Eastern Europe is a strong, dynamic growth region for Esselte and its Leitz brand in particular, but it has required perseverance, positioning and purpose to get there and be successful
The Berlin Wall was still being dismantled when work began on the construction of Esselte’s Eastern European empire.
The company began at an early stage to try and find an approach that could be carbon-copied accross the region. It soon realised it needed to have a committed investment to effectively serve the local markets, and a network of factories, warehouses and sales offices was established.
Kozienice in Poland was its first Eastern European factory and today is the home of the company’s largest factory on the continent. Esselte also operates the Czech Republic’s largest European LAF factory in the town of Lánov and products are also produced locally in Russia. The region is now one of the company’s best served and most successful markets and in many ways it is also the heart of its entire European operation.
Milan Pacák, Regional Vice President of Eastern Europe at Esselte, says: "We are strategically committed to providing our local distributors in the B2B sector with consistent and superior sales, marketing and logistics support. We always strive to deliver the highest service levels in any given market. With this in mind, we always carefully evaluate when and how to approach each single market in the eastern region from a very holistic perspective. Being strong on the ground is a critical success factor."
"For instance, seven years ago we made the decision to produce our products in Russia and we’ve never regretted it. We support key customers by providing qualified sales training, which builds trust and increases both the credibility and the acceptance of the brand," adds Pacák.
The holistic approach has proven to be such a successful blueprint it continues to serve the company well. When Esselte recently looked to expand its operations in the Ukrainian market, it switched from direct cross-border deliveries to customers and opened a distribution centre in the country. Consequently, product inventory is stocked locally which, says Pacák, "provides our Ukrainian customers with significantly improved reliability and product availability when customers require it".
The eastern expansion of Esselte looks set to continue and this month it announced that it has opened a new sales office in Bucharest, Romania, a country where the company has had enormous success, doubling its sales in the last four consecutive years. In order to fuel this strong sales growth, Esselte is adding additional sales resources to its exisiting local sales manager providing key Romanian partners with expanded support on sales training and business expansion.
In addition, Esselte has replicated many of its proven, highly impactful marketing programmes that have driven sales in other markets in Romania. Once again the company is mainly focusing on a selection of strong customers that it feels offer the most potential for delivering a professional offering to local end-users.
The group’s performance in Eastern Europe is above average compared to other regions while in some countries sales have simply sky-rocketed. Esselte is the unquestionable market leader in Poland, the Czech Republic, Slovakia and Hungary, "holding phenomenal market shares in some of these countries". The Russian operation is now well established and the company is predicting healthy growth there. It is also confident that it can become the leader in a number of new markets such as Kazakhstan, Belarus, Moldova, and especially the Ukraine and Romania.
The successful introduction of the "latest and greatest filing and desktop innovations" to the markets across the region is not only at the core of its regional strategy for expansion, it’s also a fundmental way of staying ahead of the competition.
The launch of the Leitz Active Lever Arch File last year was a huge success across the region, with Russia quickly becoming second only to Germany in terms of volume in Europe for this product. In 2008, the region’s teams are hoping that the Leitz CombiFiles (a hybrid of a pocket and a folder, promoted as a product that can greatly change work habits) will be as successful. And then there is also ImpressBIND – a new and unique binding technique resulting in "a great looking presentation in a matter of seconds".
Initial results and feedback for all new product launches look very encouraging. Indeed, Esselte believes that the eastern region is even eclipsing most of the western European markets in terms of speed to market and sales success.
However, with success comes the need to keep a very close eye on the competition in order to stay ahead of the curve.
"We in Eastern Europe are facing attempts of local players to copy our successful innovations and enjoy the fruits of our investments. But they are realising that it is not always that easy. The quality is often poor and while they are still copying, we are already in the market with newer and better products," says Martin Kula, Regional Marketing Director of Eastern Europe at Esselte.
"A perfect example of this is our PP range Mineral. Based on the success of this range, we have literally made this segment into a very sizeable piece of business in many countries in the region. Followers soon appeared. But at that time, we were already going to market with Vivanto – a new, fresh and dynamic design with the latest finishing technology, great quality and an incredibly broad range. And it has been a huge success!
"Subsequently, ‘mineral fakes’ were wiped out from the mainstream market. Our dealers also lost interest in these low-end products where margins are weaker," comments Kula.
The speedy development, introduction and marketing innovation of new products may be critical to staying ahead of imitators, but with over 100 patents for Leitz folders alone, the company is optimistic that "the brand will continue to bring a breath of fresh air into the industry in the future".
Training is key
The company provides support to trade partners through its special training courses and sales training measures for customers, salespeople and end-consumers. For example, nearly 1,800 members of sales staff from specialist partners have been educated about Leitz products, the foundation of the enormous sales growth that Leitz is generating in Eastern Europe.
