The Counselor’s 21st annual listing of the 
promotional products industry’s sales leaders.
By Arn Bernstein, MAS
Company profiles compiled by Erik Caplan and Arn Bernstein

Now The Good News – Sort Of

But there was some positive spillover as well. A number of businesses ultimately realized that one of the basics tenets of good business – a quality product/service at a fair price will almost always help a company to succeed, while the reverse will eventually cause profit erosion – is indeed still true, particularly when the competition understands it, too. 

American automobile manufacturers, for one, have known this for over a decade now. The hotel industry, one of those hardest hit by 9/11 and its aftermath, was quick to attempt to undo the damage, offering reduced rates, special packages and extra perks to draw guests. It worked; the lodging market as a whole is still soft, but it’s slowly recovering. 

Another highly visible example was phone-service carriers, who began to offer extras on their wireless and land systems, including one-bill packages that for the first time incorporated unrelated items such as Internet access. And there are plenty of other examples, too.

Looking through the broad scope, however, it’s as we noted a few paragraphs back – not much had radically changed. Service may have been rising, but price still ruled, and the erosion of loyalty between distributors, suppliers and buyers kept up. Advertising, as a whole, took some serious shots. Customers’ cash was still up for grabs, but there were far more hands than there were dollars, and many companies kept concentrating on maintaining their existing accounts while increasing their customer base.

It has to be remembered, too, that while the actual numbers were down for a little less than half the industry, the number of new clients and orders was frequently up; it was the size of orders that experienced shrinkage. So the good news is that even though firms may not be ordering as many promotional products as they were in the past, they are, in fact, still ordering them because they understand their value as an sales tool and ad medium. 

Which brings us to the 2003 Top 40 distributors, which this year represent sales of $2.8 billion – not too shabby, even though that’s down by $100 million (3.4%) over the previous year. Interestingly, the declines reported in last year’s edition of the State of the Industry were far worse – 9.3% or $300 million, which makes 2002 seem a little less menacing. Not only that, this $2.8 billion in aggregate sales accounts for 17.9% of all industry sales, a 0.2% increase over last year’s figure. A miniscule ripple, to be sure, but still a ripple.

Breaking It Down

Let’s look at a few more comparisons. Among the 80 firms that made up last year’s supplier and distributor Top 40 lists, there were 39 sales increases, 35 decreases, four with no change and two new firms, for which a comparison couldn’t be drawn. This year, the picture was only slightly different: 32 increases, 36 decreases, 10 with no change and, again, two new companies (both newcomers were on the distributor side).

Breaking it down a step further, this year’s Top 40 suppliers posted 19 increases, 17 decreases and four firms with flat sales (last year the numbers were 20, 17 and three, respectively). Increases ranged from 0.2% to 19.6%, with the majority in the 1% to 5% vicinity, although seven firms had double-digit gains. Declines ranged between 0.2% and 14.5%, with most in the 5% to 10% range and four in double-digit territory. All told, suppliers seemed to fare a little better than last year. The likeliest explanation? Since distributor orders were smaller but more numerous, they were still selling product at roughly the same clip.

On the distributor side, there were 13 sales increases, 19 decreases, six with no change and the two new firms that couldn’t be charted. The equivalent numbers for 2001 were 21, 16, one and two, respectively. Increases ranged between 3.5% and 28.9%, with four companies posting double-digit gains and most firms lumped in the 5% to 10% group. Those with decreases ranged from 0.4% to 32.6%, with the majority in the 10% to 25% range; nine experienced double-digit drops.

No Deeper Trend 

You can look for them, but there aren’t really any hidden gems waiting to be unearthed in this year’s Top 40 data. The overall decline in sales was simply a matter of business being off for many of the larger firms in the industry. It’s the same elementary formula: When a Fortune 500 client or Top 100 buyer cuts its ad budget, it involves a lot more money than a local supermarket or dry cleaner. And when the cuts happen, promotional products will invariably be included, and distributors and suppliers will feel the squeeze to some extent. Also, the larger they are, generally speaking, the tighter the squeeze is felt. 

Some companies were able to still make a profit. Some weren’t. This year, while there was some acquisition activity among the Top 40, it really affected only two firms in terms of sales increases: Jack Nadel’s purchase of two branch offices formerly belonging to HALO Branded Solutions involved 16 highly experienced salespeople and was almost solely responsible for the firm’s 28.9% increase. And while Alpha Shirt continued to position exclusive brand names, its acquisition of Kay’s Enterprises was a major element it its sales increase. In a similar vein, newcomer Corporate Edge resulted from the merger of two smaller distributorships, and Magnet LLC’s decline resulted from the divestiture of two non-promotional-products divisions.

