Valassis Communications, Inc. - Company Profile, Information, Business Description, History, Background Information on Valassis Communications, Inc.
Livonia, Michigan 48152
U.S.A.
Company Perspectives:
Valassis connects people to brands. We provide our clients with prove n, effective Connective Media Solutions to help them achieve their ma rketing objectives and optimize their relationships with consumers. W e listen to clients, help them to identify their needs, and partner w ith them to: Plan strategic marketing and media campaigns--such as ad vertising, consumer promotion, and co-marketing--that will achieve sp ecific business objectives; Execute strategic marketing and media cam paigns from start to finish; Evaluate how well strategic marketing an d media campaigns meet business objectives. We achieve our mission th rough the efforts of a highly trained, diverse and enthusiastic workf orce. We provide employees with fulfilling career opportunities, list en to their suggestions for improvement, and recognize accomplishment s.
History of Valassis Communications, Inc.
Valassis Communications, Inc., created the industry of freestanding i nserts, the four-color coupon booklets distributed in newspapers. The company's coupons are added mechanically to papers throughout the we ek, but are carried most prominently in Sunday newspapers, where as m any as a dozen separate inserts are common. These appear in single or multiple folded sheets, printed in full color. Valassis was the lead ing company in this market for most of its history. In the 2000s, the company met a formidable competitor in News America Marketing, a sub sidiary of media giant News Corporation. Valassis fell to the number- two slot in the market in the 2000s, and holds about 46 percent of th e market share, with the News Corp. subsidiary taking the remaining 5 4 percent. Valassis coupons are distributed to more than 60 million A merican households in more than 550 different newspapers. About half of its income comes from this area. The company also produces special ized promotional materials and has stakes in firms that provide Web-b ased coupon distribution, data warehousing, and direct-mail advertisi ng services. Valassis has a growing international presence, carrying out coupon and marketing services in Italy, Spain, Germany, and Engla nd, as well as across the United States, Canada, and Mexico.
Beginnings
The company had its origin in 1970, when George Valassis opened a sma ll sales agency in his home in suburban Detroit. He handled contract printing for numerous products, including computerized form letters. After purchasing his own printing press in 1971, however, he found it difficult to keep the machine in operation due to a lack of business .
In 1972, Valassis decided to solicit coupon advertising from a variet y of retail product companies. After locating merchandisers who wishe d to promote their products with cents-off coupons, he then printed t he coupons and purchased distribution arrangements with local newspap er publishers that would insert the coupon sheets in their papers. Th e business proved to be highly successful, as product manufacturers d iscovered the advantages of cooperative coupon advertising. The inser ts were effective at enticing consumers to try virtually any product and, unlike advertising, their influence on buying patterns was highl y measurable.
The inserts developed by Valassis were freestanding sheets containing bold four-color promotions. Because each sheet could be divided into 8, 10, 16, and even 24 or more different coupons, each a small adver tisement, Valassis could piggyback several different companies' promo tions on the same printing. This created a need to assign coupon spot s carefully, since competing colas or brands of raisin bran, for exam ple, could not be satisfactorily run on the same page. Valassis's sol ution was to encourage large manufacturers to purchase several coupon spots at once. These companies would place coupons for several nonre lated products, from breakfast cereal to cleanser, thereby creating d emand for additional sheets from competitors.
Valassis immediately won business from companies such as General Food s, Procter & Gamble, General Mills, Nabisco, and Kellogg, but, st ill unable to purchase newspaper distribution rights on an efficient scale, the company lost money for several years as it pioneered a pat h in the new industry. Undeterred, George Valassis purchased addition al printing machinery and increased his sales and production staff to 46 employees. By 1974, circulation of his freestanding inserts had g rown to 25 million households on sales of $5.7 million. Finally, in 1976, with virtually the same circulation, sales rose to $11.8 million, nearly double the 1974 figure. This confirmed for Valassis that manufacturers placed a high value on coupon advertising and enco uraged him to continue efforts to expand the business.
Upgrading and Expanding in the Late 1970s and Early 1980s
Valassis began replacing his older equipment with newer, state-of-the -art machinery that featured added functionality. This included large , eight-page inserts and an oversized "super page." To house the oper ation, Valassis purchased a new production facility at Livonia, in we st suburban Detroit. With sales growth at nearly 40 percent per year, Valassis marked sales of $23.5 million on a circulation of 27.8 million in 1978, and $33.7 million in sales on a circulation of 3 0 million a year later.
