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The Counselor’s 20th annual listing of the 
promotional products profession’s sales leaders.

By Arn Bernstein, MAS 
Company profiles compiled by Erik Caplan, Kathy Huston and Arn Bernstein

There’s a centuries-old Chinese saying you’ve possibly heard before: “May you live in interesting times.” Ever stop to analyze it? On the surface, it sounds like a relatively harmless nice well-wish – an Asian equivalent of the French, “May you have happiness all your life” or the Irish “May the wind be always at your back...”

But when you consider that “interesting” doesn’t necessarily mean “good,” you realize things can also often take an unpleasant turn. Seen in that light, this seemingly innocent phrase becomes what it was intended: a mild epithet or curse.

So what could an ancient, innocuous-sounding Chinese barb of ill will possibly have to do with this year’s Top 40? On the surface, nothing. But taken as part of the big picture, 2001 was definitely what one could call an “interesting” year, in several ways:

For one, the pessimists among the country’s economists finally got to say, “Told ya so!” What they’d been haranguing us about for the past seven years happened – a major economic downturn. Things began with the dot.com shakeout in late 2000 and early 2001, which resulted in a number of tech firms once thought near-invincible going under (or drastically shrinking). Then the recession hit in earnest. Well, at least it appeared to be a recession. Some money-watchers with a more logical outlook wondered if the true cause was the media’s near-daily mantra that a recession was imminent. Once the thought was firmly seeded, corporations saw all kinds of opportunities to increase profits by slashing jobs, services, quality – or all three. It wasn’t their fault, after all; it was because of the recession.

And the domino effect took over: layoffs soared, budgets (ad and marketing included) dwindled or even vanished; branches (retail and corporate) closed and stocks roller-coastered. It got worse for a while, seemed to level out, took another dip and finally looked as if a turnaround, however small, had begun.

And then came September 11. After the paralysis of the first few days wore off, all kinds of aftershocks were felt. Wall Street pulled in its horns so far that bulls and bears were indistinguishable. Some firms were simply afraid to take any step forward. Some immediately cut back all marketing activities – lowering quantities ordered, the number of orders, the variety of products/media used. Others stopped advertising altogether for a while. And still others, unfortunately, grabbed the chance with both hands to add even more to the bottom line by chopping still more jobs and budgets. 

As travel became more contained, many airlines and hotels saw major losses in bookings. The cherry on the sundae was the demise of a handful of supposedly rock-solid companies like Enron, whose executives truly took the meaning of “heartless greed” to a new nadir. 

But beyond the really key things like unity, compassion and caring, 9/11 also spawned some good in the business arena. Flying may have tapered, but driving went up (of course, so did gas prices, but c’est la vie). Traffic and reservations slowly increased at stateside vacation spots, as fewer folks chose to leave the USA. The immense wave of patriotism that hit the country created all sorts of opportunities, many times coupled with the invaluable added PR and good feeling of donating to one of the victims’ funds.

On a more general level, price stopped being king and became emperor for a while, meaning that loyalty to customers, distributors and suppliers continued to erode. Internet advertising, which had just settled in comfortably with its more traditional cousins, took the same kind of hit other media were feeling everywhere else. And owing to the dates being so close to September, holiday sales – while definitely far better than most expected – still weren’t quite as strong as many had hoped.

Beneath this veneer, however, the base rock remained unchanged. The scramble for more of the client’s buying dollar was just as frenzied as ever, if not a hair intensified. And most firms, again, stayed focused on expanding their customer base and/or maintaining their existing accounts.

For Us?

As always, the pertinent question, at least as far as the Top 40 goes, is how the general business climate affected the promotional products industry specifically. The short answer: Not all that great, but not all that badly, either. This was the first time in over a decade, after all, that poor economics really reached out and touched logoed goods as a profession. 

Still, we did far better than many other fields. Despite the economic woes experienced worldwide, the Advertising Specialty Institute’s estimate of industry sales for 2001 was determined at $16.501 billion – 2.9%, or $493 million higher than last year’s figure of $16.021 billion. In simpler terms, with tough times all around, imprinted merchandise still managed to achieve a modest but solid increase. Granted, it was far from the 20% jump seen between 1999 and 2000, but any port in a storm – particularly when you consider that promotional and ad spending in other media fell by anywhere from 5% to 20%. 

