Esselte Leitz GmbH & Co. KG - Company Profile, Information, Business Description, History, Background Information on Esselte Leitz GmbH & Co. KG

Siemensstrasse 64
D-70469 Stuttgart

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History of Esselte Leitz GmbH & Co. KG

Esselte Leitz GmbH & Co. KG is Germany's leading manufacturer of premium binders and other products for filing and archiving documents. The Leitz Ordner--the "Mercedes" of loose leaf binders which on average costs two and a half times as much as other binders--has a market share of about 40 percent in Germany. Roughly two out of three hole punches in Germany are made by Leitz, as well as one quarter of all report covers. The company also makes tab organizers, file folders, staplers, letter trays, filing systems, binding and laminating machines and supplies, and offers electronic archive system software. The Stuttgart-based company with an over 125-year-long tradition was acquired by Swedish office supplies maker Esselte in 1998. An essential part of Esselte's business strategy, the company markets the Leitz brand all over Europe.

Reinventing the German Office: 1871--1925

The formation of the German Empire under Prussia's Wilhelm I--a unified German state that put an end to protectionism and bureaucracy among the four German kingdoms of Prussia, Bavaria, Saxony, and W├╝rttemberg, five grand duchies, 13 duchies and principalities, and three free cities--created a national economy of an unprecedented scope. This in turn spurred the imagination of bankers and entrepreneurs and triggered the unprecedented wave of economic activity that became known as the Gr├╝nderzeit. One of those new entrepreneurs was the mechanic Johann Ludwig Leitz, who in 1871 set up "a workshop for the manufacture of metal parts for office organizing materials" in a backyard in the German city of Stuttgart. Starting out with three workers, Leitz made Biblorhaptes, an early kind of binder which businesses used to file their correspondence and other documents. At the time, a French manufacturer dominated the market with a high quality product. However, within a few years, the Leitz Biblorhapt gained a reputation in Germany. The business even grew through the economic crisis that followed the Gr├╝nderjahre and Leitz moved to a bigger location.

Besides its first success in form of awards at regional trade shows, the company also had to overcome some tough challenges. A lot of time and money was spent on "patent and trademark wars." Then, in 1884, Leitz' production manager Bux left the company, set up his own shop, and started competing against his former employer with lower prices. For three years Leitz didn't make any profits for that reason--until Bux went bankrupt in 1887. The company started thriving again and by 1888 employed almost 20 people. Louis Leitz--the founder had changed his name--spent most of the 1890s improving his product. In 1892, the company introduced a hole punch and a year later the first binder-mechanism using a lever--a big improvement over the older models. Four years later, Leitz launched a further improved product with the lever placed outside the metal rings that held the paper sheets. This model became the prototype of the ring binders used in German offices for the next century, and the "Leitz Ordner" became synonymous with them.

In 1897, Louis Leitz decided to significantly expand the scope of the company. A year later Leitz' 60 employees moved to a newly built factory in the small town Feuerbach, which later became a part of Stuttgart. The new building remained the company's headquarters throughout the next century.

After the turn of the century, Leitz continued to create innovative products and more efficient technologies. In 1901, the company started making "quick binders," report folders with a simple metal fastener. Beginning in 1902, more and more production technologies were refined so that the covers of file boxes and binders were made in just one production step. In 1905, the first flexible hole punch, "Komet," with two different widths was introduced, followed by an "extra strong" model. In 1908, the company started offering two different kinds of binders, one of higher quality, one more affordable. New back labels and the Griffloch--a metal-framed hole in the back of the binder that made it easier to pull them out of a shelf--were added. The company's first subsidiary was established in Berlin, and the capacity of the plant in Feuerbach greatly expanded. By 1913, Louis Leitz was Germany's largest manufacturer of binders and file boxes. In that year, the company led negotiations between seven German companies in the same business that resulted in an agreement among them to place certain price caps in order to ensure profitability for all of them.

