Joining Forces

A tide of merger and acquisitions has washed through the point-of-purchase industry. Company tie-ups may bring more customers, but some believe the quality of service is suffering.

In a burst of activity, marketing networks are acquiring UK point-of-purchase companies to augment their portfolios. Other groups are developing POP capacity internally to stay abreast of this competitive market.

Fords Design Group is one of the latest targets of this acquisition fever, having been bought by German group Arno. Fords chief executive Martin Law explains what this means for his company: “We recognised a couple of years ago that we had to manage our clients internationally and have critical mass. We needed to demonstrate this by linking with another company. After seeing a number of offers, we decided Arno was the perfect fit.”

This is not a case of a smaller company being swallowed up by a bigger corporate, he stresses: “Because Arno is three times the size of us, it was us that ended up being taken over, but the plan is for the creative partners in Germany and in England to work together on international projects. We’ve just pitched for a major global job and it was great to work with the creative people in Germany to thrash out a presentation.”

Fords will now transfer its manufacturing to Germany to take advantage of the exchange rate. Law adds: “Arno also has an international distribution merchandising installation company, which our clients are crying out for, and it has a well developed international division. All this will mean economies of scale and the ability to be more cost-effective for our clients.”

In January, Coutts Retail Communications bought a 60 per cent stake in Dutch POP company Eddag. Late last year, Coutts also merged with PMCraft and Arken Display. Coutts group marketing manager Lucy Lynch says: “We have been growing organically year on year, and acquiring companies. These moves have allowed us to broaden our proposition without losing focus.”

Lynch believes the major marketing companies are finally recognising “that POP is an extremely effective and efficient use of budget. Lots of brands and retailers are redirecting budgets from above-the-line to below-the-line, and the big marketing services companies want to be part of that. There are obvious benefits for an agency which has an integrated approach, but there is also the drawback of not having a clear focus and specialism.”

She sees similarities to what happened in the above-the-line sector about a decade ago: “Lots of specialist agencies were striving to compete in a fragmented market. Then they began to merge and consolidate to create the industry we have today – a powerful market dominated by six or seven very large companies. That could be the way things go in point of purchase.”

In the print field, there is a growing awareness of POP’s potential to increase revenue. Bezier Printing chief executive Brian Dudley explains how his companyapproached this opportunity: “Customers are increasingly trying to consolidate their supply base, wanting their suppliers to provide more than one service. We now offer the complete package, from consultancy through to design, prototyping and printing.

“We have made an investment in people and resources because in our industry, smaller, traditional businesses are going to fall by the wayside unless they offer the complete range of services.

Growing internally

“We’ve chosen to develop internally because, in our experience, it’s the best way to do it. More acquisitions fail than succeed because of attempts to ram two different cultures together. That’s especially true when merging a design house culture with a printing culture, which tends to be more manufacturing based,” he adds.

But some point of purchase companies are consciously avoiding the tide of mergers, add-ons and acquisitions. Kesslers sales and marketing manager Charles Kessler says: “Whether you’re part of a bigger group or a standalone is not the issue – it’s how good you are at servicing your clients’ needs.

“In the late Eighties, there was a spate of advertising agencies buying display companies, but many of them found they didn’t understand the specific needs of three-dimensional marketing and it didn’t work.

“We’ve picked up business from new clients which have been unhappy as part of a big marketing services group. The customer isn’t interested in whether you’re part of a big group or not. If you turn out quality work in every respect, everything else is of minor importance.”

Kessler believes his company’s specific expertise requires an independent stance: “Merchandising is an unusual stream of marketing because it is three-dimensional and is thus specialised and quite detailed.

“We have offices in Europe and New York, which is an advantage when working with international clients. We carry out global projects for our clients and have units and projects on all continents. We’ve grown over the years so that we can look after all aspects of merchandising, display and in-store needs.”

Companies that have point of purchase as one of many skills seldom provide the quality of work offered by specialists, says Frontline Display marketing director Barry Jobling. He echoes Kessler’s cautionary note on the intricacies of the industry: “It’s not the easiest industry to be part of because it’s becoming more technical. There are far more issues to be considered when you develop point-of-purchase solutions.

Specialist experience

“We have been involved with a lot of companies that claimed to be point-of-purchase professionals, but they still come to us to solve problems. The reason is that we are specialists in this field. What we bring is 20 years’ experience in the business. If a buyer is looking for point of purchase as part of an overall marketing solution, a team should be assembled consisting of an advertising agency, a sales promotion agency and a point-of-purchase agency.”

But Jobling acknowledges the benefits of scale: “As clients have grown, becoming pan-European and global, the buying power is shifting from local markets to head offices, which want complete control globally and are looking for people who can help them. People buy point-of-purchase companies to give them the ability to do that.”

For those point-of-purchase companies that have joined forces with bigger partners, the inevitable upheavals to staff must be skilfully managed to avoid stress on customer-facing relationships. Lynch says Coutts has had to restructure the entire group to meet the new needs.

Meanwhile, Fords is increasing staff numbers to cope with its additional workload, according to Law. “Initially, we will see a ten per cent increase in staff, but we will need to review that in six months’ time. We estimate that we will probably grow by the same percentage again,” he says.

The process will be made more complex by Arno’s own plans to accumulate more point-of-purchase companies in its bid to dominate the sector worldwide. This growth will inevitably lead to more global work for the UK arm, says Law.

Bringing in skills

Bezier has tried to tap internal resources to fill new point-of-purchase positions, but this is not always possible.

Dudley says: “Where possible, we try to promote from within, but in some areas it’s necessary to bring in specialist skills from outside. In spite of that, it’s still easier to get people to integrate into an existing culture than try to put two cultures together in a merger or acquisition.”

Membership of a global elite offers clear benefits to point-of-purchase specialists, says Law.

“Clearly, clients are becoming more global in their outlook. Companies like ours have had to ask how we are going to compete in the future. We felt that if we weren’t part of a major organisation, we would lose out.”

Opportunists vs survivors

It is hard to fault Law’s reasoning, but Frontline’s Jobling questions the staying power of the global marketers who are currently so enamoured of point of purchase: “Now that there is a boom, everybody is jumping on the bandwagon. It will be interesting to see who is still going to be around if there is a slump.

“The independents who have been around for 20 years and who are specialists will still be there because we know the industry inside out. The others will probably revert to what they’re really good at.”

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