Big Interview

With French FLAIR

Under Nicolas Potier’s stewardship during the past 12 years, France-based reseller Bruneau has more than doubled its top line and become a leading multinational player

After being freed from the shackles of its OTTO/3 Suisses masters in early 2015, Bruneau has had three private equity owners, with the most recent transaction closing at the end of 2021. For many, this revolving ownership door might be a sign of turbulent times but, at Bruneau, it has been just the opposite.

Far from being a ‘distressed’ target for investors, the operator has been doing rather well, both on the top and bottom lines. This is due, in no small part, to the steady hand of CEO Nicolas Potier, who has successfully transformed the business from a largely France-focused catalogue reseller into a European B2B e-commerce player.

OPI’s Andy Braithwaite caught up with the Frenchman to find out more about Bruneau’s recent acquisitions and how the company has been adapting to changing market conditions.

OPI: It’s been almost six and a half years since we last had a Big Interview with you. The world has changed since then, hasn’t it, and so has Bruneau. Can you provide an overview of the group today?

Nicolas Potier: Yes, we’ve undergone several changes of ownership for a start, as you know. When we last spoke for this feature, we had just been acquired by a private equity company, Weinberg Capital Partners. Now we’re owned by TowerBrook Capital Partners. In between, our main shareholder was Equistone.

OPI: You are clearly quite popular among these private equity companies. They don’t seem to have any trouble selling and buying you!

NP: Well, it requires a lot of effort on the management side of the acquired party, but it’s actually quite common in terms of how these financial institutions operate. The important point is that the number of employees of the group who are now also shareholders has increased tremendously.

A few months from now, around 80% of our employees, or at least two-thirds, will be stakeholders in Bruneau.

OPI: Interesting. I saw on the Equistone website that the company referred to the transaction with TowerBrook as a secondary MBO. I was wondering what this meant exactly. What’s the rationale behind having employees participating in the firm – was this instigated by you?

NP: Yes, it was. I thought it would be a good idea to involve more of our employees in the future and the financial performance of the whole group. In France in particular – which remains our main business unit – we’ve had a successful profit-sharing scheme for many years. But, in addition, we also wanted to encourage staff to invest some of their own money.

This started with approximately 120 managers and now we’re expanding it to everyone who wants to be part of the investment. I believe it’s really important everybody is invested as much as possible in the fate of the group from a financial standpoint.

I believe it’s really important everybody is invested as much as possible in the fate of the group from a financial standpoint

OPI: Talking of financials, can you tell us a bit more about these?

NP: The business is currently turning over close to €500 million ($572 million). When we last spoke, I think it was around €300 million. Geographically, we acquired Muller & Wegener in Luxembourg three years ago; we expanded in Spain where we acquired Viking which was integrated into Bruneau Spain; and most recently we purchased Viking and Office Depot in Italy.

Therefore, I would say that just under half of the growth of the group has been external with these acquisitions while the rest has been organic.

In parallel, we’ve done quite a few things in terms of internal efficiencies and cost reductions – not easy to do – and we’ve also worked with our suppliers to achieve some benefits from this expansion of scale. As such, the profitability of the group has been very solid.

OPI: I saw an article in Les Echos which put your EBITDA at around €70 million.

NP: I cannot comment on this. What I can tell you is that our net result – after tax and interest, etc – has been between 5-10% of revenue over the past several years. It’s a very solid performance because it’s really what is left after everything has been paid, and so we can reinvest.

It means we have flexibility to look at further external growth if some good opportunities present themselves, and also to invest in our own business – in technology or logistics, for example.

OPI: Let’s focus on your international expansion for now. Firstly, in Luxembourg and Spain, how have those acquisitions gone for you in terms of their integration?

NP: They were very different deals. In Luxembourg, we first became the majority and then the sole shareholder of Muller & Wegener. It’s a very well established and highly regarded brand in Luxembourg, which is a relatively small market. We kept the brand, the management and local business practices as much as possible, but were able to capitalise on the supplier side.

Initially, we decided not to integrate the business as regards IT and logistics. Now, we are planning on doing that, at least in terms of the

information system – to be able to digitise and modernise this important part of the company. It will be a significant project to undertake, probably in the second half of this year and going into 2023.