Supplier Stats 

Once again – for eight years in a row, in fact – Norwood Promotional Products Inc. took the top supplier spot at $385.2 million, a $900,000 (0.2%) decline from 2001. Dard Products filled the 40th position, with sales of $26.9 million, only $100,000 below Admanco, last year’s number 40. The monetary difference between the first and 40th slots was $358.3 million vs. $359.1 million in 2001. The difference between the first and fifth spots was $240.2 million ($264.5 million last year), and between the first and 25th positions, $344.9 million ($343.4 million in 2002). The largest monetary difference was, again, between the first and fifth spots – $188.2 million, somewhat larger than last year’s $174.1 million. The smallest difference was between the 37th and 38th positions. A fairly small $40,000 last year, this year the difference was a miniscule $7,000.

Individually, only three companies, the same number as last year, had jumps of $10 million or more. The largest monetary single increase belonged to SanMar, at $15 million. The smallest? Gemline, at $200,000. Other increases ranged from a high of $13.3 million to a low of $800,000.

On the decrease end, only one firm, Broder Bros. Co. Inc., had one of over $10 million. This was also the largest, at $15 million. The smallest was Senator USA at $700,000. The remainder fell between $8.5 million and $900,000.

Whys And Wherefores – Up

But the real question is, of the Top 40 companies who achieved double-digit increases – in fact, of those who achieved any increase last year, how did they do it?

Perhaps somewhat intriguingly, most make basic logical business sense. Let’s start with the bigger guns on the supplier side: 

“We inventory twice as much as most of the competition, in over 100 styles in sizes XS to 6XL,” says Danny Tsai, CEO of Tri-Mountain/Mountain Gear, which saw a 19.6% increase. “That’s in stock 98% of the time, meaning we can fill shipments, including split shipments, immediately. We also offer 25 proprietary styles, which we’ve added to for several years.”

Leed’s 15.2% bump was the result of a gamble, plain and simple. “We started planning at the end of 2001 that rather than just hunkering down, we’d take a calculated risk,” explains vice president Sam DiBiase. “We came out with more new products than we ever had before, including two brand-new areas – insulated coolers and writing instruments. We invested in more inventory than ever, and we made sure our price points would be attractive to distributors.”

Naturally, there were many other reasons as well. Dard developed its own tooling for several products and opened a Hong Kong office. In addition to more proprietary styles, SanMar initiated Internet ordering capabilities, redesigned its advertising and introduced a team catalog. Lanco Products Corp. made major improvements and enhancements to its customer-service structure and invested in additional technology. In addition, notes Brian Landow, president, “We had introduced several new products in 2001 that I believe took distributors almost a year to really associate with Lanco.” And Gill simply enjoyed the benefits of a political-year spike.

Other firms cited increased advertising (sounds like a plan), more focused sales efforts, aggressive new-product development, key hires, new catalogs, higher industry recognition, more sales reps, new spec sample programs, reorganizations of sales forces, improved sales kits and loyal distributors.

Crossing over to distributors: In Beanstalk’s case, notes president Jon Sloan, its 20.2% jump was because it was chosen the exclusive proprietary merchandise supplier for all licensed goods pertaining to the most recent James Bond film, which, as you’re likely aware, was a major box-office success.

For Proforma Inc., new franchisees were only a part of the whole, explains Alan Chippendale, president: “We also picked up several very strong programs, and added some highly experienced business owners to our ranks. We also invested heavily in our resources – which, honestly, were pretty strong already – to help our franchisees grow their business by finding new clients and penetrating their existing clients more deeply. It was a matter of more value-added services.”

Mike Delaney, senior vice president of National Pen Corp., admits the firm was totally surprised by its 11.8% increase, but attributes it to more aggressive sale tactics, focusing on core clients, improved/simplified re-ordering procedures, and, against almost everyone else, an increase in order sizes. Why does he think this occurred? “I’d love to say it was completely due to our awesome, amazing service, but that was only part of it. Beyond that, we’re not really sure,” he says.

Other strategies mentioned included more corporate programs, branded merchandise, a diversified client base, more salespeople, new associates, more innovative programs, an enlarged art department, increased demand for promotional products from clients, and just gold old-fashioned hard work.

Whys And Wherefores – Down

In discussing why certain decreases occurred, the responses tended to be more similar, for distributors and suppliers, with most settling around – no surprises here – the poor state of the U.S. economy and long-term 9/11 fallout, i.e., what occurred after the initial flash of patriotism faded. “In addition to the tough business climate, integrating acquisitions and inventory management were challenges,” says Tony Laxa, marketing director of Broder Bros.

Corvest Promotional Products cited a drop in the pharmaceutical market while the drug-manufacturers “code” involving promotional product use was being worked out, and the backsplash from morally and ethically void firms such as Enron and Worldcom, which resulted in more conservative business spending.

