You ain’t seen nothing yet
Before this Big Interview, we didn’t know a huge amount about Ton Adam and ACI Supplies. Reasonably press shy, the IT distributor has managed to stay somewhat off the radar, but significant growth in the last few years means the company can no longer hide.
Having started as a bookkeeper in a small family business, Adam launched ACI Supplies in 1988. Since then it has grown to be a more than €700 million ($960 million) business with a presence in seven European countries, stocking 80 brands and in excess of 15,000 products. The distributor’s 4,500 customers are certainly aware of its growing reach and portfolio, but to find out more OPI put Adam in the hotseat.
OPI: One of the most significant chapters in ACI’s history seems to be in 2006 when you opened up in five countries in eight months (see box below ‘ACI: A history’. How did you manage that?
Ton Adam: Exactly, to provide a better service to local resellers we opened up sales offices and warehouses throughout Europe in eight months. But what we didn’t know was that although it was the right time for the market, it was the worst possible timing, financially speaking. We didn’t see the financial crisis popping up. We made our plans and wanted extra funds from the bank, but they said no and then it was a totally different game. So it took us 18 months to come out of that situation.
OPI: So did you have to cut back on plans?
TA: No, we stuck to the strategy. We said: “If we carry on we expect an increase in turnover, so we can also expect an increase in profits.” And that was the wait and see time, but it proved to be the right strategy. Yes there was this global financial hurricane, but it was not an easy time for anyone. Besides that there were positive effects as well. Whole businesses were shaken up and those that were healthy, well they’re still there. Those that were not were shaken out.
OPI: How many employees do you currently have?
TA: At the moment we have about 200 employees, and the number is still going up. We had an increase of 10-11% compared to last year.
I will keep employing staff because that is what a market needs. In a market where price differences are getting very small, especially in computer supplies, personal contact will become more important. Until now we’ve done our business through telephone sales and the internet – about 50% of our business is carried out online and we will continue to invest in that. But we also want to have more people on the road, in the market, in the field.
OPI: How many locations do you have?
TA: We have Maastricht, which is our central office – I don’t like the word headquarters because we’re doing it all together – and our warehouse of about 20,000 sq m (200,000 sq ft). In Germany we have a sales office, without a warehouse, and in Italy and Spain we have new warehouses and sales offices. Then we have sales offices in Geneva, from which we cover the French market, and in the UK. We originally started with a UK warehouse as well in 2006 but we closed it. In 2010 we acquired a distributor in Greece, known today as ACI Hellas.
OPI: Why did you close your UK warehouse? Do you believe your expertise lies more in the continental European market?
TA: Correct. In the UK we’re still doing business but with selected partners only. For us the UK is a totally different market than Europe, and of course you still have the currency effect. If we were to consider doing more in the UK in the future then it would be as a separate entity.
OPI: Is that something you’re planning?
TA: I knew that was going to be the next question! Not at this moment. Does that mean that we won’t do it? No. It depends on the time and on how the UK is going to develop.
OPI: Is the Netherlands your strongest market?
TA: No, 20% of our business is in the Netherlands. Although this is our home market, our sales are evenly distributed among the different markets we are operating in. Obviously our main markets are Benelux, Germany and France. I want to have the right balance. I don’t have to be number one in a specific country; if we are number two, three or even five that’s ok, because being in all the different countries will give us a stronger European position. And we are now looking at other countries.
OPI: Such as?
TA: Our focus for the coming years will be the south of Europe – Italy, Iberia and Greece. We took over a company in Greece against the market – Greece is not immediately the country to enter. But on the other hand it offers possibilities.
OPI: Are you looking at Eastern Europe?
TA: As I said before, we’re looking at Europe. We’re looking at Scandinavia that’s for sure. Are we going to carry out an acquisition? No. Are we going to greenfield? Probably. This year? I don’t know. In Eastern Europe we have more time, it’s very different to the rest of Europe.
OPI: Earlier this year you predicted sales increases of 20% for 2011. Are you on track to achieve this?
TA: Yes, every year it has been between 20-30%, with some exceptions such as 2006 and 2007. But from 2009/2010 to 2010/2011 we have increased sales by 48%.
OPI: That’s remarkable!
TA: That brought us to about €750 million in sales.
OPI: So how did you achieve this growth?