How did we do it? The huge post-9/11 demand for smaller, patriotic-imprinted goods such as T-shirts, caps, mugs, flags, pins and so on was one factor. Millions of units were sold, many as fundraisers, others as morale-boosters. 

The second element was really more of the same from the past few years: Promotional products remained an especially recession-resistant form of advertising, due to their ability to specifically target almost any audience, the fact that they have a superior cost-per-impression ratio, and that they tend to be longer-lasting. Beyond cutbacks and cost-slashing, most corporations didn’t forget to remember imprinted merchandise as a key part of their total marketing/ad mix.

Interestingly (but not unexpectedly), last year’s sales increase more than likely occurred thanks to the resiliency of the small guys – distributors doing under $1 million a year, the bulk of the promotional products industry. As in the business world at large, many of the bigger firms saw decreases of an almost unprecedented nature. But while a 10% loss for a eight-figure company usually means millions, for a $500,000 distributorship it has far less impact.

This year’s Top 40 distributors posted total sales of $2.9 billion, 9.3%, or $300 million under 2001’s $3.2 billion – a drop, to be sure, but not an earth-shattering one – and again, largely confined to the bigger companies. Even then, the figure represents approximately 17.6% of total industry sales, vs. 17.9% the year before, barely a blip on the statistical scale.

As per usual, for the sake of completeness (but not comparison), the rest of the story follows: Combined 2001 sales for Top 40 suppliers remained the same at $3 billion, about 18.2% of the entire industry. Putting the two together – keeping in mind that this includes duplication of many sales – Top 40 supplier and distributor sales were $5.9 billion – off $300 million from last year. Not too bad in such volatile times.

The Basics

Of the 80 companies that qualified for the Top 40 rankings in last year’s State of the Industry issue: 

• 65 reported increases
• eight posted drops
• one had no change, and 
• six were new to the list, which prevented a fair comparison. 

This year things were split nearly down the middle: 

• 39 achieved sales increases
• 35 saw decreases 
• four saw no change, and
• two were new (actually five, but we were able to compare last year’s sales for three).

Categorically, one newly-ranked company was a supplier, four were distributors. Separately, Top 40 distributors experienced 21 sales increases, 16 sales decreases, one with no change and two that couldn’t be charted since they were new. Increases fell between 30.8% and 0.3%; decreases ranged between 56.6% and 1%. The majority of increases were between 9% and 1.2%; seven were in double digits. It was the opposite with those whose sales declined. Most (10) were into double digits. This seemed to be an indicator that competition remained strong and buying somewhat weaker.

For suppliers, the picture wasn’t much different: 20 decreases, 17 increases and three no changes. Increases for this year fell between 25.9% and 1%, with most under 10%. On the other side, declines ranged between 21.2% and .3%, with a majority in double digits. So while suppliers’ overall sales didn’t fall below last year, they experienced the same kinds of problems distributors had been plagued with.

Unlike last year, only one decrease – the 56.6% experienced by distributor HALO Branded Solutions – wasn’t due solely to slipping sales and smaller orders. Due to the fact that, in entering Chapter 11 last September, HALO sold off some properties and was separated from what became Beanstalk Group Inc., the company posted a substantial drop in revenues.

Looking at the entire Top 40 – suppliers and distributors – the majority of increases (20) were between 1% and 5% (vs. 14 firms last year), with the next-highest segment, (11) falling between 10% and 25% (15 last year). Third place was the 5% to 10% category, with only four firms this year vs. 13 last year. In addition, two companies experienced rises of 25% to 50%, and two were under 1%.

As for decreases, the largest number (18) fell between 10% and 25%. The next biggest group (10) was between 5% and 10%. Third was the 1%-5% category, with all of two firms. 

