 – adjusted for store closures and negative currency effects – were almost flat; the figure of $22.49 billion was an adjusted decline of just 0.1% versus the year before.

The trend was even better at the end of the year, with fourth quarter adjusted sales edging up 0.8%.

The reason for the positive sales momentum? It’s largely new categories in Staples’ North American Commercial (NAC) division: categories beyond office supplies – in particular janitorial, breakroom, furniture and copy and print – were up in the double digits during the year and accounted

Tech drag on retail

for $3.4 billion (or 40%) of NAC’s total sales. These categories were described by CEO Ron Sargent as “the growth engine” of the company, but it wasn’t doom and gloom for traditional

• • • • • • • • • • •

The retail channel continues to face its own challenges, of course, but take out the negative impact of technology sales – PCs, laptops and tablets, and accessories – and comparable sales are relatively stable thanks to growth in areas such as copy and print and facilities and breakroom supplies, and omnichannel initiatives like in-store

In the fourth quarter, even paper and core office supplies were up supplies either: underlying sales of paper and core office supplies at NAC were flat, while ink and toner were only down by 2%.

There has been some speculation around whether NAC’s growth has been due to acquiring accounts

Staples FY 2014 results at a glance • •

following the merger of Office Depot and OfficeMax, but customer acquisition has been relatively stable – much of the growth is coming from increasing share of wallet with existing customers. This has been boosted by the addition of more than 100 specialist sales reps and the move to a team-based selling model.

Total company sales were $22.49 billion, an adjusted year-on-year decline of 0.1%.

North American Stores & Online (NASO) sales were $10.45 billion, with same-store retail sales down 4%.

Staples.com sales increased 8.5% to $2.42 billion, about 23% of total NASO sales.

Staples closed 169 North American stores during the financial year and expects to close a further 50 stores this year.

North American Commercial sales were $8.27 billion, up 3.3%.

International sales were $3.77 billion, a 2% local currency decline.

Weaker-than-expected sales in Australia, China and South America led to a goodwill impairment charge of $409.5 million.

Companywide gross margin was down around 20 basis points to 25.8% of sales.

Adjusted operating profit was $959 million, down around 23%.

Private label products represented 28% of total sales.

Services such as copy and print and EasyTech represented almost 9% of total sales. $250 million of annualised costs were eliminated, about half of this from SG&A reductions.

Restructuring charges for the year amounted to $170.9 million.

kiosks. In the fourth quarter, even paper and core office supplies were up.

The new 12,000 sq ft (1,200 sq m) ‘12K’ store format is proving to be a more profitable alternative to the ‘big boxes’, but it’s a slow roll-out process – so far, fewer than 60 stores out of a total North American network of over 1,650 outlets are 12K stores.

At the International division, cost reductions are beginning to filter down to the bottom line, but it was still something of a mixed bag of results. Europe returned to profitability in the fourth quarter despite a drop in sales, as stable contract sales were offset by declines in the online and retail channels.

Australia, China and South America, though, all failed to meet their 2014 sales targets.

The rest of 2015 is set to be more of the same – the challenge for Staples will be to focus on its core reinvention plan as the FTC conducts its investigation into the proposed Depot acquisition. w w w.opi.net | OPI Magazine

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news n Analysis

Staples’ turnaround gathers momentum

News ■ And finally...

Comment Staples has agreed to buy Office Depot. To gauge reaction in the industry, OPI asked whether the deal will go through and, if so, what it might mean, especially for the vendor and wholesaler channels. Below are just a few of the responses.

Jeff Smith [Starboard CEO] is betting millions of dollars that it will go through. As for the wholesalers, Staples just bought SP Richards’ (SPR) biggest customer – you figure it out. Also, on 22 January, investment group BlackRock took significant positions (over 5%) in both US wholesalers. Coincidence? I doubt it.

Rick Marlette, co-owner, OPSoftware I don’t see many negatives from this for anyone other than the thousands who will lose their jobs as a result of this merger.

Depending on how quickly it removes depressed retail locations and consolidates duties/responsibilities to achieve substantial cost savings, Staples is in a great position.

Independents will benefit from this merger as they face one less big box competitor. Additionally, if history is any indication, the merging of two large, bloated companies takes time and causes headaches for stakeholders including their customer base. I can only imagine it will take a number of years to get that ship sailing smoothly. With combined sales north of $35 billion, I’d be very happy to wrestle 0.5% of profitable business from Staples and Office Depot as they struggle with integration.

Joanna Davidson, President/CEO, National Office Works This deal is bad for everyone involved except, perhaps, Starboard Value. The proposed merger will cause tens of thousands of layoffs at both companies. Everything from the bid business to SPR and vendors will be impacted. Consumers – including contract – will not see any savings as the office superstore channel has already shown that it does not react to retail pricing from Walmart. The FTC allowing Depot and OfficeMax to merge was a very different issue as it promoted competition by making the new company more viable to compete. This merger has the opposite effect.

Matthew Sack, Owner, M*A*S Marketing Network

TWEET CHAT follow us on Twitter @OPInews, @andy_opi

$15.2 billion

Shipment value of global hardcopy peripherals in Q4 2014

$13.4 billion

Estimated amount end users will spend on 3D printers by 2018

75%

Percentage of retail and consumer brand apps that don’t provide store locators

42%

Percentage of customers that use smartphones to do research while in stores

@XPD_Chat We did it! 640 kms ‘cycled’ 18 hours in the saddle. Fantastic XPD team effort and huge thanks for all the donations! @Michaeluk Yeah baby only gone and won it, best in Europe, I’m a proud chairman @NemoGroupUK WELLDONE @Nemotim & team @OPInews @OfficeSupplyGeek Ugh, the horror. PEN AND PAPER to process orders!

No, seriously, I bet it’s horrible, old school... @dwattersw #OfficeDepot: Thanks 4 the condescending line of women’s “office supplies” (thank you cards, inspiration journals, etc)

SNAP SHOT

We believe that the merger will actually accelerate the addition of new products and manufacturers into both wholesaler and superstore product assortments. This industry is no longer competing ‘within the family’, but now has to quickly learn to compete with game changers that are highly capitalised. The consumer wins, as do those resellers, distributors and manufacturers that remove the inefficiency that is choking profits.

Harry Peters, President, Strategic Sales and Marketing

Don’t forget to take part in the discussions on the OPI LinkedIn page

Dealers at United Stationers’ CORE Live event in Nashville got involved with one of the wholesaler’s charitable partners, A Soldier’s Child. Volunteers helped wrap birthday gifts for more than 100 children of fallen soldiers. Children were then presented with their birthday presents during a special celebration.

opi.net poll results Has your business changed to cater for the millennials entering the workforce?

Yes 38.5% No 23% Working on it 38.5% 14

OPI Magazine | April 2015

Big Interview | Simon Drakeford

Power player Euroffice CEO Simon Drakeford tells OPI why the Office Power model will make independent dealers more prosperous

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OPI Magazine | April 2015

Euroffice | Big Interview

by Andy Braithwaite andy.braithwaite@opi.net

SIMON

Drakeford’s entrepreneurial spirit has just been recognised by his industry peers after he collected the Professional of the Year accolade at this year’s European Office Products Awards (see page 27). Not only has he overseen the growth of Euroffice in the past seven years to a £36 million ($53 million) online reseller, he is now looking to leverage its e-commerce and technology expertise in the form of Office Power, a solution for dealers to reduce fixed costs and improve profitability.

OPI caught up with Drakeford to learn more about progress at Office Power and for his thoughts on recent developments in the UK business supplies market.

OPI: We reported in January on your most recent published accounts to the end of March 2014 (see opi.net). Can you provide an update on business since then?

Simon Drakeford: I understand where you were coming from with those numbers, but they painted a bit of a distorted picture, so I’d like the opportunity to correct that.

The first thing to say is that technology-focused businesses like ours tend to have heavy periods of investment.

Last year and, to some extent, this year have been significant investment years for us in Germany and in Office Power, and that was why you saw negative figures compared to the prior year; we haven’t invested like that since I joined in 2007.

For the current financial year, revenue is generally flat year on year, while EBITDA is up around 200%. Full-year EBITDA will probably be around £2.5 million in the core trading groups. My point is that it has been a good year this year, but last year was by no means as bad as it looked.

OPI: If you strip out those investments and one-offs, how do the years compare?

SD: This year is better for two main reasons.

Firstly, there was a greater impact from Spicers’ problems in the previous year and, secondly, we’ve been better at managing our margin in our core business – largely due to optimising our Google costs.

OPI: What’s your strategy for growing the core business?

SD: We think there is single-digit growth there. You could grow it dramatically, but it’s difficult to do that and sustain profit – and we want to sustain profit so that we can invest in Office Power. Most of the businesses in our sector that are really growing fast online aren’t making much, if any, profit.

So you have to get the balance right between revenue growth and profit. In the online space, with a lot of businesses operating at a loss, we’ve got to model ourselves on where we think the right level of growth is. And for us that is about contribution optimisation.

OPI: How has the Euroffice business in Italy been performing?

SD: That’s been stable, but both Italy and Germany are focused on profit and burn rate as opposed to pure growth. Our strategy is to make them strong and stable, and make them ready for Office Power expansion, as well as grow profits.

Office Power benefits from a ‘mother ship’ to feed off, and building those businesses so they have sound operational management and processes and a strong supply chain, etc, makes Office Power possible.

OPI: What about other markets? You’ve talked about France before.

SD: Not in the short term. We would like to prove that the model can succeed in Italy and Germany first. France, though, would be the logical next market.

OPI: You’ve already referred to Office Power and I can sense you’re itching to talk about it! Just remind our readers about its rationale and why you took this step.

SD: Our core market has become saturated; there is increased cost, increased competition, declining revenues and margin.

It’s an industry in chronic decline. Then there’s Amazon, of course. We’ve still got a massive office products industry, but one of the most challenged channels is the small dealer channel. Our strengths as a company are in marketing and technology and selling

“Most of the businesses in our sector that are really growing fast online aren’t making much, if any, profit”

w w w.opi.net | OPI Magazine

17

Big Interview | Simon Drakeford office products online, so rather than build an offline sales channel we wanted to enable one, because that’s what we’re good at.

That gives a compelling multichannel model – which is something I firmly believe in – so if a customer wants to buy online they can buy online, but at the same time if they want that person-to-person sell they can do that as well.

The timing was right for us because you’ve got to have that ‘want’ before ‘need’; I talk about a ‘want to need continuum’ of change.

A lot of dealers don’t want to change, but they’re beginning to understand that it will eventually turn to a need. I think dealers are beginning to want to change.

OPI: In a lot of cases you’re asking your dealers to change their business model.

That’s quite a leap of faith for them to take, isn’t it?

SD: It is, but you have to look at the alternatives. And if you look at the performance of the dealers we have on the platform, then it’s less of a leap of faith.