Surviving Two World Wars: 1914-45

In 1914, World War I began and Leitz had to face challenges such as scarcity of raw materials and fuel, government-imposed restrictions, and unreliable transportation. However, the main challenge was that many Leitz workers had to serve in the German Army--including Eberhard Leitz, one of the founder's sons. He came back when the war ended in November 1918, but the year of regained peace was a year of loss for the company: Louis Leitz died. His two sons, Eberhard and Ludwig, took over at a time of economic turmoil. The German Weimar Republic ever so slowly slipped into inflation that after five years exploded into hyperinflation. Leitz issued new list prices every month for the years 1919 and 1920 that increased 200 percent each time. After a short break in 1921, prices grew by rates in the 1,000 percent range and reached six- and seven-digit percent increases in July 1923. With concerted action, Leitz managed to expand even in those difficult times. In its 50th anniversary year, the company reported 250 employees on its payroll. In 1923, Leitz took over the Stuttgart-based binder-manufacturer Schukir. In the second half of the 1920s, the company introduced new products, such as a hole punch with a little arrow that helped center the paper, binders designed to stand rather than lay, a binder with an expanded capacity for documents, a much smaller than the usual binder model, and a little metal clamp that fit over the rings and kept the documents in place. In addition, Leitz launched a promotional newsletter for its retail partners with helpful tips on how to make their business thrive.

The late 1920s and early 1930s brought more political and economic turmoil to Germany. The worldwide economic depression was taking its toll on the country's export-oriented economy. Unemployment reached new highs, causing widespread poverty and political unrest. In January 1933, Adolf Hitler, leader of the right-wing National Socialist party, took over as Germany's new chancellor. It took him only a few years to eliminate many of his political opponents and to prepare the country for another war. Leitz, however, kept expanding its business. In 1933, the company acquired two Berlin-based competitors: Gr├╝newald's Registrator & Co. and Regga Briefordner-Fabrik. Two years later Leitz introduced the fully automated production of quick-binders.

In 1935, Eberhard Leitz's 20-year-old son Manfred joined the family business. However, shortly after he had to leave for the two years of mandatory military service the Nazis--as the National Socialists were called--had introduced in the same year. By 1939, the Leitz catalogue offered some 300 products which were shipped to 84 countries around the world.

World War II began on September 1, 1939, when German troops invaded Poland. As a manufacturer of products with little importance for the German war economy, Leitz again had to cope with rationed supplies of necessities for running its business, including coal and electricity. The government required civil products to be simplified and made from less raw materials. Moreover, the following draft of men to serve in the army reduced the company's workforce by more than half. In 1943, they were partly replaced by slave workers from France. When the Allied forces flew air-attacks on Stuttgart, Leitz had to hand over part of its production facilities to the firm Bosch for the war effort. One day before the American army took over Stuttgart, the Wehrmacht took shelter at Leitz' headquarters. Because the city surrendered without much resistance, the buildings remained untouched.

From Binders to Office Systems: 1945-59

A few weeks after Germany's unconditional surrender ended the war, Leitz resumed operations. In mid-July 1945, the company started out with 22 workers, a modest number compared to it's pre-war staff of 750. The supply of gas and electricity--and consequently the production process--were frequently interrupted. In January 1947, the company even had to shut down operations completely for a week-long power-outage. In the same year, the company had to clear out its warehouse to be used by the military administration. The foundation of the Federal Republic of Germany in 1949, uniting the three zones occupied by the Western Allies, cleared the way for postwar reconstruction. In the same year, the first of the third generation of the Leitz family, Manfred Leitz, joined the company, which was transformed from Louis Leitz OHG into Louis Leitz KG. In 1950, when Martin Leitz and Dr. Herbert Klaiber joined the top management team, the company's output exceeded the pre-war figure for the first time. The year 1951 marked the beginning of the reconstruction and expansion of the company's buildings and facilities.

At the beginning of the 1950s, Leitz made a strategic decision: to expand its product range from binders and related products to all office systems for organizing and filing paper. In 1953, a brand-new production plant started operations in D├╝sseldorf and the facilities in Berlin were extended for a higher capacity. In the same year, Leitz started making different kinds of "ALPHA" hanging folders. However, the company got off to a bumpy start. Due to high fluctuations in the orders received, Leitz had to adjust output by introducing part-time work schemes and layoffs. In 1954, Ludwig Leitz died, and a year later his brother Eberhard also passed away. Their sons Martin and Conrad now took charge of the family business. By 1955, the number of Leitz employees had exceeded the 1,000 mark. In 1956, Leitz took over office supplies manufacturer Herm. Herdegen GmbH. Three years later the company ventured into organizational consulting. As an added value to Leitz' customers, the organizational advisors analyzed the flow of information in a given company, calculated the time, space, and cost required for alternative filing and archiving solutions, and presented the optimal combination of Leitz filing systems to the customer.

