Commentary & Analysis
CGX CEO Joe Davis Shares Latest CGX Strategies, Industry Insight
What better way to end the year than by having a conversation with Joe Davis, CEO of Consolidated Graphics and WhatTheyThink’s Print CEO of the Year. Davis tells us what’s new at Consolidated Graphics, talks about acquisition strategy, and shares valuable insight into the strategies that have delivered business success for the company.
By Cary Sherburne
Published: December 21, 2010
Cary Sherburne Interviews WhatTheyThink’s 2010 Print CEO of the Year.
WTT: First, congratulations on being named the very first WhatTheyThink Print CEO of the Year. (See Joe Davis's acceptance speech.) Tell us what the award means to you and why you think awards like this (based on peer voting) are important for the industry.
JD: I certainly appreciate being nominated for the award and making the finalist group. I know there were a lot of other people who were nominated, so I felt fortunate to be one of the five finalists. Then when I was selected as the Print CEO of the Year, I was overtaken with some degree of emotion. It means a lot when you are voted on by your peers. The Bible says love thy neighbor, not love thy competition, so when you get votes from your competitors, it means a great deal. I sincerely appreciate the vote of confidence from my competitors and peers. For the industry, I believe this is the first time we have ever had anything in the industry that is actually voted on by your peers. You can be nominated by anyone, but the selection is not left to a panel of judges. It is the fact that the award is granted based on votes from other printers in the industry that makes the award much more prestigious and rewarding to receive.
WTT: It was our pleasure to provide the platform for this award, and we are already planning to start the nomination process for 2011, which will be awarded at the Print CEO Forum on September 10th!
Can you give us a brief update on the latest from CGX, including some of your latest new products, such as the New Forte Select Line?
JD: We already had Forte promotional products in place. The Select line is not just your normal promotional products, but rather, really high end promotional products. We want to offer our customers more than just pens and pencils; this offers products that will make nice gifts for customers and others, all personalized. Another CGX product that is being received very well in the market is the CGX Flex Mailer. This will save our customers significant mailing cost. If you want to mail a CD or something dimensional, it has to be manually handled by the Post Office and can’t take advantage of discounted postage. Our CGX Flex Mailer (patent pending) allows these pieces to be processed as an automated flat and has been approved by the USPS. We have some rather large customers who want to use this in their advertising campaigns. They can ship things like trial samples of a new soap, a computer disk, papers, promotional products, etc., and still take advantage of postal automation discounts. Not only that, but we can also print the Flex Mailer with their message inside or outside, bringing another dimension to the packaging for direct marketing pieces.
Another innovation is the Lamá Display Solution offered by Wetzel Brothers, serving the temporary point of purchase industry. Let’s say a headquarters operation wants to send out a display to 3,000 franchise or company-owned locations. Normally these displays include instructions on how to put them together, but it takes some time to do that. Sometimes our customers find out that their stores never even take them out of the box. They sit in a corner until they are out of date and are thrown away. The Lamá allows you to design a temporary point of sale product that auto assembles itself when it is opened. So when they open it to see what’s in there, the display pops up. It is a rubber band kind of assembly, and there are no excuses for not assembling and using it. We are one of the few licensees in the U.S. to have this patented French product. Another temporary point of sale product is one where we print a background and messaging on up to 64-point board on conventional presses and then punch holes in it as a more attractive and branded replacement for pegboard displays. These are just a few of the innovations we are bringing to market.
WTT: Your revenue for the September 2010 quarter grew faster than GDP. What are you expecting for the December quarter?
JD: We had some nice growth in the September quarter, as you said, helped by acquisitions and election printing; without that we did have a slight decline in same store sales. For the December quarter, we are predicting up to 5% same store sales revenue improvement excluding election printing and acquisitions—flat to 5%
WTT: What’s your current acquisition strategy? I notice there has only been one announced recently—The Hickory Printing Group. What types of companies are you seeking?
JD: In the last 12 months, we have made three asset-type acquisitions. We bought certain assets from Modern International Graphics in Cleveland and Kohler Print Group in St Louis, and almost all of the assets and business of Hickory Printing Group in North Carolina. Hickory was the largest of the three. With Modern and Kohler, we got some really fine leadership as well as a group of dedicated employees, so we have been very pleased with both of those transactions. Hickory is a fine company with a great reputation, and we expect to grow that company dramatically. Hickory had two facilities, both of which are owned by investor groups, but we did assume some leases and acquired certain assets from Hickory.
We have to get ready to deal with the new normal and keep focused on that.
In terms of future acquisitions, we are very aggressive in the marketplace. We are having various types of discussions with 25 to 30 companies or more, including confidentiality agreements, exchanging information, and so forth. Unfortunately in today’s economic climate, many companies are having difficulty coming to grips with the financial reality they are in and it can be difficult to structure deals around some of those problems. But we are aggressively seeking acquisitions. I told my group that I think at some point in the downturn, we will be making an acquisition a month. That’s not a prediction, but put forth as a possibility. There are a lot of really great companies out there that for various reasons have gotten into financial difficulty. Maybe they bought a lot of new equipment when the economy was good, maybe they took on bank debt to buy out a shareholder; or maybe they had some customers that left them. Many great companies have been thrown a curve ball in this economy. I met with two companies in my office just recently. I think they are great people; we just need to figure out how we can structure a deal. We have a lot of expertise in that area. Jim Cohen, our EVP of Mergers & Acquisitions, is a lawyer by training and has a lot of expertise in dealing with these situations. Sometimes you have lawsuits, union pension liabilities and lots of other overhangs you have to deal with. We think we have expertise in that. I have been dealing with banks in these situations since Houston went through a big downturn in the 80s. Sometimes there are banks involved in these discussions as well. I’m not sure the economy is going to come back as quickly as some predict, and that has been my prediction all along. We have to get ready to deal with the new normal and keep focused on that.
