Groupe Aeroplan buys Carlson? So why do that?

Groupe Aeroplan buys Carlson? So why do that?
Loyalty magazine was so intrigued as to why Groupe Aeroplan bought Carlson Marketing that we rang them up and asked. Rupert Duchesne, president and CEO of Groupe Aeroplan very kindly took some time from his frenzied schedule of meeting and greeting Carlson clients to explain the US$175.3m deal and all is now much clearer…..

Loyalty Magazine: So why the deal?

Rupert Duchesne: There is a huge amount of synergy between the two companies. People tend to think of Carlson Marketing as a consultancy, but this is not simply the case. Carlson are extremely discreet, and since the 30s, they have built up a massive business that today does very much what we do, in terms of setting up and running loyalty schemes for companies. They never talk about their client list or talk about their role, but when we saw what they do, this is remarkably similar to us.

You say that the two companies are going to be run separately and independently, but is that not going to cause a problem for some of the clients of Carlson, when it is owned by Groupe Aeroplan?

Rupert Duchesne: People in the same space as Carlson may be talking this up, but there will be few implications for Carlson clients. It already has a loyal client list where multiple companies operate in the same space. In the US Carlson works for literally dozens of banks running their loyalty programmes, so to suddenly suggest that there is a problem is hard to fathom. It is the same for Groupe Aeroplan. We have two financial services companies in Canada that are clients of ours. We operate effective Chinese walls. All the Carlson clients I have spoken to so far are comfortable with that.

You have explained the synergies between the two companies, but what is the reason for the purchase?

Rupert Duchesne: For Carlson, we will be able to provide a great deal of capital resources to enable them to grow aggressively. For Groupe Aeroplan, it will enable us to grow in markets where we have little presence currently, especially the US, but also in South America, India and the Far East. We will also be able to share resources. For example, both companies are currently involved in setting up offices in India. Now we will be able to run these together.

Will Groupe Aeroplan expand under its brands, namely Aeroplan, Nectar, Air Miles (in Canada and the Middle East) and LMG Insight and Communication in the UK, or will it operate white label schemes in new areas?

Rupert Duchesne: That is an interesting question, but it will depend on the destination. We are developing Nectar in Italy and we will use a brand where we own a programme, but Carlson has been successfully white labelling for decades. One would think the scheme is owned and operated by the retailer, but in fact it is Carlson which is behind it. You can assume that a substantial proportion of the revenue for Carlson comes from running these white label schemes, rather than from straight consultancy. This is what makes the acquisition such a good fit.

Apart from capital, what can Groupe Aeroplan bring to Carlson?

Rupert Duchesne: Two areas of operation that Carlson has not so far offered clients are liability management and trade analytics.

Liability management sounds boring, but it is extremely important. When you run a loyalty programme, you receive fees for running the programme and you also earn transaction fees, but you don’t take the risk for the points issued. Groupe Aeroplan however, because it owns the scheme, also owns the points, and has developed a great deal of expertise in how to manage them. This is a rich seam of cost minimisation for the retailer. We have extraordinary expertise in this.

Trade analytics, is handled by LMG Insight & Communications, which is a subsidiary of LMG UK, which runs Nectar. It provides insight communications and data analytics which are produced from the packaging of Nectar and Sainsbury’s data and then resold to supplier companies. Historically Carlson has not been a player in this area, but now it will, especially for India.

What was it about Carlson that particularly impressed you?

Rupert Duchesne: The synergy. Our organisations are remarkably similar, and there is also the fact that Carlson is a long term company. Of its top ten clients, the average length of tenure is 14 years. We would have been far less impressed if it had been the normal type of advertising/consultancy firm.

How soon will you be able to get started with your plans?

Rupert Duchesne: The deal should close in December, subject to US antitrust requirements, and so by January, we should be ready to go. There will be a lot of activity in South America, India and the Far East, and of course in the US.

It is very exciting. To have the strength of balance sheet to grow in a recession is an extremely good place to be.