The COUNSELOR'S 18th Annual Listing of the Promotional Products Profession's Sales Leaders

If you were holding this report a year ago, you’d have read about history repeating itself – at least as far as the promotional products industry was concerned. And for good reason: It did. Our industry, much as any other, generally mirrors the overall U.S. financial climate. It did this in 1997 and again in ’98.

But what about 1999? Well, it’s kind of hard to say. In some ways, the next-to-last year of the millennium veered off-course a bit. While economists in general noted a very slight slowdown in consumer and business spending, all hastened to add that even if the recovery period was slow – which it probably would be – there was no need for anyone to become even a little concerned, much less begin to panic. All told, the dip would be a slight bump in the road as opposed to a gaping pothole. It wouldn’t even knock your alignment out of whack.

Apparently, however, not everyone listened to the entire statement. The same small coterie of money men (and women) who have been predicting a sizeable recession/depression for years continued their doomsday rhetoric. And (as any politician worth his/her weight in promises knows) if something is repeated often enough, a number of people will begin to believe it – or at least react to it.

In the business sector, the reaction wasn't all that visible. Corporate downsizing continued, but on a comparatively smaller scale than in previous years. Employees still put in longer and tougher hours (frequently compulsory), with compensation increases (when offered) remaining below most expectations. Leisure time retained its status as the prize most workers kept their eyes on, and in true capitalistic tradition, companies still placed profit before all else. On the surface, it was “business as usual” for business.

But a layer or two down, things began to change a hair. The change was near-imperceptible, but it was there. A number of firms decided that maybe a recession could show up down the road, and as a result sought out ways to tighten their belts a little without it looking as if they were. The result was not buying less advertising, but trying to get it a little cheaper. Consequently, loyalty to whom they bought from previously – something that’s been slowly but steadily slipping for the past four years or so – eroded even further.

The ongoing proliferation of e-commerce, dot.com, Internet-based (or whatever else you wish to call them) firms also had an effect, as many could offer lower prices because of lower overhead or overstuffed financing. Add it all up, and the combination has the result of making the overall battle for the buck more intense than ever.

What Does It All Mean?

The overriding question, of course, is what all this means for promotional products as an industry. On a grand scale, the industry did very well indeed. Based on the Promotional Product Association International’s (PPAI) projections for 1999, total industry sales were $14.9 billion, a $1.7 billion, 12.8% climb over 1998’s $13.2 billion tally. That represents the largest single-year increase since 1997, definitely making 1999 a banner year – and a positive indication that corporate America is continuing its application of imprinted merchandise to help attain its marketing and sales goals.

To put this into perspective, if you combine distributor Top 25/Sales Leaders sales for 1999 – $4.6 billion, a whopping 27.7% increase over 1998 – and compare that total to PPAI’s number, these two groups account for nearly a third (30.9%) of all industry sales.

Basic Growth

On a category-by-category basis, there were increases in all areas but one between 1998 and 1999. Top 25 distributor sales went up 17.8%; Top 25 suppliers 12.5%; Mail-Order Sales Leaders 12.6%; and Promotional Products Plus Sales Leaders (PPP) saw the smallest increase at .09%, largely because Jostens Inc. dropped out of the rankings for falling below the minimum requirement for the category.

The one decrease occurred with the Unimprinted Sportswear Supplier Sales Leaders, which fell $81 million, or 13.3%. The drop, however, wasn’t due to declining sales, but to the fact that one ranked firm, Good Buy Sportswear Inc., was acquired by another, Alpha Shirt Co. Also (and more significantly), two formerly- listed companies, Hartwell Sports Inc. and Premiumwear Inc. (formerly Klouda-Lenz Inc.), decided to concentrate on and increase their imprinting capabilities, thereby moving onto the Top 25 supplier list.

The main difference this year was the number of firms recording decreases in sales. All told, there were 10, nearly double the number for the past two years combined. Except in one case however, the declines were all under 10%, ranging between 9.7% and .9%. The single exception was Hartwell Sports, whose 45.4% drop was largely the result of an adjustment after it was discovered that last year’s figure was much higher than it should have been, due to nonindustry sales being mistakenly lumped in with its total.

