Toronto-based marketing firm Pareto Corp. has shut its doors suddenly and is filing for protection from creditors under the Companies’ Creditors Arrangement Act.
The company, which was acquired just two and a half years ago by U.S. private equity firm Riverside Co. for $125-million, was focused primarily on what is known as “shopper marketing,” which broadly speaking refers to marketing done at or near the point of purchase. That can include store layouts, in-store displays, sampling programs, packaging, and other elements that speak to shoppers while they are in the process of making a purchasing decision.
While this type of marketing is as old as advertising itself, it has received more buzz in recent years and many large agencies – Grey Group and DDB among them – have begun touting that specialty.
Graham Hearns, Riverside’s managing director of global marketing and communications, confirmed the closing in an interview Wednesday. He cited a sluggish economy and increased competition in the space that pushed prices down as the main reasons for the company’s decline.
“We’re in the process, this afternoon, of filing for CCAA,” he said. “... Up until Sunday, we were optimistic that we could make things work and come to new terms with the lenders, but ultimately we came up short.”
He added that Riverside continued to invest in the firm after its acquisition, and has lost its entire investment.
Pareto had been in business for more than 10 years, and was publicly traded before the 2011 acquisition. Clients included Capital One, L’Oréal and Ford. It had more than 200 full-time employees and more than 1,500 part-time, according to a statement on its LinkedIn page. Employees were informed about the closing on Monday and Tuesday, Mr. Hearns said. Pareto executives did not respond to requests for comment.
“There’s an enormous amount of competition in the space now,” said Jason Dubroy, vice-president and managing director of ShopperDDB, a division of ad agency DDB Canada. “When our practice started up about two and a half years ago, there were a couple of ad agencies that were getting into the space. Suddenly, many different agencies are either calling themselves shopper marketing or professing that they had shopper marketing as a capability.”
Pareto was most focused on in-store signage and merchandising, such as setting up the “planograms” that determine how products are laid out on shelves and how shoppers’ eyes are directed when they are looking at displays. In recent years as shopper marketing came more in vogue, Pareto added related services such as “experiential” marketing (activities such as pop-up shops, sampling programs, and events for example,) Mr. Dubroy said.
Competition is especially fierce in the area of third-party shopper marketing – essentially, outsourced labour services that provide staff for product sampling in-store, on-site promotions at events, and other programs. That is where the pricing pressure was likely greatest for Pareto, as competition has been especially fierce.
For example, the Canadian division of U.S. firm Crossmark, which has a 12-year presence here and competes in the third-party space, has seen growth. And Toronto-based firm Mosaic Sales Solutions was acquired by U.S.-based Acosta Sales and Marketing in June of 2012. That typifies the consolidation in this area of the industry; in 2011, Mosaic acquired its competitor, Consumer Impact Marketing, and last October, the newly-formed Acosta Mosaic Group acquired another Canadian firm, Hunter Straker.
“It’s a very competitive market,” Chris Terrio, president and CEO of Crossmark Canada, said in an interview Wednesday. “... As you look forward in our industry, not unlike the consolidation you see in the retail environment, in the near to mid-term the third-party agencies and sales and marketing services agencies will experience further consolidation.”
Pareto’s online statement said the decision to declare insolvency was made very quickly, and suggested that some employees would continue to work independently with former Pareto clients.
“Our banking partners decided to change direction and within a matter of hours 10+ year old [Pareto] that grew to over [$100-million] was no more,” the statement said. “... New companies have formed and many supportive clients have stuck with team members who will bounce back and deliver awesome solutions, services and experiences.”Report Typo/Error