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Newsstand Challenges

Newsstand Challenges . Steve Burbridge SVP Sales and Logistics - West. There are a number of challenges facing the single copy portion of the magazine business. Among the most important are: Profitability of the wholesalers, Challenges from other commodities, and

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Newsstand Challenges

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  1. Newsstand Challenges Steve Burbridge SVP Sales and Logistics - West

  2. There are a number of challenges facing the single copy portion of the magazine business. Among the most important are: Profitability of the wholesalers, Challenges from other commodities, and Sluggish unit sales (is flat the new up?) leading to a push for increased profitability/productivity from retailers Newsstand Challenges

  3. Wholesale Landscape Has Changed • Willingness to cut discounts or withhold incentives to retailers • Refusing to distribute products due to cover price and/or discount (e.g., Bauer’s Cocktail) • Confronting publishers over low cover prices on existing, high unit volume titles (e.g., OK) • Cutting titles to be distributed based upon efficiency, discount, etc. • Moving to once/week delivery and geo-routing • Reviewing delivery methodology (hybrid of truck and DSD via 3rd party carriers such as UPS and FedEx) • Reviewing pre-weekend and galley delivery approach

  4. Key Retailer Themes • Checkout racks • Threats from other CPG companies as well as the retailers themselves • Wrigley going after Over-the-Belt for gum/mints only • Soda Coolers at more than every third checkout • Gift Cards • Self-scan roll-outs • Other merchandise such as Slim Jims • Retailers reducing the # of checkouts for magazines and/or going to lower profile racks

  5. Key Retailer Themes • Rack Charges • Traditional $22.28 per pocket moved to $25.00 as of 3/3/08 • Large retailers seeking - and getting – SBT (scan-based trading) • All retailers are looking for margin improvement and are seeking it from Wholesalers AND Publishers • Retailers looking to reduce their authorized lists and go to more full-faced mainlines

  6. Gum/Mints Over-the-Belt • Wrigley’s acquisition of such brands as Lifesavers and Altoids has them pushing retailers to dedicate space OTB for gum and mints at the expense of magazines • Bill Wrigley Jr. making account calls on retailers’ senior management teams

  7. Soda Coolers • Acquisitions such as Glaceau (Vitamin Water) by Coke, as well as a retailer’s desire to increase gross margin from Private Label water, are driving retailer to place their own coolers at more lanes to try to capture sale in this stagnant category • Funding from Coke and Pepsi as well as the high GM from water (60% or more) is driving this push

  8. Other Commodities …gum / mints OTB. The worst of all worlds? Personal finance products plus…

  9. Self-Scan • Self-scan continues to rollout at retail with new configurations and new players • Magazine community working to “actively” merchandise this space

  10. Front-end Configuration • The impact of other commodities, self-scan, coolers, etc., lead to a major loss in real estate UScan UScan Express Traditional c/out Traditional c/out Traditional c/out Cigarette c/out Traditional c/out Traditional c/out UScan UScan Express = possible opportunities (very limited pockets) = magazine fixturing = other products = coolers

  11. Mainline Initiatives • Retailers starting to take back control over mainlines as well • “Wholesaler-controlled” • Source of inefficiency • Best Practices include: • Planograming some portion of mainline • e.g., Wal*Mart, Target, CVS, Walgreens, Safeway, etc. • More full-faced product • Demographic clustering / Limiting # of SKU’s • Space-to-sales by segment • Signage Source: TWRSM Research

  12. Other Retailer Themes • Scan-based Trading • SBT can be a good thing for the category as it reduces check-in and check-out time. However, high shrink rates and the cost of absorbing store-level inventory can lead to less profitability to wholesalers • Growth of store perimeter and kiosks impacting display • As “fresh” becomes more important, retailers grow produce, bakery, etc. that forces mainline space to become smaller • Retailers adding in-store kiosks and services – Starbucks, etc., - “squeezes” the front-end and results in less merchandising space at checkout • Little to no growth in traditional retail outlets • Most growth at retail coming from chains with no magazine programs (such as Kohl’s, Trader Joe’s, etc.) or those with small programs (Walgreens, Target, etc.)

  13. The Future • No traditional checkouts? • RFID • Handheld scanners • WWWD/WWTD • What Will Wal*Mart Do? / What Will Target Do? • What else?

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