WTT: You have begun planning for EMERGE 2011, your annual customer event Can you share any highlights and talk about what prompted CGX to hold this event and how it benefits you and your customers?
JD: We have been planning for 2011 EMERGE since almost before the end of the 2010 conference, which was a great success. How do you measure the success of something like that? Our customers were very positive, and I see some increased revenue as a result of it. Anytime you are CEO of a company and you have a first-class event and spend a lot of money, you like to see some returns. I think we have seen some of that. It fosters collaboration and integration, internally as well as among our customers and suppliers. In our business, it is extremely important to ensure that various groups are using new technology and capabilities to make their marketing campaigns more effective and deliver better return. We want to expose our customers to the lasest technologies and techniques, whether they are in our quiver or that of one of our partners. We are not just limiting our customers to our own technologies and solutions. We will have some very name brand companies attending this conference, and we expect to have a fair amount of news announced there, both from us and our partners. Last year, we had people from HP, Adobe, Xerox, Kodak, XMPie, and other technology-driven companies. Adobe chose to launch CS5 at EMERGE. Our focus is to find suppliers and people that want to partner with us and use this event as a launching point for innovation. We are limited in the number of attendees we can have at this conference, and that is somewhat of an issue. Last year, we had 750 attendees; this year it will be more like 900. We want to keep it around 900 as a private invitation-only event. We want to make sure it doesn’t turn into another trade show.
WTT: What are the primary factors to which you attribute the success of the CGX group of companies?
...we have about 25 of our company presidents who joined us right out of college...
JD: We have a group of 70 companies that are part of the CGX group and the primary driving factor to our success is the presidents who run each individual location. I have the best group of presidents that you will find anywhere in the world. Those individual presidents have a lot of autonomy and authority. They make great decisions within a certain framework, and run their individual locations. We combine that with what we have developed at CGX: a brand name, a marketing strategy, CGX solutions and technology offerings. We have added good, solid financial backing and controls as a public company. We have adequate sources of capital and never have been strung out on capital needs. We have always been able to make the investments we need to service our customers. If one of my guys comes up with an idea, I don’t say I don’t like idea; I say let’s look at what it would do for us, what would it cost, what revenue streams would it produce, how customers would benefit. That’s the way we run our business. Add to that our leadership development program. Today we have about 25 of our company presidents who joined us right out of college, went through Leadership Development, and now run companies. That is a powerful group of presidents that we have grown and developed. Jim Singer in St. Louis ran his company for five years after we acquired it and then said he would like to do something different. He said, “What I really like to do is sell and market, and I would like to have someone else run the company while I focus on sales and marketing.” He’s been doing that the last several months and is happier than ever. James Hill, in his 30s, has run two companies for us, GraphTec in Baltimore and Chas P. Young here in Houston. Now he has moved to St. Louis, and his skill set combined with Jim’s will make the company even more successful than it has been in the past. Leadership Development has become increasingly important as technology has become more important to the industry. Unfortunately, it is difficult for some to grasp technology and some don’t want to put the effort forth. We find that college grads are better able to explain to customers what our technology offering is.
Another factor in our success is our centralized infrastructure: In Houston we have servers, programmers, developers and high levels of computer expertise. In our companies, we have a number of standard operating procedures and technologies, but from a financial standpoint, we basically have two industry standard MIS solutions in place, from EFI. All the data is aligned when it gets to me, making it easier to manage the business.
WTT: What types of projects are ongoing or on the drawing board for CGX’s future? IT? Cost reduction? Workflow efficiencies? Other?
JD: Most of the major projects involve technology. About a year and a half ago I hired a world class CTO, Paul Garner, who oversees the whole group. He has a Chief Information and Security Officer, Paul Madden, whose prior expertise was with a major Houston hospital group. Data security is becoming more important, with HIPAA, SAS70, etc. Anytime you are handling personal information, data security is extremely important. We are focusing a lot of our talent and CAPEX on being certain that we are very compliant with all of the regulations. Having someone dedicated to that is a strategic advantage for us. Not many, if any, printing companies have that. We will be talking to our customers and prospects about that at EMERGE, May 18 and 19 in Dallas.
WTT: What advice do you have for your peers as we head into 2011?
...what we have done through our leadership development program is to attract a lot of new talent to the industry.
JD: I would say the economy will continue to be difficult. The government has lowered its forecast for GDP growth for 2011, so I think we need to be prepared for the printing business to be about like it is now, for the next two to three years. That may not sound very optimistic, but I try to be a realist. If it is better, I will be delighted. But I think we have to be realistic about that. What we have to do as a company—and our peers face the same challenge, is to be able to offer our customers innovative solutions that improve their marketing results. At the same time, we have to attract talented people to our industry, not just people who think the way they have always thought. This new technology requires a lot of new skills and training, and some of the people in this industry today may not want to put forth the effort to develop those new skills. They will be left behind. Someone asked me in Chicago, what is my legacy in the industry. I don’t particularly like to talk about legacy, but what we have done through our leadership development program is to attract a lot of new talent to the industry. That has to continue for us to be a successful company and for the industry to be successful. And it’s not just technology. For example, our Vice President of Sales Development, Paul Castain, is a former Dale Carnegie sales trainer, and he is available as a resource to our sales folks. When our associates graduate from the program and want to go into sales, we require them to go through his program. We want to make sure that we have armed them with the best print training, and now we have to arm them with the best sales background.
WTT: Anything else you would like to add?
JD: I would like to thank WhatTheyThink again for sponsoring the Print CEO of the Year Award. I have been on a high ever since. If I get a little depressed, I look at my award and get reenergized.