What does this higher number of decreases mean exactly? The most likely explanation is that the pairing of improved technology (i.e., the simplicity of e-shopping) and clients seeking lower prices has moved some sales into the hands of smaller competitors. And while this is something that undoubtedly merits keeping an eye on, it’s certainly no cause for undue alarm at this point, especially in light of healthy industry sales overall.

On the other side of the fence, 46 companies (vs. 55 last year) noted sales increases. Of those, one experienced growth under 1%; five between 1% and 5%; 13 between 5% and 10%; 15 between 10% and 25%; 10 between 25% and 50%; and one over 50%. Three companies – the same as in 1998 – reported flat sales with no change, and four firms were new to the rankings, with no previous figures on which to base a comparison. Increases ranged from a high of 89.6% to a low of .13%. Last year the spread was 75.2% to .2%.

Buying And Selling

In what’s become a familiar story in the last decade, several of the increases were at least partially the result of acquisitions and/or mergers completed since the 1998 rankings. However, they weren’t as numerous as in previous years. Some of the highlights on the distributor side: Geiger acquired Creative Advertising Techniques, Holt Marketing Group and O’Cain Advertising; Brown & Bigelow bought Widdico Promotional Products; Aspen Marketing Group bought B-12; Corporate Express Promotional Marketing became, via a parent-firm-level buyout, the parent company of BT Office Products International; and Summit picked up Gardner & Gelmacher Inc.

On the supplier side, Norwood Promotional Products Inc. purchased Advertising Unlimited Inc. (AUI), Premiumwear acquired Klouda-Lenz, using its own name; Swiss Army Brands bought Bear MGC; Taylor Corp. purchased Galaxy; and Magnet LLC picked up Pro-Towel Inc., among other transactions. One distributor, Renaissance Promotions, made the list for the first time this year because it only just qualified under the ASI and/or PPAI membership requirement.

The largest single increase in sales (89.6%) was posted by Bensussen-Deutsch Associates Inc. in the distributor category and had nothing to do with mergers & acquisitions. According to company officers, the bump was a result of signing with several new major clients, as well as increasing business with existing ones.

Continuing with an important 1997 decision, The Counselor permitted inclusion of firms that – even thought they weren’t ASI or PPAI members – were: a) owned by Top 25 companies, and b) functioned exactly as traditional promotional products distributors and/or direct houses. This is the case with companies owned by Aspen, Cyrk Inc. and HA-LO Industries Inc.

To briefly reiterate (an unabridged explanation can be found in the 1997 Top 25 report), the term “promotional products” encompasses far more than “specialty advertising” ever did, pulling in previously unincluded areas of promotion and breaking down several traditional barriers in the process.

Suppliers Surge

For the fifth year running, Norwood captured the number-one spot on the supplier list at $431.5 million, which included AUI’s 1999 sales. This was a 42.5% ($302.8 million) increase from last year, making Norwood the only supplier, again, with a rise of more than $100 million. The 25th position posted sales of $31.8 million (vs. $28.5 million last year). The dollar difference between first and 25th place was $399.7 million, compared to $295.1 million the year before.

In terms of basic growth patterns at the top of the heap, the difference between the first- and second-place rankings was $474.2 million, more than double 1998’s $206.6 million. Only three suppliers, half of last year’s number, saw bumps of $10 million or more, ranging from $107.9 million to $11.7 million. The remaining companies posted sales increases of between $1 million and $6.2 million – not bad considering last year’s equivalents were $300,000 to $7.6 million. The largest physical jump in the rankings was Gemline, which rose six spots from 18 to 12.

When it comes to employees, increases were recorded across the board and, as in ’98, were reflective of solid, steady and controlled growth. The number of employee sales reps jumped 29.1%, from 322 to 416. Production employees increased from 11,523 to 12,049 in 1999, a 4.4% rise. Customer-service reps gained 6.9%, going from 789 in 1998 to 844 in ’99. In short, it seemed like business was basically good, despite some scattered downturns. This makes basic sense; a strong economy translates to more sales. This creates a need for more salespeople, production workers and customer-service reps to keep the cycle operating at peak efficiency.

The one major exception to the relatively moderate employee increases was in multiline reps, which leapt a staggering 176.4% to 340 (vs. last year’s 123). This is likely due to the fact that as the demand for more personalized service continues to grow among distributors (spurred by the same demands from their clients), suppliers are requiring experienced, knowledgeable, proven salespeople to maintain that level of service. And multiline reps – most of whom are industry veterans – can fill this niche in geographic areas where the supplier isn’t otherwise represented.

