For EOS manufacturers and resellers, Portugal is a good place to be right now. At a time when the sector is struggling in the rest of Europe, EOS is still the fastest growing OP product category in this southern European nation – although for how long is unsure.
Managing director of MPA, Martin Wilde, described EOS in Portugal as "a train that won’t stop", despite the OP market as a whole being depressed. "Penetration of printers in IT in Portugal is not strong," he told OPI+, suggested that there’s plenty of room for growth, "and the installed base of mono laser printers in north-west Europe is in decline. The level of PCs per capita is far lower here than the western European average, so EOS is growing faster."
If you look at the figures, the average number of PCs per 100 white collar workers in Europe is 102; in Portugal it is 45. The average number of PCs per 100 inhabitants is 33; in Portugal it is 18.
But Wilde believes that EOS has little puff left. "We expect the EOS market to increase in 2006 and the growth rate to slow from 10 per cent in 2005 to 2 per cent in 2009," he said. But he adds that he fully expects EOS to move from a parallel supply chain to a single supply chain with broader ranges. "New products entering the EOS market during this period will take the market on further," he believes.
Outside EOS, Portugal reflects some of the doom and gloom seen elsewhere in Europe in recent years. As defined by MPA’s nine habitual product categories, the Portuguese OP market as a whole increased by only 2.2 per cent in value terms between 2003 and 2004 to reach €619.8 million ($731 million) at manufacturers’ selling prices, equivalent to €864 million at user buying prices. Neighbouring Spain, meanwhile, saw a modest 4.7 per cent increase during the same period.
Portugal’s depressed climate has not only resulted in sagging demand, but also in severe price competition at all levels, which in turn accounts for the narrow margins currently being achieved in the Portuguese distribution chain.
Like elsewhere, traditional OP sectors are flat and unlikely to pick up much either. However, Wilde admits that paper volumes are picking up slightly, fuelled by the growth in the printer market. On the back of this, the archival market and the shredder market are also enjoying small growth.
The office furniture sector, unsurprisingly, is lagging behind the GDP curve, said Wilde. "Since Portugal is just coming out of recession, the office furniture industry was in decline in 2004. We expect growth in this sector to start to happen 2008-2009 as the economy would have moved forward by then. Until then, companies will likely use a stock of second-hand furniture."
Although MPA does not cover jan/san, Wilde also foresees a pick-up in this sector. "Offices are not suddenly going to start using more bleach or toilet paper," he said, "but this remains a growth area for office product dealers."
The dealer community in Portugal is small. Wilde estimates that there are around 150 dealers (compared to 3,500 in the UK and around 8,000 in neighbouring Spain). There is just one dealer group, Uniarpa, which consists of six members and boasts joint sales of €40 million.
As in other European markets, Portuguese dealers are being squeezed at one end by contract stationers such as Office Depot and Antalis, and on the other by the superstores.
And like in other European countries, the OP superstores are not doing badly, with a current market share of around 5-10 per cent. Staples has 15 stores in the country with sales estimates of €40 million, according to MPA. Office 1 did have seven stores and brought in sales of just under €10 million. That said, OPI+ recently discovered from Office 1 CEO Mark Baccash that the franchise operation no longer has a presence in Portugal because the company is in litigation with Portuguese franchisee Papelaria F. Portuguese OP superstore Officepac, meanwhile, currently has five outlets.
"Like in Spain and Italy, OP superstores as well as supermarkets are doing well in Portugal and hurting the local papelarias," says Wilde. But he admits that OP superstores have had it tougher in southern Europe than in the continent’s north-western part, because southern Europeans are often suspicious of faceless multinationals. This is perhaps why Office 1 was, at one stage, successful in Portugal. The franchise model allowed a local shop feel while enjoying the buying power of a multinational.
It is, of course, not only the retail arm of the big OP retailers that have, at times, struggled in Portugal. Mail order businesses are not what they are in northern Europe, mainly due to cultural differences. Depot’s Viking mail order business will finish up in the country at the end of this year. This does not bode well for Portugal’s overall OP mail order sector – Viking, the nation’s leading player in this channel, recorded sales of no more than €10 million per year.
Looking forward, Wilde expects the Portuguese OP market to recover in 2006-2007 in line with more favourable economic conditions. Until this time, it will be largely sustained by growth in the EOS sector; after that, it may well be characterised by the sector’s decreasing growth.
For more information on the report, visit
www.mpainternational.com