Further Growth: 1960-93

The 1960s and 1970s were years of unprecedented growth for Leitz. By 1971, the company's 100th anniversary year, Leitz shipped its products to 120 countries around the world. In addition, the company's first foreign subsidiary was established in the Netherlands. However, the company's main growth happened in Germany. Bernhard Klaiber replaced his father, Dr. Herbert Klaiber, who retired, in the top management team. A new production facility was built at the Feuerbach location. Another new plant for the manufacture of plastic foil sheet protectors was erected in record time in M├╝nchingen near Stuttgart. By 1975, Leitz employed about 2,000 people at six locations, including Feuerbach, M├╝nchingen, D├╝sseldorf, Berlin, Rangendingen, and Uelzen. In 1979, the company started making products from plastic.

The 1980s were a decade of significant growth, excellent profits, and more changes in management. Manfred Leitz was succeeded by Helmut Leitz, who took over responsibility for marketing and distribution. In 1988, Eberhard Leitz entered the business, followed by Joachim Leitz in 1990. That year marked the reunification of the two separate German states that World War II had created. The expanded market caused a significant boost in sales for Leitz. In 1990, the company's new state-of-the-art central warehouse in Heilbronn opened its doors. A new sales office was established in Leipzig. Due to high demand from the new eastern German states, sales for Leitz products peaked in 1992 at DM 524 million. The company's workforce had grown to 3,000. The production plant in M├╝nchingen was greatly expanded. A novelty in Leitz' product range--small binding machines for the office--was introduced in 1992. It was also in 1992 that the company restructured its organization into a group of companies under the umbrella of Louis Leitz KG.

Buying and Being Bought: 1993-2000

The growth period of the 1980s and early 1990s was followed by a period of consolidation due to a stagnating market. Three out of eleven domestic sales offices were closed down, as well as the plants in Rangendingen and D├╝sseldorf. With domestic markets shrinking, Leitz saw a possible solution in another effort to expand internationally. The company had set up a subsidiary in the United Kingdom--Leitz (UK) Ltd.--in 1998. In 1994, Leitz took over the Turkish market leader for office supplies, Mahir & Numan A.S., hoping for more business in the Middle East. In the same year, the company acquired a share in the French Centra, Mecarex, and Tarifold group, which competed in the low-price segment while the Leitz brand was positioned at the premium price level. In 1996, the company's 125th anniversary year, the Leitz Ordner--as the company's binder was called in German--turned 100. Leitz itself was Germany's largest manufacturer for office supplies and the 50 million Leitz Ordners that were shipped annually generated one-third of the company's sales. Four of the six top Leitz executives were great-grandsons of the company founder. The company's foreign subsidiaries and sales offices in the United Kingdom, France, Turkey, the Netherlands, Austria, Sweden, Singapore, and the United States generated almost one-third of the company's revenues. Leitz product catalogue had grown to more than 2,000 articles.

However, the market for office products had changed in the 1990s. A growing number of internationally operating office supply retail chains entered the German market and started competing for market share with lower prices. Overcapacities among office supplies manufacturers put further pressure on prices, a situation which in turn significantly lowered profits. On top of that, electronic data storage systems started competing with paper-based filing systems. To survive and secure the long-term future of the company in this environment, Leitz was looking for a solution to turn the family business into a "higher-class player" with at least one billion German marks in sales--almost double what the company was hitherto generating. Buying or being bought--those were the two options. However, the company's funds and possibilities for financing a larger deal were limited.

In 1998, the Swedish conglomerate Esselte AB acquired Louis Leitz International GmbH for an estimated DM 580 million. The holding company Louis Leitz GmbH & Co. KG remained as a financial holding company for the heirs of the Leitz family. The new parent took over Leitz's management team and placed the responsibility for export management, especially in Central Europe, in Stuttgart. Although the family business disappeared, the Leitz brand endured.

Principal Competitors: Herlitz AG; Elba B├╝rosysteme GmbH; Avery Dennison Corporation; Smead Manufacturing Company.


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