2010 Review of the year

 

2010: Review of the year

 

This past year has seen a number of peaks and troughs as organisations struggle with the aftermath of a tough 2009. Some companies have shone through, while others are barely still with us. And there have been a few interesting victories for independent dealers that have started to change the way things work…

 

January

 

The year began as 2009 had left off for Office Depot, as its Business Solutions Division (BSD) in the US continued to be plagued by overcharging and price switching allegations. The company was embroiled in a battle with the city of San Francisco which claimed it had been overcharged by $5.75 million, which still isn’t resolved. At the end of the month, Florida’s Lee County School District received a $300,000 refund cheque.

 

Rival Staples also received negative publicity after it agreed to pay out $42 million as a global settlement in several lawsuits concerning overtime payments for assistant store managers.

 

There were a number of acquisitions, notably in Europe where Durable bought Scandinavia’s Idealplast. On the reseller side, two major local players in France – Groupe Action Bureautique and Fiducial – both strengthened their market positions.

 

On Wall Street, shares in Avery Dennison fell over 10 percent in one day as its quarterly results came in below expectations.

 

It was a busy month for executive changes. In a major development at UK wholesaler VOW, Managing Director Ian Sinclair was shown the door, with Sales Director Adrian Butler getting the call from Alan Barclay to take over.

 

February

 

Lyreco CEO Eric Bigeard dropped a bombshell when he announced that he was to retire at the end of December after 22 years at the helm, at the same time as OfficeMax CEO Sam Duncan announced his retirement. Meanwhile, Office Depot CEO Steve Odland was awarded a contract extension. Little did we know…

 

Depot’s BSD contracts situation made it into the national press with a less-than-favourable article in Fortune, while BSD President Steve Schmidt made the first of a number of "set the record straight" YouTube videos. In particular, Schmidt attacked the "outrageous statements" of whistleblower David Sherwin. Sherwin called the video "an act of desperation".

 

Fourth quarter and full-year results were generally positive, mainly due to cost-cutting measures. At the end of the month, aftermarket cartridge maker Nukote filed a $100 million lawsuit against rival Clover.

 

March

 

Wholesaler United Stationers hit the headlines with its $15 million acquisition of technology provider MBS Dev, a relatively small acquisition in the global scheme of things, but one that was to have greater significance later in the year as national accounts came to the forefront.

 

The latest episode in the Office Depot contracts saga revolved around allegations that it was refusing to release data requested by contract auditors from Hillsborough County. Meanwhile, Staples’ share price took a beating after its cautious outlook for the rest of the year despite solid quarterly results.

 

Number three big box OfficeMax announced an agreement to manage the office supplies category at the 1,300-store supermarket chain Food Lion, part of ‘Max’s new channel strategy. In Europe, wholesaler Spicers announced the retirement of European Purchasing Director Stewart Barton-Taylor, who had been with the company for over 20 years.

 

April

 

In what turned out to be the start of the major story of the year, US Communities announced that it would rebid its $500 million piggyback contract for office supplies, held for 14 years by Office Depot. The announcement that the school supplies portion of the contract had been the subject of a multiple award raised hopes that the independent dealer community might win a portion.

 

The month ended on another bad note for Depot after the Missouri Attorney General revealed that the office supplier would pay $320,000 to 14 school districts and non-profits in the state, plus a further $120,000 in costs following a two-year investigation into contract price switching.

 

It was a busy month for acquisitions. Among others, 3M completed the purchase of leading Asian label manufacturer A-One and HP said it planned to acquire smartphone maker Palm for $1.2 billion. United Stationers took a minority stake in managed print services (MPS) company NER Data Corporation and Pelikan completed the acquisition of German stationery and OP manufacturer Herlitz.

 

In executive news, Office Depot’s President of North American Retail Chuck Rubin suddenly resigned in order to become CEO of beauty products retailer Ulta.

 

May

 

The big news of the month was the return to the OP arena of US industry icon Howard Brown four years after he sold leading independent dealer Allied to Office Depot. Brown, along with son Michael and a core of former Allied execs, announced the launch of HiTouch Business Services, a full-service dealership built on the distribution network of their existing Rentacrate business.

 

Industry consolidation continued unabated. Mondi reached an agreement to sell its paper merchant business, Europapier, to the Heinzel group for j60 million and France’s aftermarket consumables vendor Armor snapped up Dutch counterpart Wecare4. Dutch files, folders and archiving systems manufacturer Jalema announced the first of two acquisitions during the year, buying German PP files manufacturer Avanti.