Physically, too, supplier growth spanned the spectrum from major to moderate to minute. The numbers involving facilities saw increases all around. Warehouses and plants saw the biggest jump – 10.4% and 19.5%, respectively, vs. 26.4% and 1.2% last year. Again, this is a logical pattern; more plants generally mean more production, and as sheer product numbers increase, so does the need for adequate warehousing.

Distributors Do Too

With sales of $967.4 million, Cyrk once again held down the top slot, a 39.4% ($273.6 million) increase over its 1998 figure of $693.8 million. Total sales for the 25th spot were $28.9 million, $4.5 million higher than last year. The dollar spread between the first and 25th spots was an impressive $938.5 million – a sizeable jump over the $669.4 million difference last year.

Growth patterns were as might be expected from such a wide range. The difference between the first and second rankings was $474.2 million, a far cry from last year’s $54.8 million gap. This, said Cyrk, was not only the result of taking on more major clients with lucrative programs, but also reflected a continued upswing of its direct-house activities and business with its existing clientele.

On the other hand, HA-LO, the number-two-ranked firm, experienced a relatively modest 6.1% increase rather than a major decrease, as might be suggested by looking at last year’s figure. This number, which after careful examination by both HA-LO officers and The Counselor, was determined to have inadvertedly included a combination of nonindustry sales and some which were accidentally included twice. Consequently, its 1998 sales figure appearing in this year’s chart has been adjusted to reflect reality.

Only the top two companies, Cyrk and HA-LO, saw dollar increases of $100 million or more. Beyond this, seven firms reported increases of $20 million or higher, and another four between $10 million and $20 million. The remaining 15 firms saw rises of between $2 million and $9 million. Of the three posting declines, they ranged between $2 million and $5 million. As noted before, the largest individual jump in the rankings was Bensussen-Deutsch, moving up four spots from 12 to 8.

In a partial replay of 1998, distributors posted increases in only one of three employment-related areas. Independent sales reps saw an increase of 7.3%, from 4,967 in ’98 to 5,330. One might have expected the figure to be higher, based on the fact that the number of full-time employee sales reps in the Top 25 plummeted by 894 – a 25.4% decline. Conclusion: It would seem that distributors are employing more free agents, taking advantage of the fact that the IRS has eased the rules regarding independent contractors and that they don’t have to offer them benefits.

Still, based on these numbers, they’re not taking on enough indies to make up for their loss of full-timers. Or at least they’re not reporting it. Then again, it remains true that good, experienced sales reps aren’t easy to find and harder still to hold onto – especially these days. The truth is, many leave to go elsewhere or start their own firms. Finally, part-time sales reps – always a weak number – fell from one to zero among the Top 25.

Talking bricks and mortar, the total number of offices among these firms skyrocketed 145.2% to 748 (vs. 305 in ’98), and offices outside the U.S. increased from 21 to 34, a 61.9% jump between 1998 and 1999. While some of this increase in facilities is certainly due to growth and expansion, it’s also largely the result of one newcomer firm that reported a huge number of offices across the country. The jump in foreign offices, on the other hand, supports the burgeoning trend of internationalism.

A new question was added for suppliers this year – the total square footage of their manufacturing and office areas. The chart offers individual numbers, but for those readers wondering about the aggregate, it was 802,140 square feet for offices and 5,032,440 square feet of manufacturing space – a grand total of nearly six million square feet.

Comparing The Growth

For five years in a row (now dangerously close to crossing over from trend to fact), overall distributor growth has overshadowed that of suppliers. Looking at it categorically, distributor sales were $3.3 billion vs. $1.8 billion for suppliers. The largest dollar difference in distributor rankings was between the first and second spots ($474.2 million), vs. last year’s $454 million disparity between the second and third positions. The smallest gap was between sixth and seventh place, as well as between 22nd and 23rd – $300,000 in both cases.

The largest gap for suppliers was also between the first and second positions ($320.8 million), vs. 1998’s spread of $206.6 million. The smallest difference was between spots 16 and 17 – at $100,000, the same amount as last year.