OPI: Do you have any numbers?

SD: We’ve got 15 dealers at the moment and going through the platform we’ve got about £5 million of contracted revenue. I’ll leave you to do the maths on the average size, but there are some bigger ones and smaller ones in there.

I think the most important number is that the average dealer net contribution is 20%. I describe that as profit after the COGS [cost of goods sold], the delivery, the customer service, debt, financial processing, administration, warehousing, etc. So that’s almost net profit before their sales costs.

OPI: What exactly are you doing for these dealers?

SD: There’s the website, of course, and the fulfilment; we do a lot of their marketing, answer the phone for them branded in their name – which no one else does; the system does a lot of query management, debt management, invoicing, cash collection, etc. It’s a fairly advanced CRM system: there’s advanced reporting and a content management system. The efficiency comes from the fact that the system replaces a lot of manual processes and does an excellent job of selling the product.

OPI: 15 dealers – that doesn’t sound a great deal.

SD: Is 15 where I want it to be? No, because there are so many dealers out there and I know that Office Power works and I can make them more prosperous.

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I will admit that Office Power is currently underperforming against its potential.

Awareness is our biggest problem, which is a shame because – and I know anyone would say this in my position – I believe we have the best offering. So it’s a case of getting the message out there and meeting with the dealers.

OPI: What kind of dealers are you looking to attract?

SD: At the moment our sweet spot is about £200,000-£2 million. We think there are about 1,500 of these dealers in the UK, but we will only take a dealer if we believe we can make them more prosperous – we spend a lot of time and analysis proving this.

OPI: Some say that giving up that last-mile delivery to a third party will cost dealers their identity.

SD: Euroffice is one of the most successful dealers in the UK and we’ve never had a last-mile concern, so I think that is just a perception. The reality is that quite a lot of these dealers already use drop-shipping.

They keep a van for some deliveries and they can do that under our model, but they will just make less profit if they do.

“With current margins going where they are going, the majority of traditional dealers will have to change if they want to survive”

Euroffice | Big Interview I believe that you can build a stronger identity through a quality, branded website and portal than you can through a delivery vehicle. We are all about strengthening dealers’ brand identity through all touch points of our service model.

It’s a fact that with current margins going where they are going, the majority of traditional dealers will have to change if they want to survive. And the critical part is that they should change when they want to change before they need to change. If they wait until the ‘need’ stage, it’s not necessarily too late, but it’s more complicated and they will probably have already lost a significant number of customers. That’s a fact, and I’m hoping our industry isn’t too traditional to see that.

OPI: Time to talk about Spicers, I think.

Euroffice has been closely associated with Spicers for the past 15 years. How badly did their supply issues affect you?

SD: It certainly wasn’t a picnic! In fact, it was the biggest threat to our relationship in 15 years, and we’ve had a fairly stormy marriage.

Our quotas got quite low with Spicers.

“I’m not quite ready to hang up my stationery boots just yet” always had other suppliers in, we’ve become more focused on the ease with which we can or cannot switch volume of demand to other fulfilment areas.

OPI: How easy was it for you to go to other sources such as VOW? SD: It’s a lot easier now than it was. While we had those channels and processes in place across some categories, it was more difficult across others. And so we won’t find ourselves in that position again.

We now have a balance and the ability to move that balance with much more dexterity than we had before.

OPI: Spicers has been involved in the market consolidation in the UK [merging with OfficeTeam]. Were you surprised by the Spicers and Vasanta deals last year?

SD: Not really. It’s clear that when you have an industry with a lot of overcapacity and in chronic decline, vertical M&A is a bit more obvious. Even in the US, there is a lot of integration between the wholesalers and some of their biggest customers which is not that different from the vertical integration we’ve seen in the UK, so it shouldn’t have been as much of a surprise as it was.

OPI: What is the overall volume going through Spicers?

SD: A lot lower than it was. The number fluctuates – it’s up on what it was two months ago, but was down a few months prior to that; by the time this article gets published it will have changed again.

OPI: But is there a strategy to up the sourcing from other suppliers?

SD: The strategy is based on pure market forces. And these forces are price, availability and service levels.

OPI: Is that something you’ve been looking at closely for the past 18 months or so?

SD: Absolutely. Since we got more scared than we thought we needed to be, multi-sourcing has been a key focus for us. I think we became complacent, and whilst we

OPI: To what extent do you view the wholesalers as competition, now they have resellers in their groups?

SD: It doesn’t bother me because you have to believe in competition. So if a SPOT salesperson is doing a better job than you, you have to up your game to beat them.

Do you want to know what Drakeford thinks of Amazon, Google and the UK dealer groups? Check out our additional content online at opi.net and on the OPI app.

OPI: Anything you can say on your own future plans?

SD: I’m genuinely excited by Office Power and it feels like we have only just scratched the surface of what we can achieve. We have a great piece of technology that works and I’m really enjoying taking it forward. So I’m not quite ready to hang up my stationery boots just yet. w w w.opi.net | OPI Magazine

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Hot Topic | Consolidation

Hive of activity

THE

OP industry is on the move – or so it seems. The past few months have seen plenty of merger talks and consolidation activity. Particularly looking at the US dealer community, there’s been a hive of activity surrounding some of the bigger resellers (think Innovative, Office Essentials, Miller’s Office Products...).

In Europe, meanwhile, the UK wholesale scene was shaken up in an unprecedented manner last summer.

In Germany, Kaut-Bullinger in the south further added to its portfolio while office products stalwart OTTO Office in the north has been put up for sale by its owners (see ‘Waiting game at OTTO Office’, right).

But when the mother of all consolidation moves was announced

Consolidation at reseller level has been hotting up, no doubt about that. But is it an opportunity or threat? And what about the vendors – will they follow suit? Heike Dieckmann finds out… at the beginning of February and tongues starting wagging about the repercussions of a potential Staples/ Office Depot merger, discussions on where the industry is headed certainly heated up (see our poll results below and And finally on page 14). And that debate is as acute for the reseller community as it is for the industry’s manufacturers.

As Interaction Managing Director Jan Van Belleghem says: “Take a look at our industry and compare the speed of consolidation on the reseller side with that of the manufacturers – it’s remarkable.

There’s hardly been any activity and

opi.net poll results What will be the main consequence of a Staples/Office Depot merger?

More vendor consolidation 26% Vendors going out of business 18% Wholesaler consolidation 12% More opportunities for other resellers 44% 20

OPI Magazine | April 2015

probably the biggest story has been the failed acquisition by 3M of Avery Dennison’s office products division at the end of 2012.”

And as the pool of resellers is declining, so is the need to have a wide range of manufacturers, especially in traditional categories where the industry’s decline is at its most ferocious.

Vendor impact And while CCL Industries, parent company of Avery, has in February signalled its positive intentions for the labelling segment with the bolt-on acquisition of pc/nametag and Meetings Direct, in other categories, the signs don’t look too positive.

ACCO and Smead are just two of several names that have recently been in the headlines for their cost-cutting initiatives. ACCO also admitted in its 2014 annual report the severity of the impact that the Office Depot/OfficeMax merger has been having on its results, with a further $40 million in sales expected

Consolidation | Hot Topic to be shaved off this year. This figure is only going to be further exacerbated if the Staples/Depot merger goes ahead.

It begs the question as to what the long-term strategies of some of these players are, as downsizing alone presumably cannot be a strategic goal going forward and the word ‘acquisition’ has certainly been mentioned?

Double whammy Mike Rowsey, CEO and Managing Director of US manufacturer rep group Harbinger National, says: “You have to look at this vendor by vendor, think about it in terms of the products they sell, where they sell those products today and, importantly, where they’re going to sell them tomorrow.

“Companies like Smead and ACCO are facing a double whammy. They’re being hit by the serious secular decline in our industry, and then on top of that have to deal with the consolidation that has occurred already and the potential of what might happen between Staples and Depot. These vendors are really feeling the impact of these two things happening simultaneously. For them, the world isn’t going to look pretty in the next five years, so what are they going to change other than continue to take cost out? Because, as we know, there’s always the end of the road in terms of how much cost can be taken out.”

There is still product innovation, but even where it plays into today’s changing workforce – products for the mobile workforce, tech

Waiting game at OTTO Office Having celebrated its 20th anniversary last year, for Managing Director Uwe Orgas and his team at OTTO Office there’s little to cheer about in what must be very unsettling times for the company at the moment.

One of the biggest home-grown names in German OP, OTTO Office last November confirmed it was up for sale, with investment bank Rothschild reportedly in charge of finding a buyer.

But while the announcement came only towards the end Uwe Orgas of the year and shortly after Orgas was in a buoyant mood chatting to OPI about the company (see Big Interview, OPI November 2014) and its future prospects, the writing for OTTO Office as part of the mighty Otto Group has evidently been on the wall for much longer than that.

The first round of negotiations to find a buyer took place as early as last summer. All talks apparently failed, for a number of reasons including issues with its e-commerce systems as well as logistics operation (OTTO Office has two warehouses with a capacity of 500,000 sq ft – 50,000 sq m – in southern Germany). But the real drawback presumably was that, in initial negotiations, any potential buyer would only be able to retain the OTTO name for a period of 24 months. This could be seen as a huge sticking point, given the considerable brand reputation that the OTTO name commands in the global mail order space.

OPI has been informed that the second round of negotiations is now underway, with a number of purchase conditions having been changed. What these exact conditions are is uncertain, but the asking price has apparently become “more flexible”. Importantly also, for any buyer wishing to benefit from the OTTO brand, the length of use of the name has reportedly been extended to ten years, offering a much longer-term rebranding framework.

Hamburg-based OTTO Office was founded in 1994 and employs around 300 staff. It now serves mainly the German market, with some operations in Belgium. The company pulled out of the Czech and Slovakian markets in 2012. In France, meanwhile, Argosyn, a joint venture established in 2013 by the Otto Group and France’s Mulliez family, is in the process of selling fellow OP mail order operator JM Bruneau for a reported figure of H100 million (now $106 million) deal to Weinberg Capital Partners.

Could a private equity firm become the new parent of OTTO Office too?

accessories or entirely new categories like 3D printing and all that it entails – the revenues generated are mostly only a fraction of the sales lost through declining segments. To change those sales ratios will take time and persistence.

But it’s not just the products themselves nor is it just the big players with the massive overheads and quarterly shareholder expectations that are affected and that contribute to so many manufacturers struggling, says Johannes Peter Martin, Group Managing Director of Kaut-Bulllinger.

“For progressive resellers, one of the biggest topics is e-commerce,” he explains. “E-commerce is all about data and, in a nutshell, most of the smaller vendors in our industry haven’t got any usable e-commerce content – the know-how just isn’t there. As such, resellers more and more choose those vendors that can or are willing to support them in their e-commerce efforts, and that often eliminates the little players.

