Gage Marketing Group History

Address:

10000 Highway 55
Minneapolis, Minnesota 55441-6365
U.S.A.

Telephone: (612) 595-3800
Fax: (612) 595-3871

Private Company
Incorporated: 1991
Employees: 250
Sales: $70 million (1998 est.)
SICs: 8742 Management Consulting Services

Company Perspectives:

To be the premier provider of integrated marketing services to our clients, measurably impacting their results through the delivery of superior strategic, developmental and executional marketing services.

Company History:

Gage Marketing Group, a widely diversified marketing business, has provided services to roughly 75 percent of the Fortune 100. With consulting and communication expertise, in-store marketing and promotion, and travel services, the company is among the leading integrated marketing agencies in the United States.

Ties with Corporate Giant: 1960s-80s

Edwin C. (Skip) Gage III established Gage Marketing Group in 1991 following the return of his father-in-law, Curt Carlson, to the helm of Carlson Companies, Inc. Gage had been appointed CEO of the privately held, Minnesota-based company in 1989, during a period when Carlson was grappling with health problems.

Gage, who married Carlson's younger daughter, Barbara, in 1965, joined the company in 1968, leaving his position as account executive with Chicago-based Foote, Cone & Belding Advertising. Starting out as director of marketing, development, and research, Gage transformed a one-person office into a $50 million business by the mid-1970s through the acquisition and integration of direct marketing, promotion, and incentive operations. When Carlson moved into the travel business, Gage assumed responsibility for that area as well.

In 1980 Gage was named president of Carlson Marketing Group, Inc. Three years later he was appointed executive vice-president of the entire corporation and in 1984 succeeded Carlson as president.

In the mid-1980s the conglomerate, which began as the Gold Bond Stamp Company and then diversified into areas ranging from real estate to jewelry manufacturing, pared down its scope of operation to focus on hospitality, travel, and marketing. As chief operating officer, Gage drove the restructuring.

In 1988 the corporation reorganized. Carlson Holding Companies, Inc. was established as the parent company for the Carlson family concerns including Carlson Companies, which consisted of businesses such as T.G.I. Friday's restaurants, Radisson hotels, and Ask Mr. Foster travel agencies. Gage was named CEO in 1989, but his tenure proved to be short-lived.

Plans to expand the company's international travel holdings were hampered by the war in the Persian Gulf and an economic recession at home. Carlson Companies' profits fell off. Gage resigned as CEO and president when the 77-year-old Carlson--within a year after undergoing quadruple bypass surgery&mdashøok back control of daily operations of the $8 billion company.

No longer heir-apparent to the empire, Gage was named co-vice chair. He shared the newly created position with Carlson's older daughter, Marilyn Carlson Nelson, whose credentials included a degree in economics, experience as a security analyst with Paine Webber, board memberships with major corporations, and a major role in bringing the 1992 Super Bowl to the Minneapolis Metrodome. Nelson had been named senior vice-president of the holding company in 1989.

Setting a New Course: Early 1990s

Gage responded with an offer to buy Carlson Marketing Group; his father-in-law turned him down. Carlson did agree to sell four businesses--Promotion Management, Adistra, Carlson Lettershop, and Outdoor Travel, which according to a January 1992 Star Tribune article represented about 10 percent of Carlson Marketing Group's total revenues.

"I built Carlson Marketing Group, and to a great extent the travel company. I made a major contribution to Carlson Companies and I really feel like this was the time for me to do my own thing and that's very difficult with Curt, because he likes people to do his thing. It was probably more the idea of doing my own thing, my own way, than necessarily being an entrepreneur. In a way, however, being in a family company, in a major job, is somewhat like being an entrepreneur in and of itself, because there is an ownership position, at least, through family," said Gage in a 1992 Corporate Report Minnesota interview with Lee Schafer.

Gage continued to serve on the Carlson board, and his family connection left open the possibility he might well return to the company one day. Wife Barbara and sister-in-law Marilyn stood in line to share their father's fortune which was estimated in a September 1991 Fortune article at $1.3 billion, making Carlson one of the nation's richest men.

The Carlson Company businesses Gage and his wife Barbara purchased formed the first leg of the integrated marketing business he envisioned building. The largest, Promotion Management, provided traditional fulfillment services such as the administration of rebate forms, samples, and gift items. They also dealt with coupons, catalog orders, and telemarketing. Michigan-based Adistra, founded in 1958 and purchased by Carlson in 1990, specialized in auto industry sales and incentive programs. A much smaller operation, Carlson Lettershop, offered printing and mailing services. Gage also bought another small Carlson business, Outdoor Travel, which arranged adventure vacations. In all, Gage Marketing Group employed about 1,500 people with about half in Minnesota and the rest in the Detroit area; El Paso, Texas; and Juarez, Mexico. Combined sales for the operations had been $65 million a year.

The promotional industry from which Gage Marketing drew the bulk of its revenues had experienced a drop in sales volume in the late 1980s, and sales volume was flat in the early days of the 1990s. A few large players dominated the field--Iowa-based Promotion Fulfillment Corp. was among the largest in the nation. In the light of a changing marketplace Gage planned to add two other divisions: one to develop market strategy and a second to implement advertising, promotion, and direct-mail plans.

