Corporate Express (CE) North America has been described as "the benchmark" for the industry following a recent restructure of its executive team.
The business to business supplier, which boasts revenues of $4.6 billion a year, announced six new appointments to its executive board and a significant shift in its approach to SMEs. Heading up the new-look group is the well-known face of Jay Mutschler, appointed to the newly-created role of COO. With 23 years’ experience in the industry, including EVP at Office Depot and SVP and general manager at Eastman, Mutschler is seen as a safe pair of hands in directing the formidable collection of OP executives that feature in the reshuffle. "It is essential to the long-term health of any organisation that we continually adapt our business model to the changing conditions of the marketplace," said Mutschler’s boss Mark Hoffman, president and CEO at the company. "Jay has a proven track record in the office products industry and will provide the key leadership in meeting our customers’ needs going forward."
Mutschler is keen to get his teeth into the job. "I am very excited with this opportunity to create a greater connection among our senior leaders, field leaders, sales force and customers," he said in a statement following the announcement. "We have further enhanced our focus and structure to drive our broad product offering and high levels of customer service to clients of all sizes."
So that’s the company line, but these latest changes highlight a company that has had its fair share of suffering in the past but continues to impress with its evolution and vision.
Frans Koffrie, president/CEO and chairman of the board at parent company Buhrmann, described the shift as an "opportunity to move the business to a heightened level of performance". To achieve this, CE has constructed stand-alone OP, furniture, facility supplies, imaging and computer graphics supplies (ICGS) and document and print management divisions, each with their own presidents. All are under the auspices of the new leadership team.
It’s a sharpening up, then, of the company’s top management…or is it a complete overhaul? "One can assume that a lot of the dead wood has already been taken out following the financial difficulties Buhrmann had in 2002/2003. The company has come through a very tough time," said analyst and industry expert Rob Sweers from banking research consultants Insinger de Beaufort. "It is my view that CE can be considered to be ahead of the pack in terms of what they are doing. The company has taken a number of strategic initiatives to drive the top line as well as to enhance margins. For example, the emphasis they are paying to the SME sector. This has been a slow learning process for them and as a result they’ve had to fine-tune the way they approach the SME market – but now they seem to have got it right."
The company will also be focusing on customer segments rather than the geographical profit centre approach of old. The new approach, concentrating on the mid-market, follows the current climate with the industry keen on this very profitable sector.
Van Hindes, VP of communications at the company, told OPI: "We have been focused on the mid-market segment for a couple of years but this particular change, with the dedicated commercial office products division, was designed to enhance that focus on the mid-market and local customer segment. This change allows us to be more focused on supporting that particular customer segment."
Sweers said he agreed. "One thing we have to bear in mind is that the corporate office supplies market – supplying the larger accounts and to some extent the SME sector – is still a hugely fragmented market. Even though there are just a few really large players who can provide the market on a nationwide basis, you still have lots of local competition. There are lots of opportunities for all of the companies, not only CE, to capture more business in that area. The revenue opportunities are still there. Over the past few quarters, the top line growth on an organic basis has accelerated quite substantially for CE. This is due to economic developments but also the initiatives the company has taken. In that respect, the restructuring the company is putting in place is a fine-tuning of the organisation to the changed circumstances it finds itself in and an attempt to increase the efficiency of the organisation."
CE has been trying (along with its counterparts) to tackle the SME market for a while. But what marks this company out from others, said Sweers, is its ability to learn.
"The teething problems that it had resulted from approaching the SME segment the same way it had approached its large corporate accounts. If you are servicing a large corporate account then you have one-to-one contact with the client and the account is physically interfaced with CE. The technical facilities like logistics, distribution, timetable, delivery etc are embedded. That requires a sales representative to keep contact and the customer signs a contract, all of which creates client loyalty. An SME client doesn’t have that interfacing so it is a lot less loyal and is inclined to act on impulse. A leaflet or an ad campaign might sway them to choose a competitor. This lack of loyalty means the sales rep has to contact them on a regular basis in order to keep the business. When CE first approached SMEs and set up the account they thought that was it was arranged and the rest of the business would follow automatically – but that didn’t happen."
CE has developed sales teams and management structures to cater for these differences. Sweers said CE’s other initiatives have been geared to its existing business, mainly corporate accounts, using single suppliers, preferred suppliers and delivery features. The significant boost in private label and the integration of the Australian model, with the extension of the product range, have been an astute shift in direction. Corporate Express believes it will see annual savings in the region of $30 million, with $10 million estimated to be saved towards the end of this year following the restructure. One-time costs of $55 million covering severance and other costs will be incurred.
Sweers: "I think it’s good that the company is adjusting to the developments that it is facing. Private label is now roughly 25 percent of its sales and a sector that is significant in terms of its overall business, so it is paying attention to that now and adjusting accordingly.
"I see the management in CE, including the management in Amsterdam, as highly superior. I feel that Buhrmann and CE are the benchmark for the industry. If you look at what the others are saying, be it OfficeMax, Staples or Office Depot, you do see a lot of copycatting in their statements and conference calls. What they are now saying is what you would have heard in CE’s conference calls two years ago."
• In mid-July, CE announced the sudden departure of SVP and CFO John Brenholt, who left the company to take a role with another company.
Brenholt joined the company in 1999 as VP for finance of CE promotional marketing. He joined CE North America in 2001 and had served as assistant controller and VP of financial services.
Jeffrey Lasher has been named as Acting CFO, while continuing his role as VP controller.