Reference no: EM133294990

Granet Publishing: The Looneyspoons Story!

The Market

In 2009 the Canadian publishing market was valued at $3,337.7 million, an increase of 2.5% over the previous year. Although the market has exhibited a deceleration in growth since 2007, it is nevertheless growing and is projected to reach $3,752.7 million by 2014.[i] (See Exhibit 1.) Of note is the fact that the Canadian market grew at 2.9% from 2005-2009 while the US market grew at only 1.6%. The overall publishing industry is made up of books, magazines and newspapers with books making up 42.9% of the total market value. (See Exhibit 2.) With revenues of $1.4 billion in 2009, book sales represented the most lucrative aspect of the Canadian publishing market.The Canadian publishing industry faces numerous challenges and threats. Buyer power is relatively strong as bricks-and-mortar retailers have limited shelf space and thus will only selectively stock titles with high consumer demand. Rising prices for paper pose a significant expense for book publishers eating into already thin margins. The emergence of online distributors has allowed many new works to be published since books can be printed on demand. Gains made in the digital realm, further erode margins for bricks-and-mortar retailers, increasing competitive pressures. An added complexity for book publishers in Canada is the necessity to consider two official languages: English and French. Creating books in multiple languages adds to publication costs due to translation services and separate print runs.Another threat to the publishing industry is the increased availability of free online information. The popularity of search engines such as Google and user-friendly search capabilities has fuelled the growth of free sources of information on the Internet. Material, which in the past might only have been available in hard copy, is now readily accessible online in part or in its entirety, negatively impacting sales revenues for the publishing industry. Even material which is copyrighted, such as recipes published in cookbooks, often are shared in blogs and other online sites. Many consumers forgo purchasing books as a result, which has a negative effect on sales.In the past, the vast majority of authors would work with established publishers to print their books, reach the desired audiences, and make sales. However, self-publishing has become more sophisticated and considerably more accessible. New companies such as Lulu.com help authors get published and allow them to retain 80% of their profit. Lulu's open publishing platform makes it easy to publish content in multiple formats: hardcover and paperback books, ebooks, mini books, photo books, cookbooks, travel books, calendars, CDs and DVDs.[ii] Today, almost every city in Canada offers authors easy access to print on demand services for self published works which can then be distributed and promoted locally, nationally or internationally by listing on sites such as Amazon.com or Apple's iBookstore.

Competitive Environment - Publishers

Intense competition and high market rivalry characterize the Canadian publishing market. The increased availability of ebooks and free online content has led to higher levels of competition. Publishers' success is dependent on consumer spending which was negatively impacted by the stock market downturn in 2008 and the subsequent recession that followed. While mainstream publishers and retailers must cater to the demands of the mass market by printing and stocking titles that will appeal to a cross section of the population, independent publishers can cater to niche markets and run their operations at lower costs.Large international publishers dominate the Canadian landscape. Most are afforded some level of protection from the ups and downs of the market through diversification efforts, that is, they have a variety of subsidiaries that span a broad range of media interests. For example, one leading company, Bertlesman, has five subsidiaries: RTL Group, Random House, Gruner+Jahr, Arvato, and Direct Group. Besides publishing and printing, the company offers products such as storage media devices, newspapers, CDs, and DVDs; and TV and radio broadcasting.[iii]Bertelseman's book publishing arm, Random House, sells more than 500 million books annually. Similarly, the book publishing division of another competitor, News Corporation, owns HarperCollins which had 165 titles on the New York Times bestseller list in 2009.According to Statistics Canada, 41% of domestic sales are by Canadian-owned publishers, while the other 59% come from the Canadian subsidiaries of foreign-owned multinational companies.[iv] Many companies which publish educational materials and textbooks, such as McGraw-Hill Ryerson, Pearson Education, and John Wiley also have corporate divisions that focus on mainstream books. In addition to large, well recognized companies, there are also many small independents in Canada. For example, Whitecap Books in Vancouver is a leading independent book publisher with special expertise in culinary books.

