Chas. Levy Company LLC

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Chas. Levy Company LLC

1200 North North Branch Street
Chicago, Illinois 60622
U.S.A.
Telephone: (312) 440-4400
Fax: (312) 440-7414
Web site: http://www.chaslevy.com

Private Company
Incorporated: 1883
Employees: 8,500
Sales: $725 million (2002 est.)
NAIC: 422920 Book, Periodical, and Newspaper Wholesalers

The Chas. Levy Company LLC is one of the top four distributors of magazines in the United States, and the leading distributor of books to mass retailers. The company's operating units include Chas. Levy Circulating Co., which sells magazines to grocery, drug, and large retail stores, and Levy Home Entertainment, which distributes books to the likes of Wal-Mart and Target. The firm is owned by board chairman Barbara Levy Kipper, the granddaughter of its founder.

Beginnings

The Chas. Levy Company traces its roots to the year 1883, when 15-year-old Chicago newsboy Charles Levy won a horse and cart in a raffle and decided to put them to use distributing papers. His first assignment was hauling copies of the Chicago Mail to the stockyards, and he soon found his niche as a middleman distributing papers to newsboys and newsstands on the city's West Side, handling major publications of the era like the Times, the Chronicle, and the Inter-Ocean. As his workload increased brothers Joseph, Ben, and Max joined him in the enterprise.

In the early 1900s the Levys began purchasing gasoline-powered trucks to make deliveries, hiring union drivers to cover their growing network of delivery routes. By this time Charles Levy had come to focus on promoting the business and maintaining good relations with newspaper publishers, while Joe Levy handled the day-to-day management chores.

In 1910 the company began distributing magazines, starting with Curtis Publishing Company titles like the Saturday Evening Post, the Ladies Home Journal, and the Country Gentleman. As their popularity grew, in particular that of the Post, Levy started to buy up other magazine distributors in the Chicago area until the firm was the sole Curtis distributor for the city. The company subsequently made deals with other magazine publishers like Crowell and Macfadden to distribute their titles in Chicago as well.

During the 1910s and 1920s the Chicago newspapers established their own distribution systems within the city, and Levy redirected its efforts to the outlying areas. The company's routes expanded to service towns up to 100 miles away, including Elgin, Rockford, and Joliet, Illinois, as well as the suburbs that were beginning to spring up around Chicago, starting in 1923. Levy would truck newspapers directly to a publisher's suburban branch, which would handle distribution door-to-door. The firm also continued to deliver magazines to local businesses like newsstands, pool rooms, hotels, and candy and cigar stores.

Late 1940s: Adding Paperbacks

Following World War II a new opportunity presented itself in the form of paperback books, which had become popular through their use by servicemen fighting overseas. In the late 1940s the company started distributing the inexpensive books, which at that time cost between 25 and 50 cents each.

In 1952 Levy purchased one of its main competitors, the J.O. Stoll Company. Each firm controlled approximately 30 percent of magazine distribution to newsstands in the Chicago area, with Levy handling the titles of four large publishers and Stoll those of 11 smaller ones. Afterward the number of magazines Levy carried increased from 150 to 750, while annual book and magazine sales doubled to $5 million. With this surge in business Charles Levy's son Charles, Jr. ("Chuck"), who was now running the company, hired his friend Herbert Fried to oversee the integration of Stoll. Among the changes made at this time were the centralization of distribution operations and the transfer of magazine distribution from independently owned routes to company-owned ones, which made the delivery drivers full-time Levy employees.

The 1950s also saw Levy's newspaper business grow at a rapid rate as the suburbs expanded. The firm was handling the out-of-Chicago trucking for the city's three major papers, the Tribune, the Sun-Times, and the American, with delivery runs made as far away as Milwaukee, Wisconsin to the north and South Bend, Indiana to the east. Nearly 70 trucks were utilized to deliver up to one million papers per night.

To ensure that the business grew in a healthy manner, Levy began to hire professional management personnel, as well as training the firm's existing staff in modern business techniques through the use of seminars and classes. The company also instituted a profit-sharing plan to encourage productivity. Levy was one of the first in its industry to take this approach, in contrast with many magazine and book distribution firms that were still small, family-run organizations.

The late 1950s saw Chuck Levy found the Council of Independent Distributors, a trade organization that promoted the interests of companies like his own. In 1962 Levy began distributing hardcover books, and by 1965 the company's annual revenues had reached an estimated $14 million.

In 1968 the firm created a new unit, Computer Book Services (CBS), which helped retailers select titles based on computer analyses of sales data. Herb Fried, who was now serving as president of the company, chose former Bantam Books executive David Moscow to run the division. Taking advantage of emerging computer technology, the company placed punch-cards in each book, which retailers could return to generate a new order. CBS was targeted toward mass merchants, and soon began working with retail giants like Sears, Montgomery Ward, and Penney's. The chains were able to consolidate most of their purchases with Levy rather than dealing with different distributors around the country, which saved them time and money. The initiative helped Levy become the largest paperback book distributor in the United States during the decade. This era also saw the company ship books overseas to developing nations in association with the Books USA program, as well as to troops serving in Vietnam.

Parallel growth was occurring in Levy's magazine division, through innovations like the Family Reading Center, a super-market fixture that organized and expanded the number of magazines displayed and also offered space for children's books and paperbacks. Initially used in some Chicago area Jewel food stores, the idea caught on and was soon adopted in many locations. Levy subsequently brought out a checkout counter rack that could hold as many as 15 different publications, nearly four times the amount previously displayed.