“Even those companies that maintained modest spending purchased lower-priced items, lowering the value of the order,” explains Lisa O’ Leary, marketing director of Sanford Promotional Products. “Increased competition from non-branded, imitation imports also contributed to declines, further demonstrating that customers were trading down for less expensive, lesser-quality items.”

Hilton Corporate Casual president Tim Cronin offers, “Lower-priced items have been replacing apparel. Our customers have become more of a competitor than at any time in the past. Many are importing their own shirts, and this has had an impact.”

Some of the other elements contributing to supplier decreases were fewer corporate events, consolidating six distribution centers into three, deflation and increased competition. 

For distributors, the situation ran pretty much the same way. “Many meetings were cancelled [after 9/11] and some of the special events where merchandise would be used, such as conventions/meetings were postponed for over a year,” notes Howard Trilling, American Identity vice president of marketing. 

“We continued to see weak demand in our top customer markets, notable transportation, agriculture insurance and technology,” says Chris Vernon, president of The Vernon Co. “We’re confident that as they recover, we’ll be in a position to recapture revenue momentum.”

Dan Harms, vice president/CFO/COO of JII Promotions Inc., explains, “Our client base is, in many respects, representative of the business census. Our clients range in size from small and large and cover a broad base of market sectors. The overall economic conditions have forced a number of businesses to cease operations – in some cases entirely, in some cases a location or plant closing. As a result of this and smaller orders, we’ve experienced sales reps choosing to retire or leave the industry rather than attempting to rebuild their client base.”

Included among the other reasons submitted were Past challenges of working under Chapter 11 status, emotional uncertainty associated with employment security, divestitures, non-repeating large orders, preoccupation with the possibility of war, more selective end-buyers, lower staffing levels of clients and higher unemployment.

Making It 

In our mission – well, one of them – to develop as accurate a snapshot as possible as to where distributor sales are being generated from, we ask all Top 40 distributors two questions. One of them is, “What percentage of your sales represents products manufactured, assembled or imported by your own company?”

For the third year in a row, the dominant response was 0%, cited by eight firms. The next-highest number was 10%, given by five firms. Last year, it was six companies who noted 5%. The next highest numbers were 5%, 20% and 25%, given by three distributorships each. Two firms each reported 8%, 60% and 70%, and the rest noted figures between 95% and 100%.

What the results seem to point to is that, to a minor degree, while many key Top 40 distributors choose to stick with the standard supplier-distributor distribution chain, more than a few others are increasing in their their self-sourcing, manufacturing, imprinting, importing and/or assembly.

As a reminder, it’s important to remember that all distributors doing so aren’t deliberating trying to cut suppliers entirely out of the picture, but merely attempting to remain as competitive as possible in the current economy. In addition, as we noted last year, while holding on to acceptable profit margins, distributors who go beyond their standard role can order and/or inventory blank stock, imprinting it (in-house or outsourced) as needed by clients; purchase and/or design custom/proprietary products; and have far more control over imprint quality, order-tracking and turnaround time.

Majority Sales

The other question asked of all Top 40 distributors is to try 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.

Just as last year, five companies indicated mail order. However, five as opposed to six last year noted corporate catalog programs. The remaining 30 cited traditional selling.

Once again, the same analysis emerges: Most Top 40 distributors prefer to remain with the industry’s basic set-up, leaving more specialized areas such as corporate catalog programs and mail-order to those more experienced in those areas.

But, the same note as last year, and the year before that, still applies: This is not an indication that this is the way operations will still be at this point six months or a year from now. They probably will, but one can’t say for certain. While it seems to be that most distributors wish to stick to traditional selling, the potentially higher profits in mail order, and corporate catalog programs, might mean that more will experiment.

Sales Per Employee Ranking While every Top 40 firm has a sales staff of one form or another, we wondered how things would look if an equal share of their promotional products sales were attributed to every employee in their workforce. The results follow. Those marked as “unreported” were firms who were unable or unwilling to supply workforce numbers.  Distributor Sales Per Employee RANK COMPANY SALES (millions) TOTAL WORKFORCE SALES PER EMPLOYEE 1 Thomas Direct Sales $34.3 8 $4,287,500 2 Beanstalk Group Inc. $134.7 72 $1,870,833 3 Caliendo Savio Enterprises Inc. $28.4 16 $1,775,000 4 Corporate Edge $30.3 19 $1,594,736 5 Renaissance Promotions $34.2 25 $1,368,000 6 National Pen Corp $73.8 65 $1,135,384 7 Konik & Co. $23 23 $1,000,000 8 Zouire LLC $22.7 26 $873,076 9 Artcraft & Foremost Inc. $42.3 50