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Grocery coupons get full color makeover

Catalina Marketing Corp. will spend $100-million to take its targeted grocery store coupons from scratchy black and white to splashy.

By MARK ALBRIGHT
Published July 28, 2006

Catalina Marketing Corp. is jazzing up its coupon printers at supermarket checkout stands with full-color graphics.

The St. Petersburg electronic marketer this month began installing 140,000 color printers in 14,000 supermarkets around the country. In the Tampa Bay area, the first batches debut in Sweetbay Supermarkets followed by Winn-Dixie and Albertsons.

The company, which will spend $100-million on the upgrade planned to be completed late next year, is counting heavily on the extra eye candy of full-color photography to expand its reach from coupons to printing little ad messages that fit in the palm of shoppers' hands.

Because Catalina printers are programmed to dispense coupons based on what a shopper actually buys, the company can customize ads or coupons that are handed only to buyers of complimentary or competing products.

Consumer product goods makers have used the system heavily to entice shoppers to try a rival brand.

Customized color ads would add a new dimension to the riot of advertising unleashed at shoppers inside grocery stores. Sweetbay already sells advertising printed on the back of its cash register tapes. In-store ad competition ranges from cases of beer stacked in the shape of football stadiums to blinking coupon dispensers on shelf-tags to ads glued to the floor.

Catalina's current coupons are printed in black ink on white paper pre-printed with red stripes.

"Color changes everything for us," said Jay Parsons, executive vice president of Catalina's supermarket division. "We talked with ad agencies two years ago about using our black ink thermal printers for advertising and they replied 'No, because they're ugly.' We think they'll have a better opinion now."

Catalina already charges a premium price for its work because its 6.5 percent coupon redemption rate percent is several times higher than rival forms of coupon distribution. So Catalina will be raising its rates by 25 percent to more than a dime apiece for color. The company found in tests, some of which were in local Sweetbay stores, that color coupons increased the redemption rate by 25 percent.

For now, only the printers in supermarkets, which is 62 percent of the company's business, are lined up to get color printers. About 7,000 of the 21,000 supermarkets in Catalina's U.S. network will not get them yet because the phone lines to the stores cannot handle that many data.

The new product is part of a broader attempt to re-ignite Catalina's growth after a few off years. But the company is vague about sales expectations beyond saying that operating margins will be depressed until 2008 because of the up-front expense of buying new printers.

Catalina outlined the printer rollout after releasing earnings Thursday for the quarter ended June 30.

Net income was $14-million, or 30 cents a share, up from $13.7-mllion, or 27 cents a share, in the same quarter a year ago. Revenues rose 15 percent to $92.9-million.

The company, which was nearing a saturation point in supermarket chain penetration a few years ago, also reported progress in attempts to get in drugstores, discount stores and convenience stores. While prescription drug companies dominate marketing at the pharmacy counter, Catalina sees its printers spreading to other drugstore registers to promote health and beauty aids, vitamin supplements and even government-sponsored health alerts.

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

[Last modified July 28, 2006, 01:12:03]