CVI purchase doubles Potpourri’s number of titles
The dictionary defines “potpourri” as a combination of incongruous elements, but multititle catalog mailer Potpourri Holdings doesn’t view its 10 titles as incongruous at all. The company, whose titles include gifts books Expressions and Potpourri, crafts catalogs The Stitchery and Counted Cross Stitch, and horse-related gifts catalog Back in the Saddle, plans to grow by acquiring “catalogs of gifts/home and crafts products to achieve product and list synergies,” says president/CEO Jack Rosenfeld.
To that end, in early October, Potpourri acquired Catalog Ventures Inc. (CVI), which publishes five gifts/apparel/home goods catalogs, from home shopping cable network ValueVision International for an initial cash payment of $5 million and up to an additional $5.5 million contingent on CVI’s performance over the next year. CVI, which consists of Serengeti, Nature’s Jewelry, The Pyramid Collection, Northstyle, and Catalog Ventures Favorites, had sales of $31 million last year. The acquisition brings Potpourri’s sales to approximately $85 million for the year.
Potpourri’s customers are primarily females with an average age of 45 who spend an average of $65; CVI’s customer base is also primarily women who spend an average of $50-$75 per catalog order. With the CVI acquisition, Potpourri’s database has grown to 4 million names (with 1.3 million 12-month buyers), and the company will mail a total of 60 million catalogs annually, Rosenfeld says.
In addition to a similar customer base and product, CVI brings to Potpourri excess warehouse and fulfillment space, which “will enable us to provide back-end services for a smaller catalog acquisition,” Rosenfeld says. “We prefer to keep top management, merchandising, and marketing in place, yet typically take over the back-end operations because smaller catalogers can’t do them efficiently.” Other synergies include paper and print buying, as well as co-mailing titles geographically to save on postage.
And with the Web becoming more important to catalogers, CVI’s full-time Webmaster will come in handy, according to Rosenfeld. “All of our titles are online, but one CVI catalog is already seeing 10% of its sales from the Internet,” he says, though he won’t say which title that is. “The expertise of one catalog will help all the other ones. So we’re eager to coordinate all our Web activities, from having one server to partnerships and alliances.”
A lesson learned?
Rosenfeld and HIG Capital, an equity investment company, acquired Potpourri Holdings in early 1998. At the time, the company consisted of four titles. Rosenfeld made his first catalog acquisition, Back in the Saddle, in September 1998.
“The trick as a catalog consolidator is to get as many synergistic resources – specifically in marketing, fulfillment, and purchasing – and have it expandable,” says Larry West, of New York catalog consultancy West & Co. “The goal is to get size and economies of scale, which hopefully translates to higher profit levels.”
Industry observers agree that Rosenfeld has experience in acquisition strategies. He held a number of executive positions at multititle cataloger Hanover Direct since 1974; from 1990-95, he was the company’s president/CEO.
It was during Rosenfeld’s tenure as CEO, however, that NAR Group Ltd. acquired a controlling interest in Hanover and proceeded to add such diverse catalogs as upscale gifts cataloger/retailer Gump’s, golf products book Austad’s, and home products title Improvements to the firm’s existing titles, which sold predominantly moderately priced apparel and home goods. Some observers feel that Hanover’s financial problems in the mid-’90s stemmed in part from its aggressive acquisition strategy.
Then again, that could explain Rosenfeld’s determination to ensure that all Potpourri’s acquisitions target a similar audience and sell related merchandise.