PBS - Holding ag

Big Interview with Richard Scharmann

Holding firm

Austria-based multichannel group PBS Holding is continuing its
development across Central and Eastern Europe. CEO Richard
Scharmann explains the group’s strategy

IN the not-too-distant past, PBS Holding’s multichannel combination of wholesaling, dealer franchising and direct sales to end users looked a bit of an old-fashioned business model amidst the trend for nice, clear lines separating who did what in which channels. However, business models have been changing. Just look at Spicers and Vasanta in the UK, Quantore in the Benelux region and Novexco in Canada, where wholesaling now sits squarely with direct operations. Maybe PBS had the right idea from the start! Richard Scharmann has been with PBS Holding for the past ten years, in what is his second spell with the firm, and has been CEO since 2008 following a management buyout. OPI spoke to the 47-year-old Austrian following another year of growth for the group.

OPI: Richard, perhaps you could start with a quick overview of PBS Holding’s 2014 performance.

Richard Scharmann: Well, we grew quite significantly last year to around H250 million ($295 million) in sales, but this was mainly due to the acquisitions we made at the end of 2013 and the beginning of 2014. Organically,
in Austria and Germany we achieved growth of between 1-2% compared to 2013 and in Eastern Europe it was a bit higher – about 3-4% – in a region where the market grew by about 1%, so we did take some share.

OPI: Could you remind us of your operations in your different markets?

RS: Our two main markets are Austria and Germany, where sales are about H92 million and H90 million, respectively. In Austria, we run both the wholesaling and B2B channels and we are clearly the market leader here and achieved really solid results last year. We have a very well-developed IT and logistics infrastructure in Austria and I think we’ve raised the bar significantly in this market. In Germany, we are still very focused on the wholesale channel and are not doing any direct business there. We had a significant change when we took over the Kugelmann business at the end of 2013 and were busy last year with the integration work. Again, over the past 2-3 years, we have invested heavily in infrastructure – last year we spent about H2 million improving our systems and we are really happy with the set-up we have right now. Eastern Europe accounts for the remaining H70 million of sales. A relatively new market for us there is Poland and that has really grown since we acquired the Biella wholesaling business at the end of 2013. We achieved about H19 million in sales in Poland in 2014 and I believe we are now the market-leading wholesaler in this market. We’ve finished the integration process and will now really start to invest in our systems and logistics infrastructure and broaden our offering in terms of products and product groups and really drive the market in Poland. The Polish business is already profitable, which is important, and we see good opportunities there. It’s still wholesale only, similar to Germany where the dealers wouldn’t like to see us operating in two channels.

OPI: So you don’t have plans to go direct in Germany then?

RS: Definitely not. But it is interesting to look at the changes taking place in the OP market, especially in the UK with Vasanta and Spicers and their wholesaling/direct models. I don’t think anyone would have predicted that two or three years ago. From my point of view, that’s wonderful to see because for years we were the ‘strange kid on the block’, with people saying no one would understand our concept because we’re doing wholesaling, we’re doing direct and we have different approaches in different countries. And now it’s almost the norm. What’s interesting is the direction of ADVEO because they are still very much focused on their wholesale-only approach, so now they are almost the strange kid on the block in that sense.

OPI: You mention ADVEO. How has it emerged as a competitor over the past couple of years with Spicers and Adimpo coming together?

RS: It’s been a major development. And as a competitor I do have a lot of respect for them: they are providing a comparable concept to the market in terms of logistics, ERP and ordering systems, and a franchise
concept. We just recognise that they are busy with their integration work in much the same way as we were last year in Germany. We are lucky enough now to have a structure which is set and ready while ADVEO is still in this integration phase; they are thinking about the right logistics set-up in Germany and whenever you touch those structures it’s a huge change.

OPI: You’re going head to head with ADVEO’s Calipage group in Germany with your Büroprofi dealers. How’s that been doing?

RS: Yes, it’s a franchise concept comparable to Calipage. We have almost 100 dealers in Austria and about 40 now in Germany, growing very well. In both countries around 80% of sales we do with the Büroprofi partners are direct deliveries to the end consumer, so it’s stockless 80%.The second franchise network we have in place in Austria and Germany is Skribo, which is more on the retail side. We have 70 shops in Austria and we are close to 100 right now in Germany – 2014 was a really strong year in Germany; we added almost 30 Skribo partners.

OPI: It sounds like good growth in Germany both with Büroprofi and Skribo. Where are these new members coming from?

RS: Some are joining us from other groups, but this is the minority of new partners. On the Büroprofi side we are seeing some new members coming from the globals – sales reps who want to start their independent company and we believe we have the perfect set-up for them. In fact, they are among the most successful players in our groups because they’re very customer focused and they know how to deal with high-end systems, so they are strong competition even for the globals. Then we get new members from the cooperatives because these cooperatives are still very much focused on the purchasing side and less on the marketing side. So we have dealers joining our franchise networks because they need the last mile in terms of marketing and communications to the end customer where we, I believe, can provide better and more sophisticated tools.

OPI: Turning to product assortment, how have you been developing in areas such as hygiene, catering and facility supplies?

