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. market).

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 Group.

"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 adds.

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 Schneider.

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.