Information Resources, Inc. History

Address:

150 N. Clinton
Chicago, Illinois 60661
U.S.A.

Telephone: (312) 726-1221
Fax: (312) 726-0360

Public Company
Incorporated: 1977
Employees: 4,700
Sales: $334.5 million
Stock Exchanges: NASDAQ
SICs: 8732 Commercial Nonphysical Research; 8742 Management Consulting Services; 7372 Prepackaged Software

Company History:

Information Resources, Inc. (IRI), the world's second largest market research company, provides customers with a broad range of services designed to assist in making marketing decisions. The company's Information Services Group develops and maintains computerized databases that enable consumer packaged goods companies to accurately monitor the effectiveness of their marketing, as well as their coupon promotion and television advertising. IRI's InfoScan, a weekly research service that collects sales information on all brands using scanners placed at 2,700 supermarkets, 500 drugstores, and 250 mass merchants nationwide, is the core of the Information Services Group. InfoScan generated $180.6 million of IRI's $334.5 million in 1993 revenue. IRI's Software Products Group sells decision support software and information systems for a diverse range of industries and government agencies. Software sales accounted for $95.4 million of the company's revenues in 1993.

IRI was founded in 1977 by market research veteran John Malec and University of Iowa marketing professor Gerald Eskin. Their inspiration to create IRI came from two sources: a pioneering market research company called Adtel, Inc. and the emergence in the early 1970s of bar codes and supermarket scanners. Adtel used purchase diaries kept by consumers to compare the effects of alternate TV ads run by separate cable systems. The main drawback of the Adtel system was that it took rather long to decipher the data. Malec figured that if scanners could be used as a tool for collecting the same types of information, that problem would be solved. In 1978, they enlisted the company's third founder, William Walter, to develop the necessary computer models to make their idea a reality.

Unfortunately, the trio did not have enough money to get the company off the ground. After numerous banks rejected their pleas for financing, a new strategy was adopted. They approached prospective customers directly, and by 1979, IRI had $2 million in contracts for future services with 11 companies, including such big-names as Coca-Cola, Quaker Oats, Kraft, and Procter & Gamble. IRI then bought $2 million worth of scanners from National Semiconductor, and operations were begun in earnest.

In January 1980, IRI launched BehaviorScan, its first scanner-driven market research service. Marion, Indiana, and Pittsfield, Massachusetts, were chosen as the initial test markets. IRI provided scanners free of charge to 15 supermarkets in those two towns, and 2,000 households in each town were recruited to participate. Each time a member of a test household went shopping, the universal product code (UPC) on each item purchased was scanned, and the information fed to IRI's computer in Chicago. In addition, devices were attached to the television sets of test families, enabling IRI to not only monitor what advertising was being watched, but also to test different versions of commercials by cutting into cable programs and replacing the preprogrammed ad with a different one. BehaviorScan created shock waves in the market research industry, and sent competitors like A.C. Nielsen scrambling to improve their own technology, particularly in the area of scanner-based services.

By 1982, IRI's net income reached $2 million on revenue of $12 million, 60 percent of which came from its ten largest clients, a list including General Foods, Campbell Soup, Nabisco, and R.J. Reynolds. IRI went public in March 1983. On the first day of the offering, the price of IRI stock shot up from $23 to $43 a share, and $20 million was raised to pay off the company's long-term debt. By that time, BehaviorScan was tracking the purchases of 15,000 households in eight cities. Drugstores were also added in several of IRI's test cities. Sales for 1983 jumped to $21 million.

IRI continued to grow at a brisk pace in the mid 1980s. In 1984, it was ranked 15th on INC. magazine's list of the 100 fastest-growing public companies in the United States. That year IRI registered sales of $35 million. Revenue more than doubled to $75 million the following year when IRI acquired Management Decision Systems, Inc., a company specializing in decision support software. In 1986, president and chief operating officer Gian Fulgoni, who had come over from Adtel in 1981, took on the additional position of chief executive officer. Malec retained his board chairmanship.

Increasingly, IRI was seen by industry observers as the young, aggressive alternative to Nielsen, the world's largest market research company and the industry's sluggish dinosaur. IRI's technology was perceived by many as a step ahead of Nielsen's. Long-time Nielsen clients were beginning to defect in growing numbers after InfoScan, the first nation-wide supermarket tracking service based on UPC scanning, was introduced in 1987.

In August 1987, Nielsen's parent company, Dun & Bradstreet Corporation, proposed a $590 million takeover of IRI. The offer was accepted, but in November the Federal Trade Commission challenged the acquisition, asserting that such a merger would hinder competition in the consumer tracking industry. Dun & Bradstreet immediately withdrew the offer, and IRI remained independent.

The aborted deal was fairly damaging to IRI, however. Its stock price plummeted, leaving the company with a sizable debt. Clients who had put off using InfoScan in anticipation of the merger had to be won over anew. In spite of this setback, revenue continued to soar, reaching $105 million for the year. InfoScan was tracking the purchases of 65,000 households by this time, and IRI's reputation among potential customers remained stellar.

In 1988, IRI developed VideOcart, a shopping cart equipped with a video screen that displays product promotion information, as well as recipes, item locations, and trivia games. In order to avoid the high cost of developing VideOcart, IRI spun it off in 1990. Meanwhile, large-scale customer defections from Nielsen continued. Among the companies that began subscribing to InfoScan in 1988 were Frito-Lay, Procter & Gamble's Soap Sector, and ConAgra.

