Living deep in collector country, editors at Des Moines-based Meredith (MDP) Corp. saw three years ago that women all across the Midwest were forming clubs to help them organize family photos and memorabilia. For them that meant one thing -- a growing audience. So they put together a magazine, scrapbooks, etc., and packed it with stories on how best to keep journals, take snapshots, and even use clever alphabetizing techniques. Labeling it a Better Homes and Gardens "creative collection" publication, they pitched it in thousands of supermarkets and other outlets for $4.99. It did so well that Meredith now churns it out six times a year, for $5.99, and sells subscriptions.
That was just the latest in the century-old Iowa media outfit's bag of tricks. Ever since the September 11 attacks drove many Americans inward to focus on their families and look for fun closer to home, Meredith has been cashing in. Years of honing its home-and-hearth approach have paid off big lately for nearly everything in the company's 177-magazine publishing stable (it also owns 11 TV stations) -- from mass-circulation titles like Better Homes and Gardens and Ladies' Home Journal to niche publications such as WOOD, Midwest Living, and, since last fall, American Baby. The company, with readership as high as 38 million for some titles, also has deep relationships with a slew of advertisers.
So more and more, Meredith is jumping on every trend its editors spot that might appeal to its readers and that would give its vast advertiser network new outlets. Some of its new products are niche magazines, such as scrapbooks, etc. or Kitchen and Bath Ideas; others end up as custom publications for retailers such as Home Depot. It's also coming up with marketing stunts that boost its magazines and advertisers' wares at the same time. This spring, it teamed up with the Country Music Television channel and the Lowe's (LOW) Cos. hardware chain to help music stars decorate a sprawling home.
Hard-hitting journalism, it's not. But while other publishers have limped along in a punishing advertising climate, $1 billion-a-year Meredith has been sprinting ahead -- Merrill Lynch & Co. expects a 50% gain in operating income, to $177.6 million, for the year ending in June. Wall Street loves the customization strategy: Meredith shares are up from a post-September 11 low of $27 to about $44. Says Blaylock & Partners LP analyst Edward J. Atorino: "It's one of my favorites."
But can the Iowans keep up the pace? Chief Executive Officer William T. Kerr, a former New York Times Co. executive who has headed Meredith since 1997, faces a few challenges. For one, he wants to preserve the homey Main Street culture after the death in February of Edwin T. Meredith III, the company founder's grandson. Meredith, 69, a former longtime CEO, had chaired the company's executive committee. Wanting his editors close to the heartland, he had insisted on keeping the headquarters and all but a few editorial offices in Des Moines, resisting internal overtures to move to New York.
As the family leader, with 57% of the voting power in the company, Meredith kept his outfit independent even as consolidation steamrollered the media world. Kerr says Meredith's daughter, Dianna "Mell" Meredith Frazier, is carrying on the legacy as a director and head of planning. Frazier, 46, who declined to comment, keeps a lower profile than her great-grandfather, who had been Agriculture Secretary under Woodrow Wilson and was a potential Presidential candidate in 1928. But Frazier's involvement is "an area of major stability," says Kerr.
Don't confuse stability with being staid, though. When it comes to milking its advertiser relationships, Meredith is innovative, even brash. Consider how it is teaming with Mattel (MAT) Inc. and GMC Trucks on a show called The Better Homes and Gardens Experience. This summer, it rolls a custom-built trailer into Wal-Mart parking lots and state fairs -- 20 markets in all. The first half of the tour will showcase Barbie gear, featuring dance lessons for young girls and selling clothes based on the doll's wardrobe, along with furnishings from other Meredith advertisers. Then, later this summer, shiny new General Motors Corp. trucks will take Barbie's place. Editors will drop in at the events to discuss decor and housewares. Says Better Homes Publisher Daniel M. Lagani: "It's a mobile version of the magazine."
Meredith is also barging big into branding. On June 9, the company announced plans to market home decor products under the familiar Better Homes and Gardens name. That puts Kerr into territory Martha Stewart pioneered with Kmart (KMRT) -- only Kerr will be selling his wares through home sales reps, à la Tupperware. Kerr is mulling whether to pursue broader product lines, as Stewart did, and is even picking up a few advertisers that have pulled out of Martha Stewart Living in light of Stewart's legal woes. But Kerr is wary of overexposure: The Better Homes name will soon disappear from a real estate brokerage franchise because Kerr couldn't control the quality of the services.
As Meredith figures out the right branding balance, it's also cashing in on some media partnerships. Its book Trading Spaces: Behind the Scenes, based on the Learning Channel cable hit about home decorating, is a New York Times best-seller. Food Network-related books are on the way, too. A more untested arena: New Age fare. One of Meredith's newest titles, MindBodySpirit, shows readers how to cut stress and pamper themselves. But if it doesn't catch on quickly, it will be yanked; Meredith shows little mercy on lofty concepts that don't pay their way.
Lately, Meredith hasn't had a problem filling the till. Its branding strategies, tight marketing relationships, and down-home appeal long ago helped turn the company built on Successful Farming magazine into a cash machine. Now Kerr just has to keep the ideas coming. By Joseph Weber in Des Moines