Taking the Junk Out of Junk Mail

All these attributes have catapulted IWCO Direct into third place among direct mail production providers, behind Chicago-based R. R. Donnelley and Pennsylvania-based Transcontinental Direct. Since 2002, the company has grown at an annual rate of 31 percent, far outpacing the 6 percent annual average growth that the direct mail marketing industry has experienced during those years. IWCO Direct’s revenues have grown from $91 million in 2001 to $265 million last year.

Some call the mail that streams out of IWCO Direct’s facilities “junk.” But Andersen and Wicka know its value. And competition from telemarketing and e-mail hasn’t slowed down the volume. “It’s not junk mail anymore,” Andersen asserts. “We don’t [send to] ‘Current Address.’ We do highly personalized products, with custom messages.”

Stacking Growth

IWCO Direct began in 1969 as a printing company called Instant Services in South Minneapolis. Founder Frank Beddor soon changed the name to Instant Web Company, bespeaking its focus on printing using a “web,” or reel of paper, versus printing using individual plates. He’d later shorten that to IWCO. (The company name is pronounced as its individual letters.) Andersen, who’d been president of Minnesota-based printer Banta Information Services Group (now part of R. R. Donnelley) before Beddor lured him away, became an equity partner in IWCO Direct in 1999. Wicka, whom Andersen had hired at Banta, joined the partnership in 2002 as IWCO Direct’s executive vice president and chief marketing officer.

In February 2005, Beddor sold his share of the company when IWCO Direct was acquired by New York private equity firm Citigroup Venture Capital in partnership with Andersen, Wicka, and three minor shareholders. Citigroup owned 65 percent of the company and was brought in to support its growth and expansion efforts. (This summer, Citigroup Venture Capital, renamed Court Square Capital Partners after being spun off from Citigroup in 2006, announced that it would sell its share of IWCO to another New York investment firm, Avista Capital Partners—the private equity group that bought the Star Tribune.)

IWCO Direct, which also has a mailing and processing center in Little Falls, recently expanded to the East Coast through two acquisitions there; it plans to acquire a business in the western United States in 2008. It has production facilities in New York through the acquisition of Fala Direct in 2005, and it recently purchased Cox Target Media’s Valpak direct mail production facility in North Carolina. That plant is expected to add $60 million in annual revenue and 450 employees to IWCO Direct. IWCO Direct currently employs 1,650 people, about two-thirds of whom work in Minnesota.

Most of IWCO Direct’s customers are in the financial services and insurance industries, which together make up about 53 percent of business-to-consumer direct mail nationally. Andersen notes that the vast majority of his 90 or so customers probably have annual revenues of about $100 million to several billion, and his accounts with those customers range primarily between about $500,000 and $40 million per year. The rest of the business-to-consumer segment in the direct mail industry is divided among the automotive, retail, nonprofit, travel, and entertainment industries, as well as consumer products not sold in retail stores.