OPI: But the Muller & Wegener brand will still be maintained in the future?

NP: Yes, because it’s very strong, and we are closely attached to the brand itself and the people working there. perspective. It also had a strong team which has been working fairly independently from all the different [Office Depot Europe] reorganisations taking place in Central Europe.

The complexity lies in the fact that it is split between two brands – Viking and Office Depot – with very different business models: catalogue and internet for Viking, without salespeople in the field; and Office Depot, with contracts and a lot of outside reps. There were also two IT systems.

OPI: What about the Viking brand in Spain? How attached are you to that?

NP: Well, it’s a different type of integration. It’s been more of an absorption and, anyway, we were not allowed to keep the Viking name going forward. We also wanted to focus our energy on one single brand.

What we did do is we had a full integration of the information system after a couple of months, which was very quick, and we integrated the logistics into our Bruneau facility near Barcelona. We are lucky to be working with a legacy commercial team there which is efficient and led by an excellent manager. They added some new processes and practices that were ingrained into the Viking model, but weren’t really used at Bruneau at the time.

Overall, we have enhanced the way we do business now. It’s working well and has given our Spanish operation the critical size it was missing. To be honest, we have had some challenging times in Spain over the past 10-15 years. With the acquisition, we are now making a profit, which we are happy about, and looking forward to developing this side of Bruneau further.

OPI: Let’s talk about Italy. It’s a new market for Bruneau, and you acquired two parts from Aurelius – Viking and the Office Depot contract piece. What attracted you to both entities?

NP: First of all, the Italian market as a whole was of interest to us. It’s close to France geographically and culturally, and is a large country with a big economy. It has been struggling lately, but I do believe Italy has a lot of potential from a general economic standpoint.

When we looked at this opportunity, we knew the integration would present some challenges. Yet, at the same time, we saw that, among all the business units of Office Depot in Europe, it was probably one of the healthiest from a performance

OPI: Viking is closer to Bruneau’s historical model. Would it not have been practical to just acquire the Viking part?

NP: Splitting the business was too complex because all the back office functions were shared: logistics, purchasing, customer service – you name it. We therefore decided to acquire the whole company and are currently in the process of implementing our IT platform there.

We have had some challenging times in Spain over the past 10-15 years. With the acquisition, we are now making a profit

OPI: How is that going?

NP: It has required a lot of work and effort from the teams in France and Italy, but we are confident we will switch to our system over the course of 2022.

OPI: For both Viking and Office Depot?

NP: Yes. What we have in mind is that we will gradually be able to implement the business model we have in France and Belgium, which is very much digitised. Just to give you a number, about 90% of our sales are generated through the internet. In Italy, it’s about 60%.

But more than that, what we have been able to develop in our business units is what I call a hybrid model. It’s predominantly digital from a transactional and web shop standpoint, with open pricing and so on. And we have combined that – successfully, I believe – with our inside and field sales teams. It’s a stronger web marketing and even paper catalogue approach, together with a complementary sales team for the larger accounts.

This is something we want to implement in Italy as well. We are not certain yet what the

model will look like exactly, to be frank, but this is the objective we are pursuing. However, the first priority was the change of the IT platform, because this structures the overall operation.

OPI: How many people do you have in Italy?

NP: We have approximately 120 employees, but also a lot of independent sales agents.

OPI: I was going to ask you about the sales function in Italy, which is perhaps a little different from other markets. How do you approach this part of the business?

NP: The agents are very dynamic. In fact, they were hugely successful at coping with the pandemic and were able to sell quite a lot of ‘beyond office supplies’ products.

We want to continue with this commercial spirit and dynamism. At the same time, we want to find a specific Italian model – similar, possibly, to what we have in France, but tailored for the local market.

OPI: What about the branding in Italy? Anything you can say?

NP: Not yet, but we will not continue with Viking and Office Depot, I can say this much. We will probably have to change it in 2023.

OPI: Was this part of the agreement when you acquired the businesses?

NP: Yes. And we are still discussing and reflecting on how to go about the branding in Italy. We will probably aim to have only one brand, and that could well be Bruneau, but we haven’t made a final decision yet.