The company's employee roll grew to 193 people in 1979, and additions to staff included a young marketing manager from Procter & Gambl e named Dave Brandon. Brandon, who played football at the University of Michigan, found employment at Procter & Gamble after graduatio n through a recommendation from coach Bo Schembechler. Brandon remain ed in touch with a former teammate, Larry Johnson, who joined Valassi s after marrying George Valassis's daughter. Brandon brought to Valas sis a powerful personal style. Although he began in the company perfo rming some low-priority jobs, his potential was quickly appreciated. As he ascended to higher levels of management, he developed an open, folksy style within the company, giving personal attention to the hum an, as well as the business, aspects of Valassis. This atmosphere lat er won Valassis inclusion in a publication that identifies the best 1 00 companies for which to work. One component of that atmosphere is a n across-the-board employee profit-sharing plan that can augment annu al salaries by as much as 15 percent.
By 1982, circulation had grown to 38 million (50 percent more than in 1977) and sales had increased to more than $90 million, represen ting a fivefold increase over the period. This expansion led Valassis to build a second plant at Durham, North Carolina, in 1983, which wo uld enable the company to more easily distribute its materials in sou theastern markets. In 1985, a third plant was established in Wichita, Kansas.
With the expansion of printing capacity, Valassis's sales more than d oubled in 1984, to $200 million. Now in a position to consolidate its market, Valassis bought out its largest competitor, Newspaper Co -op Couponing (NCC) in 1986. In an effort to streamline operations, V alassis dissolved NCC's freestanding insert operation and added two n ew printed promotional products to the operation. Nearing saturation of the freestanding insert business, in large part as a result of goo d expansion and a rise of upstart competitors, Valassis began run-of- press advertising, in which coupon space is reserved on pages of the newspaper itself. The primary market for run-of-press coupons was the typical weekly food section of daily newspapers, again featuring cen ts-off coupons for a variety of products.
A second extension was specialty printing, including production of br ochures, catalogs, posters, and magazine inserts that concentrated on foodservice and fast-food promotions. More sophisticated specialty p rinting included scratch-and-sniff and lottery-style rub-off contests . Primary customers included Pizza Hut, Arby's, McDonald's, and LensC rafters.
Run-of-press and specialty printing were aggressively promoted as com plements to the standard freestanding insert promotion. The success o f the formula also propelled Valassis into a new function, that of pr omotional consultant. Now advertisers could retain Valassis much as t hey did ad agencies or public relations firms and receive advice on s pecific campaigns.
Acquisition by Consolidated Press Holdings in 1986
The consolidation of NCC also made Valassis an attractive takeover ta rget. With an extremely strong record of sales growth and a favorable position in a market that included competition only from much smalle r companies that lacked the finances of a larger operation, Valassis was discovered by Kerry Packer, chair of Consolidated Press Holdings, an Australian publishing conglomerate. The Australian publishing ind ustry, dominated by a handful of media barons, had been exhausted of virtually all of its independents. With few investment opportunities in Australia, Packer and other barons such as Rupert Murdoch and Robe rt Holmes Court began shopping for deals in the American and British markets. The acquisition of Valassis in 1986 represented an unusual d eparture for Packer, who had confined his takeovers mostly to magazin es and other periodicals. Rupert Murdoch's company, News Corporation, was evidently on the same track as Packer. Valassis's principal comp etitor in the freestanding insert market beginning in the early 1990s was News America, a subsidiary of News Corp.
After the takeover by Consolidated Press Holdings, George Valassis le ft the company for retirement. His company, however, benefited from n umerous press arrangements made possible by its association with Pack er. Sales increased by nearly $100 million by 1987, to $381 m illion. Packer placed David Brandon in charge of Valassis. The arrang ement, in which Packer maintained a hands-off approach from 12,000 mi les away, suited Brandon well. He maintained his folksy style, insist ing on personally meeting each new hire. But with the added responsib ility came larger compensation. When Brandon's million-dollar-plus sa lary became known, his relationship with employees suffered somewhat.
Brandon kept Valassis on track and ensured that all sales and growth targets were met. For the most part, this kept Packer content and in Australia, but by 1992, Packer decided the time was ripe to reap the benefit of his investment in Valassis. In March of that year, he engi neered the sale of 51 percent of the company's shares to the public. More than 22 million shares were issued through the New York Stock Ex change, yielding Packer's Consolidated Press Holdings a profit of abo ut $900 million. The company continued to trade publicly, but was dominated by Consolidated's 49 percent interest.
Meanwhile, Valassis's business continued to expand. Because more than three-quarters of American households used coupons, they were proven sales aids. In Brandon's words, Valassis's coupon business was analo gous to printing money. "We bring it to your home and lay it on your doorstep and say 'use whatever you will.'" But manufacturers' custome rs are always retailers, rather than consumers. Retail grocery stores stock, on average, 18,000 items, all of which compete for shelf spac e. As the coupons drive up consumer demand for a product, retailers a re "pushed" into distributing--and giving favorable shelf display--to that product.
