PPB May 2018

by Tina Berres Filipski N ot toomany in the industry were expecting such a large percentage increase in 2017 over 2016, but it didn’t surprise Janie Gaunce, president/CEO of Grapevine Designs in Lenexa, Kansas. At The PPAI Expo in January, she talked tomany large-company distributor principals whose businesses, like hers, were up substantially year over year. “The average amount of growth for 2017 from those whom I spoke with was 18 to 20 percent,” she says. “And, most everyone I’ve spoken to in the first quarter of 2018 seems very optimistic. Our bookings going into the new year supported that, and the first quarter finish line year over year was unexpectedly strong.” Gene Geiger, MAS+, CEO of Geiger in Lewiston, Maine, also wasn’t surprised about the uptick among larger distributors. “It does seem tome that we are seeing a continuation of a trend where the larger firms, which have scale and deep resources, are growing at the expense of smaller firms. Outside investors, such as private equity firm, are seeing and amplifying the consolidation opportunities.” However, he’s not sure growth at this rate is a trend that will last. “While I would like to think our industry is growing at a rapid rate, a nearly 10 percent growth rate strikes me as a blip or an anomaly. Having said that, I think the larger firms and those in hot markets will continue to grow at these rates, while smaller firms will struggle.” Gaunce is equally upbeat about the opportunities available in today’s market. “There is an energy about our industry that seems to be swirling upwards,” she says. “It’s a feeling. It starts with clients who are extremely optimistic about the business climate in general. Whenmarketing budgets grow, our industry benefits. When fashion designers blow up apparel with logos; when causemarketing, festivals and event business grows; when employees aremore rewarded and incentivized, the promotional products industry benefits. Perhaps these things, combined with the explosion of our own industry trade associationmarketing led by PPAI, individual distributor new business development efforts (noted in the survey) and increased distributor social media/marketing efforts have created a rising tide where you simply have to ask yourself, ‘Why couldn’t we hit 9.3 percent?’” Larry Cohen, CAS, president of Axis Promotions in New York City, says the 2017 percentage increase is surprising but he has one possible explanation. “The 9.3 percent growth seems to be a big jump that I wouldn’t have anticipated, but the growth of the internet part of the industrymay be picking up sales that weren’t otherwise being captured.” Still, he thinks last year’s sharp growth is a deviation from the pattern. “Fromwhat I’m hearing fromother distributors, most are not seeing that significant of growth—we are not in our own business, although we are doing well. So, I think those numbers are a bit of an aberration. Having said that, I hope this is the new normal as I think our industry has a strong role to play in the overall advertising andmarketing world.” GregMuzzillo, president of Proforma in Independence, Ohio, considers the data from the perspective of his own thriving corporation, as well as what his distributormember-owners are experiencing. “A 9.3 percent increase for the entire industry, especiallywith the number of smaller distributors, sounds aggressive to me. That said, end users arewide open for business, have strong budgets and are looking for creativemarketing and branding solutions, and they are seeking the increased efficiencies that sophisticated online programs offer.” He adds, “We are seeing similarly strong growth, especially for our larger owners who are selling large accounts, large programs and growing their sales teams. It is an exciting time for well-equipped, larger and sophisticated distributors to grow.” Jeff Lederer, president of supplier Prime Line inBridgeport, Connecticut, sees two reasons for the large percentage increase in 2017 sales. “Distributor acquisitionsmust have played a big role in the increase for 2017—assuming they did not report same store sales,” he says. “In addition, ‘affiliations’ to distributor aggregators would have added to the increase as well. Both of these are positive for larger suppliers like alphabroder and Prime becausewe believe distributors—particularly the larger ones— want to partnermore closelywith full-service, one-stop-shop suppliers.” StanDohan, MAS, president of supplier The AllenCompany inBlanchester, Ohio, also believes distributor acquisitions played a part in the increase. “Anumber of established, sizable andwell-known distributorsmade acquisitions of some distributors that were large in their own right. I believe theywould tell you that these deals played a significant part in showing growth in 2017.” DavidNicholson, president of supplier Polyconcept NorthAmerica inNew Kensington, Pennsylvania, says, “Acquisitions certainly played a role in driving the higher growth rates for the large distributor segment. This would include several significant acquisitions that were announced throughout 2017—but also themoves of smaller distributors and sales account executives to franchise distributors. It’s difficult to put a number on the impact, but there is little question that ameaningful portion of distributor growthwas derived frommerger and acquisition activity. Inmymind, this raises a question of howmuch true organic growth is actually occurring across the industry.” For distributors, the data provided in this research report and others provides valuable tools for their businesses, but suppliers also see these reports as vital tools in their planning. “It Why Was 2017 Such A Strong Year? Company Principals Weigh In. PPAI Exclusive Research: 2017 Distributor Sales Volume Estimate | FEATURE | MAY 2018 | 47