Bjorn Maarud

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OPI: Good morning Bjorn. I know you’ve just come back from holiday so I will ease you into things. For those unfamiliar with your company, C Tybring-Gjedde (CTG), can you give me a bit of background?
BM: Sure Bruce. Basically, we sell into the contract stationery market both in Sweden and in Norway and in addition to that we have a retail chain in Norway which we call Binders.

 

OPI: What is the key characteristic of the Nordic market at the moment?
BM: The whole Nordic market is very fragmented. Norway is more fragmented than Sweden, and Denmark is even more fragmented than Norway.

 

OPI: And how is CTG’s performance in the countries you operate in?
BM: Well, we are very happy with the situation we have in Sweden. We have a very good management team and a good team overall in Sweden. We must admit that we have been struggling a bit more in Norway, but we are absolutely on the right track. We are increasing our turnover. Our Binders retail chain had eight years of losses before 2004, but we changed the top management. We changed 11 out of 19 shop managers, and we changed the bonus structure. That really gave us a push and we came back into profit in 2004 and the start of 2005, so we’re very, very happy with that.

 

But the market overall, we can’t see it growing. We had expected a small growth in Sweden, but we haven’t seen that so far. Nordic region markets are more or less stable.

 

OPI: What was CTG’s revenue last year?
BM: That was around NKr1.5 billion ($233 million).

 

OPI: And can you tell me about your time at CTG and how you’ve turned things around there? The company has certainly changed quite a bit under your leadership.
BM: Well, I joined the company three years ago. CTG had then been through a very difficult period over the previous six or seven years. There were different reasons for this. First of all, the financial results had been awful since 1997. We have tried to figure out what went wrong and we believe it boiled down to all kinds of things like bad internal control, weak contingency plans, weak execution of plans, a sort of unclear strategy. There were also a lot of managers coming and going in that period. In addition, CTG had acquired many companies and had problems in integrating them into the group.

 

When I came in we started to look at the situation and we divided the turnaround phase into three different parts. We started with one phase which we called "Mastering Ourselves". That’s the main topic that was supposed to get the company profitable.

 

We saw that we had to do a few things like downscaling the number of staff. So we implemented a lay-off programme. We carried out quite substantial changes at top management level and changed seven of the nine top managers including myself. And they had to put in place a new financing structure for the group. That was phase one.

 

Phase two we called "Mastering the Market". We had to work more aggressively towards our customers and come up with new concepts that really put the customer in focus. We had to change our marketing concepts, and partly we also had to change our assortment – the product portfolio. The main goal for this phase was to convert falling revenues into positive revenues – which we succeeded in doing.

 

And the last phase, which we are working on now, is what we call "Mastering the Future". We started that in late 2003/early 2004 when we realised that, once we had a solid base to build this company on, we needed to look at acquisition opportunities, mergers, alliances etc.

 

What we have done here is a major move for the Norwegian market. In June we agreed with Rich Andvord (one of Norway’s big three along with CTG and Julius Maske/S-Gruppen) that we would merge our two companies.

 

OPI: Well Bjorn, this really is a major development in the Norwegian market isn’t it?
BM: Yes. We have a turnover of NKr1.5 billion and Rich Andvord adds another NKr1 billion. Through the merger we will be the largest player in not only Norway, but also in the Nordic region. We are in a very interesting phase. It will make us much stronger not only in retail, but also in wholesaling. 50 per cent of the turnover of Andvord is wholesale, so that will be added to the company.

 

OPI: And the other 50 per cent is contract stationery or does it have any retail?
BM: No, no retail. That is purely contract stationery.

 

OPI: Looking ahead, how far would you go in terms of expanding? Might you go out of the Nordic countries potentially?
BM: No. Our first focus will be to stay within the Scandinavian market. We are covering Norway very well. We are covering Sweden very well and we have also opened a branch in Denmark. That’s our first task – to cover the Scandinavian market.

 

We also have a cooperation through the European Office Supplies Alliance (EOSA) with a company in Finland, so we cover that market as well.

