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Valassis Communications, Inc.

Valassis Communications, Inc.

19975 Victor Parkway
Livonia, Michigan 48152
U.S.A.
Telephone: (734) 591-3000
Toll Free: (800) 437-0479
Fax: (734) 591-4994
Web site: http://www.valassis.com

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

Valassis Communications, Inc., 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. Valassis was the leading company in this market for most of its history. In the 2000s, the company met a formidable competitor in News America Marketing, a subsidiary of media giant News Corporation. Valassis fell to the number-two slot in the market in the 2000s, and holds about 46 percent of the market share, with the News Corp. subsidiary taking the remaining 54 percent. Valassis coupons are distributed to more than 60 million American households in more than 550 different newspapers. About half 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. Valassis has a growing international presence, carrying out coupon and marketing services in Italy, Spain, Germany, and England, as well as across the United States, Canada, and Mexico.

Beginnings

The company had its origin in 1970, 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 8, 10, 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 figure. This confirmed for 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

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 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. In 1985, 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 1986. 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 foodservice 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 LensCrafters.

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 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 Corporation, was evidently on the same track as Packer. Valassis's principal competitor in the freestanding insert market beginning in the early 1990s was News America, a subsidiary of News Corp.

Company Perspectives:

Valassis connects people to brands. We provide our clients with proven, effective Connective Media Solutions to help them achieve their marketing objectives and optimize their relationships with consumers. We listen to clients, help them to identify their needs, and partner with them to: Plan strategic marketing and media campaignssuch as advertising, consumer promotion, and co-marketingthat will achieve specific business objectives; Execute strategic marketing and media campaigns from start to finish; Evaluate how well strategic marketing and media campaigns meet business objectives. We achieve our mission through the efforts of a highly trained, diverse and enthusiastic workforce. We provide employees with fulfilling career opportunities, listen to their suggestions for improvement, and recognize accomplishments.

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 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 was 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 distributingand giving favorable shelf displayto 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 online 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 online. 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."

Competition in the 2000s

In August 2000 the company's Valassis Data Management subsidiary acquired 80 percent of PreVision Marketing for $30 million plus 145,000 shares of stock. PreVision was a Massachusetts-based customer relationship management firm. Prevision had revenues of about $14 million, and handled so-called relationship marketing for large retail clients such Toys R Us and The Gap, whereas Valassis worked only with grocery chains in this service area. Relationship marketing was defined as efforts to enhance customer loyalty, and included management strategies, information science such as database mining, and direct-mail marketing. It was a relatively new business area that had become hot in the high-tech run-up in the late 1990s.

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 its 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 specialized promotional items.
1992:
Valassis goes public on the New York Stock Exchange.
1995:
Canadian marketing company McIntyre & Dodd is purchased.
1997:
Packer sells his stake in Valassis; the new corporate headquarters is completed.
1999:
Valassis begins investing in companies that distribute coupons on the Internet.
2003:
The company purchases NCH Marketing.
2004:
Revenue passes $1 billion.

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 early 2000s was not expected to hurt Valassis, however, because typically coupons became more popular as consumers tightened their spending. The coupon market had risen by more than 10 percent in the recession of the early 1990s, for example. Yet the early 2000s did not see a comparable surge in coupon use, and Valassis did suffer somewhat. Whereas its revenue stood at more than $849 million in 2001, with net income of almost $118 million, for 2002 the company brought in only 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 companies and in relationship marketing had not done as well. Changes in accounting 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 spent $60 million to buy NCH's expertise in managing promotion information and managing coupon marketing. NCH had large clients such as the department store chain Target Corp., the drugstore chain Walgreens, Kraft Foods, consumer products manufacturer Procter & Gamble, and the world's largest retailer, Wal-Mart Stores Inc. It worked for these companies to recover coupon money from manufacturers, and it also had data management capabilities. NCH provided a way for Valassis to expand internationally, as the newly acquired company already had substantial 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 competition forced Valassis to lower prices, and its net income declined. A shareholder filed suit against Valassis in 2004, alleging that the company 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 relating to its competition with News America. The battle between the two companies led prices for freestanding inserts to fall by almost 20 percent over the first half of the 2000s. By the mid-2000s, News America had passed Valassis in market share, holding an estimated 54 percent of the market to Valassis's 46 percentthis in an industry that Valassis 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 company renewed its commitment to the city of Livonia, buying a $30 million building from Northwest Airlines in 2005 in order to consolidate its employees from three buildings to one. The company had close to 1,000 employees in its headquarters city, with another 3,000 at various plants and offices across the United States and abroad. The company's European marketing, which it had pushed with the purchase of NCH in 2003, seemed to be doing well, and the company planned to expand certain coupon and free sample business projects in Spain, Italy, France, and England over the next few years.

