Big Interview

BUY, BUILD, grow A consolidator in the office supplies space – that’s MTH Retail Group’s remit. From the resulting synergies then follows organic growth

Rooted firmly in retail, Austria’s MTH Retail Group has considerably spread its wings over the past 20 years. It now commands a solid position in the B2B as well as B2C space in our sector. Under the leadership of Group CEO Dr Martin Waldhäusl, the organisation has not only expanded its customer focus to become a multichannel operator, it has also ventured outside its home turf to explore other markets.

It has done so through a steady M&A campaign which, in Switzerland certainly, has catapulted it to a market leadership position.

OPI’s Heike Dieckmann spoke to both Waldhäusl and Johann Pintarich – who runs Swiss entity Office World Group – about the need for consolidation in a shrinking market and the necessity to reach customers wherever they are. In our sector, this is increasingly online, but the death knell of traditional retail has certainly not rung yet.

OPI: Martin and Johann, this is your first interview with OPI and while our readers will be familiar with at least part of the company, it would be great to have a short introduction. Martin, let’s start with you. Can you give me an overview of MTH Retail Group and your role within it?

Martin Waldhäusl: Sure. My background is in investment banking and I’m the entrepreneur behind the whole MTH Group which was set up in the 1990s. MTH stands for Management Trust Holding and is a family-run entity headquartered in Austria comprising a portfolio of companies which operate in three business areas. One of these is MTH Retail Group which, as the name suggests, has a focus on B2B and B2C retail with a product emphasis on office supplies.

Overall, MTH has revenues of roughly €1.2 billion ($1.2 billion) and we employ about 6,000 people globally. It’s essentially a large group of medium-sized organisations.

OPI: How big is MTH Retail within the group?

MW: It is by far the biggest part with about €900 million in revenues. In terms of geographical coverage, MTH Retail concentrates purely on the DACH region – Germany, Austria and Switzerland. We have approximately 5,000 staff.

OPI: Before we delve deeper into the various components of MTH Retail, can you tell me where you fit into the picture Johann?

Johann Pintarich: I joined MTH Retail in 2011. Beforehand, I had worked for Dutch operator Buhrmann in its paper merchanting division and then at Corporate Express/ Staples. I ran the Austrian and Central European business for Corporate Express for nearly ten years up to 2011.

The B2B side is about 60% of our business right now

At MTH Retail, I was Managing Director of Austrian B2B contract operator Pagro Direkt for several years. Before I joined, the group didn’t really have a big focus on B2B in the area of large and medium-sized accounts.

I moved to Switzerland when MTH Retail bought OfficeWorld and iba which we merged to create OWIBA. I have been there ever since in a number of roles.

OPI: Looking at an organisational chart (see page 24), there are a lot of companies under the MTH Retail umbrella, including bricks-and-mortar and online resellers, and wholesalers with a B2C as well as B2B focus. How do you segment all the various components of the group?

MW: We are predominantly organised in geographical terms because of the slightly different models in each country. There are local management structures with country From left: Johann Pintarich and Dr Martin Waldhӓusl

CEOs, but with some overarching group functions coming from our HQ in Austria.

Germany is mainly B2C with two non-food discount chains – Mäc Geiz and Pfennigpfeiffer, so for your audience this is probably not hugely relevant. That said, both have a focus on stationery products.

In Austria, we have three components which are a mix of B2C and B2B: non-food chain Libro which sells, directly to the end consumer, electronics, gifts, stationery and books; Pagro Diskont is a speciality retailer for office, school and household items aimed both at private and business customers. Pagro Direkt, finally, is a B2B platform with an extensive range of office products – this is the one Johann has just referred to.

Switzerland is a bit different in that it’s mainly B2B with a broad set of companies under the Office World Group umbrella. These are: Office World – stores and online; B2B reseller iba; wholesalers Ecomedia, Oridis and Papedis; and managed print services (MPS) provider Tramondi. Johann will expand on all of these I’m sure.