“That said, we’re often having the same issues with the bigger operators. It’s a real struggle to get that content we need – it’s not the technology or the systems – so much so that we’re having to postpone the launch of our own B2B e-commerce platform from April to June. We’re starting from a much lower base than we anticipated.”

It’s a familiar story – those that don’t adapt to today’s workplace and the new demands of the customer will sooner or later fall by the wayside. Indeed, those standing still are in fact going backwards – that seems to be the current perception.

Wholesale changes The wholesale community is a good example for this and it’s interesting how differently two countries that are in many ways quite similar in their OP set-up have evolved. When the two OP wholesalers in the UK and two of its biggest dealers/contract stationers came to an impasse because of their – often historical – structures, they did something that years ago would not have been possible: they joined together and became SPOT (Spicers/OfficeTeam) w w w.opi.net | OPI Magazine

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Hot Topic | Consolidation and EVO Group (Vasanta/ office2office) last year.

It’s too early to predict the long-term success or failure of these new entities (especially given some of the legacy problems that SPOT has inherited), but the so-called hybrid model has become surprisingly accepted already.

First advocated by Austrian player PBS Holding many years

Maybe so, but the wholesalers on the other side of the Atlantic have adopted a somewhat different approach, namely by branching out into adjacent categories. Jan/san, breakroom, safety and industrial supplies have all become segments that both United Stationers and SP Richards have grown organically as well as through acquisition, and it’s a strategy

“Consolidation at every level of our industry is going to accelerate at a pace that none of us ever anticipated” ago and initially met with raised eyebrows, it’s become the go-to model for many. As Van Belleghem says: “I believe the hybrid model is likely to become the norm.

All of these wholesalers have sophisticated warehouses that need to be fed with merchandise to have a healthy turnover. If customers no longer need their merchandise from a wholesaler, it’s logical that they look elsewhere to make that warehouse work.”

that is likely to be reinforced (see also ‘Cody’s CORE catch-up’, page 38).

That’s not to say that ultimately we won’t see one of them buying a very large independent dealer, of course.

That same model of branching out is also evident on the dealer side, and two Pinnacle dealers – Guernsey and Innovative Office Solutions – are viewing it as a core priority. And acquisitions have been – and will continue to be – on the agenda, increasing both scope and scale.

Says CEO Dave Guernsey: “Guernsey has been for the past 20 months a) pursuing the integration of a large acquisition; b) adding a major new category; c) rebranding to reflect our broader scope of products and services and d) working on an ERP change to ensure a competitive end-user experience in the online and mobile world.

“We absolutely believe scale is key to a prosperous future and more acquisitions are being pursued now.

We are looking at jan/san suppliers and traditional OP dealers. The cost of doing business today is such that an increasing top line is crucial to the coverage of expenses needed to be competitive.”

Brooks Smith, CFO of Innovative, echoes those sentiments. He says: “The recent acquisition of S&T Office Products was good for us because it was a similar business and we bought the company for its customer relations. But our next acquisition will probably be more strategic in terms of looking at expanding product categories or getting into some areas

Window of opportunity While much has been made of possible antitrust issues in the US threatening the Staples/Office Depot merger, what about in other parts of the world? After all, the two resellers have operations outside the US with combined sales of more than $8 billion, and there is a proviso in the acquisition agreement that allows Staples to pull out of the deal if the competition authorities require “meaningful” Office Depot international assets to be sold off.

What would a merger mean for the international community?

Dominance in Canada

Looking at neighbouring Canada first, Staples is the dominant market player in the country with its 280 retail stores and a strong Staples Advantage contract business. And while Depot-owned Grand & Toy closed its 19 stores last year, it is still a force on the commercial side with sales estimated at around C$400 million (US$320 million), and bringing these two together would only consolidate Staples’ already strong market share.

The biggest direct competitor of a merged entity would be Novexco, but the multichannel player is of course still in the process of integrating its contract businesses following the acquisition of Lyreco Canada in January 2014.

Novexco CEO Robert de Montigny says: “Lyreco was the third player in Canada, so if Staples and Office Depot merged we’re going to be the number two. Of course, we’re going to be very small by comparison, but if you think Robert de Montigny

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about public tenders or government business, there will be one less player in the field and that will also open up opportunities for other distributors and for independent dealers. The question is whether the antitrust authorities will approve the creation of such a dominant player or ask Staples to sell off part of the business.”

Balanced in Europe

The two power players’ biggest international operations are in Europe – estimated at more than $5 billion in combined sales – but this is in fact a region where there appears to be a slim chance of antitrust issues getting in the way. This is due to a number of reasons: the fragmented nature of the European market; Depot and Staples having different sized operations in different markets; and the presence of a strong pan-European competitor in the contract space in the form of Lyreco.

In fact, if you put the European business of Staples and Depot together, you get a nicely balanced and strong business in the three channels of retail, direct and contract, without any of them really having a dominant market share.

Cost synergies from Europe are also likely to be substantial, and there is certainly the potential for a stronger, leaner and more efficient business to emerge following what is likely to be a lengthy integration process.

If the merger indeed goes ahead, overall and certainly in the short term, resellers will benefit from the inevitable disruption that will ensue, says Jan Van Belleghem, Managing Director of distributor

Consolidation | Hot Topic that our customers are asking us to get into. The question is: do you grow the talent you need or do you buy it?

For instance, smaller jan/san dealers may have great customer relations, but they don’t have the technology to service that customer. Marrying the two will create an instant winner.”

The jan/san sector in particular is becoming a crowded space as Al Lynden, President of regional player Chuckals, points out: “When we look at potential acquisitions, our first look would be at traditional OP dealers. Our ability to expand into jan/san and all those other things have proven to be very successful in our last two acquisitions, but the problem in the jan/san area is that those players are a target for everybody right now. So we’re not aggressive in going after that particular category, because we don’t want to get into a bidding war with other dealers.”

Scale has become even more important with the potential Staples/ Depot merger looming large. Adds Smith: “Most larger companies that

are looking for an OP or jan/san supplier usually like to look at two or three options. And if you take one of the major players out of the equation, they might be saying: ‘OK, who’s the large independent in town or the regional player that we could bring into the equation?’ It could be a real plus for us.”

Upbeat attitude There’s definitely an upbeat attitude among the wider OP reseller community in the US as regards the short-term repercussions a Staples/Depot merger could have (for an international perspective, see ‘Window of opportunity’, below).

United Stationers CEO Cody Phipps said during its earnings conference call in early March: “Our experience has been that during the integration, there’s a lot of disruption with two big players coming together and we tend to benefit from that.”

United, of course, is also in a good place to keep its position as Staples’ partner should the merger go ahead,

alliance Interaction. “In Europe I would certainly say that a Staples/Depot merger represents an opportunity,” he notes.

“You can foresee that the two companies will have their hands full with the integration Jan Van Belleghem process for at least a couple of years. They will lose some focus and there’s a window of opportunity for other resellers to build a closer working relationship with customers during that time. These large organisations don’t tend to become more flexible the larger they get, so those that are agile and flexible will benefit.”

It might also be an opportune time for Lyreco to re-evaluate its presence in some of its key markets. There will undoubtedly be an opportunity for organic growth as good talent becomes available, while acquisition targets could include resellers such as Fiducial and Wulff in the Nordics, both of which have been struggling in recent times.

Picking up business in Australasia

Turning to Australia and New Zealand, both Staples and OfficeMax enjoy a strong position in the enterprise and government sectors.

In Australia, industry consultant Andrew Penfold believes that the combination of market leader Staples and number two OfficeMax would result in an entity ten times the size of its nearest competitor, independent dealer Complete Office Solutions (COS), with Lyreco in third place.

If the deal does go through in Australia, Penfold thinks COS and Lyreco could pick up some contract business. The same applies, though perhaps to a lesser degree, to the independent groups

despite the fact that Depot’s first call wholesaler is SP Richards (SPR).

Looking at the long term, it’s perhaps a different story and not just for SPR should it lose all of the big box business. Says Guernsey: “If independents can’t compete, the B2B end user will suffer the consequences of only having one source for OP to go to. Amazon, Walmart and Costco do not offer the broad scope of services required by the business consumer.”

Rowsey adds: “The relationship between large independents and either United or SPR is going to change.

They’re going to become closer than they have ever been before. If you fast-forward the dealer community 3-5 years, there will be between 200 and 300 dealers left that command 80% of the independent channel. Neither of the wholesalers can afford to lose any one of those large customers, so they will develop much more symbiotic relationships with them.

“If this merger goes ahead, consolidation at every level is going to accelerate at a pace that none of us ever anticipated. Period.”

Office Brands and Office Choice, although after the initial benefits they will face a larger, more cost-effective competitor.

And let’s not forget Officeworks, although its strength is in the retail and small business sectors. Penfold says that it would have “a window” to push into the mid-to-large B2B and government contract areas – not a large part if its business, but “they are fairly hungry to get a bit of everything”.

Office Brands CEO Gavin Ward also highlights the potential for Officeworks and Lyreco to grow their businesses in the wake of a potential merger. And he told OPI that he doesn’t see any regulatory issues that would block the merger if Gavin Ward the market is taken as a whole.

Ward says: “Their market shares are not that significant: Staples 8.2% and OfficeMax 3%. The combined turnover of Staples and OfficeMax would be less than Officeworks’ on its own.”

He adds that there “would most likely be opportunities for our members in Australia” following a merger, including “the scope for us to participate at a greater level in the corporate and government sectors”.

The situation in New Zealand appears similar. In the contract sector, the major players are OfficeMax followed by Staples, but the market as a whole includes national retailer Warehouse Stationery and leading independent group Office Products Depot, as well as other mass market and online resellers.

Plenty of ifs and buts, but even if conditions are imposed in any/ all of Staples/Depot’s global subsidiaries, it is unlikely that these would be significant enough for the whole merger to be scuppered.

Those at a local level will be following proceedings closely.

w w w.opi.net | OPI Magazine

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Dealer Spotlight | RTC Proffice

STORMING AHEAD Leading Romanian reseller RTC Proffice is showing impressive growth

by Andy Braithwaite andy.braithwaite@opi.net

OPI

readers should be familiar with Romania’s number one office supplies reseller RTC Proffice. The company won the Emerging Reseller of the Year prize at the 2010 European Office Products Awards when it was part of the retail and distribution empire controlled by Romanian business magnate Octavian Radu.

Since November 2011, the firm has been under new ownership after it was acquired

by Sweden-based investment fund Oresa Ventures. After a couple of tough years, partly due to the economic issues in Romania, RTC is very much on a growth trajectory once again. Sales were up about 5% in 2013 and 2014 was even better, with the top line jumping 15% to around H27.5 million ($29.1 million).

Market leader RTC is still by far the largest player in the Romanian OP market, with a market share estimated to be in the region of 15-20% and it is bigger than the next two largest resellers put together. CEO Gabriel Muresanu says that the market itself is relatively stable at the moment with reasonable growth perspectives; the number of employees in the services sector is growing as an increasing number of international companies outsource their needs to customer service centres in Romania.