What It Means

If you’re trying to discern some deeper meaning in all of this, don’t. At the end of the day, the plain truth is that a number of Top 40 firms simply didn’t have a good year last year. And again, it shouldn’t be surprising that the industry’s 80 largest firms basically took the biggest hits. Consider: The Top 40 distributors tend to handle major corporate accounts, most of them among the Top 100 end-buyers of logoed products. Should a General Motors or Pfizer Pharmaceuticals suddenly cut its promotional budget by 20% or 25%, not only does the distributor’s order and profit base shrink, but the supplier (who’s been providing the goods) feels the pinch, too. Even before 9/11, The Counselor had heard from several major suppliers – in particular some wearables suppliers – that sales were “way off.” Often, this trickled into many nonindustry areas suppliers were involved with as well – retail, for example. 

Some firms simply sucked it up. Others managed to seek out other areas of potential profit. At this writing, however, it looks as if the economy is truly turning around again, to the point where 2002 may be a much better year. 

Bought, Sold

The number of acquisitions, mergers or other transactions that affected the Top 40 to one degree or another was relatively small in 2001. On the distributor side, the only major news was HALO’s going Chapter 11. For suppliers, Broder Bros. acquired Full Line Distributors in September, which accounted for most of its sales increase. Part of Norwood Promotional Product Inc.’s decline can be attributed to its dropping the Norwood Collection, its apparel line, in December. And part of Noteworthy Co’s jump was due to its March purchase of Avanti. 

Suppliers: Stability, Sort Of

For the seventh year running, Norwood held down the number-one spot, this year posting sales of $386.1 million. Last year the firm posted a $4.5 million increase over 1999 sales. This year it experienced a $49.9 million drop. 

The 40th slot was occupied by Admanco Inc., with sales of $27 million, $3.5 million lower than last year’s 40th-ranked firm, Gold Bond Inc. The dollar differential between the first and 40th positions was $359.1 million, vs. $407.6 million last year. Between the first and fifth spots, it was $264.5 million ($300.9 million in 2001), and between the first and 25th spots, $343.4 million (compared to $391 million last year). The largest difference was once again between the first and second spots. Last year it was $251.7 million; this year it narrowed to $174.1 million. The smallest gap (only $40,000) occurred between 27th and 28th place. 

On an individual basis, just three supplier firms achieved increases of $10 million or more, vs. 10 last year. The largest single jump, $31 million, was again experienced by Broder. The smallest was Stouse, Inc, at $300,000. Other increases ran from a high of $9.4 million to a low of $500,000.

Of those with declines, five firms saw drops of $10 million or more. The largest was, again, Norwood’s $49.9 million. The smallest was Magnet LLC at $300,000. The rest ran the gamut from a high of $9.8 million to a low of $500,000.

Distributor Up- And Down-turns

After regaining the top spot last year (following a three-year absence), HALO was relegated to the number-two slot in this year’s distributor Top 40. Top honors went instead to American Identity, with sales of $216 million. This represents a $31 million decrease from 2001.

The 40th spot was grabbed by newcomer Zouire LLC, with sales of $20.9 million. For comparative purposes, last year’s top and bottom positions were $445 million and $24.3 million, respectively.

Other places, a sort of numerical atrophy took hold. The difference between the first and 40th slots was $195.1 million – a decent number, but a far cry from last year’s $420.7 million difference. Between the first and fifth spots, it was $68 million, vs. $300 million last year, and between the first and 25th position, $176.2 million ($410.2 million in 2001).

The biggest gap was between the second and third spots, at $28 million. The smallest was $200,000, which occurred three times – between the 18th and 19th, 32nd and 33rd and 39th and 40th positions. Last year’s largest gap was $198 million (also between the first and second spot). The smallest was $100,000, which occurred seven separate times. 

Taking a firm-by-firm look, only four distributors reported sales increases of $10 million or more; in 2001 it was nine. The single largest increase was seen by Integrated Marketing Systems, dba/Group Communication Inc., at $23 million (vs. $72.4 million last year). The smallest was Goldman Promotions, at $100,000. Remaining bumps ranged between $6 million and $400,000, the latter occurring three times.

