Big Interview: Nicolas Potier

If the proposed merger of Staples and Office Depot goes through, that could have a big impact in France where their respective JPG and Viking businesses operate in the direct channel. However, the market leader is 60-year-old firm JM Bruneau, which cou

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France’s leading direct office supplies reseller JM Bruneau has recently come under new ownership in the form of Weinberg Capital Partners. Far from shaking up their investment, the new shareholders have kept faith in Managing Director Nicolas Potier and his management team to continue with their development strategy for the D300 million ($330 million) business.

When Potier joined Bruneau in July 2010, he was new to the business products industry, having previously worked in technical sales and general management – both in France and abroad – for firms including Air Liquide, General Electric and Alcan Packaging. He has certainly made his mark on the industry and is currently Chairman of French trade association UFIPA.

OPI met up with Potier at the UFIPA conference in Monaco to find out what makes Bruneau tick…

 

OPI: You were new to the OP industry when you joined Bruneau. Was it a culture shock?

Nicolas Potier: Not really. Of course, there were aspects that were different, especially in terms of marketing. But when you are an integrated business like Bruneau with its logistics and its commercial side operating mainly from one facility, it’s not that much different from running a factory – it’s just a factory which prepares packages and delivers them to clients.

I also discovered at Bruneau a small business mentality and a strong client-service culture which were similar to what I had experienced when I was working in Turkey. This service mindset was engrained throughout the whole of Bruneau, and my goal has been to continue with this because I think it’s an extremely important aspect of the company. 

OPI: Looking at Bruneau’s recent history, how long had you been aware that the former owners [3Si, jointly owned by the Otto Group and the Mulliez family] wanted to sell the business?

NP: The decision to sell Bruneau was made at the start of 2014, so everything happened relatively quickly. 

OPI: Did you sense – even before then – that there was any lack of desire to continue to invest in Bruneau?

NP: No. The Mulliez family and the Otto Group have a strong B2C rather than a B2B culture, so it was natural that they didn’t view Bruneau as a strategic component. 

At the same time, I am lucky to run a company that is successful and healthy from a financial point of view, and there was no real urgency or financial need to sell.

OPI: But that feeling of uncertainty can always have a negative impact on things like staff morale, etc.

NP: The two shareholders of 3Si left us a lot of autonomy. The results were good and we were never limited in our ability to invest, with the possible exception of making acquisitions. 

But in terms of investments, over the past four or five years we have invested a lot in modernising the IT infrastructure, for example. And our performance was not affected in the slightest. 

OPI: Could you just remind us of Bruneau’s main business areas?

NP: The Bruneau Group can be divided into four subsidiaries: Bruneau France, Bruneau Belgium, Bruneau Spain and Maxiburo, an e-commerce business that used to operate as OTTO Office in France. Combined, we have annual sales of around H300 million and about 750 employees, of whom about 600 are in France. 

Our headquarters and main distribution centre are located south of Paris in Les Ulis; this facility handles all orders for Bruneau France, Bruneau Belgium and Maxiburo. Spain is a case apart because it has its stock and order processing in Barcelona.

France represents about H230-H235 million in sales, followed by Belgium with about H55 million. Spain is a much smaller operation at about H15 million. We have a healthy operating performance and last year EBITDA was about H25 million.

OPI: How have you been doing in 2015?

NP: Group-wide our sales and operating results in the first half of the year are roughly flat versus last year. 2014 was a good year, admittedly, but we were expecting things to be a little better this year, although we are not seeing an uplift yet. That said, we continue to take market share because the market is declining overall.

OPI: Are you actively chasing market share gains?

NP: I believe our taking share is the result of our continuous improvement strategy and because we are constantly looking at making things better for the customer. If something is not right, even a small thing, we try to put it right straightaway. That’s something I personally keep a close eye on, and I put myself in the shoes of the client. 

I think this attention to detail is one of the reasons clients are attracted to us and why they remain loyal to us.

OPI: Let’s look at your recent acquisition by Weinberg Capital Partners – for just under L100 million, I believe.

NP: That is correct. The acquisition officially went through on 31 March. It was a reasonable price given our sales turnover and financial result.