The reseller’s impressive recent top-line increase, as Muresanu explains, has been due to a number of reasons. “The growth was driven by increasing the number of sales

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reps, investing in sales-force training to improve the sales process quality, increasing the number of customers and a continued focus on complementary ranges such as breakroom supplies, cleaning, personal protection equipment and promotional items,” he notes.

The strengthening of the sales team has been one of the key priorities for Muresanu over the past couple of years, a strategy that is set to continue at RTC as it looks to build on its team of more than 100 sales consultants who operate out of nine regional sales offices as well as the Bucharest-located head office.

In addition, RTC will make further investments in IT systems to enable improved sales-force productivity and to help increase the overall profitability of the company.

“Considering our plans for accelerated sales-force development in terms of number of sales people, increased quality sales process and IT tools, we are confident that our market share will continue to grow in the coming years,” states Muresanu.

Product expansion Another success has been the move into different product categories, part of RTC’s goal to be the provider

New product categories have been growing by at least 30% each year since 2011 and now represent almost 15% of total sales

RTC Proffice | Dealer Spotlight of choice of an integrated solution for companies that are looking for a centralised ordering platform and a one-stop shop for all their workplace needs. These new product categories have been growing by at least 30% each year since 2011 and now represent almost 15% of total sales, depending on how you define these product groups. 2014 was a particularly strong year in the cleaning category, backed by some successful promotional activity.

RTC’s ability to grow is underpinned by a modern logistics and distribution network centred around its main 7,000 sq m (70,000 sq ft) warehouse in Bucharest from where it is able to provide 24-hour delivery throughout the country. 6,000 SKUs are kept on stock and more than one million packages are delivered each year to over 10,000 customers.

Following the acquisition by Oresa Ventures – which included the rights to the RTC brand – extensive market research revealed the value of the RTC name in the Romanian market. It was therefore decided to maintain the RTC Proffice name, but to give the brand a fresh, new look in order to reflect the new corporate values of the company.

Core values “Our values revolve around the notions of simplicity, relationships, initiative, involvement and partnership,” explains Marketing Manager Eliza Nițescu. “We also introduced the slogan ‘Have a good day at the office’ which reflects our focus on our customers’ needs and our goal to provide a complete and ‘smooth’ level of service.”

As part of the overall rebranding effort and to promote employee engagement, RTC introduced its ‘Change A Life’ campaign in 2013 in partnership with some of its most valuable brand partners. The initiative helps Romanian orphans attend school by supporting an organisation called SOS Children’s Villages.

Working with 12 brands – Apli, Dahle, Durable, Edding, Stabilo, Falken, Pentel, Legamaster, Leitz, Post-it, Scotch and tesa – a percentage of their sales is donated to the charity. The first year of the campaign contributed school supplies with a value of H25,000 H and helped SOS children start the school year with new backpacks, notebooks, pens and other school supplies.

RTC has been a member of the European Office Supplies Alliance (EOSA) since the end of 2008, and Muresanu says the reseller supported EOSA’s decision to leave BPGI from the beginning of 2014.

RTC Proffice Fact Box Founded: 1994 Headquarters: Bucharest, Romania Owner: Oresa Ventures Annual sales: H27.5 million ($29.1 million) Stock: 6,000 SKUs

RTC is aiming to achieve another year of double-digit growth in 2015 “We feel that we are closer to the vendors now and we can influence more directly what is negotiated in the contracts,” he notes, adding: “The EOSA a-series private label programme is in a period of aggressive expansion and we are committed to promoting it on the Romanian market.”

In what is a unique situation for an EOSA member, RTC is also Lyreco’s strategic partner in Romania, having signed a strategic partnership agreement with the global reseller in September 2012.

“We bid together for international accounts that have offices in Romania,” says Muresan.

“We are very pleased with this collaboration and we expect it to continue.”

Following the success of 2014, RTC is aiming to achieve another year of double-digit growth in 2015 and is targeting profitable sales growth of at least 10% as it looks to strengthen its grip on the Romanian office supplies B2B channel. w w w.opi.net | OPI Magazine

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Event Review | EOPA 2015

And the winner is…

thE

14th European Office Products Awards (EOPA) saw the good and the great of the European business supplies sector gathered in Amsterdam, Netherlands, on 4 March for an evening of achievement and celebration.

With industry peers of the highest calibre in attendance – many guests had been taking part in the second OPI Partnership event during the day (see also page 32) – evening proceedings after a fabulous gala dinner began with a warm and witty industry toast by US-based Beth Wright, recently promoted to Chief Commercial Officer of Bi-silque which means that the European market is now very much on her radar too.

Whichever side of the pond you are from, Wright referred to the current staple in the OP industry and that, ironically, is ‘change’.

That change – whether it’s in terms of adapting to different customer demands, embracing new product categories or facing the never-ending need to cut costs and become more efficient – has been felt by all shortlisted companies in the total of ten award categories.

Embracing change And it is that enthusiasm in moving outside its comfort zone that has seen CEP Office Solutions coming out on top with its ‘Take a Break’ range in the facilities management category or Esselte Leitz rising to the technology challenge with its winning Leitz Icon Smart Labelling System, in the process reinvigorating the labelling category as a whole.

Nominations for the EOPA were many and varied and the judges – comprising industry executives from

Thank you to our sponsors

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OPI Magazine | April 2015

all distribution channels – had a tough time deciding on the cream of the crop during the EOPA judges meeting in Munich, Germany, last December.

Interestingly, despite the much talked about decline in sales of traditional OP, the traditional category was as strong as – if not stronger than – ever, proving that there’s plenty of innovation, especially if products can bridge the gap between between traditional and digital, as Hamelin’s Oxford SOS Notes Uploadable Notebooks do.

There are always two awards that are eagerly awaited for their more personal flavour and this year’s winners were up there with the best of them. Euroffice’s CEO Simon Drakeford was named Professional of the Year (see also our Big Interview on page 16) while former Lyreco veteran Steve Law was handed the Industry Achievement award.

And so concluded the 14th EOPA, with a rousing standing ovation to Law, the chance to chat and network with friends and peers, and a sneaking suspicion that there’s plenty of life left in our industry – whatever that means these days. The only aspect that might need addressing is the entertainment side of things (those who were there will understand!).

EOPA 2015 | Event Review

FM Product of the Year

Staples Advantage’s Christian Horn (middle) presented the award to CEP’s Cedrik Longin (left) and Alun Lloyd (right)

Esselte Leitz: Leitz Icon Smart Labelling System Technology products have become another key focus for many office products resellers and some smart innovations made this a hotly-contested category this year.

The judges commended all shortlisted companies for their outstanding products that, across the board, combined innovation and great design along with the all-important commercial success.

However, it was Esselte Leitz that pipped everybody to the post with its Leitz Icon Smart Labelling System. With this smartly-designed product, Leitz rejoined the labelling category with a vengeance. Judges liked the easy-to-use intelligent cartridge system and the fact that there’s a wide range of label sizes covering every customer’s needs. Resellers, meanwhile, have reported strong sell-through of the product. Encouragingly also, the product has helped grow – even reenergise – the labelling category as a whole.

A wonderful endorsement for Esselte Leitz in a historically traditional category.

CEP Office Solutions: ‘Take A Break’ Range Facilities management (FM) has become the go-to adjacent category for many office products companies – manufacturers, resellers and wholesalers alike – as resellers continue to report more growth here than in any other category.

As such, vendors that historically haven’t been involved in FM are rising to the challenge and coming up with innovative new solutions, often complementing their existing ranges.

Nominations for this category were plentiful and the shortlist strong, but the winner – France-based CEP Office Solutions – was able to offer the complete package with robust sales backing up a good product.

CEP’s ‘Take a Break’ range capitalises on two growth areas – storage and catering – and the judges were impressed with the simplicity of the idea, its execution and the remarkable catalogue listings achieved in Europe. A comprehensive and affordable solution for providing drinks and snacks in meeting rooms, the ‘Take a Break’ range has been a great hit with end users already. A well-deserved award for a concept that CEP is now hoping to take across the Atlantic to the US.

Technology Product of th e Year

Sponsored by

BPG’s Luke Chapman (middle) presented the award to Esselte’s Jaap van Selm (left) and Matthijs Kassies (right) w w w.opi.net | OPI Magazine

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Event Review | EOPA 2015

e of the Year FM Year iativ Initthe keting of MarProduct Avery UK: Creating a Social Connection with Consumers To win this category, which is open to both resellers and manufacturers, applicants had to demonstrate, above all else, a real return on their investment. The EOPA judges were not looking at how much money was spent, but whether it was spent well and achieved results.

All shortlisted entries met these criteria and represented a broad spectrum of campaigns with a vast array of budgets.

3M was impressive and came close to winning for the second time in a row with its promotion. But it was Avery that really captured the judges’ attention with its ‘Creating a Social Connection’ campaign.

It may not have been the campaign with the largest budget, but the judges liked the way Avery created an emotional connection with its customers on social media. This created a dialogue of discussion about Avery products that enabled the company to really understand its online customer. Reaching into the online community also allowed Avery to drive significant brand awareness and engagement which will help long-term growth.

An engaging campaign well deserving of this award – congratulations to all the team at Avery.

Traditional Product of th e Year

Office Depot Europe’s Olaf de Boer (right) presented the award to Eric Joan of Hamelin

Hamelin: Oxford SOS Notes Uploadable Notebooks

Lyreco’s John Watson (left) presented the award to Mark Cooper of Avery

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OPI Magazine | April 2015

Traditional products may be lacking the growth of other, newer categories, but they still represent the roots of the industry, so perhaps it’s not that surprising that this year’s shortlist has again been long and varied, with some outstanding examples of sales excellence and innovation.

As such, the decision to pick a winner was a difficult one and the EOPA judges highly commended ACCO’s Nobo Prestige Whiteboard for its well thought-out concept that is focused on end-user behaviour and encourages up-selling.

Ultimately, the decision was unanimous, however, and it was Hamelin’s Oxford SOS Notes Uploadable Notebooks that took the prize. The notebook combines an old-fashioned paper-based product with a modern way of working, perfectly bridging the gap between the traditional and digital world. Resellers have already enjoyed strong sales with this product in a difficult category, so all credit to Hamelin for making a traditional product modern.

EOPA 2015 | Event Review

Dealer Group of the Year NEMO Group Nobody is a better judge of a dealer group than its members. On that basis alone, UK-based NEMO Group was in a good position already, since EOPA judges were inundated with nominations from NEMO members wanting to support their group.

But there was more to it than that. The judges were looking for a dynamic, engaged dealer group that meets the needs of its members by providing a comprehensive package of products, resources and services, with pioneering initiatives to give them a competitive edge in this challenging market.

