Valassis Communications, Inc. History

Address:
19975 Victor Parkway
Livonia, Michigan 48152
U.S.A.

Telephone: (734) 591-3000
Toll Free: 800-437-0479
Fax: (734) 591-4994

Website:
Public Company
Incorporated: 1992
Employees: 1,679
Sales: $794.6 million
Stock Exchanges: New York
Ticker Symbol: VCI
NAIC: 323110 Commercial Lithographic Printing

Company Perspectives:

Our vision is to be the world's leader in the marketing services industry. This means we will provide our customers with proven, effective solutions to a wide range of marketing challenges. This also means listening to their need and creating solutions where they currently don't exist. We want to partner with our customers to help them grow their businesses. Our vision will be achieved through the efforts of the people working at our company. We will strive to provide our employees with fulfilling career opportunities, listen to their suggestions, and recognize their accomplishments. We believe that if we focus on our customers and value our people, our shareholders will benefit from growth in their investments. Key Dates:

Key Dates:

1969:
George Valassis founds a small printing sales agency in a suburb of Detroit.
1972:
Valassis introduces first 'freestanding inserts' of newspaper ads.

1970s:Company grows with success of inserts, moves operations to Livonia, Michigan.
1982:
Durham, North Carolina plant is opened.
1983:
A Wichita, Kansas facility is added.
1986:
Acquisition of Newspaper Co-Op Couponing; Kerry Packer buys Valassis.
1989:
Valassis Impact Productions is formed to produce specialized promotional items.
1992:
Valassis goes public on the New York Stock Exchange.
1995:
Purchase of Canadian marketing company McIntyre & Dodd.
1997:
Packer sells his stake in Valassis; new corporate headquarters is completed.
1999:
Valassis begins investing in companies that distribute coupons on the Internet.

Company History:

Valassis Communications, Inc. is a relatively young corporation, but it has the distinction of having created the industry of freestanding inserts, the four-color coupon booklets distributed in newspapers. The company's coupons are added mechanically to papers throughout the week, but are carried most prominently in Sunday newspapers, where as many as a dozen separate inserts are common. These appear in single or multiple folded sheets, printed in full color. As the first and largest company in the business, Valassis controls nearly half of the freestanding insert market. Valassis coupons are distributed to more than 60 million American households in more than 530 different newspapers. Three-fourths of its income comes from this area. The company also produces specialized promotional materials and has stakes in firms that provide Web-based coupon distribution, data warehousing, and direct mail advertising services.

Beginnings

The company had its origin in 1969, when George Valassis opened a small 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 variety of retail product companies. After locating merchandisers who wished to promote their products with cents-off coupons, he then printed the coupons and purchased distribution arrangements with local newspaper publishers that would insert the coupon sheets in their papers. The business proved to be highly successful, as product manufacturers discovered the advantages of cooperative coupon advertising. The inserts were effective at enticing consumers to try virtually any product and, unlike advertising, their influence on buying patterns was highly measurable.

The inserts developed by Valassis were freestanding sheets containing bold four-color promotions. Because each sheet could be divided into eight, ten, 16, and even 24 or more different coupons, each a small advertisement, Valassis could piggyback several different companies' promotions on the same printing. This created a need to assign coupon spots carefully, since competing colas or brands of raisin bran, for example, could not be satisfactorily run on the same page. Valassis's solution was to encourage large manufacturers to purchase several coupon spots at once. These companies would place coupons for several nonrelated products, from breakfast cereal to cleanser, thereby creating demand for additional sheets from competitors.

Valassis immediately won business from companies such as General Foods, Procter & Gamble, General Mills, Nabisco, and Kellogg, but, still unable to purchase newspaper distribution rights on an efficient scale, the company lost money for several years as it pioneered a path in the new industry. Undeterred, George Valassis purchased additional printing machinery and increased his sales and production staff to 46 employees. By 1974, circulation of his freestanding inserts had grown 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 circulation. This confirmed to Valassis that manufacturers placed a high value on coupon advertising and encouraged him to continue efforts to expand the business.

