Mittelstand

How a century-old German photofinishing firm survived the digital revolution

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Not your grandma's photo album. Source: Cole Keister, CEWE Studio [M]

In 1997, way back in the distant days of analog photography, the technology chief of the enduring German photofinishing firm Cewe approached his boss and showed him a design that would bring the company into the future: A digital photo processing machine.

“You’re destroying my life’s work!” the boss replied anxiously. A day later, however, the boss gave the order to have the machine built.

It was a wise move. The digital boom that subsequently took hold in the noughties wiped out 90 percent of Cewe’s bread-and-butter business: Printing photos from negatives. As affordable, high-quality digital cameras burst onto the scene — a process accelerated in recent years by the development of ever-better smartphone cameras — Cewe was forced to shutter 23 photo labs that employed 1,200 people. But the company didn’t only make cutbacks; it retrained staff too, preparing them for the shift to digital photography and online printing.

Despite the digitization of photography, people still want tangible photo products they can touch.

“No one else in this industry adapted to digital change as radically and uncompromisingly as we did,” said CEO Christian Friege, 51, who has been running Cewe — Europe’s biggest photo services business — since last summer. “It’s a huge achievement by my predecessors without which our company would no longer exist today.”

The disruption caused by digital photography was so huge that the giants like Kodak were forced to file for bankruptcy protection. But Cewe has managed to thrive, proving that despite the digitization of photography, people still want tangible photo products they can touch and hold. The company prints some 6-million “photo books,” a photo album designed online, for its clients per year.

Cewe is a good example of a successful German Mittelstand company, a medium-sized business thriving in its own particular niche market. The company started out in 1912 as a photo lab in the northern city of Oldenburg, and the name stems from the initials of the founder, photographer Carl Wöltje. In 1961, his son-in-law, Heinz Neumüller, set up Cewe Color, an industrial color photo lab business and expanded it to 24 sites in Europe. But even now, in the digital era, the company does a brisk business selling products like advertising brochures, photo calendars, and of course, the modern photo album, or photo book.

“This one here is the Rolls-Royce of our photobooks,” said Mr. Friege, stroking an album with metal highlights on the cover.

The photo industry continues to evolve at a rapid clip. Smartphone cameras have gotten so good that many people are leaving their digital compacts and SLRs at home. Last year, some 1.2 trillion photos were taken with phones, twice as many as four years ago, according to industry consultancy Infotrends. Smartphones now dominate the market and customers are increasingly designing their photo albums on their phones. In response to that trend, Cewe this month announced it is taking over some 80 percent of French photo app Cheerz for €36 million ($44.5 million). It expects the deal to boost its growth in France and southern Europe.

Cheerz was the latest in a series of acquisitions. In 2012, Cewe snapped up Saxoprint in Dresden, one of Europe’s most advanced offset printing companies. And in 2015, it acquired DeinDesign, which allows people to design their own phone cases. Then, in January, it gobbled up Berlin-based online printer Laserline, which focuses on commercial printing and advertising.

Cewe’s revenue edged up 1.1 percent to around €600 million last year, and its operating profit increased 4.7 percent to €49.2 million. Its sales of photo books took a hit early last year because of a rise in sales tax, but increased again in the second half, keeping it the European market leader. Since 2014, the company’s share price has doubled.

That is particularly good news for the Neumüller family, which continues to own a good chunk —  some 27 percent — of the company’s shares.

Katrin Terpitz covers companies and markets at Handelsblatt, focusing on Germany’s Mittelstand and family-owned businesses. Anja Müller contributed to this article. To contact the author: terpitz@handelsblatt.com

 

 

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