Global stationery company’s planned distribution deal with China Stationery Ltd. (CSL) terminated due to disagreements on product pricing.
The Sun Daily reports that a CSL company official has confirmed that the CSL-Pelikan synergistic partnership has been called off after the companies “could not agree on the prices of products they wish to cross-sell in China”, following reports that the partnership “may not materialise”.
CSL was reported to have sold its equity interest “below cost on the open market” after paying a premium of RM50 million ($15.27 million/€11.56 million) to acquire a 9.79 percent stake in Pelikan last year. The company has since sold 3.57 million shares of Pelikan in the open market, cutting its stake down to 8.8 percent.
Pelikan signed a two-year dealership agreement with CSL last December for the company to distribute and sell Pelikan branded office and school stationery products in China and Hong Kong. However, the CSL spokesman reportedly explained that “due to cultural differences between the two companies and differences of opinion over the pricing strategy”, the partnership has been terminated.
He added that “as a Chinese company”, CSL is “used to executing its work plan at [a] fast pace”, a culture that European companies such as Pelikan do not share as they choose to take things “step by step”.
The company official continued: “For example, in the area of procurement, it takes a very long process for them [Pelikan] to get back to us. They need plenty of time to make a decision on the amount of orders, but that’s not the way we do things here at CSL.”
The competitive pricing of products in China was also listed as a reason for the partnership ending, as “Pelikan (being a premium stationery brand) insists that CSL sell its [Pelikan’s] products in China at a certain price level which is so much higher compared with the local products.
“These are some of the things that we can’t do for them,” the official said. “We are supposed to cross-sell Pelikan products at a competitive price. But they think our proposed pricing is too low compared with their selling price in Europe. As such, there is no point for us to hold Pelikan shares anymore because it does not add value to our investment since the partnership has been called off.”
The CSL official maintained that the termination of its agreement with Pelikan will not affect the company’s income, explaining that it was “just an extension to penetrate the European market. As for [Pelikan], it was to expand the reach of their products to China”.
According to the article, CSL’s net profit increased 2.7 percent to RM227 million ($69 million/€52.5 million) last year, with revenue rising 14.5 percent to RM965 million ($294 million/€223 million).
“We expect the performance in FY13 to remain favourable, as consumers have become more affluent and the increase level of literacy, demand for high quality plastic stationery market will increase over time,” said the CSL company official.