Karlie | Germany

Turbulent times

In November of last year, the Belgian branch of Karlie-Flamingo filed for bankruptcy, and has since been acquired by former owner Erwin Van Tendeloo and the Laroy Group, and re-established as Flamingo Pet Products. 

“The declaration of insolvency seemed to be fraudulent from our point of view,” says Karlie CEO Dominik Müser, “and designed to open up the opportunity for a third party to buy the Belgian division.” According to Dominik, the motive behind this was to stop plans to transfer all operations to Germany and close down the Belgian site of Karlie-Flamingo. “We had already started to transfer certain activities to Germany before all this happened,” he explains. “Karlie Flamingo Belgium had been a real problem for the Karlie Group for a couple of years and highly loss-making due to its cost structure. It was our intention to centralize all activities in Germany and close down the logistics part of the Belgian branch. Belgian management decided that they were not going to let this happen.”

Consequences

“The insolvency put us in a very difficult position,” Dominik continues. “All Belgian assets were frozen, which caused huge problems for our daily operations, as about 60% of incoming goods went through Belgium. The Belgian warehouse was closed and all cargo was held for several weeks, causing an enormous amount of damage, and straining customer relationships. At Group level, Karlie was forced to file for insolvency as well, but only for the holding company. However, this move allowed Karlie Germany to be saved.”

Karlie expects it will take until halfway through April before all full-service operations are restored. Luckily, most customers have remained loyal. “When this happened, we decided not to go to court over this fraudulent declaration of insolvency, as a trial would have taken several years and we had to conduct damage-control, but the likelihood is very high that a lawsuit will follow in the near future. It’s a pity. The way in which this process was handled caused a lot of damage to both companies.”

Looking ahead

Now that the dust has settled, it’s time to look ahead and make plans for the future. “The first half year will be about stabilizing the business and re-establishing a loyal supplier base,” says Dominik. “We are working on a new financing contract and the establishment of a new parent company. Then we can start building up stock level.”

After that, the focus will be on restoring Karlie to its former glory. “The ‘old’ Karlie – the way it was before it was bought by the investor – was known in the industry for its reliability, innovative nature, and top service level. This is the reputation that we want to restore,” explains Dominik. “We want to be an international player, with a small assortment, and on top of that present real innovations – not just product modifications or new colours. We are on our way and the service level has already improved a lot.”

The company will focus on big chains with international business, and bring the added value of a complete category management approach: taking care of assortment, space management, etc.

Hopes and dreams

Once the business has been stabilized, international expansion is next on the agenda. Approximately 80% of business will come from the German-speaking markets of Germany, Austria and Switzerland, but the intention is to create a strong export business that represents at least 20% of turnover. “Turnover in France will have to be rebuilt from scratch. Other than that, we will focus on what can be managed from Germany, without an additional sales force. We’re optimistic about the future. The market has definitely changed, but we believe there is a stable foundation for Karlie to come back,” says Dominik.