Well Done Deals: Focus on Niche Cataloging

This past year has seen a small, niche food purveyor begin its slow rise out of anonymity. Mackenzie Limited, a catalog of primarily high-end imported seafood, has struck two interesting deals. It acquired the consumer mail-order business of a domestic seafood supplier, and it signed a licensing and fulfillment deal with a seafood restaurant chain. Here’s the inside story on a catalog company that’s emerging onto the industry’s radar screen.

Baltimore-based Mackenzie Limited today is owned by the father-daughter team of Walter Cederholm and Laura McManus. Cederholm is a retired quality control specialist in the nuclear power industry and works at Mackenzie only a few months a year, primarily during the all-important holiday season. McManus runs the day-to-day operations. He is analytical and methodical. She is bubbly, articulate and warm. Fulfillment and operations interest him, while creative and merchandising get her talking. Both are astute entrepreneurs.

They bought the business in 1996 from James Mackenzie, a U.K. native who had inherited the business from his grandfather. Back then, 75 percent of sales came from the company’s signature Scottish smoked salmon.

But since that time, McManus has diversified and grown the product line, so that today, only 40 percent of sales come from smoked salmon. Other items include, for example, caviar from Russia, Iran and the United States; foie gras from France; British Stilton cheese; Scottish kippers; Maryland crab cakes; Japanese farm-raised scallops; Maine lobster specialties; Italian balsamic vinegars and olive oils; and a wonderful selection of gourmet desserts (including a $150 cheesecake) and gift baskets.

Mackenzie specializes in what McManus calls “artisanal foods,” that is, high-quality items made by small producers and not widely available. That mission, along with a smart strategy to diversify into domestic products, led McManus and Cederholm to buy the consumer mail-order division of Ducktrap River Fish Farm earlier this year.

The Deals

Belfast, Maine-based seafood merchant, Ducktrap River sold seafood to both consumers and to wholesale businesses such as Whole Foods supermarkets. Earlier this year, Ducktrap quietly put up for sale its mail order catalog.

“They wanted to focus on the wholesale side of the business, not list prospecting and marketing,” says McManus. “But it was a nice fit for us. It gives us a domestic source for salmon and helps us diversify our product line. Plus, it fits our criteria of offering good-quality food items. Ducktrap is a premiere smokehouse with top-notch technology and products.”

Terms of the deal were not disclosed, but McManus projects Mackenzie’s overall sales this year to double, from $1.5 million to $3 million. Moreover, the deal helps Mackenzie to grow its total customer file from 16,600 to 32,100.

Ducktrap River products are being fully integrated into the Mackenzie catalog. One recent edition even included a cover wrap introducing Ducktrap products into the Mackenzie product lineup.

McManus and Cederholm also struck a deal this year with Phillips Seafood Restaurants. For the past year and a half, Mackenzie has been doing the mail-order fulfillment of packaged food products for the Baltimore-based restaurant chain. And in September, Mackenzie and Phillips took the partnership a step further.

Mackenzie has been licensed to create a consumer catalog and e-commerce site for Phillips and to continue to fulfill its consumer sales. “They transferred their inventory to us, and we market the products under their name,” says McManus in describing the arrangement. “We’ll cross-market products among both the Mackenzie and Phillips catalogs. It’s a good marriage. We can help them get better positioning among our housefile of proven mail-order seafood buyers.”

And the father-daughter team appear not be done their deal making any time soon. Criteria they seek: High-quality foods whose fulfillment easily can be integrated into Mackenzie’s infrastructure. In fact, when Catalog Success spoke with them in early September, the duo was considering three or four other deals, but wouldn’t divulge specifics.

The Entrepreneurial Spirit

Before buying Mackenzie, McManus sold package printing to food companies, and so was no stranger to the food business. Moreover, her husband is in the seafood distribution industry.

McManus had a colleague, George Bacharach, who knew Mackenzie family members wanted to sell the catalog. “I always had an entrepreneurial spirit,” says McManus. “And this opportunity just landed in my lap. I enjoyed my sales job, but I also wanted to give cataloging a shot.”

Before deciding to plunk down cash, McManus worked at Mackenzie during the busy sales season. In February 1996, she even traveled to Scotland to work in the company’s smokehouse. And they performed a blind taste test among family members. “Mackenzie salmon won every test, including my own,” says McManus. “I like to say I tried the salmon and bought the company.”

McManus and Cederholm purchased the catalog along with George Bacharach and his wife, Jenny. But within a year, problems were brewing among the partners. “The Bacharachs wanted to run a mostly holiday business, but I wanted to grow the company beyond that,” McManus notes. “We realized we had a difference in business philosophy.” In July 1997, McManus and Cederholm bought out the Bacharachs.

Since then they’ve used small business loans and other means to slowly grow the company and product line. Mackenzie is housed in a small, 5,400-square-foot facility in a Southwest Baltimore office park. McManus’ wonderfully cluttered office is right off the reception area. The contact center is housed in a small room behind the reception room. And the distribution center, complete with industrial-sized refrigeration equipment and just one dock door, takes up most of the remaining space.

To be sure, this is a company that has poured its profits not into plush corporate surroundings, but into creative and merchandising.

High-quality Creative and Merchandising

Eight times a year, Mackenzie mails its eye-popping catalog. Stochastic printing, 50 lb to 70 lb basis weight paper, exceptionally detailed photography and copy that sings help explain its average catalog response rate of an impressive 4.7 percent from its housefile.

Creative is outsourced to various professionals, including a food photographer, graphic designer and food stylist. McManus’ brother, Matt Cederholm, a Boston-based financial analyst, does the copywriting. Here’s an example from the Summer 2004 catalog:

Mackenzie Scottish Smoked Salmon, full slices

From the icy lochs of the Northern Scottish Highlands. Buttery soft on the palate, blending hints of the sea with the earthiness of hardwood smoking. Ours is a mild, low salt cure, delicately smoked for a perfect balance of flavor and texture. Sliced to translucent thinness and interleaved with cellophane, a simple expression of luxury.