Competitive Environment - Retailers

The Canadian book retail sector is highly concentrated with few large retailers. Indigo Books & Music is the only national chain in the country with 249 stores. It operates 96 superstores under the Indigo, Chapters, and World's Biggest Bookstore brands, and 151 small format stores under the banners Coles, Indigo, IndigoSpirit, SmithBooks and The Book Company.[v] With so much power in the hands of one retailer, Indigo can effectively determine the choice of books available to Canadians since it controls stock selection and terms. Not having Indigo carry your title means losing access to almost half the Canadian retail channel. Indigo asks its suppliers to contribute to its co-op marketing budget. In return it provides highly visible store placement, a vital determinant of sales, or provides other promotional support. This cost presents a major barrier for smaller publishers.Two powerful regional chains operate in Quebec: Renaud-Bray has 25 stores and Archambault has 15 stores. These chains are the as dominant in the Quebec market as Indigo is in the rest of Canada.According to the Quill & Quire's "The Book Trade in Canada," there are 1,937 independent booksellers in Canada. This number has declined over the past decade with store closings in major cities in every province. While most independent book retailers are single stores, some independents have as many as four or five locations.Although conventional book retailers account for the bulk of book sales, publishers also rely on distribution through non-traditional retail channels and online sites. Non-traditional channels include retailers such as Costco, Walmart, grocery stores, drugstores, big box stores, and specialty shops. (See Exhibit 4 for details.) Costco is the largest non-traditional book retailer. Its warehouse model is based on low prices and high volume and is estimated to represent between 10-15% of consumer book sales in Canada. Its markup ranges from 8-15%, considerably lower than the 40% plus markups taken by traditional book retailers.The online market for book retailers is varied and includes traditional bricks-and-mortar competitors as well as those without any physical store presence. Leading online book retailers in Canada include Indigo, Amazon.ca, and AbeBooks. Because Amazon does not disclose Canadian online sales revenues or break down the number of books sold on Amazon.com and shipped to Canadian addresses, market share cannot be calculated. However, analysts agree that Amazon accounts for a significant percentage of online book sales in Canada. Many publishers, varying from individual authors to large companies, also sell books directly to consumers from their websites.Retail book sales are led by Indigo which has captured an estimated 44% share of the market. Independent book stores and non-traditional retailers each account for a 20% share, with a 4% share going to online sellers.[vi]

Distribution Challenges

A constant challenge for all retailers is operational efficiency. First they must ensure that orders are procured, fulfilled and shipped efficiently. Then, once they have received the inventory they must manage their investment and focus on achieving rapid sales and high stock turns. Supply chain management is vitally important since distribution represents a major cost in the book industry. Of note are significant costs associated with returns. Retailers reserve the right to return unsold books to the publisher, with return rates as high as 50-70%.

Granet Publishing Background

Janet and Greta Podleski are sisters whose idea for a one-of-a kind, low-fat cookbook changed their lives. In 1995, inspired by Greta's love of cooking, Janet's knack for writing, and a zany sense of humour, Looneyspoons was born. It turned out to be more of a lifestyle guide, bringing a breath of fresh air and clarity to the confusing, intimidating, and often boring world of nutrition and healthy eating.[vii] The book included silly cartoons, corny jokes, and "punny" recipe titles such as Jurassic Pork, Miss American Thigh, and Chili Chili Bang Bang. The goal was to make the otherwise dry aspect of nutrition easier to digest. Janet's knew that for most people, D.I.E.T. was a four-letter word that translated to "Don't Imagine Eating Treats." After being rejected by numerous publishers, the sisters were in trouble. They had quit their jobs and sold practically everything they owned, including Greta's car, to finance the 14 months it took to research and write their cookbook. Without a publisher they were lacking the crucial distribution needed to achieve their dream of making it to the national bestseller list. Undaunted, the Podleski sisters approached David Chilton, author of Canada's all-time bestselling book, The Wealthy Barber. Not only had he self-published his own book, he'd accomplished a veritable "mission impossible" by selling over two million copies. More than ten years after first being published it's still a regular on bestseller lists. The book's sustained popularity is credited to the fact that it provides financial education in an entertaining and understandable format.There were obvious parallels between how Chilton transformed the dry, confusing subject of financial education into something that was fun and easy to digest to the approach the Podleskis had taken with Looneyspoons. However, he knew nothing about cookbooks. Fortunately for them, he gave a draft of their book to his mother. She loved it and encouraged him to back the project. As a result, Chilton and the Podleski sisters formed Granet Publishing Inc. based in Waterloo, Ontario. While the sisters originally looked to Chilton for financial backing, he helped open media doors for them as well, accompanying them on a whirlwind promotional tour doing radio and television interviews across the country after Looneyspoons hit bookshelves in 1996.Janet and Greta's dreams of creating a bestseller quickly became a reality. In its first year, Looneyspoons sold a whopping 325,000 copies, making it one was of the fastest selling books ever published in Canada. The book spent 85 consecutive weeks on Canada's national bestseller list eventually selling over 850,000 copies. Not surprisingly, publishers who previously rejected them had a change of heart. By the time they came calling, Janet and Greta were resolved to stick with self-publishing.In 1999, Looneyspoons was followed by a second healthy-eating cookbook, Crazy Plates: Low-Fat Food So Good, You'll Swear It's Bad For You! Both titles made it to No. 1 on the Canadian paperback, non-fiction bestseller list.[viii] Their third book, Eat, Shrink & Be Merry! was published in 2005 and promised all of the taste but not on your waist. The three books have combined sales of over 1.8 million copies, making them three of the top-selling cookbooks ever published in Canada.The success story doesn't end with three best-selling cookbooks. In 2000, the Podleskis were recognized on Canada's Top 40 Under 40 list. They now write a monthly column for Reader's Digest, the top selling magazine in Canada. The inspirational story of this dynamic duo has been profiled on television programs such as The Today Show, CNN, Canada A.M. Cityline, Breakfast Television, and QVC, as well as on hundreds of radio shows, and in magazines and newspapers across North America. Their success was also written up in a 2 page feature in People magazine.Along with backing the Podleski sisters' publishing efforts, David Chilton also helped them expand into the food business. Launched in 2001, Crazy Plates was a line of frozen food dinners distributed exclusively in Loblaws outlets. More recently, they introduced gourmet chicken burgers under the brand Janet and Greta's to Costco stores across Canada.