The judges were also impressed with the range of programmes available and the continued innovation of new business tools designed to help NEMO’s members in their daily operations.

Wholesaler of the Year

Sponsored by

Newell Rubbermaid Europe’s Lee Mellor (middle) presented the award to ADVEO’s Millán Álvarez-Miranda (left) and Philippe Guillotin (right)

Sponsored by

HSM’s Susanne Fritz (middle) presented the award to NEMO Group’s Tim Beaumont (left) and Michael Morgan (right)

ADVEO As something of a middleman, the wholesaler/distributor role is never an easy one in our industry, often speckled with plenty of challenges along the supply chain.

All the wholesalers on the judges’ shortlist have experienced a difficult environment over the past year for various reasons, but have found a way to succeed and profit.

The highlight of them all, however, was ADVEO. The company may still be on a journey of transformation but, as far as the EOPA judges were concerned, it should be recognised for what it has achieved so far. In just a few years, the business has gone from being a H100 million ($106 million) Spanish manufacturer and distributor to the leading pan-European OP distributor with sales of about H1 billion.

Since the acquisition of Spicers Europe, ADVEO has successfully integrated multiple businesses across Europe, rationalised its distribution footprint and made significant investments to move to a common CRM platform.

The judges acknowledged that there is still a lot to do and that not every area of the business is where ADVEO wants it to be, but it has a clear plan and is moving in the right direction – which can only be good for the European wholesale market. Congratulations to a company that has risen to the challenge! w w w.opi.net | OPI Magazine

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Event Review | EOPA 2015

Simon Drakeford The winner of this award should be a shining example of the industry – somebody who drives not just his own company, but the entire sector; somebody with vision and plenty of entrepreneurial spirit.

This year’s winner has all of the above and more.

OPI’s Steve Hilleard presented the award to a relative newcomer to the industry, somebody who joined his company in 2007, bringing with him the valuable experience he gained during several years working in the telecoms sector.

Simon Drakeford from UK online reseller Euroffice was the worthy winner and his seven years in the industry have been eventful indeed.

For a start, his company’s sales more than doubled to about H55 million ($59 million) in that time, despite competing directly with some of the largest online retailers on the planet.

Drakeford also led Euroffice’s management buyout and oversaw the expansion of his company into a number of European markets. Most recently, he established Office Power, a new division that allows smaller resellers access to Euroffice’s software, services and support platform.

Widely regarded as a true innovator, the judges also referred to Drakeford as someone who’s extremely entrepreneurial, dynamic, proactive and passionate about helping others to drive the change that is necessary if our industry is to survive and prosper. A true professional indeed.

Vendor of the Year

Interaction’s Jan Van Belleghem (middle) presented the award to Clover Technologies’ Robin Edwardes (left) and Maurice Brown (right)

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OPI Magazine | April 2015

Professional of the Year

OPI’s Steve Hilleard presented the award to Simon Drakeford

Clover Technologies Group For this category, size or age don’t matter – nominees could be well-established vendors or small and upcoming players. It’s all about substance.

The vendors that made up the shortlist all have success stories to tell, and they can all demonstrate impressive results and excellent relationships with their customers. And on the face of it, the winner of the award – Clover Technologies Group – was maybe a surprising choice, as the judges recognised the efforts of a company best known as a remanufacturer.

But – and that is why it scooped the top prize – there is more to Clover than remanufactured ink cartridges.The company has successfully diversified to become a provider of total environmental solutions and is now the world’s largest collector and recycler of mobile phones and inkjet and laser cartridges.

The EOPA judges were impressed with the quality of Clover’s products and, importantly, with its outstanding service, the latter perfectly reflecting the way in which vendors need to evolve to be more solutions-driven as opposed to focusing purely on transactional business.

Very well done to Clover Technologies and the team!

EOPA 2015 | Event Review

Industry Achievement

Reseller of the Year

Steve Law

Sponsored by

Pilot Corporation of Europe’s Hugues Chatelain (middle) presented the award to Coolblue’s Stephan Deckers (left) and Gijs Hensen (right)

To many, the most anticipated, even emotional, award of the EOPA and the highlight of the evening is the Industry Achievement award. This award, as ever, recognises the achievements of a person who has made an outstanding contribution to the advancement of our industry in Europe.

Rob Vale, industry veteran and former President of Staples Europe, took to the stage and delivered a heartfelt tribute to Steve Law – formidable competitor, friend and former colleague at Lyreco.

And it was indeed at Lyreco where Law spent over 25 years of his professional life, first in the UK for many years and then, from 2011 until he stepped down as CEO of the global contract stationer in 2014, in France.

Those two countries, of course, were but two of the places he’s been to, travelling to many far-flung corners of the planet, all for the cause of making Lyreco one of the best recognised, best organised and just simply best contract stationers in the world.

Choosing Law as the winner of the Industry Achievement award took little discussion during the judges meeting, all agreeing unanimously how richly deserved this accolade is.

Having had only a relatively short official notice period after he stepped down, Law took the opportunity to thank all EOPA attendees and the industry at large for a fabulous office products career. And perhaps we haven’t quite seen the last of him yet – that would indeed be a loss to all who know him!

Coolblue This award seeks to recognise resellers with a strong presence in their respective markets – it’s not about size, but about impact. It’s a tough category to judge as no two markets are the same, but all shortlisted companies stood out for excelling in their regions.

Past winner Amazon, for example, deserves another mention for the influence it continues to have on our industry. But there are other online success stories out there and the winner – Coolblue – was perhaps a surprise on the night, as it definitely wasn’t one of the usual suspects.

The judges, however, were very excited about Coolblue, a fast-growing online reseller in Benelux that provides a broad range of consumer and business products, including a range of office and technology items.

It’s not just the rate of growth from zero to about H500 million ($533 million) in just 15 years that impressed them. Another jewel in the crown was the unique and fun identity of the firm that resonates so well with consumers who appreciate not just outstanding levels of service, but also the company’s easy-to-navigate website and competitive pricing.

Rob Vale (left) presented the award to Steve Law w w w.opi.net | OPI Magazine

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Event Review | OPI Partnership 2015

Take your partners The second OPI Partnership more than lived up to expectations and is fast becoming a mustattend industry event

With

the inaugural event and the apprehension that came with it out of the way, the second OPI Partnership took place at the beginning of March. Some 90 senior level executives from the reseller and manufacturing communities came together for two days of top-to-top strategic discussions in a confidential environment.

The venue was once again the Hotel Okura in Amsterdam, a five-star hotel only a short distance away from Schiphol Airport that provided the perfect business – not to forget exceptional culinary – environment

to allow for efficient and hassle-free talks. An abundance of networking opportunities, including a fabulous meal on the eve of OPI Partnership and, of course, the 14th European Office Products Awards held at the end of the first day (see page 26 for a full EOPA review), over the course of the two days completed the picture.

But while first-time events come with a very different sense of trepidation, follow-ups are almost as nervously awaited: will they live up to expectations and the event become more than a one-hit wonder; will delegates return because they’ve seen

What the vendors said...

“We heard a lot of positive comments about the first OPI Partnership event in 2014 and are very happy we joined this time! A powerful two days with many well-structured meetings and great networking opportunities amongst key people from our industry. Our participation paid off!”

Dirk Naeve, VP International Sales, edding “With this being our first Partnership event, we were unsure what to expect. We came away very impressed with the format and the quality of the meetings. The one-hour meetings allowed for some very good, high-level discussions while the dinner events were a phenomenal opportunity to meet other attendees as well as have some broader strategic discussions on the overall market.”

Gary Blanchette, President, Amax “Partnership was again organised in an excellent way and for the second year proved to offer a great opportunity to interact and engage with the key leaders of the industry in a very efficient way.”

Michel van Beek, President, Fellowes EMEA

What the resellers said...

“It’s my second time at the event and I can confirm that it’s a special opportunity to have a look at the future of the OP industry and at the main vendors’ visions and plans. These meetings go further than just plain negotiations and represent concrete opportunities for new business.”

Francesco Villa, CEO, Gruppo Buffetti “For me, this is the most important industry event of the year. It gives me the opportunity to see where we are in our vendor relations, what we have executed or not, and where vendors see growth or innovation opportunities in the future. It’s also a good opportunity to socialise and compare notes with the top resellers, wholesalers, etc, in our industry.”

Thomas Glatzel, SVP Direct Business Europe (Viking) & MD Region DACH-BeNeLux, Office Depot

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OPI Magazine | April 2015

tangible benefits from the previous year and hope for more of the same; will newcomers join in, making the event even bigger and better?

The answer to all these questions was a resounding ‘yes’, judging by feedback from both sides of the table (see Testimonials box, left).

Diverse audience If further proof was needed where our industry is headed, the mix of vendors and resellers that came together for these private one-hour meetings was diverse in terms of products discussed and broad in its truly pan-European coverage.

The likes of Staples, Office Depot and Lyreco rubbed shoulders with Amazon, ADVEO, EVO Group and PBS Holding, while on the vendor side non-OP players like Proctor & Gamble, Unilever and Sofidel were sought-after discussion partners alongside familiar OP names such as BIC, edding, 3M and Fellowes.

As OPI’s CEO Steve Hilleard commented: “Once again, the reaction from Partnership delegates was hugely enthusiastic, which is perhaps not surprising given the size and diversity of the resellers and vendors in attendance and the seniority of most attendees. We have enjoyed creating this unique and valuable platform for the industry and look forward to next year when extra attention will be given to ensuring an even higher-quality group.”

Event Preview | OPI Global Forum 2015

Rough seas… …and how to steer through today’s choppy OP waters is what delegates at this year’s OPI Global Forum will be keen to learn about

ThE

fifth OPI Global Forum, to be held at the Sofitel Chicago Water Tower from 17-19 May, comes at an opportune time, a time when there’s plenty to discuss given the plethora of industry changes that have happened since the last US-based forum in November 2013.

On virtually a global scale, the most talked-about topic in OP circles at the moment is the potential Staples/Office Depot merger, and there’s no doubt it will come up in many discussions – on and off the stage – at this year’s Global Forum.

But there are plenty of other debates to be had at this invitation-only event that brings together CEO/Chairman-level executives from leading resellers, manufacturers and wholesalers of the ever-widening business supplies sector.

Addressing the core issues Chris Westfall, who stepped in at the last minute for the 2013 Global Forum and became an instant success with his dynamic enthusiasm, energy and quick grasp of the key industry issues, will take on the role of professional moderator again. He will guide the audience through a varied two-day programme of broadline presentations and panel discussions, as well as more specific and intimate roundtable debates, all focused on the core issues facing our industry today.