At the risk of falling into monotony yet again, the snapshot that emerges is that the highest growth spurts are still happening in the upper echelons of the Top 25, while the majority of the remainder is achieving less head-jarring but consistently even growth, based for the most part on sales and clients rather than any sort of M&A activity.

Mail Order Mavens

As it has since the category was established, Myron Manufacturing Co. grabbed the number-one spot with an estimated $130 million in sales – $20 million above its 1998 figure. The fifth and last position was – as it has been for several years – Atlas Pen & Pencil Corp. at $29 million, a $500,000 rise over last year. The difference between the first and final slots was $101 million, against last year’s $81.5 million gap.

The widest disparity was again, not surprisingly, between the first and second spots – $74.7 million. The smallest, $7.6 million, was between second and third, quite a jump from last year’s $500,000. There was also a slight decline this year with one firm; a drop of 3.3% ($1.9 million). All other firms saw increases of between $500,000 and $11 million. Total sales for the category were $302 million, a 12.6% increase over last year’s $268 million.

Perhaps owing to the Web and wider catalog distribution, mail-order firms saw a 20% decrease of full-time sales reps. Given their nature of doing business, however, this would seem to make sense. The number of offices, both inside and outside the U.S., remained status quo at 10 and five, respectively. As a counterpoint to the drop in full-time reps, the number of catalogs mailed rose 20%, from five million to six million.

Promotional Products Plus Leaders

Other than Jostens dropping off the list, this category also remained devoid of surprises. Carlson Marketing Services captured first place with an estimated $810.8 million in sales, a $105.7 million (14.9%) climb over 1998. The biggest, smallest and only gap was $590.8 million between spots one and two. Once more, this number represented the largest separation between any two firms on all lists. Both firms reported increases, and the category totaled $1 billion, a $900,000 (.9%) jump over last year.

Largely due to one firm’s concentration on global physical expansion, the number of total offices and offices abroad both rose quite dramatically – 203% and a mind-boggling 581.8%, respectively. The number of sales reps – independent, full-time and part-time – remained virtually unchanged from last year.

Unimprinted Sportswear

With the exception of a major sales drop due to two firms leaving the category, this segment otherwise showed healthy, across-the-board growth. Remaining in the top spot for yet another year, Alpha posted sales of $127.4 million, a $33.8 million/36.1% increase over 1998. The sixth (and final) position was again held by Kayman T-Shirts Inc. at $50 million (estimated), $77.4 million less than the top spot.

The largest gap was between the fourth and fifth spots at $24.3 million (vs. only $8.8 million last year), and the smallest between fifth and sixth at $7 million ($100,000 last year). Total sales for the entire segment were $527.7 million, on the surface a 13.3% decline over 1998’s $608.7 million. Remove the $144.8 million in sales dollars from the two firms that left the category, however, and sales growth jumps to an impressive 72.1%.

Regarding employees, data shows the number of multiline reps falling 79.6% from the year before, while employee sales reps gained ground to the tune of 101.8% – an indication that, at least in this segment, captive reps are the preferred entity. As all the firms deal almost exclusively in blanks, the numbers of both production workers and customer-service reps dropped; the former by 920 (48.4%) and the latter by 48 (9.9%). Apparently, service isn’t as pressing a need when custom imprinting is pulled from the equation – which only makes sense.

The total number of offices went up 18.7%, while facilities outside the country held steady at three. Interestingly, the number of plants and warehouses also fell from 1998, decreasing by a hefty 45.4% and 50%, respectively. Consolidation? Possibly. Whatever the reason, based on the rising sales figure elsewhere reported, these firms are definitely doing something right.

Finally, square-footage-wise, the totals for the six firms were: 360,000 square feet of office space and 2,183,000 square feet for manufacturing; a final tally of 2,543,000 square feet.

The Contenders

This is the second time we’ve published the Top Contenders lists, consisting of the next 15 spots on each list (actually 16 distributors and 19 suppliers, due to ties). The decision to list them last year was, as we noted, not only to distinguish them for their superior sales figures, but predicated on the fact that the industry is growing in terms of sheer numbers of firms. In fact, since the Top 20 – later to become the Top 25 – was conceived, the number of distributors and suppliers has effectively doubled. Therefore, it was determined that these firms deserved some recognition over and above their being placed in the Multimillion Dollar Roundtable listings found elsewhere in this issue. What’s new this year is the inclusion of actual or estimated sales figures, which weren’t published last year.