Principal Subsidiaries

Valassis Canada; Prevision Marketing LLC; Promotion Watch; Valassis Relationship Marketing Systems LLC; NCH Marketing Services, Inc.

Principal Competitors

News America Marketing; Vertis, Inc.; ADVO, Inc.

Further Reading

Adams, Cheryl, "King of Coupons," Printing Impressions, April 1, 2000, p. 26.

Flass, Rebecca, "Valassis Acquires Prevision, Expands Retail Niche," Adweek New England Edition, August 21, 2000, p. 5.

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.

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 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.

"Quicken, Valassis to Bring 700 Workers to Livonia," Detroit Free Press, February 14, 2005.

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.

Smith, Jennette, "Relationship-Marketing Ventures Take Toll on Valassis Earnings," Crain's Detroit Business, March 3, 2003, p. 4.

, "Valassis Buys N'West Center," Crain's Detroit Business, 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 Detroit Business, September 6, 1999, p. 18.

"Valassis Answers Probe," Detroit Free Press, March 16, 2005.

                                               John Simley

                    updates: Frank Uhle, A. Woodward

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Simley, John; Uhle, Frank; Woodward, A.. "Valassis Communications, Inc." International Directory of Company Histories. 2006. Encyclopedia.com. 27 Aug. 2016 <http://www.encyclopedia.com>.

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Valassis Communications, Inc.

Valassis Communications, Inc.

19975 Victor Parkway
Livonia, Michigan 48152
U.S.A.
Telephone: (734) 591-3000
Toll Free: (800) 437-0479
Fax: (734) 591-4994
Web site: http://www.valassis.com

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

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 companys 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 8, 10, 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. Valassiss 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 companys 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 Valassiss 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 acrossthe-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, Valassiss 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 NCCs 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, Arbys, McDonalds, and Lens Crafters.

Run-of-press and specialty printing were aggressively promoted as complements to the standard freestanding insert pro-motion. 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 a 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 Murdochs company, News Corp, was evidently on the same track as Packer. Valassiss 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. Brandons million-dollar-plus salary became known, his relationship with employees suffered somewhat.

Company Perspectives:

Our vision is to be the worlds 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 dont 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.

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 companys shares to the public. More than 22 million shares were issued through the New York Stock Exchange, yielding Packers Consolidated Press Holdings a profit of about $900 million. The company continued to trade publicly, but was dominated by Consolidateds 49 percent interest.

Meanwhile, Valassiss business continued to expand. Because more than three-quarters of American households used coupons, they were proven sales aids. In Brandons words, Valassiss 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 distributingand giving favorable shelf displayto that product.

In 1995 Valassis acquired Mclntyre & Dodd, a Canadian company that produced freestanding inserts and sold mail-order gifts. It was subsequently renamed Valassis of Canada. Two years later Valassiss new corporate headquarters in Livonia was completed. The building featured a gym, salon, cafeteria, and in-house physician, keeping intact the companys commitment to its employees well-being. Also that year Kerry Packer sold his shares of the company, and Valassiss 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 online coupon distributor. In October Nets 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 companys presence on the Internet. CEO Schultz described Valassiss intentions as follows: Valassis will be the leader in online promotions.

In August of 2000 the companys Valassis Data Management subsidiary acquired 80 percent of PreVision Marketing, Inc. for $30 million plus 145,000 shares of stock. Pre Vision 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 nations 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.