IRI was the third largest marketing research company in the United States by 1989, capturing 40 percent of the national tracking market with InfoScan in only two years. Software was beginning to play a more prominent role as well. IRI bolstered its software business with the acquisition of Javelin Software Corporation, a promising company that had fallen on hard times. Although IRI's revenue reached $136 million in 1989, the company still suffered from growing pains, recording a net loss of $2.9 million. Pepsi-Cola, Nabisco, and Reynolds Metals were among the high-profile companies that began using the InfoScan service during that year.

In 1990, IRI's upper management structure was revised. When Malec departed with the newly spun-off VideOcart, the new office of chief executive, a combination of chief executive officer and chief operating officer, was created. Fulgoni and James Andress, who had been serving as president and chief operating officer, became the co-holders of the new post.

IRI took a large bite out of Nielsen's industry lead by acquiring the recently folded SAMI service from Arbitron, a unit of Control Data Corporation, in 1990. The absorption of SAMI, which tracked products through scanners and warehouse withdrawals, left IRI and Nielsen as the only significant competitors in the product tracking field. For $7 million, IRI assumed all of SAMI's customer contracts. Equally important was the access gained to SAMI's Drug Warehouse Withdrawal historical data base. This enabled IRI to become instantly competitive in the drugstore arena at a cost much lower than would have been spent expanding InfoScan. The alliance with Arbitron made InfoScan information available to Arbitron's clients, mainly broadcasters and ad agencies, in exchange for IRI's access to Arbitron's television and radio audience ratings. During the year, Ore-Ida, Lever Brothers, Ralston Purina, and Tropicana all became InfoScan users.

IRI introduced two new software products, SalesPartner and CoverStory, in 1990. SalesPartner's analytical abilities enabled clients to exploit data from InfoScan more efficiently. These additions increased the share of IRI's revenue generated by software to 30 percent. Checkout counters at 2,700 supermarkets in 75 cities were equipped with InfoScan scanners, giving the company over half the U.S. supermarket scanner tracking market. Five hundred drug stores and 250 mass merchandisers were also contributing information to the system, which by this time was tracking 2.5 million UPC-coded items. During that year, IRI released a study with the sweeping title How Advertising Works. The study was one of the most comprehensive ever done on the subject, and was well-received by many major advertisers. IRI's sales continued to soar, reaching $208 million in 1991.

By 1992, the head-to-head battle between IRI and Nielsen for market research clients had become remarkably fierce. IRI was perceived by many industry analysts as having an edge in technology, while Nielsen's major strength was its international presence. During 1992, IRI snatched the gigantic Procter & Gamble account away from Nielsen, a major coup by any measure. Previously, IRI was tracking only six of Procter & Gamble's product categories, while Nielsen controlled the remaining 50.

The focus of the battle between IRI and Nielsen shifted to Europe, where Nielsen held a decided advantage. Late in 1992, IRI began offering InfoScan in England as part of a joint venture with two European companies that led to the acquisition of NMRA Retail Audit, formerly part of Robert Maxwell's AGB empire. Although IRI picked up ground in the turf war over Europe, the company's scanner-based systems were slower to catch on there due to the continued consumer preference for mom-and-pop groceries.

As the 1990s continued, IRI maintained the pace of its European expansion, opening offices in Germany, France, and Holland. The company continued to expand its line of scanner-driven services as well. One system added was QScan (short for Quality Scanning Information), a program which provides retailers with direct access to scanner data and software applications. QScan is capable of providing data for all of a retail chain's stores, rather than just a sample. Another system recently introduced by IRI is LogiCNet, which stands for "logistics communications network." LogiCNet assists manufacturers and retailers in efficiently monitoring the chain of product replenishment. QScan and LogiCNet are both part of an initiative called Efficient Consumer Response (ECR) whose aim is to improve the supply system efficiency of grocery chains.

Meanwhile, U.S. customers continued to flee Nielsen for IRI in large numbers. New clients in late 1992 and early 1993 included Kellogg Co., Campbell Soup's Pepperidge Farm, Keebler Co., and Sara Lee Corporation's L'eggs division. One defection that went in the other direction was that of a key executive. George Garrick, president of IRI's European Information Services, left the company in July 1993 to become president of Nielsen's U.S. market research division. But Nielsen received a shock when Garrick moved back to IRI after four months. The degree of intrigue that accompanied Garrick's recruitment and counter-recruitment is usually reserved for fiction, not corporate America. Ploys associated with the episode included the release of a booklet containing anti-Nielsen memos written by Garrick over the years.

In 1994, IRI announced it was acquiring the Survey Research Group, Asia's largest market research company. The company continued to focus on international expansion, and by that year its services were being marketed in 26 different countries throughout the world. Although the battle for clients was no longer as one-sided as it had been a few years earlier, IRI's list of new customers was impressive. Between October of 1993 and March of 1994, Dole Foods, Seagram Beverages, and Tetley were among the new companies in the IRI camp.

In only a decade-and-a-half of existence, IRI has attained a position of prominence in its industry. By using cutting-edge technology, IRI has been able to grow at a brisk pace. The company has had a history of aggressive customer recruitment throughout its head-to-head competition with Nielsen. If IRI's success in closing the gap in the global market approaches that of its domestic campaign, it is entirely plausible that it will eventually overtake Nielsen as the leading company in the market research business.

Principal Subsidiaries: Towne-Oller & Associates Inc.; Catalina Information Resources, Inc. (50%); Shopper's Hotline, Inc.; Information Resources S.A. (France); Information Resources GmbH (Germany); InfoScan NMRA Limited (U.K., 60%).

Information Resources, Inc. History

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