History, ownership and development of Parteisch International In 1904 Mr Johan Posten, a blacksmith, equipped an outbuilding to make products for a local hospital. The manufacture of products con- tinued on a relatively small scale until 1949. The business was run entirely by family members until 1950 at which time the company employed its first worker. In 1956 another eight people were employed. The original site was not able to expand and the business had to look for larger premises elsewhere. Over the next sixteen years the company grew into an enterprise of some sixty employees and modernized its production techniques and built facilities for the storage of raw materials under the control of Mr Gerontius Posten, the grandson of the founder of the business Johan Posten.
Mr Christoph Posten, the younger brother of Gerontius Posten, left the family business in 1965. He bought a rival family-owned factory making similar products. This business flourished by specializing in a particular speciality line for Austria, Germany and the Netherlands and continued to expand through the 1960s and 1970s. In 1969, Christoph
Posten bought the original family business from his brother Gerontius and a former family business that owned two further factories, one in Belgium and the other in the Netherlands, in 1978. Mr Ronald van Strek was appointed as a Director of the recently enlarged and growing Parteisch International in 1981. He was made Chief Executive Officer (CEO) of Parteisch International three years later with Christoph Posten as Chairman.
Parteisch International continued rapidly to expand production and sales facilities in both its home country, Belgium, and the rest of Europe.
In 1983 Parteisch bought a specialized manufacturer in the south east of Belgium. Separate sales activities grew out of each factory, generally led by enthusiastic and knowledgeable production managers rather than schooled and dedicated sales professionals. In 1988 Parteisch UK was established as a dedicated sales operation under Mr David Stewart, while Parteisch Germany was established to sell in Germany. In 1990 a sales team was created as Parteisch Sweden in Stockholm and yet another as Parteisch Norway in Oslo. In 1994 a manufacturing unit was built in the UK. In 1995 two German factories and a factory in Denmark were purchased. Both the German and Danish acquisitions were in financial difficulties at the time of purchase although it was considered that the markets in those countries could be developed using the expertise of the Belgium based company. Parteisch Switzerland in Lucerne was formed to sell products in Switzerland in 1995. A small sales office was set up in New York in 1996.
In 1998 Ms Teresa Posten, the youngest daughter of Christoph Posten and the only sibling working in the business was set the task of building and operating a factory in the Czech Republic after three years produc- tion experience in various productions units within the company.
A dedicated Czech sales team was established in 1998 to sell in the Czech Republic, and later further teams were setup in Slovakia and Poland.
Annual sales turnover of Parteisch International was €120 million in 1998 with nearly 850 employees and eleven manufacturing units through- out Europe. Sales teams at this time were based in nine countries selling to sixteen different countries. Parteisch International remained a privately owned company under the control and ownership of Christoph Posten and his family.
In 1999 Parteisch International commissioned the assistance of a management consultancy linked to a well-known international account- ancy firm. The final report suggested that there was a need for a new structure within the organization to embrace pan-European opportu- nities in a more integrated way and to adopt a more market-led
Parteisch International and Parteisch UK 125 approach after years of rapid and profitable growth. It recommended that the structure should include professional management at Board level in marketing/sales as well as manufacturing/logistics. Christoph Posten and his CEO Ronald van Strek seem to have accepted the findings of the report.
Mr Jan Straaten took the newly created position of Marketing and Sales Director of Parteisch International a year later in 2000. Jan Straaten was Belgian and moved from a senior position with a large global company producing specialist consumer products and based in the USA, where he had initially established the successful New York office for Parteisch International four years previously. Mr Bert Jonkers became the new Manufacturing Director six months later, moving from the production and logistics directorship of a large European food and drinks business based in Germany. Both men reported to CEO Ronald van Strek in this new structure. The Board reported to a Supervisory Board chaired by Christoph Posten. His three colleagues on the Super- visory Board of Directors were successful and active in running large public companies in the European environment based in Belgium, the Netherlands and Germany respectively.