OPI: What are your plans for further future international expansion and growth?

NP: We are very agnostic in terms of external growth. Firstly, we’re looking at successfully consolidating our acquisitions, which is quite work-intensive for a group of our size.

I think people often underestimate the challenges of an integration, and this can lead to failure – we have seen a fair few examples of it in our industry. I don’t want to make the same mistake, so we’ll take the time and effort required to do it properly.

Regarding the future, we are constantly evaluating opportunities, both for office supplies and other categories. We don’t want to increase our exposure too much in the traditional office space. Therefore, in markets where we already have a presence, we aim to be very selective. What I’m saying is any acquisition would have to be fairly easy to integrate and must deliver quite a lot of synergies.

Other than that, our plans are fairly broad in terms of expanding product ranges and going beyond office supplies. Geographically-speaking, we don’t want to stray too far away from France.

OPI: In the past couple of years, you’ve had to deal with the COVID crisis, changes to people’s working habits, continued digitisation of the workplace and ongoing or accelerated secular declines in some of the traditional categories. It’s quite a lot, all happening at the same time – how would you summarise the experience?

NP: It’s been a very bumpy ride because of COVID, but at the end of the day – and I hope we are through it now – I believe it’s been positive. Why? Because we’ve been agile in adapting our offering, for example. Like many other resellers, we’ve been quite successful in expanding our range of COVID-related items and providing people with products that help them when working away from the office, whether it’s from home or anywhere else.

As such, we have been able to compensate for some declines in the market in 2021 for traditional OP, including ink and so on. In 2020, there wasn’t actually a decrease because a lot of people were starting to work from home and they needed office supplies. So overall, it’s been a mixed experience but the good thing is that we’ve been able to expand our business offering.

OPI: When you look at your product mix in terms of what we call traditional stationery, ink and paper, what do they represent now?

NP: About 55-60% across all our markets.

OPI: But continuing to decline?

NP: Not really, because we’ve been able to probably increase our market share in those

categories. But I don’t believe we should look at the future of the group only focusing on these segments, because there is a secular decline, no question about it.

OPI: I would like to elaborate a little on the hybrid and homeworking phenomenon we’ve seen – and continue to see. How are you set up to deliver to home addresses? I know it’s been an issue in some countries.

NP: We have no problem with it. It’s something we have been doing for a long time. We have a large customer base of very small companies. In that sense, we really operate like a B2C business.

We have an IT system which can accommodate homeworkers, for instance, who benefit from the same conditions as if they were based in the office. The company gets a single invoice at the end of the month.

OPI: That’s good, because we hear a lot about spend leakage and employees buying their various supplies online and then expensing them. It sounds like you have it covered. To what extent do you believe COVID has accelerated e-commerce?

NP: Hugely. We were already fairly high in terms of percentages, but the proportion of sales to the web has increased, and the need for paper catalogues is probably decreasing.

OPI: I was going to ask you about catalogues…

NP: Bruneau is still producing them. Not as many as we used to and with a lower circulation, but we are still very keen to provide the market with an extensive and comprehensive catalogue.

OPI: But digital channels will ultimately gain the upper hand and replace them?

NP: I’m a strong believer in an omnichannel business model. We reach customers through catalogues, email, our salespeople and, of course, they can access our website. We are just multiplying the number of possibilities.

It’s also not one or the other channel, which is actually quite important. The same customers can have different attitudes towards how they want to interact with Bruneau, depending on what they want to buy, their mood, their location, etc.

OPI: We’re living in a highly inflationary environment now. How does that impact your ability to pass increases onto customers?

NP: This is currently the biggest challenge we are facing; it’s a very serious situation. We don’t dispute the fact there have been a lot of raw material price increases – the evidence is everywhere. And, of course, we’re having discussions with the manufacturers because they want to pass on these rises. I completely understand that.

However, for us to be able to manage this with our own customers, it is absolutely key to have maximum transparency from the vendors in terms of their cost structure for the products we buy. It’s extremely difficult to have these conversations, but we need to have them to understand the impact of this raw material – or energy or transportation – cost hike, so we can justify price rises to our clients. They are very upset about the increases we have had to put in place – we have raised prices quite a lot.