Upgrading and Expanding in the Late 1970s and Early 1980s

He 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 operation, Valassis purchased a new production facility at Livonia, in west 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 30 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 & Gamble named Dave Brandon. Brandon, who played football at the University of Michigan, found employment at Procter & Gamble after graduation through a recommendation from coach Bo Schembechler. Brandon remained in touch with a former teammate, Larry Johnson, who joined Valassis after marrying George Valassis's daughter. Brandon brought to Valassis a powerful personal style. Although he began in the company performing 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 human, as well as the business, aspects of Valassis. This atmosphere later won Valassis inclusion in a publication that identifies the best 100 companies for which to work. One component of that atmosphere is an across-the-board employee profit-sharing plan that can augment annual 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, representing a fivefold increase over the period. This expansion led Valassis to build a second plant at Durham, North Carolina, in 1983, which would enable the company to more easily distribute its materials in southeastern markets. The following year, a third plant was established in Wichita, Kansas.

With the expansion of printing capacity, Valassis's sales more than doubled 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 an effort to streamline operations, Valassis dissolved NCC's freestanding insert operation and added two new printed promotional products to the operation. Nearing saturation of the freestanding insert business, in large part as a result of good 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 cents-off coupons for a variety of products.

A second extension was specialty printing, including production of brochures, catalogs, posters, and magazine inserts that concentrated on food service and fast food promotions. More sophisticated specialty printing included scratch and sniff and lottery-style rub-off contests. Primary customers included Pizza Hut, Arby's, McDonald's, and Lens Crafters.

Run-of-press and specialty printing were aggressively promoted as complements to the standard freestanding insert promotion. The success of the formula also propelled Valassis into a new function, that of promotional consultant. Now advertisers could retain Valassis much as they did ad agencies or public relations firms and receive advice on specific campaigns.

Acquisition by Consolidated Press Holdings in 1986

The consolidation of NCC also made Valassis an attractive takeover target. With an extremely strong record of sales growth and a favorable position in a market that included competition only from much smaller 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 industry, 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 Robert Holmes á Court began shopping for deals in the American and British markets. The acquisition of Valassis in 1986 represented an unusual departure for Packer, who had confined his takeovers mostly to magazines and other periodicals. Rupert Murdoch's company, News Corp, was evidently on the same track as Packer. Valassis's principal competitor in the freestanding insert market in the early 1990s was News America, a subsidiary of News Corp.

After the takeover by Consolidated Press Holdings, George Valassis left the company for retirement. His company, however, benefited from numerous press arrangements made possible by its association with Packer. Sales increased by nearly $100 million by 1987, to $381 million. Packer placed David Brandon in charge of Valassis. The arrangement, in which Packer maintained a hands-off approach from 12,000 miles away, suited Brandon well. He maintained his folksy style, insisting on personally meeting each new hire. But with the added responsibility came larger compensation. When the private Mr. Brandon's million-dollar-plus salary 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 engineered 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 Exchange, yielding Packer's Consolidated Press Holdings a profit of about $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 is analogous to printing money. 'We bring it to your home and lay it on your doorstep and say `use whatever you will.' But manufacturers' customers are always retailers, rather than consumers. Retail grocery stores stock, on average, 18,000 items, all of which compete for shelf space. As the coupons drive up consumer demand for a product, retailers are 'pushed' into distributing--and giving favorable shelf display&mdashø that product.

In 1995 Valassis acquired McIntyre & Dodd, a Canadian company that produced freestanding inserts and sold mail-order gifts. It was subsequently renamed Valassis of Canada. Two years later Valassis's new corporate headquarters in Livonia was completed. The building featured a gym, salon, cafeteria, and in-house physician, keeping intact the company's commitment to its employees' well-being. Also that year Kerry Packer sold his shares of the company, and Valassis's Mexican operations and a French joint venture were shuttered.