In 1995 Valassis acquired McIntyre & Dodd, a Canadian company tha t produced freestanding inserts and sold mail-order gifts. It was sub sequently renamed Valassis of Canada. Two years later, Valassis's new corporate headquarters in Livonia was completed. The building featur ed a gym, salon, cafeteria, and in-house physician, keeping intact th e company's commitment to its employees' well-being. Also that year K erry Packer sold his shares of the company, and Valassis's Mexican op erations and a French joint venture were shuttered.
CEO David Brandon stepped down in 1998 to make way for Alan F. Schult z, who had been serving as executive vice-president and chief operati ng officer. Under his leadership, Valassis began to invest in a varie ty of new ventures. In 1999 the company purchased a majority stake in Independent Delivery Services, Inc., a provider of home-shopping sof tware products for supermarkets. Valassis also bought 30 percent of R elationship Marketing Group, Inc., a company that utilized retailers' frequent shopper card data to send direct mail offers to consumers. Late in the year the company restructured its Canadian operations, el iminating mail-order subsidiary Carole Martin Gifts due to poor perfo rmance.
Valassis also entered the world of cyberspace in 1999. An investment in Merge LLC, subsequently renamed Save.com, gave the company a 52 pe rcent stake in an online coupon distributor. In October, Net's Best L LC, an Internet marketing company, was acquired. This was followed in 2000 by the purchase of a minority stake in Coupons.com, which offer ed coupons online. Save.com also purchased MyCoupons.com and Direct C oupons.com, further expanding the company's presence on the Internet. CEO Schultz described Valassis's intentions as follows: "Valassis wi ll be the leader in online promotions."
Competition in the 2000s
In August 2000 the company's Valassis Data Management subsidiary acqu ired 80 percent of PreVision Marketing for $30 million plus 145,0 00 shares of stock. PreVision was a Massachusetts-based customer rela tionship management firm. Prevision had revenues of about $14 mil lion, and handled so-called relationship marketing for large retail c lients such Toys R Us and The Gap, whereas Valassis worked only with grocery chains in this service area. Relationship marketing was defin ed as efforts to enhance customer loyalty, and included management st rategies, information science such as database mining, and direct-mai l marketing. It was a relatively new business area that had become ho t in the high-tech run-up in the late 1990s.
As the long bull market of the 1990s drew to a close and high-flying technology stocks dropped precipitately, overall economic conditions in the United States became more difficult. The recession of the earl y 2000s was not expected to hurt Valassis, however, because typically coupons became more popular as consumers tightened their spending. T he coupon market had risen by more than 10 percent in the recession o f the early 1990s, for example. Yet the early 2000s did not see a com parable surge in coupon use, and Valassis did suffer somewhat. Wherea s its revenue stood at more than $849 million in 2001, with net i ncome of almost $118 million, for 2002 the company brought in onl y slightly more than a year earlier, $853 million, and net income shrank to slightly more than $95 million. Valassis posted a loss for the fourth quarter of fiscal 2002. Although its coupon business still seemed strong, Valassis's investments in web-based coupon compa nies and in relationship marketing had not done as well. Changes in a ccounting law also required Valassis to take some charges related to its recent acquisitions.
Valassis hoped to bolster its revenue with a new acquisition in 2003, an Illinois company called NCH Marketing Services, Inc. Valassis spe nt $60 million to buy NCH's expertise in managing promotion infor mation and managing coupon marketing. NCH had large clients such as t he department store chain Target Corp., the drugstore chain Walgreens , Kraft Foods, consumer products manufacturer Procter & Gamble, a nd the world's largest retailer, Wal-Mart Stores Inc. It worked for t hese companies to recover coupon money from manufacturers, and it als o had data management capabilities. NCH provided a way for Valassis t o expand internationally, as the newly acquired company already had s ubstantial business in Europe.
Valassis expected to raise its sales because of the NCH acquisition, and it knew it needed to, as a formidable competitor was eating into its market share. The News Corp. subsidiary News America had appeared on the horizon around the time Packer bought Valassis. By the early 2000s, News America was about the same size as Valassis, and Valassis steadily lost customers to the Australian-owned company. The competi tion forced Valassis to lower prices, and its net income declined. A shareholder filed suit against Valassis in 2004, alleging that the co mpany had not revealed that it was losing market share because of the competition with News America. In 2005, the Federal Trade Commission (FTC) began investigating Valassis on suspicion of price fixing rela ting to its competition with News America. The battle between the two companies led prices for freestanding inserts to fall by almost 20 p ercent over the first half of the 2000s. By the mid-2000s, News Ameri ca had passed Valassis in market share, holding an estimated 54 perce nt of the market to Valassis's 46 percent--this in an industry that V alassis had invented and for years dominated as the sole big player.