 

OPI: Can you tell me when you think you might have completed the merger?
BM: Well, it will take us a couple of months, as there is already an investigation into how we can improve costs in relation to logistics. Andvord has two logistics centres in Norway and we have another one, so of course, when this merger came along, we saw the need to really look into this – are we going to have three or are we to have two? That will also influence the timing of the implementation. Let’s say that in the next 12 to 24 months most of the work should be done.

 

OPI: So you are going to be a NKr2.5 billion company. How many staff will you have between you?
BM: We will have 880 employees.

 

OPI: Will there be a certain amount of downsizing as far as employees are concerned as you merge?

 

BM: Well, we don’t think that our biggest challenge will be the downsizing of the organisation. There might be some, if we conclude that we will go from three to two distribution centres, but where we see the biggest synergies is first of all on the purchasing side. And also with respect to logistics, of course, ie transportation costs and the structure of the distribution centres.

 

But we predict that we will open up a big internal and external market because we see that Andvord adds a lot of products and segments which we were lacking and vice versa. We will have a much better portfolio to go to market with in the new consolidated outfit.

 

OPI: CTG is the only company out of the big three Norwegian players to be publicly listed. Will this continue?
BM: Yes.

 

OPI: Why do you think you’re the only listed company in OP? Why did you make that move while the others didn’t?
BM: Well, the move was made in 1985, and the reason for that was the intention to expand the company. And that’s what happened. After 1985, CTG acquired around 25 companies – that was part of its growth strategy. The first ten years were very successful, but then it had some problems in the next seven years. But I will say that the listing has been very crucial for us with the merger, because we are buying all the shares of Andvord, and we are paying with shares.

 

OPI: What do you think the merger between yourselves and Rich Andvoord will do for the Nordic OP market?
BM: Well, first of all we will have a much stronger position in the Nordic market. Our purchasing power will increase dramatically. We can take our synergies in our logistics systems, and I think this will be the first big step with respect to a bigger consolidation in the market. I think we will see new moves, that we will result in fewer and bigger players.

 

OPI: What was the key driver behind the merger between Tybring-Gjedde and Rich Andvord? Was it something that you considered was essential to the future of both companies?
BM: Well, we took the initiative because, as I said, we had three different phases, and when we went into the third phase, the "Mastering the Future" phase, we did an evaluation of what we needed to do for the future. And we saw that we needed to strengthen our company in terms of our product portfolio. We needed bigger volumes in the contract stationery sector.

 

We made a long list of potential partners, and it became clear that Andvord was our number one choice. It is a very good fit for both companies. Andvord is very strong in direct sales and contract stationery in Norway and this is where we had our biggest challenge. Andvord is not in Sweden and we are very strong in Sweden. Andvord doesn’t have its own retail chain and we have Binders. We both have a good wholesale business in Norway and in Sweden, and we saw that Andvord had a very good track record of delivering good results while we saw a continuous improvement in our results.

 

In addition to that, we have a situation where Michel Andvord and his brother are not getting any younger and they cannot see any of the daughters or sons taking on the company, so the timing was correct. In fact, the timing seemed to be good for both firms.

 

OPI: And this is a proper equal merger without a dominant partner?
BM: It’s a proper merger. I would like to stress the fact that we are two equal partners.

 

OPI: Just a simple question to round-up the merger talk – what will the combined company be called? Will it be just Tybring-Gjedde? Or Tybring-Gjedde Andvord?
BM: You are pretty close. It will be Andvord Tybring-Gjedde.

 

OPI: And there wasn’t a fight over whose name came first?
BM: (Laughs) No. There were no big battles.

 

OPI: Who will be the CEO or the managing director of the combined business?
BM: I will be the CEO. Michel Andvord will be the chairman of the Supervisory Board, and the CFO will also be in the management team from the different companies. We haven’t settled the rest of the team yet, but we will come out with that pretty soon.

 

OPI: Ok Bjorn, I’d like to move on to the OP retail sector in Norway. You’ve mentioned how your Binders chain has been turned around. In 2004, how much revenue did you get purely from retail?
BM: Approximately NKr400 million.

 

OPI: And where does Binders stand in the retail OP market in Norway?
BM: Well, in Norway we are the only one focusing 100 per cent on office products, so I think we have a good position there. We have a very strong position within computer supplies, and we are the only one offering a total office products portfolio.

