MAGAZINE VENDORS VIE FOR CATEGORY MANAGEMENT

JAMES TENSER Additional reporting: JOEL ELSON

Retailers who have benefited from the recent magazine industry consolidation may soon witness even more changes, as vendors look to develop new category management activities.

"The demographic data news distributors are planning to develop as part of category management could possibly help identify and target customers for marketing other products," said Dan Black, buyer-merchandiser at Raley's Supermarkets, West Sacramento, Calif. Raley's has gone from six magazine distributors to one, CalWest, Oakland, Calif. "Anything [distributors] do in category management enables them to bring in the correct product mix to satisfy the different customer audiences in different store areas," Black added.

Black hasn't heard whether CalWest will run any new category management promotions, but said he would welcome them if they were developed.

Black added that Raley's gets category information from American Greetings and Ambassador cards, which have been documenting the category for several years. He said CalWest has not yet come forward with this kind of data.

In recent weeks, companies as diverse as ICD Hearst and Time Warner Co.'s TDS, both national magazine distributors; mega-wholesalers Hudson News and ARAmark Magazine & Book Services, and publishers Ziff-Davis and Conde Nast, to name just a few, have stepped up with new activities and programs aimed at chains.

"This industry is literally reinventing itself," said Mike Gummeson, president of ARAmark Magazine & Book Services, Los Angeles, one of the nation's largest wholesalers. "We are enormously excited about the category and the role we can play with retailers to drive category growth."

The industrywide awakening is the latest stage in the extraordinary re-engineering of the entire go-to-market system for magazines in recent months, say participants.

Recent upheavals in the magazine business began with Oakland, Calif.-based Safeway's announcement last August that it would reduce its count of magazine wholesalers. The trend spread rapidly to affect nearly the entire food, drug, mass merchandiser and convenience store channels. In a few extreme instances, multiregional retailers that previously did business with 200 or more local wholesalers slashed their numbers down to a handful.

In their determination to survive the shakeout, a few wholesalers bid aggressively for chain business, sometimes promising performance improvements that left some observers scratching their heads.

"Those wholesalers took gambles and they have experienced unbelievable growth. Now some are having major problems handling the growth," said Alan Heyman, director of Fountainhead Communications, Doylestown, Pa., a firm that provides geodemographic data and consulting services to the magazine industry.

Frank Herrera, president of ICD-Hearst, New York, said his company is working on its pilot program with an unnamed, multichain supermarket operator. "Category management is the hot button for a lot of retailers," he said.

TDS, New York, is now actively testing its category management model with several large grocery retailers, said Cameron Cloeter, senior vice president of sales.

"The category is shifting from supply-driven to consumer-driven," he said, adding that TDS is now experimenting "with a whole lot of ideas and techniques" in its attempt to build a new model for managing the publications category.

"We consider ourselves among the leaders in this movement," said Frank Manziano, associate director of operations for Ziff-Davis Publishing, New York. "Most of us, like other publishers, have been focusing on the wholesaler channel traditionally, but now we are also expanding into the retail side of things."

For wholesalers like ARAmark, Hudson, Anderson News and East Texas Distributors, who have been among the biggest winners so far, dealmaking with retailers has been a calculated risk. Heyman estimated that between 65% and 85% of single-copy magazine sales currently are sold through the top 50 retail chains. Twenty years ago they controlled between 10% and 20%. Said one source who asked not to be named: "Wholesalers have given away a lot of margins to keep the business. They have expended future profits and some current profits to securing the business, to be in business. Their problem going forward is, can they put the kind of management tools in place to make what needs to happen happen?"

ARAmark is making the investment in category management expertise, said Gummeson, a former brand manager at Campbell Soup Co., who brought his packaged goods expertise to ARAmark 10 weeks ago.

Said Herrera of ICD, "We as an industry have never fully utilized the product that we have. There are many aspects we haven't used: promotions, advertised products, even licensing our names."

Industry participants offer an array of opinions on that point.

"Right now the tendency among publishers and national distributors is that nobody knows what they want to do. Somebody in the magazine industry has to step up to the plate, without alienating the wholesaler, publisher or retailer, and move forward with the process," said Michael McGeeney, a former executive at Hudson News, who now runs a consultancy in the publication category management field, based in Summit, N.J.

"Who steps up? Maybe the national distributor, maybe the publisher, maybe the wholesaler," said Michael Pashby, senior vice president of Magazine Publishers of America, New York.

"The person who is going to be the category manager is going to be the winner in this whole process. Because that is who the retailer is going to rely on," he added.

"The wholesalers will only be category managers if they win by default," said Cloeter of TDS. "They don't control the actual product."

Peter White, who retired as president of ARAmark Magazine last year, warned that participants should not use category management as an excuse simply to pare assortments. "The magazine industry has grown from 1,200 to 1,500 titles in the early 80s to over 4,000 titles today," he said. "This shows the public wants more variety. There is a risk that category management could reduce variety and the public gets turned off."