Regarding sales drops, nine firms had declines of $10 million or more. Individually, HALO saw the largest total drop at $252 million. However, this can’t be entirely blamed on lost sales, noted earlier. Taking that into account, the next-largest single decline was $32.6 million, experienced by Corporate Express Promotional Marketing. The smallest was $1.1 million, reported by Executive Greetings Inc. Remaining decreases fell between $5 million and $1.4 million.

Manufacturing Percentages

Since one of our goal is to offer as accurate a picture as possible of where distributor sales emanate from, we ask all ranked distributors two questions. The first: “What percentage of your sales represents products manufactured, assembled or imported by your own company?”

Last year, the dominant response was 0%, listed by eight firms. For 2002, the same was true. Six companies noted the next-highest number (5%), reported by eight firms last year. The next highest were 20% and 10%, both listed by four distributors apiece. Two each reported 15%, 60% and 70%, and the rest noted figures between 95% and 1%.

Once again, the same conclusion can logically be reached: While a core of Top 40 distributors choose to stick with the more traditional side of the supplier/distributor relationship, a number of others are electing to do at least some of their own sourcing, manufacturing, imprinting, importing and/or assembly.

It remains important to remember, however, that distributors who do so aren’t necessarily attempting to eliminate suppliers from the equation, but simply trying to remain as competitive as possible in the current business environment. While maintaining acceptable profit margins, distributors who go beyond their standard role can order and/or inventory blank stock and imprint it (in-house or via outsourcing) as needed by the client; purchase and/or design custom or proprietary products; and have far more control over imprint quality, order-tracking and turnaround time.

Majority Sales

The second question asked of all Top 40 distributors is an attempt to determine the overall spread of their sales: “Which of the following areas represents 60% or more of your total promotional products sales?” 

The choices are traditional person-to-person selling, mail-order, corporate catalog programs or Internet/online.

Once again, the results were exactly the same as last year, though some of the players were different. Five companies indicated mail order, six said corporate catalog programs and 29 chose traditional selling.

Here again, the same analysis can be drawn: The majority of Top 40 distributors tend to stick with the basic strengths of the industry, leaving more specialized areas (such as corporate catalog programs and mail-order) to those more expert in their respective fields.

Ah, The Public

Eleven of the 80 companies ranked in the 2002 Top 40 are publicly traded, directly or through a parent firm. This year something unprecedented occurred, for the first time since we’ve begun tracking these firms: Every single one posted a stock-price decline between January 1 and December 31, 2001. These ranged anywhere between 25 cents and several dollars per share, and were obviously part of the September 11 fallout, when virtually every public company saw a severe drop in its stock for at least a week – often far longer. And don’t forget the economy wasn’t all that great before 9/11 anyway.

The lowest per-share price for 2001 was 17 cents; the highest $118.21. But as we also maintain every year, even though the pattern appears to follow the stock market in general, it remains crucial to reiterate the same qualification insofar as public companies are concerned: Unless they’re unusually persistent or abnormally severe, fluctuations in 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 expect, the majority of the public firms among the Top 40 conduct most of their business outside the realm of promotional products, frequently at far higher levels. Only two indicated imprinted products as their primary (in one case, only) line of business. Among the remaining nine, the percentage of their total sales made up by promotional products ranged from a high of 32.7% to a low of 0.12%.

In the aggregate, sales of these 11 companies were $43.8 billion – $37.9 billion greater than the total of all Top 40 supplier and distributor sales. To put it in an even more impressive context, the number was $27.3 billion greater than the entire promotional products industry. 

Methodology

To determine whether or not a firm is eligible for Top 40 inclusion, The Counselor uses a multi-step procedure. Prior to asking for any actual numbers, only those firms that have been ASI and/or PPAI members for a minimum of one year are eligible. This is done to put together as accurate a snapshot as possible of the industry while maintaining a reasonable degree of commitment to (and participation in) it.

Once this is determined, all companies we have selected as viable candidates are requested to submit their gross promotional products sales for calendar or fiscal 2001. While we request both global and North American figures, only North American sales are used to determine rankings. Why? We discovered that, in the past, some firms were reporting global sales while others were submitting only U.S. sales. In addition, as some ranked firms maintain massive overseas manufacturing, distribution and sales facilities, it was decided that using North American sales as the parameter for all Top 40 candidates was the fairest and most efficient way to put them all on as level a playing field as possible.

