Count Anton Wolfgang von Faber-Castell admits that when he took over running his family-controlled company he was a little nervous.

“It seemed risky,” he says. “We were making products that had barely changed for more than 50 years and it was difficult to see where the business was heading.”

Nearly 30 years later, Count von Faber-Castell, chief executive of Faber-Castell, the world’s biggest pencil maker, seems more composed.

Faber-Castell is based outside the German city of Nuremberg and is among a quartet of large pencil makers that have a sizeable presence in and around the city.

Last year the company had sales of €395m ($576m), more than 70 per cent of which came from outside Europe. Pre-tax profits for 2006/07 came to €33.1m, 7 per cent up on the previous year.

The company has diversified away from basic pencils to introduce a series of more upmarket writing instruments.

The humble pencil – first produced about 500 years ago – illustrates many of the trends apparent in other sectors as a result of globalisation.

With commodity pencils made almost exclusively in China and other low-wage nations in Asia, many of the world’s best-known pencil producers have moved into higher-cost writing instruments such as specialist fountain pens.

At the same time, they have also set up their own factories in low-cost nations in an effort to benefit from lower labour expenses.

“It’s becoming increasingly difficult to stay purely as a maker of basic pencils. You have to find a new approach,“ says Rayford Musgrave Hulan, vice-president for manufacturing at Musgrave Pencil, a US pencil maker.

Mr Hulan’s company – also family-controlled – has concentrated in the past 20 years on specialist pencils used in advertising, made mainly to high specifications and in small production runs.

According to data compiled by Charles Berolzheimer, president of California Cedar Products – a US producer of the wood slats used in pencils and which sells to most of the large pencil makers – about 18bn pencils were made last year globally, worth about $600m at manufacturers’ prices.

Roughly half the pencils produced last year by volume came from China, according to industry estimates.

At Faber-Castell, while its black-leaded and coloured pencils continue to be the company’s best-known products, 70 per cent of its revenues come from other writing instruments such as fountain and felt-tip pins.

The company has 15 plants around the world, including in Brazil, India, China and Indonesia, to add to the company’s historic base in Stein, where Faber-Castell was set up in 1761 by Kaspar Castell, a cabinet maker.

Count von Faber-Castell is the eighth generation of the family – which gained its current name after one of Kaspar’s descendants married into the German aristocracy in 1898 – to be in charge.

“We’ve made a big effort to create new products that have an appeal to people all the way through their lives, from the time they are children to when they retire and perhaps take up drawing or artwork as a hobby, “Count von Faber-Castell says.

Among the 2,500 types of writing instruments made by the company are a range of children’s pencils that come in 120 colours, as well as specialist fountain pens that sell for €2,500. Faber-Castell has linked up with the designers behind Porsche to come up with stainless-steel encased pens that are supposed to reflect the style of the sports carmaker.

Count von Faber-Castell has also spearheaded an effort to internationalise the company. But he says it still has more to do. “We get 14 per cent of our sales in Asia but I’d like it to be more than 25 per cent in five years time,” the Count says.

Yet, a disappointment is the company’s relatively low sales in North America – which is responsible for about 7 per cent of revenues.

Birgit Cooper, president of Heinz Jordan, a Canadian pencil distributor, says: “If you ask the average Joe in North America about the company, it’s a name they’ve never heard of.”