OPI: You sound a bit sceptical about some of these vendor increases.

NP: I’m not. But what I would hate is being in a situation where there’s so much turmoil in the market that some of the vendors might try to take advantage of it and improve their margins.

Transparency with us is so vital. Discussions would be more efficient and less time-consuming, and we would be much more understanding of the increases they have to pass on. It would also be better in terms of the longer-term relationship with us because, at the moment, we often get a very sketchy type of explanation.

OPI: A difficult time for supplier relations then?

NP: Yes. Our role as a reseller is to develop the market, and also to protect our customers from the economic consequences of the current increases. We have a duty to them in terms of being reasonable on price, and sometimes what we’re seeing at the moment seems unreasonable.

We are not dealing with one-off partners here. Bruneau has established, long-term relationships with manufacturers and, as such, we need to discuss and negotiate this kind of situation in a much more open book type of way. This is my message to my teams over and over again.

OPI: Hopefully you can have some fruitful discussions with your suppliers at the OPI Partnership event in March! Let’s move on to something else. Looking at the French market in particular, Office Depot obviously had its problems last year. Did you manage to pick up some share from this situation?

NP: I think so, and our competitors probably did as well. I feel sorry for the people who worked for the company but I think, at the end of the day, it wasn’t a very well-managed integration. It’s exactly what I referred to earlier and what I don’t want to do at Bruneau when acquiring companies.

OPI: When you look at the general health of the French business supplies market, how would you describe it?

NP: It’s been consolidating over the years. In my time in this business, I’ve seen quite a few players disappear, the latest ones being Office Depot Business Solutions and Viking. But there were others beforehand. The ones that are still around are, as far as I can see, fairly healthy.

OPI: Does it put you under constant pressure to reduce your overheads and costs?

NP: Of course. But we are stuck between a rock and a hard place – between suppliers pushing up prices and customers that do not understand increases of this magnitude. It’s the major concern I have.

OPI: You’ve been with Bruneau since 2010. What’s your vision for your own future?

NP: 12 years ago I would not have predicted that I would still be managing the group in 2022! I had no knowledge of the office supplies industry, nor of B2B reselling.

I had studied to become an engineer and worked for companies like Air Liquide and General Electric, so nothing to do with this market. But it’s been a good ride. When I joined to manage Bruneau France, it was part of a bigger group – 3 Suisses – which was not doing well. It was a difficult time; we were a business unit in a larger organisation, but we were believed to be something of a sleeping beauty…

OPI: Which makes you the Prince Charming.

NP: (laughs) I don’t know about that. But 12 years on and our growth has been fairly substantial and the results are much better.

We’ve been able to regain our independence and our employees are proud to be part of the Bruneau story – now also with a sense of ownership and having some skin in the game.

I think this dynamism and the entrepreneurship of our people is the key to the success we’ve been able to build. I hope we will be able to continue in the same vein and move in the right direction over the course of the next 12 years.

OPI: Is it a market ripe for more consolidation?

NP: I don’t really think so, but we’ll see.

OPI: It seems that the main French players have now become the powerhouses of the European office supplies market.

NP: You’re talking about Lyreco and RAJA?

OPI: Yes, and the likes of Manutan.

NP: These three players you refer to are very solid groups. We are trying to be solid as well.

We are stuck between a rock and a hard place – between suppliers pushing up prices and customers that do not understand increases of this magnitude

OPI: Well, you certainly look like you’re doing a good job. What’s keeping you awake at night? NP: This issue with inflation is worrying me a lot.

OPI: Some things you cannot control. Where do you draw the line?

NP: It’s about the way we, other players and the manufacturers react to what’s happening, because it’s unprecedented. I started my career in 1991 – I’ve never seen such an inflationary period and I don’t think the majority of the decision-makers in our industry have either.

Whether it continues, we enter a spiral of more inflation and wages going up, thereby fuelling even more inflation, I don’t know. But it would be a big challenge if that happened.

OPI: Well, good luck with that, and thank you very much for doing this interview.