Insignia Systems’ Partner Terminates Distribution Deal
Insignia Systems, Inc.—a Brooklyn Park-based maker of in-store advertising for consumer packaged goods companies—recently announced that a partner is terminating a distribution deal with the company.
Insignia Systems acknowledged that the move could result in lost revenue, although the company is also citing the event as an opportunity to establish direct partnerships with more retailers.
Insignia Systems is among Minnesota’s 85-largest public companies based on its revenue, which totaled $27.76 million in 2013. The company currently provides “at-shelf” advertising products (think promotional signs that protrude from store shelves) in more than 13,000 supermarkets, 1,600 mass merchants, and 7,000 dollar stores. The company says that more than 200 consumer packaged foods companies—including Golden Valley-based General Mills, Inc.—have tapped its services.
In late February, Insignia Systems said in a regulatory filing that it had struck a new deal with Valassis In-Store Solutions, a Michigan-based company, through which Insignia Systems was granted exclusive rights to market and sell in-store signs, displaying prices, at retailers within Valassis’ network. The agreement replaced previous deals between the two companies and called for Insignia to pay Valassis $500,000, a price that was set to be paid over the course of 2014. The terms of the agreement were set to expire at the end of 2017.
But Insignia Systems said late last week that Valassis has terminated the agreement, effective August 11. Insignia Systems cautioned that the termination comes with “a risk of reduced revenue,” but said it could also open the door for Insignia to partner more directly with retailers.
Valassis Was Recently Sold
When asked why Valassis terminated the deal, Insignia Systems Chief Financial Officer John Gonsior deferred questions to Valassis, and a spokesperson there declined to comment.
Valassis, however, recently went through a change in ownership. The company, whose stock was previously publicly traded, went private in February when it was acquired by Harland Clarke Holdings Corporation. San Antonio-based Harland Clarke Holdings, which paid $34.04 in cash for each of Valassis’ outstanding shares in a deal valued at $1.84 billion, offers payment solutions, marketing services, and retail products for a variety of industries, including financial institutions, business-to-business clients, other businesses, and individual consumers.
Gonsior told Twin Cities Business that the Valassis deal had given Insignia access to a “significant number of retailers.” But he also pointed out that the deal remains intact for several more months and said that the company has an opportunity to retain uninterrupted access to retailers in Valassis’ network if it establishes deals with them directly.
“It’s an opportunity for us to gain access to significant retailers on a direct basis, not through a third party,” which may increase profitability, Gonsior said.
Shares of Insignia’s stock closed down about 6 percent on Monday at $3.02, in the wake of Insignia’s announcement. The stock was trading up, though, by more than 5 percent at $3.19 per share on Tuesday morning.
Insignia President and CEO Glen Dall said in a statement that his company has already taken advantage of working directly with consumer packaged goods companies to sell advertising into retail stores, and “concurrent with these activities, we continue to explore new business opportunities to increase our product portfolio, attract new customers, and grow our retail network.”
“[Consumer packaged goods] brands continue to demand options to market in-store promotional vehicles, and Insignia remains fully committed to this robust in-store market,” Dall said.