To put this in some sort of perspective, the distributor contenders – which fell between $28.8 million and $16.5 million – represent $364.4 million in aggregate sales. Suppliers – whose sales fell between $30.7 million and $17.5 million – totaled $443.6 million. That’s a grand total of $808 million in industry sales – a lot of money, but a mere drop in the bucket compared to PPAI’s figure of $14.9 billion in total distributor sales. Conclusion: This is still largely an industry of small – and mid-sized entrepreneurial firms, despite the long shadow cast by the Top 25.

Manufacturing Percentages Revealed

To assist us in establishing as accurate a portrait as possible of how distributor revenues are generated, The Counselor asks the following question of all ranked distributors: “What percentage of your sales represents products manufactured, assembled or imported by your own company?”

Where last year six firms indicated 0%, that number increased to nine this year. The next highest total: three at 15% and another three at 80%. Two firms indicated 5%; another two 95%, the latter being direct houses. The remaining companies responded with numbers ranging between 2% and 100% (a direct house again).

To our eyes, it seems that while the majority of ranked distributors, in order to satisfy client demands, are remaining involved to some degree in sourcing, manufacturing, imprinting, importing and/or assembling, a core chooses to cling to the original definition of the distributor as middleman rather than manufacturer.

It must be stressed, however, that those who are involved beyond the traditional role do so, for the most part, not to circumvent suppliers, but to remain competitive by: 1) having more control over imprinting, order tracking and turnaround; 2) being able to secure proprietary or custom products; and 3) being able to order large quantities of blank items when necessary, imprinting them as called for in whatever timeframe a client requests – all the while keeping their profit margins intact.

Majority Sales Areas

The second question asked of all ranked distributors was which of three fundamental sales categories – mail-order, traditional person-to-person selling or corporate catalog programs – comprises 75% or more of their total promotional products sales. Five, of course, indicated mail-order. Of the 27 others, 23 – a marked increase from last year’s 17 – indicated traditional. Only four noted corporate catalogs, vs. 11 last year.

Using this comparison as a basis, it appears that a number of distributors have decided to leave corporate catalog programs to those firms that truly specialize in it and stick to the fundamentals that ultimately built the entire industry. Exactly how accurate this interpretation is, however, remains to be seen. Even though it looks like distributors are returning to their roots this year, the profits in corporate catalog programs are, as always, difficult to ignore.

Public Offerings

Eleven of the Top 25 firms are traded publicly, either directly or via their parent corporations. This year, seven companies noted declines in per-share prices at the end of 1999 vs. the beginning of the same year. These ranged anywhere from $17 to $1. The spread for the four firms showing per-share increases in the same timeframe period ranged from roughly $11 to $1.

The highest per-share price for the year was 102 3/16, the lowest, 3 11/16. As we’ve noted before, while this pattern seems to generally follow the stock market, it’s necessary to repeat the same qualification concerning public companies: Unless they’re unusually persistent or abnormally severe, fluctuations on the stock market are reflective of the highly fluid nature of the market as a whole and should never, unless positively confirmed by market experts, be automatically regarded as an indication that a particular company is financially unstable or insecure.

As one would logically expect, all publicly traded firms have some business activity outside the realm of promotional products, many to a far higher degree. Of the 11 public firms among our ranked companies, only two indicate logoed goods as their main source of income. The percentage of the other nine companies’ revenues representative of promotional products sales ranged from a high of 33.9% to a low of .4%. All told, total sales of the Top 25 public companies are $37.6 billion – $22.7 billion greater than sales for the entire promotional products industry.

Methodology

A multilevel procedure is employed in determining the sales figures for those companies ranked in the Top 25/Sales Leaders. Prior to requesting any hard numbers, only those firms that have been ASI or PPAI members for a minimum of three years are eligible. This ruling was created to help ensure all contending firms are limited to those who have shown a dedicated and sustained involvement in the industry.

Once this criterion has been established, all companies determined to be feasible candidates are asked to submit their gross promotional products sales for calendar or fiscal year 1999.

Unless they operate totally independently of one another, sales volumes for firms falling under common ownership are reported in the aggregate. In addition, the 1999 promotional products revenues of any acquired firms are also included as part of the aggregate number, provided the acquisition was completed on or before April 15, 1999.

