A wake-up call from Brewster

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Beside the chartreuse couch outside Dan Brewster's Manhattan office, three rows of shelves display his company's magazines. Centered in the middle row, flanked by established Gruner & Jahr Publishing USA titles McCall's and Parents, is the newest addition to the company stable, small business title Inc.

With that June acquisition, 45-year-old CEO Mr. Brewster, not yet five months into his tenure, made his mark on the company.

In his previous position as CEO of American Express Publishing Corp., "he took a rather lackluster business, and gave it a vision, gave it leadership and identified the key areas that needed to be enhanced," recalls Bob Miller, president of Miller Publishing and former president of Time Inc. Ventures, to whom Mr. Brewster reported while at AmEx.

A similar situation lies ahead of Mr. Brewster at G&J, where the elevator button reads "Help is on the way."

MARCHING ORDERS

Mr. Brewster's marching orders are to double G&J's size within five years. In 1999 and 2000, not including Inc., the company took in about $420 million in revenues.

An obstacle in Mr. Brewster's path is the perception of his company, which he admits is often tagged as "sleepy." That can be a barrier in attracting top talent. More pressingly, he needs to get Gruner & Jahr's existing titles in order.

If all goes according to plan, by the end of 2005, lumping Gruner & Jahr in with Conde Nast Publications and Time Inc. won't be met by giggles or a blank stare.

Gruner & Jahr is backed by a parent company with both will and wallet. Bertelsmann AG, which owns 74.9% of G&J, has been loudly proclaiming its expansion plans.

At a September luncheon in New York, Bertelsmann Chairman-CEO Thomas Middlehoff made repeated reference to the $15 billion the company has banked for purchases.

Mr. Brewster, a senator's son who chucked college to join the magazine world, has long been considered an executive to watch in the business, and perhaps a possible replacement for Time Inc.'s CEO Don Logan. He was also a finalist for the top spot at Hachette Filipacchi Magazines that Jack Kliger took last year.

A POOR YEAR

It's been a poor year for G&J. According to August Competitive Media Reporting figures for the top 20 magazine companies in terms of ad pages, only Gruner & Jahr and Ziff Davis Media have posted ad drops in 2000, down 4.5% and 18.7% respectively. Key G&J titles such as McCall's and Fitness posted double-digit ad page drops through September, while YM's pages were down 5.6% and Family Circle dropped 8.8%.

"They weren't any better last year," says one industry executive, "and in the best ad environment" in years, no less. Profit margins at Gruner & Jahr, which were once in the low 20% range, are in the low double digits now.

"What they need to do is jazz up the editorial," says Melissa Pordy, a media buyer for Zenith Media, New York. "They have good brand names, but [competing titles] have dusted off the cobwebs, and that's what they need to do."

For his part, Mr. Brewster allowed that "in the past, G&J missed the tech boom. It doesn't have that audience." The Inc. deal is one way to address that. Elsewhere, editorial revamps are under way.

"I want to make YM the biggest teen magazine in the marketplace," says Annemarie Iverson, who came to the teen title just after Labor Day as editor in chief, replacing Diane Salvatore. "The taste level and quality level will see a major boost."

'A TOTAL LIFESTYLE'

Over at Fitness, new Editor in Chief Emily Listfield says since "women today see fitness not as stomach crunches, but as a part of a total lifestyle," the magazine will sport a "much more beautiful" look and more "upscale" content. The impact of both editors will be first felt on the February 2001 issues.

American Homestyle and Gardening, under its new Editor Kathy Madden (a former Vogue-r), will significantly upgrade its look, right down to the paper stock, says Mr. Brewster. At Child, look for a new focus on child development and "targeting a slightly more upscale audience."

All the talk of upscaling "makes a lot of sense from Dan's perspective," says Reed Phillips, managing director of DeSilva & Phillips, a media investment banking firm. "He has published upscale magazines very successfully at AmEx."

"It's not so much upscaling as improving the content," says Mr. Brewster. "There is a fundamental connection between the magazine and the reader, based on a strong emotional and intellectual bond. If you get that part right, everything else is manageable."

However one defines it, it will come at a cost. Mr. Brewster says the G&J board had approved taking a significant charge against earnings in fiscal year 2000 and 2001, "amounting in the tens of millions of dollars," to invest in current titles' editorial.

RASH OF NEW HIRES

Mr. Brewster has created two new senior VP slots, bringing in Diane Potter from AmEx, for consumer marketing and Ken Wallace, a former Rodale VP, for corporate sales and marketing. He also hired a new publisher at Family Circle (Peg Farrell, from Hearst Corp.'s Country Living), a new VP-business development (Dan Rubin from Time Inc.), a new production VP, a new chief administrative officer. Positions yet to be filled are managing director for G&J Digital Media and director of strategic planning.

On the newsstand, G&J will borrow a page from Meredith Corp.'s book and begin targeting alternative retail outlets for single-copy placement, such as placing American Homestyle in design centers and Wal-Marts. And, borrowing a page from Hearst and Conde Nast's distribution venture Comag, look for G&J to form a distribution alliance with another magazine company "within a year," says Mr. Brewster.

Start-ups will play a major role in G&J's growth. "We've created an incubator system, which can take an editorial idea, move it fairly quickly to designing pages and into focus groups, selective clients and ultimately a direct mail test in 12 weeks."

ON THE HORIZON

The net, Mr. Brewster adds, would be a launch, or launches, coming fall 2001. In early October, after one month of the incubator's existence, 20 pages for three prospective new titles had been produced.

Mr. Brewster hinted broadly that at least one title in development complemented Inc.'s niche, but kept mum about possible other new titles. He did allow that G&J launching titles off its extensive women's-oriented franchise was certain.

"I like development to come organically from existing businesses," he says, adding that "Most of our magazines [and those] under consideration are magazines that help people manage their lives better."

Still, even with Bertelsmann's bucks backing him, Mr. Brewster's task will not be an easy one. G&J growth must come "largely through acquisitions," says Mr. Phillips.

G&J, an early favorite to buy Tribune Co.'s Times Mirror magazines, dropped out over price concerns.

Purchases are tough today, says one industry exec. "How do you buy in an overly expensive market, properties that aren't overly mature and will satisfy" return on investment requirements? One way is to pick up smaller companies' titles, like Fast Company, the exec says.

Mr. Brewster expresses confidence. "After a year there will be a much more favorable perception of Gruner & Jahr."

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