 

United Stationers announced the launch of its Orbit Point offering as it upped the stakes in the national accounts segment. is.group said that it would use Orbit Point to power its own national accounts programme and appointed Kevin France to head up its national accounts business. Meanwhile, SP Richards showed it wasn’t sitting on its hands as it launched its PrintSmart MPS programme for independent dealers.

 

Office Depot and former private label toner and cartridge supplier Nukote agreed to mediate their legal dispute, but differed on how the mediation process came about.

 

June

 

The first ever North American Office Products Awards (NAOPA) took place at SP Richards’ annual Advantage Business Conference (ABC) event. Over 250 entries were received for the eight product categories and the winners were selected by a prestigious panel of over 30 judges from leading organisations in the North American office products industry. Also at the ABC event, TriMega announced its much-anticipated national accounts programme Point Nationwide.

 

Office Depot reached an agreement with another state Attorney General in relation to its US Communities contract pricing. This time it was its home state of Florida with Depot agreeing to pay up to $4.5 million, plus $1.3 million in costs.

 

In a piece of shock news, OPI revealed that Lyreco’s Anders Kristiansen – tipped as a possible successor to Eric Bigeard – was to leave the company. It was later announced that Kristiansen was to lead Staples’ Chinese operations.

 

Vasanta, the parent company of UK wholesaler VOW, named former Spicers executive Robert Baldrey as its new Group CEO. In Switzerland, EOSA’s Peter Basci announced that he had sold his iba office supplies business to leading retailer Migros.

 

The other big acquisition news was Esselte’s move for Ampad, just three months after its acquisition of Rapid had been finalised.

 

July

 

The month of July was notable for the sensational news that Office Depot had decided not to bid on the new US Communities office supplies contract, citing "onerous" contract terms. US Communities retorted that the basic terms had not changed. Depot’s withdrawal meant there were no power channel bidders and raised doubts over whether US Communities would be forced to cancel the bidding process. Depot revealed that it would use a new award with The Cooperative Purchasing Network (TCPN) to woo its US Communities customers.

 

News about public sector contracts wasn’t confined to the US. In New Zealand, Corporate Express and OfficeMax were awarded the first all-of-government contract for office supplies, a move that was criticised by the opposition Labour Party as part of "a plan to award lucrative state sector contracts to a cosy club of multinational suppliers [that] will cut competition and lock out local business".

 

Staying in that part of the world, Staples announced that it had successfully completed the acquisition of the part of Corporate Express Australia that it didn’t already own for around $360 million. Meanwhile in Europe, Staples acquired its Finnish partner Lindell.

 

In Germany, dealer group Büroring named 44-year-old Ingo Dewitz as its new Managing Director following the March resignation of Carsten Marckmann.

 

August

 

Time will be the ultimate judge of the significance of the decision by US Communities to award the largest office supplies cooperative contract in the US to dealer group is.group, but it certainly marked a symbolic victory for the independent dealer community’s struggle against the power channel.

 

Signs of a balancing of the scales towards the independents were also to be seen in state contract awards in Florida and Texas, although New Jersey dealers were left smarting at the state’s decision to renew its contract with Staples and its NJPA piggyback contract.

 

Office Depot was once again accused of overcharging, this time by the state of Washington’s auditor office which concluded that Depot had overcharged the state by almost $300,000 during a 12-week period in 2009. The results and methodology of the audit were vigorously contested by Office Depot.

 

HP CEO Mark Hurd was forced to resign following sexual harassment claims from former soft-porn actress Jodie Fisher who had been working as an HP contractor.

 

Things were a little quieter in Europe during the month, but Lyreco made a move for j29 million Finnish dealer Officeday, and UK dealer group Office Friendly’s highly-respected Chairman Graeme Chapman announced his imminent retirement after 43 years in the office products industry.

 

September

 

It was a different story on the ‘old continent’ in September. Spicers announced the surprise resignation of CEO George Adams after just over 12 months in the job. Adams rejoined the DIY retailing industry as CEO of Dutch firm Maxeda. Spicers’ Finance Director Andrew Cowan also left the company with Marketing Director Jane Rowe also reported to be on the verge of leaving, raising new questions about the stability of the wholesaler.

