Succeeding in Tough Times – First in a Series
Succeeding in Tough Times - First in a Series
The Roots of a Revival
Eighteen months ago, Redwood Custom Communications list its most
important client. But it dug in, took the long-view, and is
standing strong for 2009. BY CHRIS POWELL
Redwood Communications president and CEO Eric Schneider was in a
pitch presentation when the news arrived: The custom publishing
company had just lost its biggest client, Kraft.
Schneider know a decision in the Kraft account was imminent, and
had instructed Redwood's then vice-president, client services Maria
Deotto to let him know the minute it arrived. It came after
Schneider had finished the opening on a re-pitch for its Air Miles
account and was preparing for the close.
"My Blackberry vibrated and I sat there for a couple of moments
thinking 'Do I look at it?'" says Schneider, recalling that fateful
day in the summer of 2007. "After holding back for about two
minutes, I just sneaked it out with nobody looking and looked at
the e-mail. It said 'We didn't get it.'"
"I could feel the blood run from my face, and I though 'I have to
pull myself together.' I dealt with what I had to do in the
presentation, I think without skipping a beat. When we were done I
just turned around to the rest of my team, said 'I've got to go,'
and bolted for my car."
It was Friday. Schneider would spend the weekend poring over the
contingency plan he began developing in October 2006 in the
eventuality that Redwood lost the Kraft business. He knew the
company's three year contract with the packaged goods giant was
expiring in 2007, and that there would be significant interest in a
property that accounted for %65 of Redwood's annual revenues.
"There was a great desire by anyone in our space to have this
piece of business, "he says.
Redwood, though, seemed to be dealing from a position of
incredible strength. It had successfully defended the account when
its previous contract expired in 2004 (ironically, one of the
companies it beat out was Iowa's Meredith Corporation, which won
the account in 2007); that same year, it was among nine recipients
of "The Spiral" as a winner of the Kraft Foods Award for Supplier
Excellence. Plus, Kraft's custom magazine What's Cooking? was
Canada's sixth most read title in the Print Measurement Bureau's
spring 2007 survey with 3.5 million readers per issue, while a
French-language version, Qu'est-ce qui mijote, had an additional
1.1 million readers (Redwood also produced Food & Family and a
Hispanic edition called Comida y Familia for the U.S.
But even though Kraft executives themselves were assuring
Schneider the review was merely a formality, he was taking nothing
for granted. "You know going into those circumstances that the
door's open and there's huge risk, irrespective of what the client
says to you, "he says. Which of course, is precisely how the (Oreo)
cookie crumbled; leaving Schneider and Redwood's management team
with the daunting task of righting a company hat had grown hugely
reliant on a single piece of business.
On the Monday after the news hit, Schneider met with Deotto and
Redwood's vice-president of finance, Brian Jackson, in a coffee
shop near the company's Front St. headquarters in Toronto. The
focus was on how to communicate the news to staff. Redwood employed
about 160 people at the time, and Schneider's business plan called
for the head count to be trimmed significantly to 110.
The Kraft business alone employed about 45 people, but Schneider
has already determined that the cuts wouldn't come solely from
there. Instead, he scrutinized the entire operation, determining
where cuts could be made that wouldn't undermine Redwood's talent
base (the company would ultimately retain about half of the staff
that worked on the Kraft business).
"We knew we would have to get there, but it was a question of how
we would reorganize to ensure efficiency, [and] also how we would
go through preservation of talent," says Schneider. "We really had
to work through the entire organization. Losing 65% of the revenue,
it's impossible to cut that extent of infrastructural cost and
still be able to service your client's effectively."
Ensuring that appropriate talent is retained in such situations is
paramount, says Schneider. "If I had to distill everything into one
philosophical perspective it's about talent," he says. "Everything
else around it feeds off it. Great talent breeds innovation and
competency that wins, and keeps, great clients. If you don't come
back to that base of talent and start focusing just on shareholders
in that narrow sense at the expense of talent, I think you're
essentially killing the golden goose."
Schneider recommends a three-step approach to coping with a sudden
(and drastic) loss of revenue: 1) Pull back in overhead where you
can; 2) Re-organize your business with an eye to retaining the best
talent and; 3) make sure you have the right shareholders in place
that will support a long-term approach for the business.
Indeed, the loss of the Kraft account would trigger a series of
events that would ultimately lead to Redwood's North American
operations being purchased by Montreal's Transcontinental Media
late last year. When Redwood lost the Kraft business, Schneider
determined that he would take a "long view" of the situation, which
didn't necessarily jibe with the outlook of then parent, Omnicon
"I didn't get the support I necessarily felt I needed in terms of
the long-term health of the business, and that allowed me to change
the shareholder structure," says Schneider. "We were an ancillary
business to a core competency, whereas in the context of
Transcontinental, we clearly sit within their vision for
opportunities within a category."
Within Omnicon, Redwood "just wasn't important enough," he
Losing the Kraft business would ultimately prove a boon for
Redwood, freeing the company to chase other business it had be
precluded from perusing because of the large number of Kraft
Competitors. In the past 18 months, it has picked up new business
for the like of Sobey's and the insurance group Aviva, while also
expanding its mandate with The Home Depot. It lost the Air Miles
account Schneider was pitching, that day back in 2007, to Roger's
Publishing, but offset that by picking up Aeroplan.
"We were constrained in a very big way because of Kraft's very
large competitive set," says Schneider. "We couldn't work with
Sobey's while we had Kraft because private label is their biggest
competitor. It certainly opened up a whole range of opportunity we
can now react to.
Redwood has since recouped with Schneider describes as a
"substantial" amount of the revenue it lost with Kraft, and has
subsequently boosted its staff to about 130 people. That total
could increase to 140 this year, says Schneider.
"There has been a recovery which in many senses has been based on
the strategy of considered decision-making, making sure I look a
long view of value creation and not a knee-jerk reaction," says
The loss of Kraft was a potentially disastrous blow for Redwood,
but like its namesake, the company continues to stand tall thanks
to savvy planning and smart crisis management.