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Valassis Communications (VCI) |
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WIKI ANALYSIS
Valassis Communications (NYSE: VCI) provides media and marketing services. Its largest consumer brand name, RedPlum, is a print advertisement that reaches 70 million US households each week. The company derives its revenue from the following four operating segments: shared mail (56% of revenue), neighborhood targeted (marketing products which target specific newspaper zones or neighborhoods and account for 21% of revenues), free standing inserts (16% of revenue), international, digital media and services (7% of revenue).[1] However, commodity prices and Valassis' entrance into the digital media industry can affect the company's revenues.
Business Growth
In FY 2010, net sales increased 4% to $2.33 billion. Net income increased 476.9% to $385.4 million.[2] This growth is attributed to the increase in production of Shared Mail pieces and improvements in Valassis' digital services business.
Trends and Forces
Increased commodity prices negatively impacts VCI's profitability
Because Valassis relies so much on print media, paper is a primary raw material in its businesses. However, the price of lumber and paper fluctuates greatly over periods of time. For example, in 2010, lumber prices increased 80% in 12 months.[3] Such changes are due to changes in demand and production as well as natural or manmade disasters. In turn, increased prices for Valassis' supplies can decrease its profitability. In order to protect against this, the company enters long-term contracts to take advantage of price discounts and prevent price fluctuations.[4]
Valassis' expansion of its digital services contributes to its bottom line
With more than 80% of shoppers participating in grocery and drug frequent shopper programs and research showing that the majority of shoppers are interested in receiving savings directly from the Internet, the coupon industry is going digital. In January 2011, Valassis entered into an agreement with AOL to create one of the largest digital coupon footprints in the US with over 7500 grocery stores. This agreement allows Valassis and AOL to to reach over 127 million users in the frequent shopper program each week across each other's networks. Valassis also expanded its digital portfolio to include email, print-at-home coupons, display ads, and coupon to card/ID features on shopper cards or mobile phones. In turn, secure coupon prints in RedPlum increased 300% from 2009 while coupon to card/ID download volume increased 1000% in the 2nd quarter of 2010 compared to the 1st quarter. In turn, Valassis' international, digital media and services segment revenues increased 12.5% to $178.8 million in 2010. As a result, Valassis' entrance into digital media can greatly increase its bottom line.[5]
Competitors
Marketing Services
Media & Entertainment
Valassis has different product lines and thus, no single business directly competes with VCI in all of its lines. However, Valassis is not the largest business in any of the industries it competes in, leading to disadvantages due to smaller brand name and less buying power.[6]
References
- ↑ http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9NDE3Njc4fENoaWxkSUQ9NDMwMzk1fFR5cGU9MQ==&t=1
- ↑ http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9ODc3OTZ8Q2hpbGRJRD0tMXxUeXBlPTM=&t=1
- ↑ http://www.connecttristates.com/news/story.aspx?id=448059
- ↑ http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9NDE3Njc4fENoaWxkSUQ9NDMwMzk1fFR5cGU9MQ==&t=1
- ↑ http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9NDE3Njc4fENoaWxkSUQ9NDMwMzk1fFR5cGU9MQ==&t=1
- ↑ http://www.hoovers.com/company/Valassis_Communications_Inc/rtyfhi-1.html
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