Overall, the B2B side is about 60% of our business right now.

OPI: With so many entities, what’s your overarching strategy?

MW: Essentially, we follow a buy-and-build strategy in different verticals – that’s the short answer. We acquire small and medium-sized companies and try and make them better. Some come out of insolvency – Libro in Austria is a good example of this and it’s how MTH Retail started – while others may need restructuring. If we do that successfully, we then look for similar companies in the same vertical to achieve even greater relevance.

The idea is always to be a consolidator in the office supplies space, to create synergies out of this consolidation and then put ourselves into positions from which we can generate organic growth.

OPI: From a B2B perspective – if it’s even possible to generalise – can you pinpoint your target audience?

MW: We have a focus on small to medium-sized businesses. We can service large corporates and are very proud of this, but they are not our go-to audience. JP: One of the advantages of having so many brands and channels is that it allows us to attract a wide range of different customers. And often that addressable client base blurs.

Libro in Austria is quite family-orientated, for instance, but Pagro has a more functional outlook with a stronger B2B footprint – the distinction between the private and the professional user is not necessarily clear-cut.

The downside with a very broad approach is you run the risk of losing a bit of focus. On the other hand, our remit is to sell stationery products and office supplies to whatever customer and through whatever channel. CEO of iba. Since the end of last year, I’ve been CEO of the whole of the Office World Group which comprises the various entities Martin referred to.

Overall in the Swiss business, we have sales of around CHF400 million ($404 million) and 600 members of staff based in three different logistics centres and 19 Office World stores.

OPI: Tell me more about these entities.

JP: Iba is a pure B2B business with contract customers – we call them ‘attended’ clients. It’s the classical sales model: we have sales reps and feet on the street for the larger clients as well as an outbound telemarketing team for smaller customers.

Whatever the size of the customer, every one of these accounts has a person looking after them and their activities with us.

Office World is a bit broader. It targets the ‘unattended’ customers. Still B2B to a large extent, but with no contracts in place, no individual price lists, and so on.

OPI: You said 19 stores. When MTH Retail bought them, I believe there were 24. And I seem to remember reading something about ambitions to double that number. What happened?

MW: That was me – very well remembered. It was an overestimation coming from my experience in Austria. We’ve learned since that the growth of the Office World brand would come primarily from the online business as opposed to the stores. And we are satisfied with that growth.

But you are quite right, my approach and outlook were different when we first bought the Swiss operation.

OPI: Let’s talk about Switzerland where Johann is in charge – this is the part of MTH Retail that is best known to our readership.

JP: As I said, I moved to Switzerland in 2017 when we acquired OWIBA from Migros. I took over from Christa Furter in 2018, initially as

OPI: There’s also a wholesale component with Ecomedia, Papedis and Oridis. How large is this part?

JP: The three wholesalers combined are about the same size as iba and Office World. In terms of product focus, Ecomedia is the The Swiss HQ and logistics operations at various sites

country’s market leader for ink, toner and paper as well as printer accessories. Papedis is strongest in stationery and office supplies while Oridis develops customised service packages for retail clients.

OPI: You also referred to Tramondi earlier.

JP: Yes. Tramondi deals directly with Canon, Ricoh and Sharp. It’s a qualified partner for corporate customers and supplies them with MPS solutions, but also with office equipment and furniture.

Until earlier this year, we had another small MPS business – DocuServ – which we divested and an entity called Office Leader which we migrated into iba.

We are always open for new partnerships and acquisition opportunities

OPI: Somewhere in the mix I think there’s also PEG, a cooperative of local Swiss stationers. Where does this fit in?

MW: PEG is our joint venture partner. It was set up as a group of individual stationery stores many years ago to facilitate joint purchasing and the offering of a range of services to its members. PEG is part of OFFIX Holding which has shares in Office World Group.

