The Biz: G&J's Brewster remains steadfast

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The lights are low and the colors are deep and muted in a French restaurant on Manhattan's East Side, where a sometimes weary and sometimes defiant Gruner & Jahr USA Publishing CEO Dan Brewster discusses what the surprise exit of Thomas Middlehoff-who was CEO at his company's majority-owner Bertelsmann AG-means to his unit.

Mr. Brewster is steadfast when asked if the changes up top mean changes in his kingdom or mission: "I don't see anything to suggest that."

Company structure buttresses that claim. Gruner & Jahr is 74.9% owned by Bertelsmann and the remainder is owned by the Jahr family, and such an arrangement in Germany means "no major strategic decision can be taken without the agreement of both shareholders," says Axel Ganz, president of the international division of Gruner & Jahr and to whom Mr. Brewster reports. "Our strategy is coordinated and approved by Bertelsmann and the Jahr group. But the change [at Bertelsmann] has no direct impact."

On July 31, incoming Chairman-CEO Gunter Thielen reassured G&J's employees in an e-mail that "our corporate strategy was unanimously confirmed by the Executive Board." But the missive also said, "we intend to reduce our debt through a short-term consolidation phase."

Thielen wrote of the need for improving "our profitability and increasing our financial resource to ensure we can grow from within."

"We are on our way to improving results," said Bernd Kundrun, president-CEO of Gruner & Jahr, "and [Mr. Thielen] said it has to be continued, and there is no question that is our strategy." A Bertelsmann spokeswoman did not return calls.

"I had a terrific relationship with Thomas," Brewster says. Like Middlehoff, Brewster is a mediagenic and ambitious fortysomething executive. He came to Gruner & Jahr in June 2000 with the blessing of Middlehoff and a mandate to double the size of the company within five years.

Industry chatter since Middlehoff's departure focuses on whether the change means Brewster's job description will change. Brewster, though, says it already has.

"Of course my job has changed," Brewster shrugs. "The economic environment has changed." An internal acquisition wish list included properties as unreachable as McGraw-Hill's Business Week and Forbes. But Brewster now suggests a significantly moderated view.

"Our strategy has been to grow organically or by acquisition into a more dominant player, and I don't think there's anything to suggest that won't continue," he says. But, he concedes, "we are probably more focused on enhancing the value of our core properties, keeping costs under control and developing new properties organically."

"The environment has changed, and goals are a bit postponed. But we want ... to gain market leadership in the U.S.," Kundrun says.

increase profits

According to Brewster, should current trends hold, G&J will increase its profits $80 million over last year's (marginally unprofitable) results, and revenues will increase as well, though he admits they're behind budgetary expectations. "I think we've done fairly well," he said. Through June, the company's ad pages are actually up 7.5%. That said, his highest profile moves thus far remain purchasing Fast Company for over $300 million and relaunching McCall's as Rosie. The former's seen two straight years of 30%-plus ad-page drops through June, and the latter's resulted in a public feud with its founding persona, Rosie O'Donnell.

"Rosie was a Hail Mary, absolutely a long shot," says Brewster, who nonetheless added its losses this year will be under $1 million and thus a fraction of what McCall's were.

While he declined to comment on the dust-up with O'Donnell, he says the magazine is "a joint venture, and very dependent on the desires of that person, and I can't pretend to tell you what, exactly, her ultimate intentions are." A spokeswoman for O'Donnell would only say "Rosie is very proud of the magazine, and she is working hard to preserve the integrity of both the brand and the magazine."

There are whispers of friction between the U.S. operations and the G&J mother ship. But Ganz says Brewster "has my total confidence, and the confidence of the board of Gruner & Jahr." Ganz termed any suggestions the U.S. arm might be sold as "totally stupid nonsense."

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