A number of former Carlson company executives joined Gage in the new endeavor, and much of the established client base remained intact including Coca-Cola, Del Monte Foods, Ford Motor Co., General Mills, Kimberly-Clark, Mazda, Miller Brewing, and Northwest Airlines. During the first year of operation, the company acquired a California promotion agency and some small travel companies and established an in-store, point-of-purchase display company and an event marketing business.

Gage had positioned the business to become a full-service, integrated marketing company with services ranging from strategy to shelf placement. According to a 1993 Star Tribune article by Josephine Marcotty, Gage was the first to put marketing consulting, program development, program production, and program management all under one roof. Skeptics of integrated marketing questioned whether manufacturers would be willing to rely on one agency to perform for all the different aspects of their marketing plan.

Gage tried to purchase the Carlson Marketing division in 1993, but the unsolicited offer was refused. According to a May 1993 Star Tribune article by Sally Apgar, the departure of Gage and other executives left the division without a sense of direction. "Once the strongest component of Carlson companies, the Marketing Group was able to fuel much of the growth in other divisions. However, with the recession and changes in the marketing industry, the Marketing Group now trails the other two divisions in growth," wrote Apgar. The Carlson business specialized in employee and customer incentive strategies.

Established in Their Own Right: Mid-1990s

Advertising Age listed Gage Marketing Group as the largest promotion shop in the United States in 1993. Revenues for the privately held company climbed to about $80 million that year. According to a May 1994 Twin Cities Business Monthly article by Allison Campbell, the original business areas' sales were "relatively flat." The packaged goods industry had shifted away from promotions to everyday-low-pricing, and the auto industry was lagging.

Adistra looked for business opportunities outside the auto industry. New clients Taco Bell and Armstrong broadened their customer mix. Gage Marketing also capitalized on corporate downsizing: more and more companies were outsourcing functions once performed in-house. New York-based Publisher's Clearing House, for example, hired Minnesota-based Gage Marketing to perform customer-service work, a service made possible through the use of high-tech phone systems.

Gage Marketing Group's gross income rose 21.6 percent to $95.7 million in 1994. "One reason for that strong growth is Gage's strong database roots, which give the agency a crossover entree into direct marketing and direct response," wrote Kenneth Wylie in a 1995 Advertising Age article. Other technology-focused undertakings included: educational program, merchandising, and online promotion development for the National Hockey League and mail processing for the Atlanta Olympic Games. In November 1996 Gage purchased the computer print personalization business of Dynamark, a Minnesota-based company. In 1997 the company launched five new Internet marketing products aimed at lessening the risk for companies considering doing business on the web.

With agencies crossing over into each other's areas of expertise and creating a new industrial environment, Gage Marketing increasingly found itself ranked among traditional advertising agencies by the trade journals. In 1997 Advertising Age listed Gage Marketing 27th among the world's top 50 advertising organizations; Carlson Marketing Group ranked 18th.

Gage Marketing continued to hold the distinction as the nation's largest promotional marketing firm with 1996 sales of $128 million and 1,800 employees. In June 1997, the company announced its intent to purchase a neon sign and point-of-purchase display business from Minnesota-base Beryl Corp. The company, which generated $15 million in annual sales, elevated Gage's in-store operation to the largest among its business units.

Gage Marketing picked up a small German-based sales promotion office from Carlson Marketing earlier in the year, but according to a June 1997 Star Tribune article by Ann Merrill, the pace of acquisitions had been slower than Skip Gage had hoped due to an internal building effort. The company had plans to expand on the East Coast, complementing its already well-established presence in the Midwest and in the West.

Plans for the Future

Gage Marketing continued to fuel its other aspirations as well. "To help it reach its lofty goal of 20 percent annual growth, Gage Marketing is devoting much attention to the front-end businesses: strategic and developmental services that generally have higher margins," wrote Merrill. On this end of the business the company developed sales promotion, direct marketing, online marketing, and database marketing programs, plus sweepstakes and contests. Yet, the back-end businesses brought in 60 percent of Gage Marketing revenues. Printing for Ford, rebate redemption for Kraft General Foods and Procter & Gamble, and telemarketing for Reader's Digest were among the projects handled by those units.

Gage Marketing sold its back-end business operations to Atlanta-based AHL Services, Inc. in June 1998 for about $80 million. The consumer fulfillment, teleservices, trade support services, automotive marketing services, and the lettershop were to operate as a division of AHL under the name Gage Marketing Support Services and be managed by Skip Gage under a long-term consulting agreement. Gage, as one of the largest shareholders of AHL, would also serve on their board of directors. Gage Marketing Group would uphold its commitment to the concept of integrated marketing by continuing to offer back-end services, but now via its relationship with AHL.

According to a June 1998 Gage Marketing press release, the major factors leading to the partnership with AHL were the ongoing consolidation in the marketing support services industry which created "larger and more broadly positioned" competitors, and the need for capital investment, especially in technology, to remain on the cutting edge of the industry.

Gage Marketing Group continued to own and operate promotion and direct-marketing agencies in Minneapolis and California, the In-Store (point-of-purchase display) marketing and database marketing agencies in Minneapolis, as well as Gage Travel. The remaining Gage Marketing operations had sales in excess of $70 million and employed more than 250 people. Following the transaction, Gage Marketing ranked sixth among the largest promotion agencies in the United States.

Gage Marketing Group History

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