 

Europe’s largest envelopes manufacturer was created as Bong merged with the envelopes division of Hamelin.

 

There was a blow for European reseller alliance EOSA with the news that one of its largest members, France’s Fiducial, was to leave.

 

September marked the end of the road for Atlanta, Smead’s former European business that had been bought out by Reiner Eckhardt and Hans Eisink in 2008. The company’s assets were later acquired by Jalema and Durable.

 

In the US, over 700 executives gathered in Chicago to see MWV’s David Williamson collect the City of Hope’s Spirit of Life award.

 

Hans Servas, a 30-year veteran of the office products business in South Africa, stepped down as Managing Director of leading manufacturer and distributor SSC. In a planned succession handover, Trevor Girnun took over as Managing Director, while Servas will stay on as Marketing Director until he retires at the end of 2011.

 

October

 

After five and a half years, Steve Odland finally called time on his controversial tenure as Office Depot’s CEO. Depot director Neil Austrian was named as interim CEO and Chairman while the company began the search for a replacement for Odland, with an announcement not expected before the new year.

 

While Depot was looking for a new CEO, OfficeMax announced that it had found one, with the nomination of Ravi Saligram to succeed the retiring Sam Duncan. 54-year-old Saligram had been President, International at food services company Aramark since 2003 and ‘Max said his knowledge and expertise in managing professional services operations and growing businesses and brands were behind his appointment.

 

There was sad news from Vasanta in the UK where newly-appointed Group Logistics Director Steve Saunders passed away suddenly.

 

In Germany, wholesaler PBS Deutschland announced a strategic partnership with Soennecken, while Lyreco said that its partnership with Russia’s Pragmatic Express had come to an end – only for Pragmatic to immediately announce a tie-up with Staples.

 

November

 

After ‘Max in October, it was the turn of Lyreco to name its new CEO, as Xerox France Managing Director Philippe Martinez was asked to fill the void left by the emblematic Eric Bigeard.

 

A couple of things for Martinez to get to grips with straightaway will be Lyreco’s new partnership in Japan with Askul and its acquisition of the Spanish and Portuguese contract operations of Antalis, both of which were also announced in November.

 

In the US, Howard and Michael Brown fulfilled their earlier promise to make acquisitions by taking over $130 million dealer MyOfficeProducts (see page 16).

 

In more takeover news, leading UK online supplier Euroffice was acquired in a private equity-backed MBO led by CEO Simon Drakeford. Founder George Karibian remained with the business as non-executive Chairman.

 

Swiss office supplier iba named 41-year-old Marketing Director Christa Furta as its new CEO from 1 January, succeeding Peter Basci as part of the Migros takeover terms. Basci kept his place on iba’s supervisory board.

 

It was all change at private label cleaning and hygiene products manufacturer Systemcare as former owners Simon Rex and Doug Skeggs announced that they were to leave the business they sold to US industrial group ITW in 2008. ITW’s Bruce Campbell was named as General Manager from 1 January.

 

The month ended with the news that MWV had agreed to sell its envelopes division to Cenveo, parent company of leading US envelope brand Quality Park.

 

At the end of the month, OPI revealed the shortlist for the European Office Products Awards (EOPA) 2011, drawn from a record number of entries.

 

The number of entries more than doubled from 2010 and more awards categories were added, demonstrating the success of the past year in the OP industry despite a tough economic climate. The results will be revealed at an awards dinner during Paperworld in Frankfurt.

 

December

 

As OPI went to press, the lead up to Christmas was presenting a calmer end to the year compared to earlier months. With the Independent Stationers US Communities contract firmly established as a successful win for the independents, December started with the news that the influential US Conference of Mayors (USCM) published an article recommending the new contract to businesses.

 

The USCM – the official non-partisan organisation of cities with populations of at least 30,000 – is a sponsor of US Communities, and the article says that the new contract will offer savings as well as being more beneficial for local businesses.

 

Another herald for the future came in the form of a study by InfoTrends, which stated that managed print services (MPS) in the office environment will reduce the consumption of marking and paper supplies in the US by $2.6 billion in 2014. It also predicted a drop in consumption for supplies in Western Europe totalling N2.05 billion.

 

In the month when it was reported that Cyber Monday spending hit a record $1 billion, time will tell whether 2011 will prove to be more profitable for the OP industry.