Granet Distribution Strategy

The distribution success of the Podleski sisters is a direct result of their enthusiastic promotional efforts. You need to have a great story to sell a book. Greta, an avid cook since the age of five, became the cooking queen while Janet, a self-described domestic nightmare, focused on research, writing lifestyle tidbits and food trivia to liven up the recipes and inject a little humour. They parlayed their Polish backgrounds into a story that caught the attention of prospective distributors and the media. For the Podleskis, distribution and promotion turned out to be a chicken and egg scenario. Without promotion, no one would stock the book but without distribution, media outlets didn't have a story to report. Both ended up being vital to building awareness of the book and convincing book stores to carry it.Janet and Greta quickly learned that public relations is everything. As noted earlier, they promoted Looneyspoons with David Chilton hitting 22 cities in 30 days on a whirlwind US tour. This landed them a spot on The Today Show in New York, which is seen by more than 11 million viewers. After a successful launch on Canada's Shopping Channel, they were able to win highly coveted 10 minute spots on QVC, the American home shopping channel. This gave them huge exposure and sales. It also helped their efforts to get distribution through retailers.Big retailers take books on what is effectively a consignment basis, meaning they can return any unsold books to the publishing company or author. When David Chilton went to market with The Wealthy Barber, he set an unheard of precedent by refusing to take returns. The Podleskis took his lead and negotiated the same deal for their books. According to Ryan Burgio[ix]who worked with Granet to promote their books into the US market, Chilton and the Podleskis are the only authors who have been able to pull off this unique practice.In addition to selling the books at retail bookstores such as Indigo and independent outlets, Granet lined up distribution at warehouse stores (Costco), grocery stores (Loblaws), and drugstores (Shoppers Drug Mart). The books can be purchased online from the Eat Shrink and Be Merry website (eatshrinkandbemerry.com) as well as from numerous online bookstores such as Amazon.Distribution is also handled through direct marketers who act as a commissioned sales force to reach corporations and wholesalers such as Whitecap Books and AG City. And, as mentioned earlier, the sisters write a monthly column for Reader's Digest, which in turn distributes the cookbooks. Another magazine, CARP (Canadian Association of Retired Persons) was also used to reach consumers with a special offer on the books. The Shopping Channel in Canada and QVC in the US have been two important components in Granet's distribution strategy. To date Eat, Shrink & Be Merry! has sold over 500,000 copies, of which 70,000 copies were sold on QVC, the American shopping channel.When Janet and Greta became co-hosts of the Eat, Shrink & Be Merry! TV series on the popular Food Network Canada TV series, it added yet another distribution channel to their mix. Each half hour show sees the sisters take on a popular, high-calorie comfort food that may be lacking in nutrition, (think chicken wings, pizza, nachos, or chocolate cheesecake) and come up with a waist and heart friendly recipe that tastes just as good. They take both versions to the street for random taste tests. Fun clips from the shows are posted to their website further promoting the cookbooks which, of course, can be purchased online. The clips, which are also posted to YouTube, are a great sales conversion tool. The videos feature food tips and are bookended at the beginning and end with ads for the cookbooks to drive traffic to the Eat, Shrink & Be Merry! website.When consumers visit the website, they are greeted with a 2 for 1 book offer, something retailers would never agree to do. While the tactic sounds like a promotional tactic rather than a distribution strategy, because people buy one book for themselves and give the second to a friend as a gift, the consumer ends up becoming a distribution channel. The website provides an opportunity to cross sell the Crazy Plates cookbook as well as let consumers know about the gourmet chicken burgers available at Costco.Co-marketing deals with Nabisco Crackers, Coca-Cola and Dempsters Bread helped distribute books. For example, Dempsters featured the Podleski sisters in television ads that showed viewers quick, easy and healthy recipes using bread. The ads promoted the company's new whole grain breads and directed traffic to ThinkBreadInstead.ca. Consumers could get a free copy of Eat Shrink and Be Merry! by sending in five original UPC codes from any Dempsters' product.While some of the above channels blur the lines between promotion and distribution, without the exuberant promotional efforts of Janet and Greta Podleski, the cookbooks may never have hit store shelves. And without distribution, making the bestseller list with three of the top-selling cookbooks ever published in Canada would have remained an unrealized dream.

Discussion Questions

Question 1. What criteria did Granet use in its channel design decisions?.

Question 2. Discuss the advantages and disadvantages of Granet's multichannel strategy.

Question 3. Without the help of David Chilton, what other strategies could the sisters have pursued to get their first book into retailers?

Question 4. What new distribution channel ideas would you recommend to help the Podelskis reach new markets and sell more books in Canada?

Question 5. When Janet and Greta entered the frozen food market, they chose selective distribution. What characteristics of this market do you believe made them choose this route? Would you recommend they stick with exclusive distribution or should they consider a more intensive strategy?