Cimpress: the sale of Albelli – growth through contraction?

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The acquisition of National Pen was only completed on December 30, 2016. Cimpress is now selling its photo print provider to Gilde Buy Out Partners. Is this how its mass customization platform functions?

Cimpress is once again involved in a major deal in the online print business – but this time not as a buyer, rather as a seller. How does that tally with its objective of becoming the global mass customization market leader? Growth through downsizing? This appears “strange” at first reading – and at second reading too. There is a more complex pattern behind this transaction, which is reason enough for me to take a closer look at the background to and possible motives behind this multi-million deal.

What are we to make of it all?

Anybody who has closely monitored how Cimpress has evolved over the last few years knows that Cimpress has invested a lot of money and energy in developing its mass customization platform and in other long-term, future-securing projects and will likely continue to do so. The No. 1 in the online print business is now selling one of its oldest brands. Cimpress – under its former name of Vistaprint – bought Albelli, a Netherlands-based print company specializing in photo print and photo books established in 2003, in the fall of 2011 and made this established brand even stronger over the course of some six years. The purchase price back in 2011 was around 60 million USD, compared to the current selling price of around 90 million USD. The fact that Cimpress has kept on expanding Albumprinter et al over the course of many years is demonstrated not least by the latter’s headcount, which has almost doubled from around 150 at the time of the acquisition in 2011 to more than 290 now. Back then mass customization specialist Vistaprint’s rationale for enlarging its portfolio was to acquire digital photo production know-how and production capacity. It’s difficult to imagine that the rationale behind the recent sale is only that of a “useful minor financial transaction” to swell the coffers.

Gilde manages one of Europe’s largest buy-out funds and is now investing in the online print industry by taking over the management of Albelli et al; Source: gilde.com

But first let’s look at the buyer. Gilde focuses primarily on established companies that are based in the Benelux or D/A/CH regions and that are well-positioned in their respective markets. To a large extent Albumprinter therefore fits the bill, in geographical terms too, and indeed in terms of the investor’s maximum investment volume of 150 million Euros, given the purchase price is around 77 million Euros. The group operates offices in Utrecht (NL), Zurich (CH), Brussels (BE) and Frankfurt and is currently investing in companies in the food (Eismann, Enkco), textiles (Koninklijke Ten Cate, Riri), jewelry (Amor), pharmaceutical (Oystershell) and education (Comcave) sectors. By acquiring the online photo print provider Albumprinter, Gilde is substantially broadening its portfolio – also as far as geography is concerned, since Albumprinter/Albelli also owns brands in Scandinavia.

“Two major deals within six months plus massive decentralization throughout the entire corporation – Cimpress is ensuring movement within the online print industry that will be monitored by many market players with anticipation.” – Bernd Zipper

Does a glance at Cimpress’ figures reveal any more about the sale? In the last eight quarterly reports from mid-2015 to mid-2017, the “All Other Businesses” section, which includes Albumprinter and its separate Albelli, Bonusprint, Foto Knudsen and Önskefoto brands, posted a drop in sales of up to 19 percent (currency-adjusted) on five out of eight occasions compared to the previous year’s figures. But neither can you infer a poor overall performance by Cimpress during this period from these figures nor can the in part poorer performance by this particular business unit be solely attributed to Albumprinter respective Albelli. That’s because group sales increased in each of the above mentioned fiscal years by around 19 percent compared to the previous year as a result of organic growth and acquisitions. Therefore Cimpress posted aggregate sales of more than 2.1 billion USD during its 2017 fiscal year (ended June 30, 2017), meaning the corporation remains the industry’s top dog. Nevertheless the strategy being pursued by Cimpress, the recently published figures from its quarterly report and the sale of the photo print p4rovider Albelli appear to have unsettled some investors, which was reflected in a fall in the share price of more than ten USD from July 26 to 27. However the share price recovered to its pre-press conference level a few days later.

Albelli was and is successful in the photo print sector, in future Gilde rather than the Cimpress management will communicate with B2C photo customers; Source: albelli.de

At least, according to Robert Keane, the decision has been taken that Cimpress will invest the figure of around 90 million USD in other ways, e.g. in further enhancing the MCP (Cimpress’ own mass customization platform), which will in future be made available to Albelli et al as fulfillment partners. And apparently both sides want to ensure that photo-print cooperation between certain Cimpress brands and Albelli continues to function smoothly. I can well imagine that although Cimpress is apparently “losing” a strong brand, it will nevertheless subsequently benefit from the photo print know-how acquired during the last six years and from continuing cooperation in the future with Albelli et al. That’s because Gilde wants to continue with the strategy of expansion being pursued by the photo print brands in the B2C sector, while Cimpress keeps in touch and benefits if anything via its MCP. That’s the way to “outsource” the photo division and assign it to decentralized partners in each country. Since price competition is pretty fierce in the photo book and poster segments right now, this would merely be a logical consequence. Therefore Cimpress can in future purchase products from external sources and does not have to maintain its own photo print production facilities. There are enough partners about in the market. It’s rumored that more than 100 companies are suppliers to the Cimpress corporation, including several photo print specialists.

My take: this deal is of greater significance for the online point sector than it might at first appear. While this action by Cimpress to sell Albelli as a major player in the photo print sector was somewhat unexpected, it does seem to make sense given how this online print market segment is evolving. After all Albumprinter along with its affiliated brands was part of the Cimpress pool for some six years – and during this period it was a key supplier of photo print technology know-how to Cimpress and also a guarantor of valuable new customer relationships throughout Europe. The corporation made use of this advantage and extended it. What remains is a reliable partner that continues to be attached to the mass customization platform in its role as a fulfiller. Whether the massive and suspiciously lengthy expansion of the MCP makes ownership of a range of brands superfluous remains to be seen and depends on sales performance. What is definite is that the platform is capable of tying in merchants and fulfillers alike to Cimpress. This is then possibly not the last transaction that Cimpress undertakes in 2017 as part of its strategy.

Founder and CEO of zipcon consulting GmbH, one of the leading consulting companies for the print and media industry in Central Europe. The technology and strategy consultant and his team actively support practical implementation in a wide variety of customer projects. His work involves developing visions, concepts and strategies for the players active in the print production process across a wide range of industries. His areas of expertise include online print, mass customization, strategy and technological assessment for print, and the development of new strategies in the print and media environment. Bernd Zipper is the creator and chairman of Initiative Online Print e.V. and, in addition to his consulting activities, is an author, lecturer and sought-after speaker, orator and moderator. His visionary lectures are regarded worldwide as trend-setting management recommendations for the print and media industry. (Profiles also in Xing, LinkedIn).

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