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Catalina tests, rolls out colorful checkout coupons

The marketing company expects an increase in redemptions, which it tracks in thousands of supermarkets.

By MARK ALBRIGHT
Published May 19, 2005

Those little coupons printed and handed out to shoppers at supermarket checkout counters are about to get a lot more colorful.

It won't be just accent colors.

"We're talking full-color graphics that include 256-pixel photos," said Dick Buell, chief executive officer of St. Petersburg-based Catalina Marketing Corp., which runs the network of printers installed in more than half the nation's supermarkets.

Catalina plans to roll out the enhanced printing capability over the next three years to more than 17,500 supermarkets.

The company expects to charge manufacturers a premium for full-color coupons, but has yet to reveal how much. Much of the pricing will depend on ongoing tests of the stopping power of full-color coupons that now will be able to feature human faces, company logos and other arresting ad visuals.

Catalina claims a redemption rate of 6 to 9 percent for its coupons that now are printed in black ink on white paper that has been preprinted with red trim. That's three to four times the redemption rate of most coupons. The company figures coupon advertisers can do substantially better than that with enhanced graphics.

"We think this will be the next step in advertising effectiveness," said Buell of the biggest technology upgrade since Catalina begin wiring up checkout printers to its store-based PCs two decades ago.

Unlike most mass media such as supermarket shelf tags and advertising printed on the floor, Catalina coupon printers can be programmed to hand specific coupons to customers based on what they buy. They have been particularly popular among manufacturers trying to get consumers to switch brands or make a repeat purchase.

The news came as Catalina reported that its turnaround after two difficult years is well under way. The company, which gets its revenues from packaged goods manufacturers, reported net income of $65-million, or $1.25 a share, for fiscal 2005, up from a loss of $19-million, or 37 cents a share, in 2004.

Revenue increased slightly to $410-million, up from $409-million, despite the company shedding several business units in a painful restructuring.

For the most recent quarter ended March 31, Catalina reported net income of $15-million, or 29 cents a share, which compared with a loss of $9-million, or 17 cents a share, in the year-ago quarter. Revenues slipped to $112-million, down from $120-million.

Catalina shares rose 4 percent to close at $25.39 on Wednesday, up 96 cents.

Since taking over last year, Buell has taken Catalina from a full-service direct marketing operation back to its basic core businesses.

Going forward, the strategy is to maximize the supermarket network with enhanced systems, to better penetrate foreign markets and to introduce coupon printing to other types of retailers that sell lots of packaged goods. Catalina recently signed a deal to outfit coupon printers at the front counters of Walgreens drugstores.

Catalina officials declined to offer analysts specific earning guidance for the upcoming year.

"Overall, however, our objective is growth sustainable for three to five years that provides annual revenue growth in the mid single digits and profits in the low double digits," Buell said.

Mark Albright can be reached at albright@sptimes.com or 727 893-8252.

[Last modified May 19, 2005, 00:43:18]