OPI: It sounds like a bargain at less than four times EBITDA…

NP: That was the price. But it does allow us to look serenely at the future; to have the ability to grow and expand, and not to be suffocated by large debt.

OPI: What is your main shareholder’s strategy? From what I have read, it’s pretty much a case of business as usual.

NP: That’s right. Above all, they are financial investors, but with the unique position of knowing this industry very well from their time at PPR when it owned – and then sold – JPG and Guilbert. 

In fact, their industry insight is partly why Bruneau interested them – they could really see our potential. 

But the development of a strategic plan comes from the Bruneau management team and then it is approved (or not) by the shareholders – that is how it works. There is also a lot of informal contact with them which allows us to generate ideas, etc.

OPI: So they must understand that office supplies is an industry that is experiencing numerous challenges.

NP: They know that, of course. Above all, they know that in this evolving and consolidating industry – with the possibility of a very large consolidation between Office Depot and Staples – Bruneau is in an interesting position. So we will continue to be consistent in our strategy, which is based on a number of key fundamentals.

OPI: What are these fundamentals?

NP: First and foremost is our focus on the client, meaning that we aim for a level of excellence with all our customer touch points, whether that is via the internet, our catalogue, after sales, telesales, delivery or personal meetings with clients. That needs a stable, experienced team – which we have – and with the new investment we have a fairly long timeline to build on this solid foundation to help us win market share. 

We also recognise the need to be more competitive; we have been successful in reducing our costs and will continue to do so. 

If we look at our top line, what are the two things we look at most closely? Firstly, it’s expanding our range of products. We’ve
 been doing that for a number of years and now we have more than 30,000 SKUs. We don’t stock all of those – some are sent by direct shipment from manufacturers – but with all the IT improvements we have made, we now have the ability to sell far more products, and we will continue to develop this strategy.

Another important area is to work with larger customers and not to limit ourselves to SMBs, which are our historical customer type. We want to develop these corporate clients – and we have some large ones already. 

One of our strengths is that, as well as office supplies, we have a large office furniture and office equipment offering. We also have a very competitive proposition with a range of services – moving, installation, etc – that are popular with larger clients. 

All of the above are ways of achieving internal growth. But, with the support of our new shareholder, we are definitely not ruling out external growth. That will depend on our resources and on how our short-term results enable us to work on acquisition opportunities. 

OPI: Are there any opportunities you are looking at?

NP: There will be, I am sure. But we don’t have any predefined plans on that subject.

OPI: Does the French market need to consolidate further?

NP: When you look at the structural declines and the profitability of the market players, I think it will be necessary. But it will probably happen anyway with Office Depot and Staples. Will it need more than that? Perhaps. 

OPI: What would it mean for you if that merger happened?

NP: We have our own strategy and will focus on what we do best.

OPI: Do you think that the Viking [owned by Office Depot] and JPG [owned by Staples] businesses are as strong as they once were?

NP: I don’t think that we are underestimating these two brands; they are both very strong players in the market. However, when these types of mergers take place, there is a tendency to look inwards – that’s normal.

OPI: What’s your view on the recent acquisition of RP Diffusion?

NP: We don’t rely on the wholesale channel, so I don’t have a strong opinion on that. I will say that I believe it’s a positive thing to have healthy operators in the channel, but Bruneau and Rouge Papier retailers are really in different markets and we hardly come across each other.

OPI: What’s your view of the market in France in general? 

NP: The declines we have seen recently are closely linked to the economic situation.

OPI: But not just that, surely?

NP: No, but these declines have a lot to do with the economy and I’m hopeful that this will pick up soon. On the subject of structural declines, they are inevitable, but that’s why I’m pushing so much for innovation from manufacturers. They need to develop products for new ways of working, and to do that you really have to pay attention to how people work – what makes their lives easier, what helps them to work more efficiently and in better conditions.

That means offering solutions around areas such as ergonomics, well-being and productivity. If manufacturers focus on that – perhaps with help from the resellers – we might manage to improve the financial performance of the industry as a whole. 

On the other hand, if we persist in selling products that don’t have a future in the workplace, then it will be a different matter.