Concerning firms with a common parent company, those sales are reported in the aggregate, unless the companies operate completely independently of each other. In addition, the 2001 promotional products sales of any firms acquired by a contender were included as part of the aggregate, provided that the transaction was completed on or before January 31, 2002. This ruling was created to acknowledge that after a firm is purchased or merged, it essentially ceases to exist as a self-sufficient entity. This being the case, its sales for the previous year are correctly assigned to the acquiring firm’s revenues.

Distributors, were asked to submit only sales numbers for promotional products, “sold to clients for promotional, recognition or public relations (goodwill) purposes.” Revenues resulting from print or electronic advertising done for clients, including Internet sites, were not permitted for inclusion, nor was outdoor advertising, travel, commercial printing (signage, POP displays) and nontraditional products such as major appliances.

Another criterion was that, of each distributor’s total promotional products sales, a minimum of 60% must have been for imprinted products. This was done to eliminate the growing number of gray areas such as marketing, event planning, etc., that had been included in some figures in the past. For instance, a distributor involved in event marketing may not include revenues generated by the entire campaign, but only those sales for any imprinted products that may have been part of it. Here again, it’s our belief that this rule helps keep contenders on a more even level.

Suppliers were required to provide only their promotional products sales, 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 serves to eliminate retail, pure premium and direct-sales figures, as well as sales to buyers or retailers in other industries. 

Suppliers were also asked to report only net income to them, not resale prices in their catalogs or set by distributors. The same requirements/questions regarding global/North American sales, acquired firms and common ownership that applied to distributors applied here.

Sales to other suppliers were permitted for inclusion, but with certain limits: all sales of imprinted goods could be included, but only 25% of sales of blank merchandise. Instituted in 1997, this requirement takes two things into consideration: First, that such sales represent for-profit business in the same field as sales to distributors; and second, that – as confirmed in conversations with ranked suppliers – the level of supplier-to-supplier sales at the Top 40 level remains extremely low.

Once all contending companies – usually several hundred – have submitted acceptable sales figures, the final determination process begins. This consists of thorough research on each firm, including financial reports, year-end statements, annual reports, personal interviews and business publications. In situations where a firm’s sales figures are proprietary, the same criteria and resources are used to develop as accurate and comfortable an estimate as possible.

This year, two new things were added to the rankings. First, a “W” or “V” on the charts indicates whether the confirmation of the sales figure was submitted in writing, signed by a company principal, or given verbally.

The second new addition was a special designation next to each firm’s listing indicating that, once ranked in the Top 40, they voluntarily chose to submit a statement of additional verification of the promotional product sales figure for 2001 they initially submitted. The verification must be signed by a senior financial officer of the firm. This was our way of raising, even further, the overall credibility of the Top 40; to make it as accurate as possible. 

Outside The Fence

Even practitioners who’ve been part of the promotional products profession for a short time, or are only part-time participants, are likely aware that a fairly large amount of imprinted merchandise-related business routinely occurs beyond the generally accepted confines of the industry proper, and definitely beyond the limits of the Top 40. The companies involved are not only financially solid, but often extremely successful. However, they’re neither ASI or PPAI members, and sell largely though major wholesalers or directly to end-buyers. 

In the process of conducting Top 40 research, we constantly run into firms that manufacture, import and sell merchandise, often quite a bit of it, that unquestionably fit under the promotional products umbrella as it’s presently defined in the marketplace. Some have or previously had direct connections to the industry. Most, though, are only marginally familiar with it. In every case, however, they’ve remained outside the borders of the profession by choice, choosing alternative distribution channels and markets. Some ultimately make their way into the profession as traditional suppliers.

With the goal of offering a well-rounded, informative and penetrating viewpoint of the promotional products arena, we’ve included short profiles on a selected group of these companies that, one day, may become direct, rather than indirect, competitors. 

Arn Bernstein is executive editor/news director/assistant director of communications; Erik Caplan is an associate editor, and Kathy Huston is a contributing editor of The Counselor. 

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