 

OPI: I know Norway as a market is dominated by domestic players, but do you think that’s always going to be the case?
BM: I think you need some personal knowledge of the market. But if the players are, let’s say, locally-owned in the future, I think we will see a much stronger influence of international players here.

 

OPI: So you think that perhaps the Depots and the Staples’ will have a real go at the Nordic market?
BM: We see that they are now entering the Swedish market carefully and I think we will also see them in Norway at some stage. We know that they are listening to what’s going on in the market and they will certainly be here in the coming years. We have to be strong in our local markets, we have to be a low-cost base with efficient logistics – and just be better.

 

OPI: To what degree has your retail chain felt pressure from the mass markets, the superstores or hypermarkets with their fast moving, low-cost office supplies?
BM: We’ve had tough competition there. But we’ve been trying to combine it with our contract stationery business so that customers can have the same rebates in the store as they have in their contracts, for example. We are also looking into concepts whereby we can offer employees – the customer’s employees – a sort of discount in our shops. But of course we are seeing that new players like Lidl compete with parts of our product portfolio and really put pressure on the margin and the prices.

 

OPI: Do you try to compete on price or is it not viable to do that?
BM: In certain areas we have to compete on price. But it’s becoming tougher and tougher. But there is one advantage in our total concept that the others don’t have: we can offer a one-stop shopping concept; also, the link to our contract stationery business is something that they don’t have. We have to look into the areas where we are unique and stress those areas. We have a good position in computer supplies, for example – inkjet cartridges and these kinds of things – and this is where we can be very competitive.

 

OPI: What are the key trends in the Nordic countries at the moment? I’ve heard that large public tenders are a big deal at the moment?
BM: Yes. First of all you have the trend that they want to have Scandinavian or Nordic partners. The big customers are going out and testing out the auction concepts much more today than they did in the past, and they see an increasing pressure on prices.

 

OPI: What about the dealer community in the Nordic region? How is it doing?
BM: Well it seems that dealers can still be very profitable. I think they do not take big orders, but they can sell to the local part of a bigger organisation at a higher price, and they are offering somewhat better service. It’s surprising how good the money is that a lot of these players can make.

 

OPI: So the independent dealer channel in the Nordic countries is reasonably healthy?
BM: Yes. I would say more so in Norway than in Sweden.

 

OPI: I just want to touch on EOSA a little bit. CTG, office2office and Ahrend were the three founding members. How has this alliance worked out for you?
BM: It has been important to us in the first place to have better prices. And we are much more able to succeed in grabbing pan-European customers. I would also say that the OfficeMax deal we have through EOSA has given us a lot of new customers in other regions. That has been especially successful.

 

OPI: How do you think EOSA will help the post-merger CTG?
BM: Well, we will need the best possible prices, and we can now also offer a better situation in the Nordic countries. Since we opened up a new office in Denmark, we are now covering several of the Scandinavian countries ourselves, and we have the cooperation in Finland.

 

OPI: I know that Rich Andvord is part of InterACTION. Will that continue post-merger?
BM: Well, we haven’t taken that decision yet, but as we see it, we have a good alternative, because we are very satisfied with EOSA, and Andvord is very satisfied with InterACTION. What EOSA has, which InterACTION doesn’t, is the marketing side or, let’s say, the customer side, which has been a good contribution for us. So we have to look into that in the coming weeks and months and see what we’re going to do.

 

OPI: Where do you think the Norwegian market is heading in the next few years? It looks like being a crucial part with your merger playing no small part in that.
BM: I think we will see more big players. Price pressures will continue, so you need to be bigger to have a lower cost base. What will happen to the retail businesses is maybe a bit more difficult to say. But we are very satisfied with what we can get out of the market at the moment. We see the improvement both at the top and bottom line in business. It’s very promising. But we need to come up with a strategy of how to develop the Binders retail chain.

 

Basically, I think we will have a shift from a very fragmented market into a market where we have, let’s say, three to five dominating players. This would put strong pressure on small local players and they will have to rethink how they’re going to survive in the future.

 

OPI: Bjorn, that will wrap it up nicely. Thanks for your time and best of luck with the merger.