Weltbild wobbles over strategy

<p>The future of Weltbild, one of Germany's leading forces in the book industry, has been thrown in the air after the Catholic Church, which set up the company 60 years ago to publish religious books and magazines, said it planned to review the ownership structure. Though no one will speak openly, the review was put in place after some bishops privately expressed concern about the strategy of aggressive commercial growth and diversification implemented by its c.e.o. Carel Halff.</p>
<p>The church is now looking for an outside investor for part or all of the &euro;2bn (&pound;1.5bn) business. According to Halff, discussions are at a very early stage, but since the announcement in early July, tensions have been running high in the town of Augsburg in southern Bavaria where Weltbild is based and employs about 1,700 out of a total workforce of 7,400.</p>
<p>Weltbild is owned by 14 Catholic dioceses and the Soldatenseelsorge in Berlin, a Christian military &shy;veterans association. Shares are divided unevenly, with the diocese of Mainz the largest shareholder (17%) and M&uuml;nster the smallest (2.4%).</p>
<p>German publisher Holtzbrinck and the bookseller Thalia have confirmed their interest in the publishing and bookselling sides of the business respectively. However, Halff, who has been c.e.o. for more than 30 years, insists that a break-up of the company remains out of the question.</p>
<p>A sale en bloc seems equally unlikely because of the particular set-up of Weltbild with its business activities covering mail order, publishing and high street bookselling. Any bid for the entire business could also draw the attentions of the German competition authorities.</p>
<p>Anyone looking to buy or invest in the group will have to closely examine its complex web of alliances and partnerships, which have helped fuel the group's aggressive expansion. Since 2000, when sales stood at &euro;831m (&pound;659m), the company has more than doubled its turnover. In the year ending 30th June 2008, turn&shy;over rose a futher 21% to &euro;1.94bn (&pound;1.54bn).</p>
<p>Weltbild began its diversification in the early '70s when it started offering books and CDs via mail order. It has built on a number of strategic partnerships: with independent bookseller Hugendubel to set up Weltbildplus (1995) and with Holtzbrinck's trade publisher Droemer Knaur (1999).</p>
<p>Most recently, in autumn 2006, it founded, again with Hugendubel, the German book chain DBH, and followed that with the acquisition of 42 book concessions within the Karstadt department stores.</p>
<p>Last year, DBH reported turnover of &euro;711m (&pound;564m), up 5.4%, putting it behind its main rival Thalia, but perhaps only for the time being.</p>
<p>Weltbild's online business, including stakes in buecher.de (33%), the Dutch-based bol.com (50%), and used book supplier booklooker.de, also had a record year, with an increase in turnover of 37% to &euro;451m (&pound;404m).</p>
<p>Becoming Germany's dominant bookseller has been just one of its recent achievements. For the past few years, Bertelsmann's book club operation Der Club and Weltbild have been engaged in an increasingly bitter power struggle&mdash;with Weltbild the clear winner. Because it does not require membership and mainly offers special editions, remainders and books that are not subject to retail price maintenance, Weltbild is not bound by the stringent German book club regulations that apply to Der Club.</p>
<p>A family-oriented catalogue with aggressive price promotions is shipped to more than four million regular customers each month. Another four to six million infrequent customers receive a catalogue up to six times a year. Of the up to 4,000 products in each catalogue, 50% are books, most of them heavily discounted with savings between 20% and 95%&mdash;uniquely, the company enables customers to select the sales channel that best meets their particular needs.</p>
<p>Publishing is perhaps the weakest of its three arms: sales fell last year by 10.8% to &euro;205.6m (&pound;161.8m) (not incuding the &euro;35.6m (&pound;28m) contribution from Droemer Knaur). Though Droemer Knaur is one of the major trade publishers in Germany, the majority of Weltbild's books are distributed through its own sales channels at very low prices, with many repackaged versions of other publishers' books&mdash;they are especially strong with how-to, illustrated books; children's; cookery; and bibles and religious titles in general. Weltbild is a far cry now from a Christian publisher, as has been noted by both the bishops and the German trade.</p>