This allowance was initially added in recognition of the fact that, after it’s acquired, a company more or less ceases to function as a self-sufficient entity. As a result, its sales for the previous year properly “belong” to the acquiring firm and are thus included.

As is our standard practice, distributors are asked to submit figures for promotional products sales only. Print/electronic advertising (newspapers, magazines, radio, TV and Internet), nontraditional products such as major appliances, travel and outdoor advertising are disallowed.

Suppliers are asked to submit only their promotional products sales. These are defined as “any product you’ve sold, with or without imprints or personalization, provided that you sold it to and/or through recognized, traditional promotional products or premium distributors/resellers.” This is asked to effectively eliminate retail, pure premium and direct-selling numbers.

Suppliers are allowed to include sales to other suppliers – unlimited in the case of imprinted merchandise, but limited to 25% of total sales of blank goods. This rule, introduced in 1997, took two things into consideration: First, as confirmed in discussions with ranked suppliers, the level of supplier-to-supplier sales at the Top 25 level is extremely low, meaning that the possibility of duplicate sales figures being submitted is almost nil. Second, it’s believed that such sales represent profitable business that’s on the same plane with sales to distributors.

The very same limitations and permissions are placed on submissions for the Mail-Order, PPP and Unimprinted Sportswear categories. The Mail-Order category was created in response to the fact that while mail-order has long been and will continue to be a indispensable component of the industry, the basic mechanics of it are usually far enough removed from more traditional promotional products sales to warrant separate treatment.

The PPP section was established to create an area of ranking for those firms with a significant part of their business in an area that is promotional by pure definition but nontraditional in terms of typical industry channels. This encompasses products used as premiums; for resale/incentive; consumer or employee redemption programs that also include merchandise such as gift certificates, home-fitness equipment, major electronic appliances and debit cards. Again, travel was disallowed.

The Unimprinted Sportswear segment was established to acknowledge several ongoing industry developments – that, for reasons of quality control, convenience or speed, more and more distributors at all levels now do their own imprinting or outsource it locally; that due to the relative ease of imprinting them, wearables are unquestionably the product segment comprising the highest incidence of industry blank sales; and that the bulk of these sales by ranked companies are to distributors, not other suppliers. These rules applied equally to the contender-level firms as well.

To maintain the integrity of the designation “sales leaders,” certain parameters were drawn for all segments. PPP rankings are limited to companies with sales of $100 million or more. Mail-Order firms are limited to those firms placing in the top five positions and will continue to be for the foreseeable future. The companies listed in the Unimprinted Sportswear category must have revenues in blanks representative of 51% or more of their total promotional products business. Beyond this, the sales, once determined, must be equal to or greater than the number of the firm occupying the 25th position in the Top 25 suppliers.

Once sales figures from all the firms in contention are submitted – several hundred all told – the process for determining final rankings begins. This involves thorough research on each candidate, including year-end statements, financial reports, business publications, annual reports and personal interviews. In those cases where a concern’s sales figures are proprietary, the same materials are used to determine as accurate an estimate as possible.

The Outside World

Even industry practitioners who are fairly new to the profession or who only sell on a part-time basis are aware that a fair amount of promotional products-related business routinely takes place outside the basic parameters of the industry – and well beyond the limits of the Top 25. This commerce typically involves financially stable and often highly successful firms that are neither ASI or PPAI members and who sell exclusively through major wholesalers or directly to end-buyers. While conducting our Top 25 research, we repeatedly encounter firms that manufacture/import and sell merchandise, usually in pretty sizeable numbers, that unmistakably fits under the umbrella of promotional products as currently defined in our marketplace.

A few of these firms have – or once had – direct connections to the industry. Others are only vaguely familiar with it. In every situation, however, these corporations have remained outside-the-realm players in the profession by choice, preferring to focus their attention on alternative distribution channels and markets. Some eventually make their way into the profession as “legitimate” suppliers; others do not.

With the goal of offering Counselor readers a more incisive, informative and well-rounded perspective of the complete promotional products arena, we’ve included short profiles on a selected grouping of these firms that one day may become direct, rather than indirect, competitors.

Arn Bernstein is executive editor/news director/assistant director of communications; Josh Vasquez an assistant editor; and Joshua Rhett Miller editorial intern of The Counselor.