Martin Wilde, managing director of MPA International, talks to OPI+ about developments in central European OP markets and how manufacturers and resellers should seek to take advantage
OPI+: MPA has just produced new studies on the OP markets in Poland, Hungary and the Czech Republic, which now cover the same product range as your western European reports, allowing direct comparisons across Europe.
Your reports claim that these central European markets are growing in importance. What are the main reasons for this and which countries look to have the strongest OP growth rates in the medium term?
Martin Wilde (MW): One of the main reasons for OP market growth in these three countries was the healthy increase in GDP (growth rates were between 4.2-5.3 per cent in 2004), and this was in part due to strong export performances and, of course, to EU accession in May 2004. In addition, these countries also enjoyed increasing service industry employment levels and, of course, rapid growth in IT penetration. The last two factors aren’t unique to this region, of course, but the fast evolution of these markets to "catch up" with the West means that they are currently stronger growth factors than in, say, Germany or the UK.
Which of these countries will have the strongest growth rates in future? Well, our reports suggest that they’re all looking fairly strong. OP demand will increase in each of these countries by 35-40 per cent in the next five years. But growth rates will begin to tail off towards the end of the forecast period.
OPI+: In what ways are central European countries aligning themselves closer to the profiles and structures of western markets in your view? To what extent do you expect this gap to close going forward?
MW: Here’s an example that gives an insight into this in terms of product mix. In 2004, EOS accounted for 47-48 per cent of OP market value across western Europe. In Poland, Hungary and the Czech Republic the share of EOS was only 40 per cent in 2003. However, it rose to nearly 44 per cent in 2004 and by 2006 it will be 49 per cent, a level very comparable with the EOS share in western Europe by that time.
In terms of OP distribution, it’s clear that these countries will also achieve greater alignment with western European supply structures. For example, while the retail channel dominates the distribution of OP at present, the contract stationery channel is increasingly taking share: Lyreco and Office Depot are already present as contract stationers in some of these countries. In addition, the OP wholesaler channels are expected to reduce their often significant direct selling businesses and become "pure" wholesalers, based on the western model.
OPI+: How can manufacturers and resellers alike seek to take advantage of burgeoning central European OP markets?
MW: One route of course is acquisition. For both manufacturers and distributors there are still a fair number of acquisition opportunities in these countries. I’ve spoken already about the contract stationery channel and many large players here are still independent. As regards manufacturers, our research has also identified a number of significant manufacturers with strong product ranges and comparatively low cost operations.
In addition, as the market structure consolidates, and as these countries adopt the euro, it of course only makes it easier for western manufacturers to begin selling into these countries.
OPI+: What are the predominant trends we can expect from central European OP markets going forward, and how will this help to shape the OP market in Europe as a whole?
MW: Well, in a way we’ve already mentioned the key trends – significant growth in volume demand, alignment of product mix with the west, and the consolidation of supply networks into a more recognisable "western" form. So, to put it crudely, a larger, more unified European market.
However, we should of course keep a sense of perspective on this. The Italian and Spanish markets, for example, are still fairly different in terms of their distribution channel structure (and manufacturer shares) from those in the north of Europe, so there’s a fair amount of evolution still to happen in the west!
OPI+: This month, MPA published an overview of key data on the western European market in 2004. Looking at the current and future state of this market, which countries emerge as the strongest OP players?
MW: Yes, we’ve just completed our two-year cycle of updates across western Europe, so now was a good time to produce a top line overview report – in PowerPoint form – that our customers could use in their own business presentations.
Looking at the data, it’s clear that in value terms the western European OP industry is dominated by three major markets – France, Germany and the UK – which together account for nearly 60 per cent of overall market value. Italy, Benelux and the Nordic countries take the next 27 per cent, while the rest is made up of Spain, Austria, Portugal and Ireland. I don’t seriously believe that these shares will change very significantly over the next few years, although there is no doubt that growth rates across western Europe will differ.