OPI: What are you seeing in some of these ‘traditional’ categories?

NP: There has been a lot of talk about the demise of writing, for example: we don’t write anymore, so there is no need for pens, paper, erasers, etc. I don’t believe that is true. When we write, there’s an intellectual process that means we retain information better and we structure our thoughts differently. I’m sure studies will show that when we don’t write, we lose something intellectually.

So in fact, the writing category is holding up well. Envelopes is a market that has been in structural decline for a number of years; print consumables are suffering at the moment; archiving is falling a bit and document storage is in decline. But these are being replaced by other products – tech items, for example – and there are other categories that are doing well, so I’m not overly worried because we have a balanced product portfolio. 

OPI: What do the different categories represent in the overall sales mix?

NP: Core stationery, filing and document storage probably represent 40-45% of our sales; IT and print consumables between 15-20%; furniture 25%; then the rest is really breakroom, snacks, cleaning products, facilities, etc. 

The latter account for about 15% – it’s our fastest-growing segment.

OPI: Are you looking to expand into any other categories?

NP: We have expanded our offer in IT and office technology – again by providing a lot of direct delivery from suppliers – and have added 7,000 SKUs in a very short space of time. We also have 2,000 SKUs just in the lighting category through a partnership with a lighting specialist. 

On a smaller scale, we have developed another partnership with a supplier that provides access to products for disabled people in public spaces – ramps, signage, etc – and that represents a few hundred more products. That’s certainly an interesting niche market, and we are looking to develop similar partnerships in other categories.

OPI: Can you tell us about your private label offering?

NP: We have a strong private label that represents just under 20% of our sales, and that level has remained relatively stable. It carries the Bruneau brand name, so we pay a lot of attention to quality and the brand positioning. 

It’s definitely not an ultra low-cost, basic range; we promote it as having a quality level that is as good as the national brands,  but at a price point that is 20-30% lower.

OPI: You’re known for your catalogue. Does the printed catalogue still have a future in your opinion?

NP: We believe it does and it is still a very important part of our sales process. When you look at how the catalogue is used in an office, it is often passed around between colleagues, and people put sticky flags next to their favourite products. It’s something that is still difficult to do online.

On the other hand, we have invested a lot in our website to make it easy to use, with plenty of product information that is well structured and easy to find. That hasn’t been the case historically, because what happened traditionally was that direct resellers basically took what they had in their printed catalogues and copied it onto the web. It wasn’t very effective.

We’ve come at that from the opposite angle; we’ve done a lot of work structuring all the product information for the website and then extracted from that – with a few tweaks – the things which work best in the catalogue.

OPI: How do you motivate your staff?

NP: First, we have a very strong management team, with experienced people, and they’ve been with us for a number of years. We don’t have a big turnover of staff, so we have people that really know their jobs very well.

It’s true to say that our teams are proud to work for Bruneau and that’s very important; they are laser-focused on service.

OPI: Everybody says that!

NP: They do, but is it always true? To have that, you need staff who are proud of their brand, and that’s not the case with everyone. But I’m convinced people are genuinely proud to work for Bruneau. 

That said, we do have a system which is somewhat unique: a profit-sharing scheme based on the performance of the company and specific targets that can amount to up to three months worth of salary in a good year. It’s a real incentive and it’s for everyone, from warehouse pickers to management.

OPI: How do you view Amazon as a competitor in the office channel?

NP: Amazon is certainly a presence in the market. They sell office supplies like they sell books and household electronics; it’s a very ‘generalist’ approach and can be attractive for certain kinds of clients for straightforward purchasing transactions.

However, I believe we have several key advantages to our business model that set us apart. For example, the combination of the website and the catalogue; our client relationships and customised pricing; our marketing and promotional approach with a loyalty programme and other incentives; our delivery and installation services. These are not things that are easy to do purely online.

There are also other aspects that are complicated online. For example, where there is one site to invoice and then delivery has to be made to several of the client’s facilities – that’s not something Amazon can do in France today.

Amazon doesn’t currently meet the needs of professional buyers. How that will evolve we don’t know, and we are watching with interest what the company is doing in the US with Amazon Business.