CEO David Brandon stepped down in 1998 to make way for Alan F. Schultz, who had been serving as executive vice-president and chief operating officer. Under his leadership Valassis began to invest in a variety of new ventures. In 1999 the company purchased a majority stake in Independent Delivery Services, Inc., a provider of home-shopping software products for supermarkets. Valassis also bought 30 percent of Relationship 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, eliminating mail-order subsidiary Carole Martin Gifts due to poor performance.

Valassis also entered the world of cyberspace in 1999. An investment in Merge, LLC, subsequently renamed Save.com, gave the company a 52 percent stake in an on-line coupon distributor. In October Net's Best LLC, an Internet marketing company, was acquired. This was followed in 2000 by the purchase of a minority stake in Coupons.com, which offered coupons on-line. Save.com also purchased MyCoupons.com and Direct Coupons.com, further expanding the company's presence on the Internet. CEO Schultz described Valassis's intentions as follows: 'Valassis will be the leader in online promotions.'

In August of 2000 the company's Valassis Data Management subsidiary acquired 80 percent of PreVision Marketing, Inc. for $30 million plus 145,000 shares of stock. PreVision was a Massachusetts-based customer relationship management firm. Valassis was also actively buying back its stock, announcing that it would devote half of its free cash to this purpose.

At the start of the 21st century, Valassis remained the pioneer and leader in its field, annually printing inserts containing more than 300 billion money-saving coupons. In addition to providing insert and other promotional printing, Valassis offered a range of value-added services in the marketing area, including promotion consulting, design services, sweepstakes planning, and industry research. Valassis was also one of the nation's largest purchasers of newspaper space, maintaining its dominant position in the market through long-standing relationships with publishers, who frequently gave volume discounts. Looking to the future, the company had begun making investments in technologies that complemented, and looked beyond, its print-based products.

Principal Subsidiaries: VCI Enterprises, Inc.; Valassis International, Inc.; Promotion Watch, Inc.; VCI Electronic Commerce, Inc.; Valassis Retail Connection, Inc.; VCI Direct Mail, Inc.; Valassis Data Management, Inc.; Save.com (52%).

Principal Divisions: Valassis FSI; Valassis Impact Promotions; Valassis Sampling; ROP Solutions; Valassis of Canada; Promotion Watch.

Principal Competitors: ACG Holdings, Inc.; Acxiom Corporation; ADVO, Inc.; Big Flower Holdings, Inc.; Catalina Marketing Corporation; Grey Global Group, Inc.; Harte-Hanks, Inc.; Mosaic Group, Inc.; The News Corporation, Ltd.; Norwood Promotional Products, Inc.; Outlook Group Corporation; Quebecor, Inc.; Queens Group, Inc.; R.R. Donnelley & Sons Company; Snyder Communications, Inc.; SPAR Group, Inc.

Further Reading:

  • Adams, Cheryl, 'King of Coupons,' Printing Impressions, April 1, 2000, p. 26.
  • Gallagher, Kathleen, 'Multiyear Contracts Provide Marketer with Growth Potential, Analyst Says,' Milwaukee Journal-Sentinel, June 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 Livonia 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.
  • Pachuta, Michael J., 'Valassis Looks for New Ways to Stuff Bargains into Papers,' Investor's Business Daily, May 27, 1997, p. B12.
  • Palm, Kristin, 'Perks (and Pooches) Can Help Keep Your Employees in Place,' Crain's Detroit Business, May 24, 1999, p. E-19.
  • Roush, Matt, 'Don't Discount Valassis,' Crain's Detroit Business, 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.
  • Stoffer, Jason, 'Valassis Communications, Inc.,' Crain's Detroit Business, September 6, 1999, p. 18.
  • 'Valassis Communications,' The 100 Best Companies to Work for in America, 1992.
  • 'Valassis Communications, Inc.: Leading the Way,' Livonia, Mich.: Valassis Communications, Inc.

Source: International Directory of Company Histories, Vol. 37. St. James Press, 2001.