Growth Strategy

Growth Strategy
After realizing its potential, Frank Krasovec built Norwood Promotional Products, Inc. into an industry power

Frank Krasovec

SMART INVESTMENTS ALWAYS HAVE been a staple on Frank Krasovec's resume.

But when the current chief operating officer of Norwood Promotional Products, Inc., began dabbling in the promotional products industry in 1978, he truly had no idea what he was getting himself into.

"I owned about 5 percent or 10 percent of the company," says Krasovec, who has invested in and managed communications, commercial real estate and venture capital firms. "All of a sudden the company grew from literally a couple hundred thousand dollars in sales to $4 million or $5 million within five years."

In 1983, Krasovec decided to buy the company. Looking back, let's just say that decision turned out to be a shrewd one. Initially, he grew the company at a modest, yet steady pace. Through 1989, he had acquired a mug, koozie and import cap company, and grown his company's sales volume to $22 million.

"So I did start to pay attention in 1989," says the CEO, who stepped into that position with Norwood that year. "I called Merrill Lynch into the front end and decided that it was time to grow the business."

From 1992-1999, Norwood made 12 acquisitions and watched its sales volume grow from $50 million in 1993 to $180 million in 1998 to its current volume of $440 million. The pinpoint strategy for the expansion, which included a 5-year run on Wall Street, was implemented by Krasovec.

"We looked at the pie chart of the industry and said that we want to be an industry leader in this category and that category and only with leading brands--No. 1, No. 2 or No. 3," he says.

Norwood went public in 1993, but Krasovec says investors weren't paying much attention to the company because either it was too small or it possessed a difficult business model to understand--or a combination of both.

No worries for Krasovec. He and nine other Norwood managers bought the company back, re-privatizing it in October 1998. Since then, Bemrose and Advertising Unlimited have joined on.

"We decided that by being private," Krasovec says, "we could execute the acquisition strategy faster without having to worry about Wall Street. Now, we are a dominant leader in 10 of 13 product categories."

Norwood has a presence in 12 of the 13 categories, with apparel the only exclusion.

"If you want to gamble as to where our next move will be ... " Krasovec smiles. "Within the next three to four months we hope to develop an apparel strategy. It is such a big part of the industry, we need it."

Norwood's move into apparel probably will not entail its own manufacturing, Krasovec says, but rather an alignment with several brand-name manufacturers. That will be necessary, he says, in order to gain the approximate $100 million in sales needed to become the No. 1 apparel supplier.

Moving forward, Norwood sees the Internet as a primary source of profitability. At the Dallas show, the company rolled out its norwood.com site, which includes links to its 13 subsidiary sites. Due to Norwood's tremendous growth, the company recently staged a reorganization in order to serve clients more efficiently. It restructured into two groups--the Norwood RCC Group and the Norwood AUI Group. Several product lines were also realigned to better focus the company's resources.

Another hot topic within Norwood is brand strategy. "This (Dallas) show, quite frankly, is the beginning of looking at that," Krasovec says. "Norwood has not been a brand itself before, and we're not sure we want to make it a brand or if we want to make it a Proctor & Gamble-type of product overlay.

"Certainly, it is easier to promote one brand, but some of our companies go back to about 1903. You don't want to lose that brand loyalty. I don't have the answer yet."

Although a profitable powerhouse in a different industry, Proctor & Gamble is the model that Krasovec likes to use for his company's future growth and development.

"Colgate-Palmolive is a great company," he says. "They do $7 billion in sales and are a top-flight producer of consumer products. Proctor & Gamble does $38 billion. I hope somebody becomes the Colgate-Palmolive of this business because we are going to be the Proctor & Gamble.

"It doesn't mean there isn't room for others. I expect there will be a No. 2 and No. 3. But I want to be so far above the others ... that's the opportunity we have."

For more information, please call (512) 476-7100 or visit the company's Web site at www.norwood.com.