Filofax's Paper Power

Despite the rise of PDAs, stationery maker Letts has sales of the day planner soaring, plus an ambitious growth strategy after the company's LBO

In an era where technology is king, mobile phones are must-have items, and the BlackBerry has become a status symbol, one might be forgiven for thinking the iconic Filofax had gone the way of the dodo bird. After all, who wants a paper-based organizer when they can plug contact details into a portable electronic gizmo and synchronize data with a PC or over the airwaves?

Turns out, plenty of people. Global sales of the Filofax day planner have soared 20% to £33.6 million ($65.8 million) since the company was taken over by Scottish stationery maker Letts in 2001, and continue to grow at an annual clip of 5%.

The secret? Savvy design and brand repositioning. Since Gordon Presly, the CEO of 209-year-old Letts, pushed through a £14 million takeover of Filofax five years ago, he has dispensed with the Henry Ford design approach of "any color as long as it's black." Now, Filofax prides itself on style-led innovation, offering products in a kaleidoscope of colors and rich materials that appeal as much to luxury lovers as to Luddites.

The company also has introduced a selection of small leather goods, bags, and other brand extensions to ensure growth in mature markets such as Britain, which accounts for 60% of sales. The aim, Presly says, is to make the brand "more of a personal accessory" than just an organizer.

Plan to Expand

Having survived the rise of Treos (PALM) and Nokia Communicators (NOK), Letts Filofax now aims to build on its success. First up: acquisitions that leverage its existing distribution network and an aggressive push into Russia, the Baltics, and the Middle East.

The company now has the means to realize its ambitions. In March, 2006, senior management joined forces with investment firm Phoenix Equity Partners in a £45 million leveraged buyout of the company, which is headquartered in Dalkeith, Scotland. Sandy Muirhead, managing partner of Phoenix Equity Partners, says Presly and his team were the key to the deal. "Our investment will allow them to expand faster, but these are only tweaks overlaid by what is already a very good management team," Muirhead says.

Acquisitions will be targeted at the premium end of the market, Presly says. That will help Filofax tap into a seismic shift in its client base brought about by the company's repositioning over the past five years: Today, about 60% of Filofax buyers are women, vs. 60% men a decade ago.

The focus on fashion-conscious females means that the company changes one-third of its product line each year. Prices for the organizers currently range from £16 for a nonleather binder up to £180 for top-of-the-range lambskin. In the U.S., Filofax also offers a range in animal skins such as crocodile and alligator that retail for about $500.

Adapting to the PC

Filofax sees even more opportunity in emerging markets. Those regions currently comprise only 4% of sales but are the company's fastest-growing, up 60% last year. Filofax's best potential, Presly says, is "developing our brand in economies where premium goods are going to become much more aspirational."

What about the rise of electronic organizers? Presly says they aren't the main threat because the markets have diverged. But to be on the safe side, Filofax is also bridging the gap between paper and technology with downloadable software offerings—similar to what U.S. rivals like Day Runner, Day Planner, and Franklin Covey (FC) are doing.

For example, Filofax currently offers an application that lets customers reformat and print contacts from their computers to put into a Filofax binder. Next year, the company will launch a product that reformats everything from Microsoft (MSFT) Word and Excel documents to Powerpoint presentations to fit into a Filofax.

Smartphone Threat

Will that be enough to prevent consumers from defecting to modern gadgets? Technology experts aren't so sure. Most agree there is a place for both, because the Filofax will always appeal to traditionalists who find it easier or more elegant to use paper. Besides, experts say, people tend to use PDAs and the Research In Motion (RIMM) BlackBerry more for wireless connectivity than as true organizers.

Over the long run, though, the greatest threat could come from so-called smartphones, such as the new Motorola (MOT) Q or Nokia E61, especially as they become more affordable and gain more features, says Roberta Cozza, a principal research analyst at Gartner Dataquest in Egham, England. A smartphone's ability to update information and synch with PCs will be particularly appealing to the younger generation, she says. (Some 68% of Filofax users are under the age of 45.)

None of this fazes Presly, who is leading the charge to prove that paper is not passé. He's aiming to boost group sales to more than £70 million within a few years from £56 million in 2005. Filofax alone accounted for 60% of that—and remains central to Presly's plans. With the company's emerging markets strategy, the marketing of the Filofax as an aspirational brand, and a constantly innovative product range, Presly predicts, "We can get there."