OPI: All quite complex, with a fair amount of M&A, consolidation as well as personnel change over the years (see ‘A Swiss journey’, right). What’s been your strategy, Martin, specifically for the Swiss market?

MW: As you know, this industry is not a growth sector. Digitisation has been going on for years and being a consolidator has become a no-brainer. Our colleagues at PBS Holding will tell you the same thing I’m sure, and are pursuing a similar multichannel strategy – although they’re more focused on Eastern European markets.

Our aim is to be a one-stop-shop for customers – any customers – where they can find everything they could ever want or need under the broad business supplies umbrella. At the same time, we aim to create synergies by consolidating small and medium-sized companies which then allows them to be more competitive. We’ve done this pretty well over the past few years.

OPI: Are there any plans to combine all your operations under just one brand, either in the individual countries or across the DACH region?

Office World Group, in its current format and with Johann Pintarich at the helm, has only been in existence for about a year. The coming together of the various components began about 12 years ago, however.

Here’s a potted history of events since iba CEO Peter Basci, son of company founder Ilo Basci, sold his business to Swiss giant Migros.

• 2010: iba is sold to Migros which owns the Office World chain of stores; Peter

Basci retires • 2011: Christa Furter, previously Marketing

Director, is named CEO of iba • 2012: iba acquires Tramondi • 2015: Office World CEO Stéphane Willa leaves; Furter becomes Office World/iba

Group CEO • 2017: Migros sells Office World and iba to

MTH Retail Group • 2018: Furter departs; Annett Seonbucher and Johann Pintarich are appointed

CEOs of Office World and iba respectively; Patrick Lobsiger replaces

Annett Seonbucher shortly afterwards • 2021: Office World Holding and

OFFIX Holding enter a joint venture agreement creating Office World Group;

OFFIX Holding has under its umbrella wholesalers Papedis, Ecomedia and

Oridis, as well as MPS firm DocuServ (now divested) and B2B reseller Office

Leader (now part of iba); Johann Pintarich becomes sole CEO of Office World Group

MW: I don’t think this makes sense right now. We are targeting quite different customer groups with brands they are familiar with. Why alienate them with something else?

What we are most certainly looking to do – apart from generating good organic growth both in the B2B and B2C businesses – is to continue our expansion strategy. We are always open for new partnerships and acquisition opportunities.

OPI: In any specific geographies or even beyond your current markets?

OPI: Talking about growth – with your sizeable retail presence, it must have been a challenge throughout the pandemic period.

MW: COVID certainly had a significant impact on the business, particularly during the lockdowns when we had to shut our stores. It was very noticeable in Germany, a bit less so in Austria, and only very little in Switzerland. The latter was partly because when the physical Office World stores were closed, customers went to our online platform instead, so the damage was mitigated. JP: Also, we had two lockdowns in Switzerland. The first one came when COVID first really hit Europe in March 2020 and we had to shut all stores. But through the second lockdown at the end of that year, we were allowed to open as a basic goods provider of office supplies. It meant we could at least sell part of the assortment.

We’re now comparing favourably again to 2019 for the whole of Office World Group.

OPI: COVID gave us hybrid working too, of course, which remains a huge part of current work patterns. How has this affected you? Do customers – whose employees haven’t returned to the office full time – still buy from you, online or otherwise, or do they head to Amazon or elsewhere?

JP: We know from analysis that hybrid workers have less consumption, certainly when working from a home office, but often they take their supplies back from the office when they go in.

As Martin said, demand for office products is shrinking overall due to digitisation although, as far as we can tell, neither COVID nor the resulting increase of hybrid working has accelerated this decline.

For the majority of our customer base, hybrid working is also not a huge factor. The smaller the business, the less likely it is there’s been a big workplace shift. It tends to be the large corporate organisations that offer hybrid working – they simply have to due to employee pressures and demands.

OPI: Has your product portfolio changed as a result of the pandemic or diminishing demand for core OP?