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 Mclntyre & 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.

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, Crains 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, Investors Business Daily, May 27, 1997, p. B12.

Palm, Kristin, Perks (and Pooches) Can Help Keep Your Employees in Place, Crams Detroit Business, May 24, 1999, p. E-19.

Roush, Matt, Dont Discount Valassis, Crams Detroit Business, February 19, 1996, p. 2.

, Valassis Takes a Clipping: But Analysts Expect 97 to Be a Cut Above, Crains Detroit Business, February 3, 1997, p. 2.

Stoffer, Jason, Valassis Communications, Inc., Crains 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.

John Simley
updated by Frank Uhle

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"Valassis Communications, Inc." International Directory of Company Histories. 2001. Retrieved August 27, 2016 from Encyclopedia.com: http://www.encyclopedia.com/doc/1G2-2844100117.html

Valassis Communications, Inc.

Valassis Communications, Inc.

36111 Schoolcraft Rd.
Westwood Office Park
Livonia, Michigan 48150
U.S.A.
(313) 591-3000
Fax: (313) 591-4503

Public Company
Incorporated: March 1992
Employees: 1,100
Sales: $684.0 million
Stock Exchanges: New York
SICs: 2752 Commercial PrintingLithographic

Valassis Communications 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 companys 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. The inserts appear in single or multiple folded sheets, printed in a full four-color format. As the first and largest company in the business, Valassis controls about 49 percent of the free-standing insert market. Valassis coupons are distributed to more than 54 million American households in more than 370 different newspapers.

The company has 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 that 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 newspapers. 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 free-standing 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 companys promotions on the same printing. This created a need to carefully assign coupon spots, since competing colas or brands of raisin bran, for example, could not be satisfactorily run on the same page. Valassiss 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 free-standing 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.

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 oversize super page. And, 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 companys 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 Valassiss 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 million50 percent more than in 1977and sales had increased to more than $90 million, representing a five-fold 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, Valassiss 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 NCCs free-standing insert operation, and added two new printed promotional products to the operation. Nearing saturation of the free-standing insert business, largely 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, Arbys, McDonalds, and Lens Crafters.

Run-of-press and specialty printing were aggressively promoted as complements to the standard free-standing 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.

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 its independents. With few investment opportunities in Australia, Packer and other barons such as Rupert Murdoch and Robert Holmes a 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 Murdochs company, News Corp, was evidently on the same track as Packer. Valassiss principal competitor in the free-standing insert market in the early 1990s was News America, a subsidiary of New 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. Brandons 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 companys shares to the public. More than 22 million shares were issued through the New York Stock Exchange, yielding Packers Consolidated Press Holdings a profit of about $900 million. The company continued to trade publicly, but was dominated by Consolidateds 49 percent interest.

Meanwhile, Valassiss business continued to expand. Because more than three-quarters of American households used coupons, they were proven sales aids. In Brandons words, Valassiss 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 distributingand giving favorable shelf displayto that product.

In the early 1990s, Valassis remained the pioneer and leader in its field, printing more than 2.5 billion inserts annually at its three facilities in Livonia, Durham, and Wichita. In addition to providing coupon 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 nations largest purchasers of newspaper space, maintaining its dominant position in the market through long-standing relationships with publishers, who frequently grant volume discounts.

Further Reading

History Fact Sheet, Livonia, MI: Valassis Communications, Inc.

Markiewicz, David A., Clip Job, The Detroit News, March 14, 1993.

Valassis Communications, The 100 Best Companies to Work for in America, 1992.

Valassis Communications, Inc. Annual Report, Livonia, MI: Valassis Communications, Inc., 1992

Valassis Communications, Inc.: Leading the Way, Livonia, MI: Valassis Communications, Inc.

John Simley

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"Valassis Communications, Inc." International Directory of Company Histories. 1994. Retrieved August 27, 2016 from Encyclopedia.com: http://www.encyclopedia.com/doc/1G2-2841200182.html

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