TA: Well as in any business, it’s a combination of product portfolio and customer mix. In 2009, I decided that we were doing well with computer supplies, but we should increase contact with resellers and know more about the product portfolio that they offer to the end-user. I thought about where we wanted to be in five years, and decided that our aim is to be a stronger party in the European market where we can supply the whole package – not just computer supplies, but also hardware, storage and so on.
The decision was what to offer first. I chose office supplies – pens, pencils, shredders and so on – because that is important to the customer base that we want to target – medium and small resellers in Europe.
It is our goal to supply our clients with what they need to serve their own clients, and to supply those products where we believe ACI can do a good job.
OPI: What are your most important product categories?
TA: Computer supplies is our core business. We have tested office supplies for the last two years in Benelux and this strategy is working. We’re now going to roll it out in Europe. That’s a big challenge because there is a big difference between this and the computer supplies market. For example, in office supplies there isn’t a European product balance. It differs from country to country.
OPI: What kinds of brands do you work with?
TA: Only A-brand. I don’t believe in private label.
OPI: And that will never change?
TA: I don’t say never but in the short-term, certainly not. In the mid to long term it depends on what the market wants. At the end of the day, if I’m saying that our aim is to help our customers to help theirs, then if it comes to a situation where we get asked for alternative products, this should impact our business.
OPI: Are you involved in managed print services (MPS)?
TA: No.
OPI: Do you intend to be?
TA: Well, not in a big way. Of course manufacturers are running programmes and to do a good job for specific customers we do it but I’m not convinced. I think manufacturers coming from the printer corner have a big advantage over those coming from the copier corner. It will be interesting to see what will happen. If we do decide ACI can step into it then we always can. At the moment we are considering it, not running away from it.
OPI: According to your company brochure, ACI has a strong service-oriented philosophy. Why do you believe this is important?
TA: Well if you don’t have your service at a high level these days then immediately you’re going to lose accounts, although it depends on the customer. Our customer mix is quite varied with a good mix of resellers – corporate, traditional, IT – and of varying size. That is why we also provide a wide range of services to resellers, ranging from EDI-solutions to logistics agreements, marketing support and so on. We do not focus on retail at the moment – for that we have a separate company – so our business is mainly B2B.
OPI: What value-added services do you offer your customers?
TA: Again, it depends on the customers. We do have customers passing by purely based on price and who are buying a lot just because there is an opportunity. Then we have the customers that we have a more extensive relationship with, almost like a partnership. We’re supplying some of the corporate resellers such as Staples, Lyreco and Office Depot, and their terms and conditions are different to those we have with a local dealer that is doing €20,000 a year. Our service is almost tailor-made.
OPI: Would you be able to offer the same tailor-made service to the smaller customers you currently target?
TA: No, that’s not possible, but that is where your website comes in, of course, and other EDI solutions. To make the purchasing processes of our clients as easy as possible, we offer tailor-made IT applications to each reseller.
OPI: Looking at e-commerce, is this quite an important part of ACI’s strategy?
TA: I think if you don’t address e-commerce now then you will be in trouble.
OPI: ACI has quite a strong e-shop.
TA: We launched a new webshop last year and this has proved to be a success. Of course you also need to have the logistics, service levels, product portfolio and availability to back this up, but I believe it’s important to invest in IT and marketing. We’re definitely going to expand our marketing. To be successful we need to think European and have a presence in all markets, and marketing programmes need to be carried out in different countries tailored to the local flavour.
OPI: Who do you see as your main competitors?
TA: We have our hands full doing what we want to do and I personally don’t believe in competitors. You have people who are doing exactly the same thing as us, and yes of course you run into a situation where sometimes you have a customer who is buying from somebody else, but if they’re not buying from us then I’m doing something wrong and I should look in the mirror and ask myself what we are doing wrong.
OPI: So you don’t look at what other distributors are doing?
TA: Of course I see the other players in the market, but I don’t see one company that is the European computer supplies distributor. That’s what we want to be. Unipapel is doing a lot of business in Spain, I think, with a good home base and they’re expanding into France and we’ll have to see what happens with Spicers. But to develop further, a distributor has to go for a total product portfolio, including office supplies and hardware, which is how we are thinking.
OPI: So ACI wants to step up as the number one European distributor?
TA: I want to be, yes. We want ACI to establish a European distribution platform.
