John Menzies Plc Business Information, Profile, and History

Company Perspectives:

Menzies is a leading logistics support services group committed to quality and added value.

History of John Menzies Plc

After more than 150 years as a retailer, John Menzies plc (Menzies is pronounced 'Mingus') has redefined its role for the 21st century. The company is in the process of shedding all of its retail activities in order to become one of the world's top-three logistics and distribution groups. Toward that end, the company has divested its chain of more than 230 John Menzies bookstores and also seeks a buyer for its 220-store chain of Early Learning Centre children's toys and games stores. John Menzies is also exiting the volatile entertainment distribution market, announcing its intention to end its long-standing distribution agreement with Japan's Nintendo, which had given John Menzies, through subsidiary THE Games, exclusive distribution rights to Nintendo products in the United Kingdom. The company is also selling off its Total Home Entertainment (THE) subsidiary, which distributes videos and music, in a management buyout. What remains of the holding company is a logistics and distribution group. The company's Menzies Wholesale is a leading distributor of magazines and newspapers to the U.K. market and represents the largest share of the company's sales. The company also remains committed to expanding its Aviation Services division, which includes subsidiaries Menzies Transport Services, Menzies World Cargo, and Menzies Aviation Support Services. The acquisition of U.S.-based Ogden Ground Services for $118 million in 2000 has transformed Menzies into one of the world's leading independent and international logistics experts.

19th Century Wholesale Empire

After serving as an apprentice bookseller in Edinburgh and then working in London for bookseller and publisher Charles Tilt, John Menzies returned to Edinburgh in 1833 to establish his own shop at 61 Princes Street. The limited nature of bookselling during that period--booksellers acted as agents for a limited number of publishers--and the great distance between Edinburgh and London in the pre-railroad United Kingdom led Menzies to expand his bookselling operation to acting as a wholesaler. One of Menzies' first customers was Charles Tilt. Other London publishers quickly assigned their Scottish business to Menzies. Among these was Chapman & Hall publishers, then bringing out the first weekly installments of a novel called The Pickwick Papers. The success of that Charles Dickens novel helped Menzies wholesale business become the major part of his growing operations.

Menzies had also been quick to seize on two other growing trends. He was one of the first to sell newspapers, such as the Scotsman, over the counter. Menzies also received the wholesale contract for the periodical Punch, which would become one of the most important magazines in the English-speaking world in its time. In 1855, Menzies added more newspapers sales to his lists--the Daily Express and the Daily Mirror--and sought other newspaper distribution opportunities. The most important of these came with the growing importance of the railroad in 19-century Scotland. Railroad stations were being served by a new type of retailer, the newsstand, and in 1857 Menzies acquired the newsstand concessions for many of Scotland's railroads and their stations, though he missed out on the country's two largest stations in Edinburgh. Menzies was to acquire the stands at both of these stations by early in the next decade.

The growing importance of Menzies' wholesale trade and of his newsstands operations led him to exit the retail bookselling market in 1859, when he closed the company's Prince Street location. At the same time, Menzies opened a new, larger wholesale facility. Wholesale remained the company's major source of revenues, representing more than three-quarters of the company's sales by 1860, a percentage that only increased in the following decades. Nonetheless, the newsstands represented a key feature of the growing Menzies company, offering what was to become a strategic distribution network.

While Menzies' sons, John and Charles, were destined to take over the family-run operation, Menzies, in 1867, prepared for his eventual succession by reforming the business as a partnership with three of his employees. The company's willingness to promote from within remained a hallmark until well into the 20th century. The new partnership, called John Menzies and Company, prepared to extend beyond its Edinburgh focus when it opened its first wholesale warehouse in Glasgow in 1868.

By the time of Menzies' death in 1879, his company had become one of Scotland's principal book, magazine, and newspaper distributors. Sons John and Charles took over the lead of the company and proved indefatigable workers, extending and strengthening the company's wholesale business throughout all of Scotland. The brothers continued to lead the company into the 1930s.

