Lyreco in South America

OPI speaks to Inforshop and Marken, the new strategic partners of Lyreco in South America.

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OPI speaks to Inforshop and Marken, Lyreco’s new strategic partners in South America.
 
Lyreco announced strategic alliances with two fast-growing resellers in South America last week, expanding its global footprint to 37 countries on five continents.
 
Lyreco is already able to service global accounts in Mexico through its agreement with OfficeMax and the new agreements with Inforshop in Brazil and Marken in Argentina have extended its capabilities in the region.
 
The size of the two companies is quite different, reflecting each local marketplace. Inforshop is a $112 million business with 280 staff and six distribution centres while Marken generates sales of around $6 million, employs 37 staff and has one main distribution facility located in Buenos Aires.
 
However, there are a number of similarities between the two companies. They are both family-run businesses, both have their eyes firmly fixed on providing quality service and both have shown impressive, above market average growth rates in the last few years.
 
Brazil’s Inforshop saw top line sales grow by 25% in 2011 and Director Thiago Britto – whose father founded the business 26 years ago – said that the goal is to average this level of growth for the next three years, effectively doubling the company’s sales by the end of 2014.
 
Britto added that this would be achieved through organic growth, and not via acquisitions, as Inforshop continues to benefit from the buoyant office supplies sector and makes market share gains. He pointed to the company’s commitment to quality – Inforshop has been certified ISO 9001 – and investments in e-commerce and the supply chain.
 
The company does business in three main areas. Contract stationery to business and enterprise customers is the main focus, representing around 75% of sales. The rest comes from a dedicated unit for the public sector and the company also has a wholesaling business.
 
Inforshop claims to have a 20% share of the key enterprise account market in Brazil and its biggest customer is petrochemicals giant Petrobras. Other major customers include local bank Bradesco and multinational food and consumer goods company Unilever.
 
The company operates out of its headquarters in São Paulo where it has a 25,000 sq m (250,000 sq ft) distribution centre. It has a similar size facility in Itu (in the São Paulo region) and three other distribution centres. Its fleet of 50 vehicles operates within a 200-kilometre radius of each warehouse and the rest of the country is covered by third-party carriers.
 
Interestingly, for a company of its size, Inforshop doesn’t offer private label products. However, Britto said that this was definitely something they are considering and that he was hoping to learn more from Lyreco on this area.
 
Britto also pointed to distribution and sales best practices as other key business areas where he hoped to tap into Lyreco’s global expertise.
 
40% growth
 
In Argentina, Marken has also been growing quickly, albeit from a smaller starting point, and sales increased by 40% last year.
 
The company was founded about eight years ago by current CEO Facundo Echavarria and operates a pure B2B model which includes catalogues, a call centre and e-commerce.
 
Echavarria notes the highly fragmented nature of the Argentinean market which he estimates at around $1 billion for the three categories of office products, paper and ink/toner supplies.
 
He said that Staples was probably the largest operator in the market but doubted that even its market share was in excess of 5%. He also questioned Staples’ business model in Argentina, claiming that it was still unprofitable.
 
However, he did admit that Staples had brought a new level of professionalism to the Argentinean office supplies market which had raised the bar in terms of customer service.
 
Echavarria also noted that he hadn’t seen much development from rival reseller Ofishop since it became Office Depot’s local partner a couple of years ago, but said that this might be due to other priorities with Depot’s joint- venture partner in South America, Gigante.
 
Unlike Inforshop, Marken doesn’t own its own delivery vehicles. However, it has an exclusive partnership with a delivery firm in Buenos Aires – an arrangement that Echavarria says is quite common in Argentina – and a Marken customer service agent travels in the van with the driver when making deliveries.
 
As a side note, none of the delivery vans carry the company’s logo as a precautionary measure against thieves targeting contents such as toner cartridges.
 
While both Inforshop and Marken are happy to partner with a global player such as Lyreco, neither said that the alliance had been made with a view to eventually selling the company to the French contract stationer. Both said they already had the systems and strategy in place to continue to develop independently, but that there would, of course, be things to learn from Lyreco.
 
BRIC building
 
Lyreco’s interim CEO Steve Law provided a bit more background to the South American alliances, saying that these types of agreements were basically client-led. Lyreco has a strategic advisory board comprising representatives of key clients and they advise Lyreco on which markets they would like to see included in global contracts.
 
Lyreco then undertakes market studies and interviews potential partnership candidates before deciding how it will proceed.
 
Law said that, currently, the BRIC (Brazil, Russia, India, China) countries are markets where global clients are particularly interested in working with Lyreco.
 
That’s now one of the four nailed down.
 
Lyreco’s presence in Russia (with its alliance with Pragmatic) ended in 2010, but Law said it was still a market which was “of interest”.  It was a similar message for India and China, but the interim CEO said the company would be exercising caution given the troubles of some of its rivals in these markets.