RS: We are shifting to these new product categories in much the same way that others are. In certain areas like managed print services, we simply decided not to enter that because we don’t have the right set-up, so maybe we have to live with more downside on the EOS side, but then make up for that by growing in other product groups like facilities management (FM) and promotional products. When you look at the past two or three years we have been able to keep our organic sales more or less stable, so we’re not growing that much but we’re not losing sales either; if we can balance the portfolio right now and if we can keep it on that level, I’m quite comfortable with the situation.

OPI: We’ve seen, for example, the two main wholesalers in the US acquiring companies from outside the traditional office products space. Would that be a strategy you would look at?

RS: It could be interesting, but the point is I don’t think we are at that stage yet. It is a potential scenario, of course, but we don’t see any real opportunity to grow the businesses with those product lines. Right now we still can grow the FM category in the double digits – albeit from a low starting point – and this compensates, to a certain extent, for the declines we have in other product groups. There will come a day when those growth rates cannot be maintained and then it will be a question of seeing how we can deal with the next stage of development. That may involve acquiring businesses outside our field of expertise, such as jan/san distributors, but it’s a category where we don’t have any real experience and where these existing operators have their own issues right now. So we are not at the point of being able to execute acquisitions in that direction, but maybe there will be a day when we will have to.

OPI: Yes, but are you currently able to offer a sufficient product assortment for your customers to be able to sell these products profitably?

RS: We select the most important products where we can at least gain some volumes that make it feasible for us in terms of pricing levels to be able to stock them ourselves. But there is a clear strategy that we are not expanding the assortment to where we’d need to run a separate warehouse for these products. Our approach is to work very closely with jan/san and facilities management distributors, linking them virtually into our assortment. So, for example, we provide 30,000 items on stock in Austria and an additional 75,000 items to our customers on a virtual basis, and we expect this number to grow to more than 200,000 items within the next two years; all items that can be ordered for next-day delivery.

OPI: What do these facilities, catering and cleaning products represent as part of the total sales mix?

RS: It depends on how exactly you define these product groups, but the figure is in the region of 15%.

OPI: You are Chairman of the Interaction wholesaling/distributor group in Europe. You’ve certainly been boosted by Quantore coming in at the start of this year.

RS: It has always been our strategy not to be too aggressive with member recruitment and to bring in partners that add synergies and structural benefits to the group, so it does take us quite a long time to pick our new partners. With Quantore it was a very successful development because within the Benelux market, apart from Quantore, there are really just the globals left, and we hadn’t had a partner there since Timmermans was acquired by Spicers.
Obviously, we’re very happy with their decision and we think that we will see other new partners in the coming years, but there is no hurry and no sense that we have to introduce a new partner every year. We have a very solid foundation and I believe we are a very powerful network compared to the others left in Europe – and there are not too many.

OPI: How is the Q-Connect brand developing at PBS? Do you use it in all of your markets?

RS: Yes, we do. It’s the major private brand. In certain markets we have different additional ones, but Q-Connect is the key brand on the private label side and it’s growing every year. Last year we grew between 3-4% on an organic basis. Of course, it does well in an economically difficult environment because customers focus more on the best price levels.

OPI: Any strategic projects you are working on at the moment?

RS: We are always looking for opportunities that fit perfectly into our network and into our strategic direction, and we will keep investing in logistics and IT as we have been doing. We’re just about to roll out a new version of our ERP dealer system called CIPS – Computer Integrated Paper Shop. In Austria and Germany we service more than 1,000 customers with this ERP solution and we plan to triple the base within the next two years.
This is a very significant investment, in addition to the logistics investments we are making, and is another area where we believe we differentiate ourselves from our competitors – not too many companies in Europe are providing tools on that kind of level. During 2015 we will have the full roll-out of these new tools in Germany and Austria so this will be a major focus.

OPI: What about acquisitions?

RS: As we have recently seen in the German market, OTTO Office is for sale and some other big players are also unofficially open for sale and these are major players in the market. So you can see that consolidation is still going on and we are monitoring some projects; I don’t expect us to announce anything in the next few months, but we plan to be an active player in the consolidation process, at least in the countries where we are present.

OPI: And just to end on a personal level; it’s been ten years or so since you rejoined PBS Holding. How do you see your future at PBS?

RS: Personally, I would expect that 2015 will continue as 2014 ended: working twice as hard to achieve comparable results in a very challenging environment. But that is not something negative at all for me personally, as long as I have my plan in mind and see opportunities we can work on.

OPI: What about longer term, say in three years’ time?
RS: Still working and still selling office products (laughs). But maybe ongoing consolidation could open doors to take PBS to the next level in terms of structure and international footprint, and clearly that excites me.

OPI: What is the ownership structure of PBS Holding?

RS: 51% is owned by the management team, so we own the majority of shares, and there are two families – the former majority shareholders of the business – who own the rest of the company.

OPI: So you haven’t got private equity people looking to cash in?

RS: No, nothing like that. So it’s still more of an entrepreneurial approach and that makes it very enjoyable.


“In Austria and Germany we service more than 1,000 customers

with this ERP solution and we plan to triple the base within the next two years”

Quelle by Andy Braithwaite (andy.braithwaite@opi.net) OPI Magazine | February 2015