OPI: You mentioned Unipapel. What do you think of its proposition to acquire the European arm of Spicers?
TA: They are doing things their way, looking at the market as they see it. The interesting thing, of course, is that they are also looking for the combination – distributing office supplies and computer supplies – and that is in line with what we think.
It all boils down to who’s doing a good job. I understand they’re going to run Spicers under the same name in the future and I don’t think of Spicers as a European organisation.
OPI: What do you mean by that?
TA: I see the UK doing what the UK is doing, France doing what France is doing, and so on.
OPI: Do you think it will make a difference having Spicers UK and Ireland as a separate entity?
TA: Well not for us because as I said earlier the UK is different for us. We’re there with a number of customers, we’re happy with that and if we can expand then we will certainly do it but the UK is a different thing.
OPI: Perhaps you think similarly to Unipapel.
TA: [laughs] I can’t speak for Unipapel and I’m not going to, but it’s interesting to see that, let me put it that way.
OPI: You’ve already mentioned the market has changed a huge amount since ACI Supplies started in 1988. Could you elaborate?
TA: The total framework has changed. The reaction to having one currency is that manufacturers are much more in control of European pricing and they should be, but we are going to see some big changes in the next few years, particularly in office products. Business has to change.
OPI: How?
TA: Office supplies is a totally different business model to computer supplies, as you know. Margins are totally different, costs are totally different but I think we will see similar changes. What do I mean by that? I think that they should go to a distribution model.
Historically, manufacturers have a lot of costs. If they want to change that they need to think outside the box. It doesn’t make sense for manufacturers to serve an account of only €2,000 a year with as high a margin as possible to cover costs. They could be serving €10,000-12,000 accounts. They should use distributors, and it will be better for the market. Also, there needs to be a European pricing structure.
OPI: Do you think there will be more consolidation in Europe?
TA: I’m convinced of it. My belief is that even if you are a dominant player in a country – in office supplies, computer supplies, hardware, or a combination of any of those three – if you don’t have access to European volume then you will have a hard time in the future. For example, if a company has 60% marketshare in one country, then it is the number one. Congratulations, but what next? Are you going to expand to have 70% of the market? This is not in the interests of manufacturers because the balance is out, so the player has to go over the borders. And things are going to change in office products, I’m shocked about what’s happening there.
OPI: Can you explain?
TA: The market is traditional and I think it is in for a big shake up over the next few years. Prices can’t stay where they are in the future; I mean it’s almost artificial. In some cases it’s even ridiculous. If you look at the margins
that manufacturers need to get for office supplies, and they’re having problems, and then you look at the margins that the wholesalers and resellers are making compared to computer supplies and hardware, it’s dramatic.
OPI: So what do you think will happen?
TA: It has to change and it will. The successful office supplier will adopt a new distribution model doing exactly what we’ve seen in computer supplies – taking costs out of the chain. By doing that you must be able to take market share.
Traditional resellers are doing business based on books, greeting cards, office products. Greeting cards are down the drain, as are books, and stationery is down 15-20%. On top of that, they have competition from the internet. So the only way that they can succeed, in my opinion, is if we the distributors, and the manufacturers, offer solutions. Resellers should be concentrating on selling.
One problem I see is that traditional resellers are offering 25,000 products; ten different brands of staples. Why? It’s crazy.
OPI: One of ACI’s tag lines is ‘Europe, you ain’t seen nothing yet’. That’s a bold statement!
TA: That’s quite a statement isn’t it! Yes, in office supplies I foresee big changes and sometimes you have to give statements to the market to make it wake up a bit.
ACI: A history in Ton Adam’s words
• We started in 1988.
• In 1990 I opened my first warehouse and we built a bit of stock.
• 1992 was the year that Europe got rid of border documents. Before that, several border documents were needed to trade abroad and not everyone was interested in buying from the Netherlands. But when this changed Europe became more open.
• In 1995 we got involved with computer supplies, with 80% of our business from Canon. Then people started asking for laser cartridges, and we got involved with HP, Epson, the whole range.
• In 1997 we became an authorised distributor for HP and after that it was all growth.
• 2002 was important, as the euro was established. Previously, currency fluctuations made a huge difference to business.
• We took a big step in 2006. To be a European distributor we needed to have a local presence in each country, so, in just eight months, we opened up in Germany, Switzerland (to target the French market), Italy, Spain and the UK.