Parteisch UK
David Stewart first met Christoph Posten and Ronald van Strek at an exhibition of retail products in Frankfurt. They discussed the possibility of his involvement in establishing a business to import and sell Parteisch products in the UK, and Parteisch UK was started from the home of David Stewart in 1988. Offices and limited warehouse facilities were leased on a trading estate in 1990. David Stewart convinced the Board of Parteisch International that the UK market required unique products and packaging unavailable from existing factories in Belgium and other European countries and a new factory was built two miles from his home in the north of England in 1994. The new factory employed eighty-five people in offices, a factory and a warehouse with a UK turnover of €3.75 million.
Stocks in the UK grew rapidly with the import of Far Eastern accessories added to the range and, unbeknown to the main Board of Parteisch International, five further storage facilities were rented at nearby sites over the next four years. Annual sales turnover increased over this time to €8.25 million but annual pre-tax profits fell back to an average of just over €150,000. In February 2002 David Stewart left the company on favourable terms after three months of negotiation in advance of significant losses for 2001, mounting problems as a result of huge stocks
and proposed stock write-offs, and fundamental disagreements about the future direction of the company.
UK Business Profile
Parteisch made a commodity and professional product that had grown in popularity as a fashion and life-style accessory from the mid-1990s.
The annual sales turnover of Parteisch in the UK had a significant skew towards a large number of small customers with small sized orders. One hundred of a total of 1,435 customers accounted for 80 per cent of the annual sales turnover (8 million) and 1,300 customers were invoiced less than €7,500 annually with an average annual invoice value of €1,100.
The Managing Director, the Sales Manager and one sales executive looked after larger customers whilst eleven sales agents and five sales office staff handled smaller customers.
A category analysis of customers in Figure 7.1 with an annual turn- over exceeding €7,500 shows a large category segment of wholesale and hospital customers (69 per cent) with smaller segments of specialist gift customers (23 per cent), supermarket (4 per cent) and multiples (3 per cent).
A Boston Box by category demonstrated that all wholesale categories were moving from Cash Cows to Dogs with specialist gift outlets as a Dodo. Supermarkets, multiples and variety stores were shown to be Stars. Margins inversely reflected the customer categories with which the company was trading so that wholesale and specialist gift categories were lowest and retail multiples and supermarkets highest.
An independent trade report in 2001 notes that the UK market was made up of four major manufacturers with many smaller suppliers including importers from the Far East. Parteisch UK was rated second in the UK market by overall annual sales turnover. The report noted major
Wholesale and hospital 69%
Multiple retail 3%
Supermarket 4%
Specialist gift 23%
Figure 7.1: Pie chart showing category of customers of Parteisch UK in 2001
Parteisch International and Parteisch UK 127 growth through retail multiples and supermarkets and the perception of a growing lifestyle and fashion trend amongst users. In fact, it esti- mates that only 23 per cent of purchases were functional whilst the rest were used as decoration, an attractive feature to set a mood, or as a gift.
Users of the product ranged across all demographic categories with fastest growth in the age range 25–34 years.
The largest UK competitor by annual turnover was established in the late 1980s as an independent company and finally sold to a large US business in 1997. Aggressive selling of good design to supermarkets and multiple retailers had grown this business rapidly and established a recognized and popular brand name. The business rated third by the independent trade report was an old established UK company with a recognized brand name and taken over by an investment group in 1996. The emphasis of the range produced by this competitor centred on design with rapid growth in retail multiples, specialist retail outlets such as garden centres and factory shop outlets, and the more specialist hospital sales. Both the market leader and the competitor with the next highest turnover showed high pre-tax profits in the region of 20 per cent of turnover in 2001.
All competitors were financially stronger than Parteisch UK in all major financial and profitability ratios as reported by a well-known financial database although some figures were misleading because of the financial structure of Parteisch International.