Competent and well-equipped trade partners are essential, particularly to achieve success in an emerging, growing market such as Eastern Europe. "We collaborated right from the start only with the most successful trade partners, because they are the only ones in a position to appropriately present our products. The recent Leitz Office Games programme where we focused on the high-quality product range from Leitz allowed us and our trade partners to sell them more effectively to end users," declares Pacák.
The Leitz Office Games campaign involved rewarding retailers that order certain quantities of goods with sports items appropriate to the promotion.
"Using such targeted campaigns can generate significant sales increases," says Barry McCool, Vice President of Marketing and Communication at Esselte. "These are also very popular among partners in Eastern Europe and they have probably been implemented better here than in any other part of Europe," he adds. Since the Leitz Office Games was launched last year, 116 carefully selected trade customers from Eastern Europe have taken part."
A love of premium products
According to the company, Eastern European consumers have waited a long time for high-quality products, resulting in a highly developed sense of strong brand awareness which Leitz is benefiting from. "Trade customers and end-consumers are increasingly seeking only the best products, and primarily purchase goods matching western standards. Products from the Leitz brand are eagerly sought after, as their quality is highly esteemed."
As the markets in countries such as Russia, Poland and the Czech Republic get more and more competitive only the best products with the strongest brands will prevail. In recent years, local teams have adopted a deliberate and well-planned focus with a significantly higher profile manner when introducing the Leitz brand to customers.
"What we are seeing is that the appeal of the Leitz brand is now on a par with, if not at a greater level than, what it enjoys in Western Europe. Customers want the best possible solution and are increasingly opting for the best product and that is generally Leitz," says Kula .
In 2007, Leitz sales increased between 25-50 percent in the fully developed markets of Poland, the Czech Republic, Slovakia and Hungary. In Russia, one of Europe’s biggest markets, Leitz posted a 40 percent increase in the sale of its files. In emerging markets, where there is still potential for high growth, the brand generated triple-digit sales increases.
In the early stages of its market presence, Esselte focused on establishing efficient and reliable logistics, setting up relationships with key local customers and supporting them with what is needed for good product presentation. At a later stage, it shifted its emphasis to educating the sales reps of dealers, showing them how to sell added value products. At the same time, it began to heavily focus on end-user ‘pull marketing’ with an objective to help develop the market.
Esselte remains committed to helping its dealers develop the market by making the cake bigger for all players and by opening new categories and trading up end-users.
The Premium Soft Plastics (added value pockets and folders) sector for instance was non-existent in the region five years ago. After extensive sampling, well-targeted marketing activities and close cooperation with dealers, Esselte built this segment up substantially and incremental business followed.
Education, education, education – it’s a demanding and time-consuming way to build the market, but in the long run, it sees it as the only sustainable way forward. Thankfully, its key dealers are "totally on the same page", allowing all parties to grow together.
Says Kula: "In all countries where we are present we have printed catalogues, sophisticated web catalogues, country websites, an image server for customers and their studios as well as dedicated microsites for specific categories. Our bindinglamination.com website provides a training platform for our dealers’ sales reps.
"When we enter markets, our dealers can expect our full dedication. Leitz is an international brand with a unified image. We adapt our marketing activities to ideally match the particular local languages, cultures and people. This applies to all promotional material, from printed catalogues all the way up to information websites."
So what’s next?
With the recent opening of Esselte’s Romanian office, is the expansion complete? Clearly not, says Pacák, as the region continues to grow and expand. "The groundwork may have been laid, but there are still lots of opportunities for sales expansion within existing markets as well as for opening up in new markets. All these will provide future revenue streams."
However, it is not just about the strong performance of the Esselte and Leitz brands and the improvements to products or design, but also about continuing to optimise costs, particularly in logistics. Esselte relocated a whole factory to the Russian town of Hotkovo, near Moscow, in 2007 because of its proximity to expert and dedicated staff, a good infrastructure and the opportunity to position itself for expansion in the Russian market.
"Our teams are so confident about our strategic direction and the quality of our approach that we can still move mountains. This has allowed us to be highly successful in pitching our arguments to our trade partners and end-users. We still have a very bright future ahead," concludes Pacák.
Building the fundamentals
Esselte’s strategy has been based on a few fundamental pillars:
• Having its own branches with skilled employees who speak the local language and are familiar with the local culture. This helps create trust and project competence.
• A strong international brand such as Leitz increases customers’ willingness to buy.
• Strong marketing and trade sales promotional campaigns help boost demand.
Esselte is a leading global office supplies manufacturer with annual sales of approximately $1 billion, subsidiaries in 26 countries and 5,000 employees worldwide. The company develops innovative solutions that simplify the modern home and workplace. Esselte sells over 30,000 different office products in over 120 countries. Its principal brands include Esselte, Leitz, Xyron and Pendaflex.
More information about Esselte can be found by visiting www.esselte.com