Some of these issues that will be addressed at the Global Forum – and that keep cropping up in the pages of OPI – are: • procurement strategies and processes • rebranding • adjacent sectors – jan/san and breakroom, for example – and their opportunities • the changing workplace • digitisation/technology • pricing • supply chain solutions

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OPI Magazine | April 2015

“By discussing strategy and best practice we can make not only our companies stronger, but the industry as a whole too” As ever, the first full day of the event will conclude with the eagerly awaited Big Interview, this year featuring United Stationers CEO Cody Phipps who will no doubt elaborate on a number of the aforementioned topics himself, perhaps most notably rebranding.

A key USP of the Global Forum is the networking. Attendees are able to experience the best, most focused, high-level networking in our industry over the course of the entire event, from welcome reception, lunch and coffee breaks to a fabulous steakhouse dinner at the end of the first day.

Will all the questions be answered during three days of listening, discussing and networking? Perhaps not, but a fantastic line-up of speakers and panellists will do their utmost to offer some clarity to steer delegates and their companies through the often muddy waters that is the OP industry today.

As OPI Director Janet Bell says: “The challenges we face are better faced together, and by discussing strategy and best practice we can make not only our companies stronger, but the industry as a whole too.

“The Global Forum is a unique meeting for our industry, with a focus on genuine high-level debate. And of course, we operate under Chatham House rules so delegates can relax and not worry about their thoughts and ideas being used later.”

Chris Westfall

You can find more information about the 2015 OPI Global Forum at www.opi. net/gf2015.

If you would like an invitation to attend, please email OPI’s CEO Steve Hilleard on steve.hilleard@ opi.net

Event Review | United Stationers CORE Live

Into the

‘Essendancy’

United Stationers revealed its new corporate branding and important operational developments at its first CORE Live event in Nashville in February

AS

an event organiser, one thing you can’t control is the weather.

Unfortunately, United Stationers’ eagerly anticipated CORE Live show coincided with some particularly severe wintery conditions in eastern and central parts of the US that led to the closure of Nashville airport on the eve of the show and major disruptions in many other key US cities on the East Coast.

Faced with these meteorological challenges, credit must go to United and its show organisation partners who worked around the clock to ensure that CORE Live went ahead pretty much as planned, with only a few last-minute tweaks to the original schedule. Numbers were lower than planned, of course, but those that did make it to Nashville – including (eventually) four members of the OPI team – were certainly not disappointed that they had made the effort to attend.

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OPI Magazine | April 2015

“I thought CORE was a very good show with excellent speakers, content and just enough ‘fun’ to make it overall enjoyable and worth the time,” commented leading US OP dealer principal Dave Guernsey.

United, of course, revealed its new corporate identity at CORE Live. From June, the wholesaler will be known as Essendant, a name which CEO Cody Phipps said better illustrates its goal to be the leading distributor of workplace essentials.

A new tagline ‘Beyond Essential’ reflects the value that it brings to its supplier and vendor partners and other stakeholders.

The new name was revealed on the second morning of CORE Live during a general session which was broadcast live to United’s 6,600 employees. “Join us on the journey to become Essendant,” Phipps told the audience and the watching employees.

The unveiling of the new name represented a soft launch for the rebranding. Essendant

“Join us on the journey to become Essendant”

United Stationers CORE Live | Event Review will officially come into being in June following United’s shareholder meeting (shareholder approval is required for the name to be officially changed, but this should be a formality). After June, customers and suppliers will start to see changes take place, with the new branding becoming fully adopted by the end of the year (see ‘Essendant explained’, right).

Common platform The other major talking point at CORE Live was the move by United to a common IT and operating platform for its jan/san and office products, which have been run separately since United acquired Lagasse way back in 1996. This is a challenging task that the wholesaler has been preparing for some time, but will mean one order, one shipment and one invoice for dealers for their office, jan/ san and breakroom products.

“United’s office products business and Lagasse coming together is long overdue,” noted Tricia Burke, President of Kentucky-based dealer Office Environment Company. “It will make a difference, as long as it is appropriately stocked.”

Kevin Garvey, VP of Sales at leading Chicago dealer Garvey’s Office Products, also believes that integrating Lagasse and United is “a great idea”. “My hope is that it will not negatively affect stocking levels,” he commented, “but I do believe that it will give [United] a competitive advantage from a convenience standpoint.”

For Guernsey, the integration needs to happen “as quickly as possible”. “We’ve been

Essendant explained Like any new name, Essendant will Diane Hund take a bit of getting used to. The word itself is a combination of ‘essentials’ and ‘ascendant’ and represents two core goals that United aspires to: to be a supplier of a full bundle of business essentials and to move that forward in an ascending fashion. The ‘A’ in Essendant reinforces the upward direction of the brand, and this aspect of the logo will be used in other Essendant marketing messages.

Product divisions will be grouped around the ‘essentials’ word; for example, Business and Facility Essentials, Industrial Essentials, etc. That will also give Essendant the scope to move into other categories.

United VP of Marketing Diane Hund explained that the rebranding had taken about two years and that she and her team had followed a fairly traditional branding process, first honing in on the core values at United – which were found to operational excellence, insight and a commitment to improve – and then using these as the foundation blocks for the new brand.

While the new name won’t officially be launched until after it has been ratified at the United shareholder meeting in May, Hund said the wholesaler didn’t want to miss the opportunity to introduce the new brand to its “largest and most important” customer group at CORE Live.

From June, the initial focus will be on the most visible aspects of the brand such as the website, larger flagship buildings, business cards, etc, with the rebranding process set to be complete by the end of this year.

Incidentally, the new corporate branding is totally separate from United’s product brand strategy, Hund confirmed, and the new name will have no bearing on current brands such as Universal, Boardwalk (which has just been revamped) and Alera.

“United’s office products business and Lagasse coming together is long overdue” waiting over a year for this to conclude and we learned it may well go through the whole of 2015,” he told OPI. “It’s very important for the channel to have a greater depth of product than simply OP.” On the vendor side, Paul Schacht, National Sales Manager at Duracell Professional Products, also sees the Lagasse/United integration as a positive development. “The combined platform simplifies things for us and gives us some scale and some synergy across this broad organisation. It also gives us better access to some new customers in jan/ san, and I think once they work through the platform integration, it will definitely make United easier to do business with,” he said.

In addition to these two major announcements from United at CORE Live, the

event featured a classy seminar programme, an impressive keynote speaker line-up and a vendor expo. While attendance at the expo was naturally hit by weather-related factors, the show floor was bustling for most of the day and vendors were able to spend some quality time with dealers.

Keep moving “Considering the circumstances, attendance was very good at the trade show,” commented Amy Brown, Director of Sales at ECi Acsellerate. “I think dealers made a point to stop by and talk to all the vendors and have valuable conversations.”

A panel Q&A with senior United executives wrapped up the event – Harry Dochelli ended by telling delegates: “To stand still today is to go backwards quickly.”

Certainly, embracing change was one of the key themes of CORE Live and all attendees left with plenty of ideas on how to bring that change to their own organisations. w w w.opi.net | OPI Magazine

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Event Review | Cody Phipps Interview

Cody’s CORE catch-up United Stationers CEO Cody Phipps held a press briefing session at CORE Live. Here is what he said about some key United Stationers issues On the shift to online Cody Phipps: For the first time, we’ve disclosed that sales to customers that mainly sell online now represent about 10% of our portfolio and are growing – and they were up 15% in the fourth quarter.

We think that is a good indication of our strategy working. We’ve said we want to win the shift online and we’re well positioned to do that.

We look at traditional online growth rates and a number of metrics that peg online growth, and from our perspective, there’s a massive shift out of bricks-and-mortar stores to online. We tend to be the chosen partner of many of the online players such as Costco.com, Walmart.com, Staples.com or Quill; we are their partners, so as they gain share through the shift to online we gain share.

Cody Phipps

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OPI Magazine | April 2015

But we’re not trying to race with Amazon, Grainger or Staples and have more SKUs that anybody else – what we really want to focus on is that fast, most convenient solution for workplace essentials. That’s where we think we bring something in the combination of having all those products in a single delivery with a high-touch service.

On United Stationers supporting national players and large e-tailers CP: I think our independent dealers understand the nature of the industry; they know there are two choices: you either support those players or you don’t.

And as you know we have great relationships with those players; they are great partners and I actually think they make us better. By partnering with the leading industry players, we are a better company as a result of that and we then help the independents be stronger.

On combining the Lagasse and office products platforms CP: Our customers have been telling us for some time that they need easier access to all these products. We need a simpler operating model that we can

leverage – and this represents about 85% of our business right now. We are committing to a common operating and IT platform for the future – over time we think we’ll bring more businesses onto this platform.

This will be a multi-year effort.

We start converting facilities in the second half of this year, and it goes through the first half of next year. A lot of that is where we have redundant infrastructure; I can’t give an exact number right now, but you will see a rationalising of our DC footprint in the coming years. This will help us serve our customers better and from a more efficient business model.

On the Lagasse and office products sales teams CP: We have announced some moves there, and Harry Dochelli is leading that effort. We’re bringing the market-facing side of our business – the sales forces and the customer care centres – together. We have segmented our customers and we’re redesigning our sales force around those segments so we can better service them and deploy our resources to them.

There’s no one-size-fits-all. You may have an office products dealer that’s 30% facilities and breakroom and 20% safety, so we’re redesigning our sales force to really bring the expertise we need to help them grow in these categories.

We started this journey four or five years ago. Some of the naysayers then said we were abandoning OP, but our view was that we were expanding and diversifying – and when I look at some of our more progressive customers, they’re ahead of us.

Today, 56% of our sales are from office products. When I joined United, that figure was 90%. Some of our more progressive customers have 40% office products, 30% facilities and breakroom and 30% something else – it’s just a sign of the times that people are expanding and diversifying what they do.

Read the full Cody Phipps interview, including his thoughts on industry consolidation, online at opi.net.

Category Analysis | MRO

Branching out Some OP resellers have looked to the MRO sector as a haven of diversification in harsh economic times, but business often remains tough for many

by David Holes

WHEN

OPI reported on the maintenance, repair and operations (MRO) segment last July, many in the sector reported buoyant sales, but strong economic headwinds remain which continue to cause some issues.

Global MRO reseller Grainger saw both overall sales and profit up 6% in 2014, but CEO Jim Ryan says he’s not satisfied with the company’s performance, particularly overseas where markets only just managed to break even. "Longer term, we remain optimistic about our opportunities in the large and fragmented MRO market," he adds, but Grainger has in fact lowered its 2015 sales and earnings forecast. It now expects 3-7% sales growth (down from 5-9%) and it also expects its profits to be lower than previously forecast.

Similarly, France-based Manutan has reported a decline of 3.6% in constant currency for Q1 2014/2015, with only the West Zone (UK and Ireland) of its five divisions recording any significant sales growth.

Sector consolidation and M&A activity remain key trends, with MRO reseller Bunzl expanding its presence in the safety category with the acquisition of Tillman, and US industrial products retailer Systemax acquiring MRO supplier the Plant Equipment Group in January 2015.

