The trend of pencil industry consolidation continues and this time it’s a notable first from my perspective.
German pencil manufacturer Johann Froescheis Lyra Bleistift Fabrik GmbH (LYRA), a company remaining independently owned for just over 200 years has sold to the Italian Based FILA Group several generations younger at just around 80 years. While I could not find any posts yet on either company’s website I have posted an excerpt from the supplier announcement letter received today from Lyra on the Indutry News page of our Pencils.com site. A phone call to FILA owners today confirms the transaction closed on July 27, 2008.
This is the first major German pencil company that I know of to sell it’s German based pencil business to a foreign owned company. This is a separate phenomenon in my mind to German pencil companies that had established foreign subsidiaries or joint ventures in the U.S. or elsewhere many years ago some of which have since been sold off to non-German owners.
A notable example of such prior transitions include Faber-Castell USA, which was originally a German- U.S. joint venture that was eventually sold to Newell’s Sanford Group in the 1990s (Faber-Castell brand name rights reverted to Faber-Castell in Germany after a few years and now Faber-Castell USA is re-establsiehd and owned by it's German parent company, but has no pencil manufacturing base in the US). Also the Eberhard Faber USA business which also had Mexican subsidiary was eventually purchased by Faber-Castell USA before it was sold to Sanford. The Eberhard Faber USA joint ventures in Venezuela was eventually sold to local partners and subsequently acquired by Sanford once again.
LYRA is headquartered in Nürnburg, Germany, the epicenter of German pencil industry and has a rich history dating back to 1806 having just celebrated their bicentennial two years ago. LYRA products represent a leading brand in the school market in Germany with strong market presence in Austria, the Scandinavian countries, Eastern Europe and also sales companies in Singapore and China to serve the Asia market. Some LYRA products are exported to North America, but the brand does not have a big presence here. The products have a very high quality image and are characterized by some specialized shapes and sizes. Lyra was one of the early companies to actively promote triangular shaped pencils of different sizes for their ergonomic benefits particularly to children as learning pencils. They still produce most of their high end product in ther Nürnburg facility, but many more basic coloring and writing pencils are purchased from Indonesia (see prior post “170 years of Made in Germany”).
The fit with FILA Group from a product range and sales channel as well as from a complementary regional distribution standpoint is a strong one. FILA’s Giotto brands have long been the market leader in school and art supply in Italy with strong distribution in Spain and via it’s purchase many years ago of Omyacolor (the main chalk producer in the world) FILA group has good French distribution as well. In 2004 FILA acquired Dixon Ticonderoga Company which had both UK distribution and strong manufacturing and marketing presence in North & Central America plus China based slat and pencil manufacturing operations. The newly enlarged FILA Group of Companies will have much stronger European market coverage, the ability to select certain products from “cousin” brands within the FILA, Dixon and LYRA ranges for introduction into new markets under the selected brand, plus the ability to further rationalize manufacturing of certain products globally across manufacturing operations, based in Germany, Italy, China & Mexico.
So will a German-Italian marriage work in the pencil industry? I know this is a match that the FILA & LYRA ownership groups have been mulling over for several years, so it’s not being jumped into on a whim. FILA have a good track record of integrating its acquisitions in other countries though not without certain cultural challenges at times. Both FILA and LYRA communications indicate that LYRA senior management will stay in place and if that can work that’s a good thing from my perspective. Certainly the LYRA management team knows and understand their geographic markets and customers much better than FILA owners and significant changes in product, brand strategy and personel would likely make more traditionally conservative German customers wary. If FILA can bring some new products to expand LYRA brand range and simple and logical manufacturing integration without damaging quality performance and perceptions then this will have a positive impact. I suspect the largest cultural challenge will be addressing differences in financing, capital allocation, accounting and management control systems and policies.
Check back in a few days when I'll have a follow-up post comparing and contrasting market branding and manufacturing strategies of the four key companies (including the FILA Group) that I consider to be the leading "Global Branded Pencil Companies".