Despite the troubling loss of ground to News America, Valassis still seemed to have its strengths. Its revenue surpassed $1 billion in 2004, with earnings of slightly more than $100 million. The comp any renewed its commitment to the city of Livonia, buying a $30 m illion building from Northwest Airlines in 2005 in order to consolida te its employees from three buildings to one. The company had close t o 1,000 employees in its headquarters city, with another 3,000 at var ious plants and offices across the United States and abroad. The comp any's European marketing, which it had pushed with the purchase of NC H in 2003, seemed to be doing well, and the company planned to expand certain coupon and free sample business projects in Spain, Italy, Fr ance, and England over the next few years.
Principal Subsidiaries: Valassis Canada; Prevision Marketing L LC; Promotion Watch; Valassis Relationship Marketing Systems LLC; NCH Marketing Services, Inc.
Principal Competitors: News America Marketing; Vertis, Inc.; A DVO, Inc.
Chronology
- Key Dates:
- 1970: George Valassis founds a small printing sales agency in a suburb of Detroit.
- 1972: Valassis introduces the first "freestanding inserts" of newspaper ads.
- 1970s:The company grows with the success of the inserts, and moves it s operations to Livonia, Michigan.
- 1983: A Durham, North Carolina, plant is opened.
- 1985: A Wichita, Kansas, facility is added.
- 1986: Newspaper Co-Op Couponing is acquired; Kerry Packer buys Valassis.
- 1989: Valassis Impact Productions is formed to produce special ized promotional items.
- 1992: Valassis goes public on the New York Stock Exchange.
- 1995: Canadian marketing company McIntyre & Dodd is purcha sed.
- 1997: Packer sells his stake in Valassis; the new corporate he adquarters is completed.
- 1999: Valassis begins investing in companies that distribute c oupons on the Internet.
- 2003: The company purchases NCH Marketing.
- 2004: Revenue passes $1 billion.
Additional Details
- Public Company
- Incorporated: 1970 as George F. Valassis & Co.
- Employees: 4,100
- Sales: $1 billion (2004)
- Stock Exchanges: New York
- Ticker Symbol: VCI
- NAIC: 323110 Commercial Lithographic Printing
Further Reference
- Adams, Cheryl, "King of Coupons," Printing Impressions, April 1, 2000, p. 26.
- Flass, Rebecca, "Valassis Acquires Prevision, Expands Retail Nich e," Adweek New England Edition, August 21, 2000, p. 5.
- Gallagher, Kathleen, "Multiyear Contracts Provide Marketer with G rowth Potential, Analyst Says," Milwaukee Journal-Sentinel, Ju ne 6, 1999, p. 3.
- Gargaro, Paul, "After a Great Quarter, Valassis Wants Growth," Crain's Detroit Business, August 24, 1998, p. 3.
- Hunter, George, "Valassis Ready to Roll: Pennies Add Up for Livon ia Coupon Company," Detroit News, May 29, 1997, p. D1.
- Keeton, Ann, "Valassis Sees $1 Billion Internet Opportunity," Dow Jones News Service, May 12, 1999.
- Markiewicz, David A., "Clip Job," Detroit News, March 14, 1993.
- Moses, Lucia, "Valassis' Bid for New Biz Worries Newspapers," Editor & Publisher, August 11, 2003, p. 4.
- Neff, Jack, and Jennette Smith, "Valassis Not Counting on Boom in Coupons As Economy Slows," Crain's Detroit Business, November 12, 2001, p. 4.
- Pachuta, Michael J., "Valassis Looks for New Ways to Stuff Bargai ns into Papers," Investor's Business Daily, May 27, 1997, p. B 12.
- Palm, Kristin, "Perks (and Pooches) Can Help Keep Your Employees in Place," Crain's Detroit Business, May 24, 1999, p. E-19.
- "Quicken, Valassis to Bring 700 Workers to Livonia," Detroit F ree Press, February 14, 2005.
- Roush, Matt, "Don't Discount Valassis," Crain's Detroit Busine ss, February 19, 1996, p. 2.
- ------, "Valassis Takes a Clipping: But Analysts Expect '97 to Be a Cut Above," Crain's Detroit Business, February 3, 1997, p. 2.
- Smith, Jennette, "Relationship-Marketing Ventures Take Toll on Va lassis Earnings," Crain's Detroit Business, March 3, 2003, p. 4.
- ------, "Valassis Buys N'West Center," Crain's Detroit Busines s, January 31, 2005, p. 3.
- ------, "Valassis' Price War with Rival Draws Attention from FTC, " Crain's Detroit Business, November 15, 2004, p. 4.
- Stoffer, Jason, "Valassis Communications, Inc.," Crain's Detro it Business, September 6, 1999, p. 18.
- "Valassis Answers Probe," Detroit Free Press, March 16, 20 05.
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