The company formally incorporated as John Menzies & Company Ltd. in 1906. In the early decades of the new century, Menzies began branching out from its distribution business, which itself was helped out by the arrival of the first reliable gasoline-driven vans and trucks. The company also began a foray into publishing, which did not last long. More successful for the company was its diversification beyond newsstands, an occasion offered by its acquisition of tobacconist Finlay's in 1922. Many of the Finlay tobacco stands were located not only in the same train stations but often alongside the Menzies newsstands. The combination of the two activities was a natural. Toward the end of that same decade, Menzies returned to its founding business; in 1928 it acquired Elliott's book shop on Edinburgh's Prince's Street, down the block from the original Menzies location. The Elliott's acquisition became only the first of many new Menzies stores, to the point where, by the end of the century, Menzies had become one of the United Kingdom's preeminent book retailers.

Major Postwar Growth

The 1930s were marked by the Great Depression, which cut into the company's newsstand sales in particular. Paradoxically, the outbreak of World War II, despite the damage the company suffered from the Nazi bombing raids, represented a boom time for Menzies, as people eagerly snapped up newspapers to remain current with events. When Charles Menzies died, he was succeeded by his widow, Helen, who guided the company into the 1950s. In 1951, John Maxwell Menzies, great-grandson of founder John Menzies, took over as company chairman.

By that time, Menzies had branched out from railroads, opening its first airport-based newsstand in Edinburgh's Turnhouse airport. The company also launched its first mobile newsstand. Menzies, now turning over some £10 million in revenues per year, had also been building up its chain of retail book stores, with seven stores by the beginning of the 1950s. By 1958, as Menzies celebrated its 125-year anniversary, the company had opened or acquired another 19 stores and was on its way to becoming one of the United Kingdom's pre-eminent booksellers.

The nationalization of Britain's railway system in 1953 largely left Menzies dominance of the Scottish newsstand market in place. Sharing the newsstand market in the United Kingdom were Easons in Ireland, and Wymans and WH Smith in England. John Menzies soon extended its dominance into England, when, in 1959, it acquired publicly-held Wymans. Menzies added Wymans' 78 retail book stores, 200 newsstands, and a strong London-based wholesaling business to its holdings. By the beginning of the 1960s, Menzies, now reincorporated as John Menzies (Holdings) Ltd., was operating more than 350 newsstands. Yet that figure was destined to shrink over time as British Rail engaged on a massive streamlining program that closed many of the country's rural and underused train stations.

The company meanwhile had been stepping up its wholesale wing, acquiring Pickles, in Leeds, and Belfast-based wholesaler Porter. The following year, the company acquired Horace Marshall & Son. Ltd. Also that year, the company went public. Menzies remained controlled by the Menzies family, which had retained some two million of the 2.5 million issued shares. The family's grip on the company's ownership was slowly to dwindle over the following decades, though family members would remain major shareholders into the 21st century.

While its wholesale wing, with more than 90 branches throughout the United Kingdom, and its retail store operations, with more than 160 shops by the mid-1960s, continued to grow, Menzies newsstands were taking on lesser importance. A major part of the newsstands' decline was the shrinking numbers of railway passengers, as more and more people opted for buses and their own cars. Yet, the growth of Menzies retail and wholesale business helped propel the company's sales to £50 million by 1970. Just ten years later, the company's sale were to climb past £200 million.

Transforming for the New Century

In the 1980s, Menzies began to branch out from its core books and newspapers distribution activities. In 1980, the company acquired Terry Blood (Records) Ltd., which formed the core of the company's later Total Home Entertainment subsidiary. That acquisition launched Menzies into the wholesale music distribution market. By the end of the decade, after its acquisition of Wynd-Up Records in 1989, that division was to become the market leader.

Menzies expanded into other areas in the 1980s as well, starting with a purchase of Children's Books (Rudgeley) Ltd., in 1981, which gave the company wholesale activities in children's books, toys, and games. In 1985, Menzies added the acquisition of the Early Learning Centre chain of U.K. stores specializing in toys and games for very young children. Menzies quickly expanded Early Learning Centre internationally, opening shops in Holland before preparing an expansion into the United States. At the same time, Menzies was building up an internationally operating distribution business in library supply and commercial stationery products with the purchases of Lonsdale Universal plc and Cambridge Jackson, both in 1982. Despite these diversification moves, the company book wholesaling unit remained a central focus and was boosted by the acquisition of Hammick, a wholesale and retail bookseller in 1987. The following year, Menzies further expanded its retail empire when it acquired the Martin Retail Group. The addition of that company's nearly 70 retail stores doubled the company's existing presence in England.