JP: We sell a lot more technical equipment now and in that sense homeworking has helped. But you don’t replace a webcam or a keyboard like you do Post-it Notes.

Apart from some specialised dealers, nobody in our space sold masks before. We do now, but this has already reached lower

Austria Switzerland Germany

levels. Where we do see continued demand – and I think it will stay – is for disinfection and hygiene products. We didn’t sell these pre-COVID and we have good growth here. It’s not a substantial part of our business but it helps offset some declines.

OPI: How would you describe the competitive landscape?

JP: In Switzerland, nobody has exited the market in the past two years, but the space is definitely getting more and more consolidated, especially in the contract business.

OPI: Your biggest competitor is Lyreco, is that right?

JP: Yes, for the contract business. MW: Lyreco is an important competitor in all its markets – it’s doing a very good job.

OPI: I appreciate you probably don’t want to talk about the competition too much, but who else is causing you a headache?

MW: I’m not sure about a headache. And there’s not really a simple answer because you’re typically not comparing like with like. A company such as Lyreco focuses on a certain sales channel or customer segment – the B2B direct business, specifically with large global customers. We’re not in that particular space, with the exception of some iba business.

Other companies have a broader approach, either geographically or in terms of product offering. RAJA Group or PBS Holding are good examples.

OPI: What about the mighty Amazon – is it mighty in your markets?

MW: We don’t have the exact numbers, but yes, it’s big. In Austria, Amazon is probably the leader in the online direct business, though not necessarily in stationery products.

Switzerland is different because there are sizeable local online players. Digitec Galaxus

is the number one, Brack number two, plus two or three others, so Amazon is definitely not a market leader in the country in our sector.

OPI: In terms of the overall European macroeconomic and political landscape, these are challenging times. What can you do to keep your head above water and mitigate any impact?

You have to work together to weather the storm to ensure you survive it without too much damage

MTH Retail Group HQ in Austria MW: Absolutely agreed, these are tricky times. It all started with COVID at the beginning of 2020 and we’ve been stumbling from crisis to crisis ever since. And they are mostly unprecedented situations.

Lockdowns, followed by reduced frequency and footfall in city centre stores, price increases, soaring inflation, forthcoming recession fears – it’s a multiple crises situation I’m sure you hear about in every interview.

Specifically for our business, order values are going down, so more orders but less in the basket, which creates higher costs. We have some initiatives in place to stop this evolution, such as pricing for multipacks, recommendations for ideal order sizes, etc, and they’re working quite well.

We are also seeing substantial price increases from our vendors and have no choice but to pass those on to our customers. That is a huge challenge right now.

In terms of mitigation, I guess the important factor is that you remain a trusted and reliable partner in among all the obstacles – to your suppliers and customers. You have to work together to weather the storm to ensure you survive it without too much damage.

OPI: Talking of partnerships and given the supply chain constraints we’ve had – have you expanded your vendor portfolio over the past couple of years?

MW: We haven’t, no. Our range of suppliers has actually been concentrated. It’s a result of the consolidation process as well as focusing more on private label. We mostly deal with European suppliers and have very long-term relationships with them.

Of course, with the supply chain issues you mention in mind, we sometimes purchase products on the spot market, but that’s not our typical approach.

OPI: How important is private label to you?

MW: It helps with the identity of each brand. Many of our brands have individual private label products which align the item with the brand. We can also create synergies on a group level. It’s very important.

OPI: Finally, where will future growth come from?

MW: Most definitely from M&A and further consolidation. As regards organic growth, the biggest opportunities come from the online parts of our businesses.

That said, while traditional retail sales are fairly flat, there has been something of a renaissance. During the pandemic in particular, customers rediscovered that they like their local brands and don’t want to buy everything from Amazon. As such, many local businesses experienced a kind of revival which was also good for footfall and frequency in our stores. I wouldn’t write retail off just yet.