Distributing Videos and Software in the 1980s

In 1976 Herb Fried stepped down as president. His place was later taken by David Moscow, who began to formulate aggressive expansion plans. Seeking new ways to take advantage of the company's existing delivery routes, he added items like computer software, which debuted in 1984. That same year, at a time when home videocassette recorder sales were rapidly taking off, the company began to distribute videos through the purchase of Detroit-based Video Trend, a fast-growing regional tape distributor with $11 million in sales. Video Trend had outlets in several markets, and in early 1985 added one near Chicago. Levy soon bought a second video distribution company in Tampa, Florida, and then acquired a third in 1986 in Seattle, Washington that had four West Coast locations.

The firm had also recently launched a series of humorous greeting cards called "Chicago Breezes," which lampooned subjects like politicians and sports teams. The line gave Levy entrée into the card sections of drug stores and supermarkets, and over the next several years the company took on distribution chores for six other greeting card makers.

In 1986 Charles "Chuck" Levy, Jr., passed away at the age of 73, having worked for the company for 51 years. His daughter Barbara Levy Kipper, a former Chicago Sun-Times reporter, took over the chairman's job.

The following year the company recorded sales of more than $360 million, driven in large part by the growth of video. Video Trend was now the third largest distributor of tapes in the United States, with revenues of $143 million. The company's Chicago-centered magazine division, in contrast, accounted for just $77 million in sales.

In 1990 Levy entered another new category, buying Mid-Michigan Music Co. of Grand Rapids, Michigan, for an estimated $2 million. Mid-Michigan distributed cassettes and compact discs to 175 stores in 26 states.

In early 1991 Levy president and CEO David Moscow was dismissed due to philosophical differences with owner and board chairman Barbara Levy Kipper. He was immediately replaced by Carol Kloster, age 42, who had joined Levy in 1974 as a personal assistant and then risen through the ranks. With the owner's blessing Kloster set about shoring up Levy's magazine business, buying United News Co. of Philadelphia during the year to give the company a larger geographical presence in this category.

Company Perspectives:

Chas. Levy Company is a leading distributor of books and magazines and provider of related services. By delivering quality service, flexibility, innovative marketing and customized support programs, we meet the needs of our business partners consistent with their perception of value. We will maintain our leadership position through the use of advanced technology, constant process improvement and continuous cost reduction. We will continue to seek growth opportunities. We will expand our primary businesses through internal growth and acquisition. We will leverage our core competencies into other related areas and pursue opportunities outside our traditional lines of business. We will provide both a challenging and rewarding environment for our employees and a fair return to our shareholders. The Company is privately held and believes strongly in actively contributing to the public interest and giving back to the communities in which we live and work.

Abandoning Newspaper and Video Distribution in 1994

Over the years Levy's newspaper distribution business had tapered off, and it ultimately became unprofitable. On April 30, 1994 the company halted distribution of the remaining handful of papers it carried, which included the New York Times and Investor's Business Daily. Earnings from video wholesaling also were dropping sharply, and later the same year the firm sold its video and music division, whose annual revenues had shrunk to approximately $50 million. The unit was purchased by the Handleman Co. of Troy, Michigan, a leading distributor of music, video, software, and books. Several years later Handleman sold Levy its book distribution arm, which had sales of $54.1 million. By now Levy Home Entertainment was the largest distributor of books to mass-market retail accounts in the United States. Over the next several years it would add capacity with new distribution centers in Salem, Virginia and Clearfield, Utah.

During this same period the firm's magazine business continued to grow. In 1996 Levy began a three-year run of distributorship acquisitions that would bring a total of nine new companies into the fold. A wave of industry consolidation was now taking place, which left 50 firms at the end of the 1990s from a total of 300 in 1995. The shakeout was caused by a change in policy at the major retail chains, which had begun forcing distributors to bid on contracts to serve many or all of their stores. This saved money for the retailers but wreaked havoc with distributors, who had to lower prices and offer new incentives to remain competitive.

In late 1998 plans were announced for Levy's largest acquisition to date, the purchase of Dublin, Ohio-based United Magazine Co., or Unimag. The merger between the two companies, which were similar in size, would create the second largest magazine distributor in the United States with 18 percent of the market. As the closing date approached, the struggling Unimag saw its debt climb dangerously high, which forced a revision of the deal. In April the Kroger Co. dropped its Detroit and Cincinnati contracts with Unimag, reportedly over concerns about the distributor's unpaid bills, and this proved a death blow to the agreement. In May it was officially abandoned, and in September Unimag went out of business.

Levy's operations continued to grow after this disappointment, and by 2003 the Chas. Levy Circulating Co. had more than 6,500 sales and support staffers, operated more than 600 delivery vehicles, and had nine distribution centers and 42 transportation centers that handled both magazines and books. Levy Home Entertainment kept more than 2,000 busy in the field doing in-store merchandising, and also employed specialists in marketing and inventory to keep customers like Best Buy, Target, and Wal-Mart in 48 states stocked with books. The two divisions' combined revenues had grown to an estimated $725 million.

After 120 years the Charles Levy Co. LLC had evolved into a leading distributor of magazines and books. While it no longer handled newspapers or the videos that once drove profits in the 1980s, it had staked out a strong position in its respective markets.

Key Dates:

1883:: Charles Levy begins distributing newspapers in Chicago.
1910:: Levy adds magazines, including Saturday Evening Post.
1923:: The first newspaper deliveries are made to Chicago suburbs.
1952:: The acquisition of J.O. Stoll Co. doubles the firm's magazine distribution business.
1968:: The Computer Book Services unit is formed to serve mass-market retailers.
1984:: The company begins to distribute computer software; the company buys Video Trend.
1990:: Mid-Michigan Music Co. is purchased.
1991:: United News Co. of Philadelphia is acquired.
1994:: Newspaper distribution ends; the Levy Music & Video unit is sold.
1999:: The merger with Unimag to form the second largest distributor fails.