Yet, as the 1990s were beginning, Menzies was preparing the first step of what was to become an entirely new direction. This came in 1989 when the company acquired Scan International Group, giving the company an international wholesale courier service. The company extended its new Transport Services division with the freight handler Cargosave in 1990. In 1993, after the acquisition of Air Marketing Services group, Menzies reorganized its growing division into a new subsidiary, Air Menzies International. The company became the United Kingdom's leading independent wholesale express air courier and air-freight consolidator. This division continued to grow in 1995, after Menzies acquired Concorde Express, based at London's Heathrow Airport, where it provided cargo handling, contract labor, and cargo transport services.

In the mid-1990s, Menzies caught on to the growing market for video games when it acquired a 37 percent share of Funsoft, the leading European distributor of games software. It then created a new subsidiary, THE Games, which captured the exclusive distribution rights to Nintendo products-including the massively popular Gameboy and Nintendo 64 systems--in the United Kingdom and Ireland. The company's retail operations also celebrated an agreement to place some 70 Menzies stores in the London Underground.

Yet the retirement of John Menzies and the appointment of David Mackay as the company's CEO--the first time someone outside of the Menzies family had been appointed to direct the company--signaled the beginning of a new era for Menzies. Recognizing that Menzies was unable to compete in a new retailing climate that included new numbers of competitors--particularly with the loss of the newsstands' monopoly on newspaper sales--Mackay promised a restructuring of the company's operations. By 1998, Mackay had outlined the company's intentions. In that year, he announced the decision to exit retailing. First, the company sold off its chain of John Menzies retail shops to rival WH Smith for £68 million in March 1998, and then it announced its intent to sell the struggling Early Learning Centre chain. That chain had yet to find a buyer by the end of the year 2000. At the beginning of 2001, however, the company announced the end of it's the subsidiary, selling the main subsidiary in a management buyout while closing the THE Games division after Nintendo's decision not to renew its distribution contract. (Both companies were among several under investigation for taking part in an alleged price-fixing cartel for the European market.)

The company's exit from retailing coincided with its decision to regroup around its core wholesale distribution wing while stepping up the expansion of its logistics services division. The company reached a partnership agreement with Lufthansa's Airport and Ground Services subsidiary to form the joint venture London Cargo Centre, based at Heathrow, in 1998. When that partnership was extended to the Manchester and Birmingham airports as well, its name was changed to Menzies World Cargo.

By the end of the year 2000, Menzies' new direction was evident and gaining support from analysts. In November 2000, the company completed an acquisition of Ogden Ground Services, based in the United States and one of that country's leading aviation services companies. The Ogden acquisition, worth £74 million ($108 million), established Menzies as the world's number three aviation logistics services groups. The acquisition also led the company to change the division's name to Menzies Aviation Group. As Menzies entered the new century, it pledged to continue its transformation, particularly with the promise to build up its logistics arm as an equal counterpart to its far-larger wholesale division.

Principal Divisions: Menzies Wholesale; Menzies Aviation Group; Menzies Transport Services; Menzies World Cargo; Menzies Aviation Support Services; Early Learning Centre; Total Home Entertainment (THE).

Principal Competitors: Advanced Marketing Services, Inc.; Société Air France; Airborne, Inc.; Alpha Airports Group; ASDA Group Limited; Baker & Taylor Corporation; FedEx Corporation; Hays plc; Publishers Group Incorporated; Tesco PLC.

Chronology

• Key Dates:

• 1833: John Menzies opens a book store in Edinburgh.
• 1835: Menzies begins a book wholesale business.
• 1857: The first of the company's newsstands are opened.
• 1859: Menzies exits the retail book store market.
• 1867: The partnership John Menzies and Company is formed.
• 1879: Sons John and Charles take over leadership of company.
• 1906: Company incorporates as John Menzies & Company, Ltd.
• 1922: Company acquires U.K. tobacconist chain Finlay's.
• 1948: Menzies opens its first airport newsstand.
• 1951: John Maxwell Menzies, great-grandson of the founder, takes over the company's reigns.
• 1962: Menzies goes public on the London exchange.
• 1985: Company acquires the Early Learning Centre chain.
• 1989: Menzies enters the wholesale courier services market.
• 1993: Menzies acquires Air Marketing Services Group and forms Air Menzies International.
• 1995: Concorde Express is acquired.
• 1998: Company begins exiting the retail business.
• 2000: Menzies acquires Ogden Ground Services and restructures the logistics division as Menzies Aviation Services.