For the OP community, MRO is a nascent but definitely growing sector to branch into.

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OPI Magazine | April 2015

US-based dealer Miller’s Office Products, for example, has announced a major rebranding initiative – Miller’s Supplies at Work – to emphasise the addition of new categories such as MRO and healthcare to its suite of traditional office supplies.

Paul Barrett, Chief Operating Officer – Industrial at United Stationers, meanwhile, identifies MRO as a key business: “The industrial market size is worth over $400 billion, and MRO makes up a significant share of that.”

Barrett explains that one leading sub-category enjoying double-digit growth is safety and security, representing a massive $12 billion segment of the MRO market: “More than any other, this category reaches into nearly every type of business. Dealers can sell safety ‘lite’ tied to first aid, gloves, hearing and eye protection, or move into areas such as lighting, gas detection or traffic safety.”

He believes this sub-category offers OP dealers the opportunity to gain a greater share of the customer’s wallet and achieve

“The [safety and security] sub-sector is the best starting point because it's the least challenging of all MRO categories”

MRO | Category Analysis higher overall margins, adding: “We see demand only increasing as areas like personal protection and safety become a greater part of corporate wellness and risk avoidance programmes.”

Mike Foster, Director of Merchandising for dealer group Independent Stationers (IS) discloses that demand for its MRO range is partially driven by end users wanting to buy from fewer suppliers and consolidate their spending power: “Gloves, first aid products, eye and hearing protection are the big movers for dealers,” he says.

First aid specialist Acme United adds that all types of reseller are now getting in on the act, with its refill and supply business expanding both in terms of volume and in the diversity of items it produces. As CEO Walter Johnsen points out: “Independent office dealers are now embracing first aid, with wholesalers and superstores expanding their range and depth of safety products. They’re broadening the scope of the industries they serve and demanding more sophisticated solutions. As such, they want full support, expertise and training where appropriate.”

Bunzl’s US distribution service R3 stocks a wide range of personal protection equipment and can offer this support says Rob Fulford, R3 Redistribution VP: “Our local experts are knowledgeable on these product categories.

We can help dealers select and maintain the right assortment of products for their customers. By using us as their ‘virtual warehouse’ we can help them expand their product breadth without having to invest in additional inventory and warehouse space.”

Early days Generally-speaking, the sector is still in its infancy for the OP industry. Foster says: “MRO is brand new to the typical dealer and still relatively new to us as a group. We’re still doing a lot of research on the type of products involved in MRO. Our dealers are getting an increasing number of requests to supply these products, so it looks as though its importance will become key very quickly – much faster than it took jan/san to become a crucial area.”

Barrett reports a similar nascent industry, with OP dealer demand for MRO and industrial products at a very early stage, again analogous with the time dealers first entered the jan/san and breakroom categories.

Like others, he identifies safety and security as by far the most comfortable entry point for dealers and adds: “This sub-sector is the best starting point because it’s the least challenging of all MRO categories. Evolving

into the broader universe of MRO will take a greater level of dealer commitment in both knowledge and selling competency," he says.

Reaching potential Barrett concludes: “We have the expertise to assist dealers in expanding their ‘comfort zone’ into all categories, most of which are untapped so far. If dealers understand their customers’ MRO needs, it will yield the potential. The eyes of many will be opened as to what they are missing as they uncover the millions of dollars that dealers are walking by today.”

Full package The astonishing growth of e-commerce has created an opportunity in another MRO sub-sector – the packaging and shipping business. OPI talks to Chris Bonnis, National Accounts Product Manager at US-based packaging specialists B O X Partners.

OPI: What’s the outlook for OP dealers wanting to break into this sector?

Chris Bonnis: Small parcel shipments within the US exceeded nine billion packages in 2014, and to feed the online shopping engines it’s set to increase a further 8% in 2015. This represents a very healthy growth opportunity for OP dealers that want to participate in this channel.

OPI: What pitfalls can you see?

CB: Entering new markets can be challenging when the product mix strays too far from a company’s core competencies. However, when a new category offers some degree of proximity to the core offering and has accelerated growth, it should be thoroughly explored.

OPI: What’s the best product entry point for new participants?

CB: Most OP dealers are familiar with two key packaging product groups – envelopes and shipping bags. Office and shipping tapes also go hand in hand. These two critical areas provide a level of reassurance for dealers and their sales people that a new product expansion opportunity is within their reach. The jump into a myriad of other categories can be a natural extension of these two key areas.

OPI: What other benefits does the packaging channel offer?

CB: Dealers looking beyond traditional OP will find rich soil to cultivate new business in this category which doesn’t require advanced technical expertise. Aside from tapes and shipping envelopes, the remaining product categories in this market, such as boxes, labels and bubble wrap, don’t need a high level of training to sell. Often it’s just as simple as letting the customer know these products are available.

OPI: What can we learn from those companies that have already taken the plunge?

CB: The most successful OP dealers have taken advantage of the surge in e-commerce sales by initiating a digital go-to-market strategy to promote packaging and shipping supplies. By adding a comprehensive selection of product to their current online offering, they provide customers with the most comprehensive shopping experience. It’s never been easier to reach new prospects and grow existing relationships by leveraging technology to get the ball rolling.

w w w.opi.net | OPI Magazine

41

Category Analysis | Paper

Paper: bull or bear market?

by David Holes

WHEN

OPI talked to the main paper manufacturers and a variety of resellers about the prospects for this sector, it gathered some quite diverse opinions. Those on the more pessimistic end of the spectrum saw an industry contracting each year by several percentage points, crippled by overcapacity and too many businesses competing for a slice of an ever-diminishing pie.

Predictions of continuing consolidation and further bankruptcies within the commercial print community painted a rather bleak picture of the future.

For example, James Kluth, Category Product Manager at United Stationers, has seen persistently disappointing sales: “Last year, demand in the US was down 4%, which is fairly consistent with the declines we’ve seen over several years. Industry analysts are forecasting that demand will again be down by another 4% in 2015.”

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OPI Magazine | April 2015

Gauging an accurate picture of the current state of health of the paper industry depends largely on who you talk to However, when viewed from a global perspective, the overall situation is more complex.

As Gerald Demets, Commercial Director of Uncoated Woodfree at International Paper’s (IP) European business, points out: “Whilst demand for cut-size paper in Europe declined by 1.5% in 2014, on a global scale office paper consumption continues to increase, mostly in fast-developing, emerging markets.

It’s important to note that paper consumption correlates with the maturity of economies.”

Slight dip Data from Iwan Le Moine, Senior Market Analyst at paper industry experts EMGE, backs this up: “Considering the current economic and political climate, demand for cut-size paper over the past year hasn’t been too bad. The figures show only a slight dip in demand of 1.6% in Western Europe, and even that figure could actually be worse

than the reality when you consider the change in distribution going on in the industry.”

GfK data from the UK indicates that value in the market is indeed increasing. Greg Allen, the research firm’s office and stationery expert, explains: “Office paper has seen a significant rise in price, protecting the market value from volume decline. In 2014, it actually grew in value by 1% due to an increase in average selling prices (ASP) of 14%.

In Q4, the market was more positive, with volume and value up by 3% and 16% respectively. Prices now look to be stabilising, with ASP in January 2015 only 2% higher than last year.”

A recent survey of 250 UK companies by waste management experts Business Waste also revealed some surprising findings about paper use in the office environment. It established that 43% of respondents hadn’t seen any reduction in their paper use over recent years and a surprising 31% were actually using

Category Analysis | Paper more paper than they were five years ago. As its spokesperson Mark Hall says: "We've been 'promised' a paperless office culture for years, but it's painfully clear that dead trees aren't going to go out of fashion for a long time to come."

Balance supply and demand One of the major challenges facing the industry that all the key players agree on is the need to balance supply and demand. Some paper mills have been closed and in Europe Metsä Board has announced that it’s exiting completely from the paper category.

This has reduced production capacity, but as Le Moine from EMGE explains: “Metsä's Husum mill is being converted away from uncoated woodfree, but it won't make a huge difference in the short term. The big question is not about the lost tonnes – they'll be easily absorbed when the mill finally stops making this grade – but what happens to a leading and highly visible brand. The biggest problems come from China, where supply outstrips demand, and Indonesia which is primarily an exporter. Both exacerbate the overcapacity situation globally.”

An executive from one of the major paper manufacturers who wishes to remain anonymous agrees that overcapacity is still a problem: “Even though some capacity has been removed, it hasn't been enough to create a balance between supply and demand and stem the decline.

Unfortunately, we believe that the continuation of consolidation within the paper manufacturers, paper merchants and brokers, retail and the independent office products channel is inevitable.”

He further suggests that there are other key issues that the industry needs to address if it is to thrive: “Making our industry attractive enough for the millennial to consider as a career path is something we need to tackle. Corporations must position themselves to grow by ensuring they are well financed, have a global footprint and are diversified throughout multiple product categories. Cheap imports are part of the global paper industry and everyone should have a strategy that

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OPI Magazine | April 2015

Green conundrum Whenever the topic of paper manufacturing comes up, green questions raise their head and it seems that the industry is still wrestling with a poor environmental image. Iwan Le Moine, Senior Market Analyst at EMGE, says: “This is still a big issue, and a volatile one too, with both user perceptions and governments taking very different views and approaches in different countries.”

But manufacturers are keen to point out that there’s actually a lot of misinformation out there that needs to be countered. The Two Sides initiative was set up in the UK in 2008 by members from the graphic communications supply chain “to inform paper users everywhere that print and paper is an attractive and sustainable means of communication”.

It seeks to change misleading statements and counter greenwash claims. As Marketing Assistant Greg Selfe says: “For a long time the industry tolerated misinformation about its environmental impacts, particularly on deforestation and waste. The reality is very different, with European forests growing by 30% since 1950 and expanding by 1.5 million football pitches every year. In the UK, 72% of waste paper is recovered for recycling, making the industry inherently sustainable.”

He adds that the digital alternatives also have an impact, with electronic waste now the fastest growing component in the municipal waste stream: “The amount of electronic products discarded globally has sky-rocketed with more than 20 million tonnes generated every year. In Europe, e-waste is increasing at 3-5% a year, almost three times faster than the total waste stream.”

Gerald Demets, Commercial Director of Uncoated Woodfree at International Paper in Europe,

takes a similar tack: “There’s clearly an opportunity for the industry to better communicate its environmental credentials and improve its perception by stating the facts. For example, producing 200 kg of paper – the average we use every year – creates just the same amount of CO2 as driving an average family car 960 km. Also, there are actually 25% more trees in the developed world today than there were in 1901.”

The benefit of recycling is another contentious issue. Demets notes that the amount of recycled office paper used is not increasing and says that in reality it’s more environmentally friendly and cost-efficient to use recycled fibre, which doesn't need de-inking, for packaging or newsprint, for example: “Office paper needs high-quality recycled fibre to provide the stiffness for fast printing and the high brightness required.”

