PARIS – The future of the “Made in France” label doesn’t just hinge on Champagne, Airbus or luxury handbags.
The Bic company’s annual report, released on Feb. 13, proves it – it’s possible to make a good living in the West with an alternative economic model based on mass-produced cheap products.
The company still makes its disposable lighters in Redon (western France), its ballpoint pens in Montevrain (east of Paris) and shaving razors in Longueil-Sainte-Marie (north of Paris). In total, 21 of its 23 main factories are located in developed countries. This choice not to outsource hasn’t hindered profits.
Despite a difficult fourth quarter, the group made a 263 million euro net profit in 2012 – an 11% increase and an unprecedented profit. The turnover progressed by 4% to 1.9 billion euros.
What’s most striking is that the operating margin reached a whopping 19.5% of sales – 38% just for the lighters. “This is comparable to Vuitton,” says Cédric Rossi, an analyst at Bryan Garnier & Co investment bank. The lighters alone account for 56% of the company’s profit.
The only things that don’t sell very well are the mugs, ashtrays and other promotional materials. This branch, on which the company concentrated its efforts these last few years, remains weak.
Progression on the stock market has been impressive: share value increased by 75% in three years. At the beginning of this month, it reached 100 euros for the first time.
“Obsessed with quality”
Bruno Bich, son of Bic founder and chairman of the board of the group for the past 20 years, isn’t expecting to be challenged at the next general assembly, in May. The 66-year-old’s mandate should be renewed yet again. Mexican Mario Guevara should also stay on as CEO. The result of the vote is no mystery since the Bich family owns 43% of the capital and 57% of the voting rights.
“We provide excellent-quality products at low prices,” says Bruno Bich. “In the context of an economic crisis, this is what people want.”
Bic’s shaving razors, for instance, are 40% cheaper than Gillette and Schick razors, which are more upscale. In the last three years, the French company has been gaining ground on its rivals. “The only risk now is that these rivals hit back more aggressively,” say analysts from Baden Hill.
According to Bic, the challenge is to keep the same low prices while maintaining innovation, without sacrificing profit margins. “The secret is: do the opposite of what the majority of your competitors are doing. While many rely on subcontractors, Bic essentially operates in house,” explains Cédric Rossi. Keeping the whole production in house enables savings on plastics orders, for instance.
“We design our machines and molds ourselves. We are obsessed with quality,” says Bich. “The result is that Chinese lighters can be used 800 times while ours can be used 3000 times,” he adds. So much so that the company believes it will keep its share of the European market, despite the recent cancellation of antidumping duties on Chinese lighters.