Or this copy for Iranian caviar:

Rare jewels from the southwest Caspian Sea, where the colder waters produce a richer, cleaner flavor. Demand is high and production limited, but our connections ensure us of the finest, freshest caviar available. Pure luxury.

“We feed my brother’s caviar habit,” McManus says with a laugh, explaining her sibling’s compensation for his catalog copywriting duties.

The creative team still uses film for its production. The design aesthetic leans toward clean and contemporary. Product shots are used on the front and back covers. Smoked salmon, still the strongest seller in the product line, gets hero treatment on the opening spreads. The 44-page Fall 2004 edition includes testimonials from customers, and is a little more densely packed than the Summer catalog. The food styling and photography is first-rate. For example, in the photo of the Maine lobster pot pie you can even see the tiny crackles in the puff pastry.

McManus used to do her buying at gourmet food shows, but these days suppliers are finding her. She prefers to purchase from smaller vendors selling hard-to-find, top-quality merchandise. “Their products are like their crafts,” says McManus of her suppliers. Her criteria for inclusion in the catalog: The item has to be in the top 1 percent of its food class in terms of quality. It also must have a good price/value ratio, says McManus.

Help With Prospecting

Early on, McManus and Cederholm knew they needed help with prospecting and circulation, so they contacted catalog consultant Stephen Lett. “Before we started working with Steve, our prospecting consisted primarily of giftees,” McManus recalls. “But now we’re doing 20 percent more prospecting with his help.”

McManus tests lists, and in fact was planning to test six or seven lists this fall. She looks primarily for names of food mail-order buyers. She admits she has gotten better response rates from the names culled from cooperative databases. Mackenzie does no insert media, but does periodically send promotional postcards. And twice monthly, the team sends e-mails to an opt-in list of 8,000 Mackenzie buyers and 12,000 Ducktrap River buyers. Response rates from e-mail campaigns are about 2 percent.

Future Challenges

McManus lists three tough tasks currently on her plate.

1. Human resources vs. growth. “In a small but growing company like ours people are either over-worked or under-worked.” Adding to the difficulty is the business’ seasonal nature, so high-quality personnel are needed only at certain times of the year.

2. Getting to the next level, from $3 million to $6 million in revenues. The key, she says, will be to find the right deals and partnerships that fit well with Mackenzie’s infrastructure and operational know-how.

3. Finding good products that meet McManus’ criteria. “But once we find them, there’s a lot of benefit to carrying those items, because there generally isn’t a lot of competition selling the same things.” This helps Mackenzie’s customer retention rates.

In short, Mackenzie Limited is a labor of one family’s love — the love of food and the desire to showcase high-quality delectables from around the world.

TAKEAWAY TIPS

1. Acquisitions

Walter Cederholm and Laura McManus, owners of Mackenzie Limited, currently are searching for acquisitions, partnerships or licensing deals. This year, they’ve purchased the consumer mail-order business of Ducktrap River, a Maine-based seafood purveyor. The duo also penned a licensing deal to cross-market and fulfill packaged food products for Phillips Seafood Restaurants. Following are some lessons they learned from these deals:

* Try not to overproject sales figures for the company you’re considering buying, says McManus. “We looked at Ducktrap’s annual sales and projected that we would bring in 75 to 80 percent of that. But our consultant, Stephen Lett, advised us that we were being too optimistic,” says McManus.

* Don’t get sidetracked. Decide what’s important to you and your current business, and winnow down the list of deals you’re considering to only those that fit your pre-determined goals. “For Mackenzie, exclusivity in product line is a must,” notes McManus. “And that’s what was most appealing to us in the Ducktrap deal.”

2. Developing Branded Products

— Make sure you have the necessary volume to support the development and time needed to make a branded product line profitable. “If you think you can sell only a pallet a week or a month, it may not be worth the hassle of developing, for example, labels and other product guidelines,” says McManus.

— Choose vendors carefully, and have a back-up vendor for each branded product, especially those that turn out to be good sellers. You don’t want to become too dependent on one supplier. Also, choose a vendor based on consistency and quality, not just on price.

— Test products in season to see if you get the sales results you’ve projected.

COMPANY CHRONOLOGY

1984 Rufus Bette-Benet starts a catalog selling smoked salmon from Scotland.

1993 Bette-Benet passes away, and his grandson, James Mackenzie, takes over the business.

1996 Mackenzie moves to Australia and sells the business to Laura McManus; her father, Walter Cederholm; and George and Jenny Bacharach.

1997 Citing a difference in business philosophy, McManus and Cederholm buy out the Bacharachs’ share of the company.

2003 Annual revenues reach $1.5 million, 17 percent above plan.

2004 McManus and Cederholm buy the consumer mail-order division of Ducktrap River Fish Farm of Belfast, Maine. The father-and-daughter team also signs a licensing deal to market and fulfill (via mail order) packaged food products for Phillips Seafood Restaurants. Expected 2004 revenue from all properties: $3 million.

ABOUT MACKENZIE LIMITED
Headquarters: Baltimore
Merchandise: Gourmet food
Annual circ: 500,000
Average order value: $118
Q4 sales: generally account for 75 percent of annual sales
Total housefile: 16,600 for Mackenzie Limited; 15,500 for Ducktrap River (a recent acquisition)
SKUs: 350
Target demographic: mail-order food buyers age 40 and older
Sales channels: catalog 75 percent; e-commerce 25 percent
Commerce management system: Mail Order Manager from Dydacomp
Printer: Arandell