Cristen Taylor, Market & Product Manager at Domtar agrees: “In addition to recycled fibre, internationally recognised third-party certification ensures virgin material is an equally-responsible option. Recovered paper can only be recycled a maximum of seven times before the fibres lose their strength and disintegrate. Without the addition of virgin fibre into the cycle, printing paper production would halt within weeks, which is why heavy emphasis on sustainable forest management, combined with responsible paper use and recycling, is needed.

“Internationally recognised schemes like PEFC or FSC, are the most effective means of providing customers with assurance that forests are managed sustainably.

North American manufacturers offer a wide variety of responsibly-crafted products so customers can choose the paper that best matches their principles, with choices ranging from certified virgin fibre products to those containing high levels of recycled material.“ allows them to compete not just on price alone.

“Having a plethora of products to offer as alternatives and a service platform that distinguishes you from your most formidable competition are vital. Firms must be creative in presenting ways to their clients for reducing costs in their supply chain, gain market share and create mill

brand equity in the products they offer. Currency fluctuations can swing both ways, so it’s also imperative to have the right foreign manufacturer to establish continuity of supply.”

IP’s Demets believes that pulp consumption worldwide is in fact growing due to economic developments in emerging markets, but notes that within Europe many

Category Analysis | Paper Paper brand importance: factors & ratings

brand, allowing them to customise the box, labels and marketing programmes: “Customers take into consideration look, feel, performance and usability. End users need to select products that meet their usage and help them look their best when their work needs to stand out. Sales indicators show that brand still matters.”

5

Average Expectation Level 3.90

3

4.55

4.35

4.00

3.94

3.82

3.47

3.17

2

Brand importance 1

0

Regularity of quality

Product performance

Physical properties

Optical Multifunctionality Brand appearance reputation

Advertising/ promotional support

Source: EMGE

paper manufacturers have taken steps to adjust supply to demand.

He says: “Imports have drastically declined as a result of the current pricing level in Europe, particularly at the current US dollar/euro exchange rate. European paper producers have actually started increasing exports to more profitable market areas.”

Fair play Meanwhile, the flood of copy paper imports into the US over recent years has had a negative impact on the industry with knock-on effects for the entire US economy.

Cristen Taylor, Market & Product Manager at Domtar refers to a petition that was filed in January in the US by four US paper manufacturers asking for an investigation into the import of uncoated paper from China, Indonesia, Brazil, Portugal and Australia. The petition seeks to impose anti-dumping and countervailing duties to offset subsidies on imports from China and Indonesia. She states: “Although competition makes us stronger and a better supplier to our customers, that competition must be fair and balanced.”

On the issue of supply and demand, improvements are on the way. Prior to the global recession, a large amount of paper-making capacity was built in Asia to meet what turned out to be overly optimistic forecasts for demand from those emerging markets. When that demand failed to materialise, the result was a glut of excess production capacity. That

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OPI Magazine | April 2015

Demets agrees that consumers attach more credibility to mill brands, which are usually sold at a premium.

He, too, sees a possibility to differentiate in the area of packaging, citing International Paper’s newly-launched, easy-opening ream as an example.

He believes there’s potential to add more value by making sure the consumer uses the right paper for the right application: “You need a different paper if you are printing high-volume black and white or printing in colour to impress the reader. This requires close cooperation with the different stakeholders in the value chain.

There are clearly opportunities to intensify this cooperation within the OP industry and I strongly encourage OPI readers to share their ideas with us so we can jointly serve our end users better.”

For another view on the paper sector, see our Final Word on page 50.

excess found its way to other markets around the world, including the US. However, paper demand in Asia is now rebounding and industry forecasts suggest a more balanced supply/ demand ratio moving forward.

United Stationers’ Kluth points to the harsh new reality that exists in the industry: “The days of mills producing thousands of tonnes and leaving them in inventory are long gone.

Mills have no compunction about taking downtime to keep inventory from growing out of control, and the downstream effect is that supply chains now need to be very efficient.”

Paper is often viewed as a commoditised category, but Le Moine stresses the importance of adding value: “It’s vital if you’re a 5 (billion tonnes) cut-size paper Cut-size supply-demand balance manufacturer, because if there is no value you 4 will soon go out of business. Mills are constantly striving to 3 differentiate Operating Ratio themselves from their competitors for that edge, and 2 hopefully charge for it.”

Taylor reports 90% 87% that some 1 resellers have had success in marketing their own private 0

2013

2014

in Europe Capacity

Shipments

93% Source: EMGE

Average Rating - Europe

4

2015

Your OPI

5 minutes with...

Michael Alfinson, Purchasing Director, RKV, Sweden

Describe what you do in less than 20 words.

I arrange all the assortments, agreements and catalogues for my entire group, plus much more.

If you weren’t doing your present job, what job would you like to be doing?

I would like to own a shop selling exclusive clothing for men.

The best moment in your career.

My start as a purchaser at Björsells, nowadays known as Staples.

The industry figure you most admire, and why.

BPGI’s Jim Preston. I have never met a guy as polite, friendly and knowledgeable as him.

Your best piece of advice to someone who has just joined the OP industry Sell the right product to the right customer at the right price.

The most memorable travel experience you’ve had while in the OP industry.

Going to China is always great, but some of the trips have been very interesting!

What do you think will be the biggest issues affecting the OP industry over the next five years?

I think that business conducted online will become more prevalent. At the same time, it seems that dealers have stopped selling office supplies and instead are focusing on FM products because it is a growing market.

However, I think this is very dangerous.

“Sell the right product to the right customer at the right price”

What sports team do you support, and why?

IFK Göteborg. It is the best football club in the world – at least in my world – otherwise Arsenal.

If you could invite two famous people for dinner, who would they be and why would you invite them?

Although so many others have attempted this for numerous years, I’d invite President Obama and President Putin and tell them what they should be doing.

Best way to spend the weekend.

At the golf course would be my first answer, but I think I should say it would be with my family in a nice restaurant somewhere.

Any annoying habits?

Talking about how well I play golf.

Which character from a film or TV series do you think most resembles you, and why?

Ian Dunross from the 1988 NBC miniseries Noble House. Pierce Brosnan – who is exactly like me (haha) – played him.

How would you like to be remembered?

As a good father, I hope.

What do you like best about the OP industry?

We still have so much to create, do and sell, but really don’t understand it all yet.

What do you like least about the OP industry?

That some industry people think everything will be taken care of by the internet – I disagree.

Any interesting hobbies or collections?

I did collect stamps once upon a time. Today, I have a small collection of TinTin cars.

I love TinTin.

Your favourite movie, and why?

An Officer and a Gentleman. It is the most romantic movie ever made. The ending is so... (excuse me for me a moment…)

www.opi.net | OPI Magazine

49

Your OPI

Final Word Your industry, your opinions

Ricardo Ferreira, Brand Manager, Grupo Portucel Soporcel

The paper industry: evolving, not dying People predicting the end of the paper industry have been proven wrong many times over the years. In 2014 again, the uncoated woodfree sector performed fairly well and in Europe office paper consumption was the same as in 2013 despite the low level of economic growth.

Of course, we would love to have a stronger economy in Europe that would sustain 2015 consumption better, but even with flat consumption, the industry’s balance is improving. Some capacity will close this summer and imports are being reduced as pricing levels outside Europe are significantly better when you sell in US dollars.

Hopefully this will support the European paper industry.

Paper is often talked about as a commodity product. In my opinion that is wrong. If some papers sell well and others don’t, then by definition they cannot be commodities (and relevant brands play a role). Customers immediately see the difference – not all paper reams are born alike!

The big challenge is to get customers to buy the right paper for their needs and to trust their supplier/distributor.

was extremely slow and costly, and you had to send a messenger to share a printing file. Today, anybody in an office can print excellent documents, has access to plenty of colourful images and can distribute printable files with a single click. Email, for example, has been one of the biggest positive influencers of the printing industry.

As a result, office paper must be able to print at 40 pages per minute in colour, double-sided, without jamming, all day round, with excellent print quality. But do users want to pay twice the price for a 120 g/m2 ream to do that?

Of course not, so you have to develop papers in 80 g/m2 and even 70 and 75 g/m2 that deliver exactly the same performance. That is difficult and a lot of R&D goes into the process of achieving it.

“Paper is often talked about as a commodity product. In my opinion that is wrong”

Quality over price The market is still rife with cheap paper that too many distributors use as a door opener. Cheap paper means poor quality, it’s as simple as that. End consumers are sensitive to price, of course, but they are even more sensitive to quality and when they know a brand will give them the quality they want, they look for that brand and if it is not in your shop/catalogue, they will go elsewhere.

Also on the price issue, recycled paper does not add any value and it does not drive customer satisfaction.

Irrespective of the perception consumers have of its environmental benefits, recycled paper is always weaker than virgin paper, so why would anyone pay more for a product that is effectively worse?

Importantly, resellers associate quality not just with a brand but also with the paper’s distributor, so if they are not happy with the distributor, they will find another one.

Conversely, if distributors sell premium-branded paper, they get better customer satisfaction and retention, and that drives sales of office products (and the sheer number of products that are used together with paper is massive).

Technology, as ever, is crucial to the overall debate.

Every time customers can print differently, paper suppliers have to embrace the new technology that allows them to do that. Not so many years ago, printing in colour

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OPI Magazine | April 2015

Supply chain consolidation

Logistics in the paper industry is big business. Paper mills are getting bigger and distances to end users are growing. And as end users demand more and more service, so the supply chain must evolve accordingly.

Most OEM paper today is distributed through merchants which themselves are key partners for many wholesalers. In theory, many different distribution models can happily co-exist, as long as every part of the supply chain is trying its best to be efficient, and nobody thinks they own the customer.

On the sourcing side, the impact of China working hard to reduce capacity and close mills that are environmentally unsound has created initiatives in other parts of the world.

More supply in pulp from Latin America, for example, has been absorbed much better than anybody had predicted.

Lastly, consolidation is a big topic. Mills that cannot produce their own pulp in competitive ways have to focus on special and very high-value products to succeed, and unfortunately some couldn’t do it. And unless vendors can adapt to product segments that generate better value than producing ‘only’ copy paper, others will follow.

Want the Final word? Email editorial@opi.net

IN THE NEXT ISSUE • Big Interview with Brad O’Brien of Office Choice • Breakroom Special, including an overview of this ever growing opportunity for resellers, interviews and analysis...

Office Products International ISSUE NO.2 4 8

The word in office.

magazine

Big Interview Simon Drakeford, CEO, Euroffice p16 April 2015

APRIL 2015

A hive of activity

As consolidation hots up, who are the winners and losers? p20

WWW.OPI.NET

p36 EOPA winners revealed p26 p42 Paper: bull or bear market? p12 3M revises paper policy United Stationers rebrands