SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 25, 1999
THE READER'S DIGEST ASSOCIATION, INC.
(Exact name of registrant as specified in its charter)
Delaware 1-10434 13-1726769
(State or other juris- (Commission File (I.R.S. Employer
diction of incorporation Number) Identification No.)
or organization)
Pleasantville, New York 10570-7000
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code:
(914) 238-1000
ITEM 5. Other Events.
Filed herewith as Exhibit 99.1 is a copy of the
company's news release, issued today, outlining the Company's
growth strategy.
ITEM 7. Financial Statements, Pro Forma Financial Information
and Exhibits.
(a) Financial statements of business acquired
Not applicable
(b) Pro forma financial information
Not applicable
(c) Exhibits
Number Description
99.1 Press Release of The Reader's Digest
Association, Inc. dated February 25, 1999
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
THE READER'S DIGEST ASSOCIATION, INC.
(Registrant)
Date: February 25, 1999
/S/GEORGE S. SCIMONE
George S. Scimone
Senior Vice President and Chief
Financial Officer
EXHIBIT INDEX
Exhibit No. Description
99.1 Press Release of The Reader's Digest
Association, Inc. dated February 25, 1999
Exhibit 99.1
Contact: Stephen J. Morello
Vice President, Public Relations and Corporate
Communications
(212) 872-7027 or (914) 244-7717
READER'S DIGEST OUTLINES GROWTH STRATEGY
Company Will Pursue Wider Sale of Non-Publishing Products,
New Marketing Channels and Continued Geographic Expansion
Strategy Will Deepen Company Presence in Five Key Consumer
Interest Areas
Aggressive Internet Presence Seen
PLEASANTVILLE, N.Y., February 25, 1999--Thomas O. Ryder, chairman
and CEO of The Reader's Digest Association, Inc. (NYSE: RDA, RDB)
today outlined a five-point growth strategy for the company in a
speech to financial analysts and company employees.
The key elements of the growth strategy include:
- - Dramatically expanding the company's presence in five targeted
areas of intense consumer interest -- home, health, family,
finance and faith -- that offer high growth potential and suit
the company's brand.
- - Selling products and services beyond publishing that fit with
the Reader's Digest brand in the five targeted areas, initially
focusing on health and financial services.
- - Continuing geographic expansion, by entering new countries and
expanding offerings in countries where the company already has a
presence.
- - Developing new channels -- including direct response TV and
non-sweepstakes mail -- to market existing and new products and
services.
- - Making the Internet an integral part of all the company's
business by investing in high quality website development,
enhancing current sites and creating new ones.
Mr. Ryder said, "This strategy builds on the core strengths of
Reader's Digest -- our strong global brand, the unique trust we
enjoy with our customers, our unmatched direct marketing
capabilities and our skill in selecting, simplifying and
presenting information for our customers."
"Our plan will allow Reader's Digest to deepen the relationship
we have with millions of customers who are 50 and older -- the
fastest growing and wealthiest demographic -- and to attract new
customers to a range of new products under the Reader's Digest
brand."
Well Positioned For Growth
Ryder noted that as a result of the company's efforts to reduce
costs and monetize assets, it could make significant investments
in expansion. "With an investment pool of $300 million and no
debt, we are very well positioned to undertake an expansion
effort that will improve shareholder value and increase the
company's long-term success," Mr. Ryder said.
Targeted Consumer Life Stages and Interest Areas
As part of its growth strategy, the company said it will sharpen
its focus and seek to establish a strong market position in five
select consumer interest areas: family, finance, home, health and
faith. It will market products and services to consumers at
particular stages of their lives, such as the formation of their
families and midlife retirement planning.
Mr. Ryder said, "We are a general interest company today and we
will continue to create and promote these products tomorrow. But
we will expand within a set of life interests that our customers
care most deeply about. We already have millions of buyers in
each of these categories, but we have a much greater opportunity
before us: to develop a far more varied range of products and
services to sell to current customers and to attract new ones."
These interest areas are also being targeted because they share
four key characteristics:
- - Reader's Digest already has a presence in them on which it can
build.
- - The categories are large and growing information categories.
- - They fit well with the Reader's Digest brand.
- - The need for trust and simplification in these areas is
paramount.
"Reader's Digest can provide even more meaningful products and
services to a broader portfolio of customers by focusing in a
disciplined way on these five consumer interest areas and the
critical life stages -- like marriage, home buying or retirement
- -- in which they often play an essential role," Mr. Ryder said.
Company Will Focus First in "Health" Area
The health category, where Reader's Digest already has
substantial assets, will be the first priority among the
company's five targeted interest areas. Reader's Digest
announced it would significantly expand magazine and book
publishing in the health area. Reader's Digest also will build a
significant presence in health on the Internet.
The company is also considering entry into product categories in
which it could capitalize on its brand strength and direct
marketing skills, including the direct mail pharmaceuticals and
vitamins business. Direct market pharmaceuticals is a $10
billion business that has grown 30% in each of the last two
years. The company is currently in discussion with potential
partners and acquisition candidates and could enter the market in
its fiscal year 2000.
Expanding Non-Publishing Products and Services
The company identified two other areas where it would initially
seek to expand its non-publishing products and services:
financial services and catalog merchandise.
- - The company's initial focus in financial services will be on
insurance and credit cards, which the company will offer its
customers either on a co-branded or endorsed basis. Ultimately,
the company plans to offer a broad range of insurance, debt and
asset accumulation products, partnering with several leading
financial institutions. Reader's Digest customers age 50+
present the key target market for financial institutions.
Reader's Digest said it expects to select partners by June.
- - In merchandise, the company's efforts will build on the
initial success of the recently acquired Good Catalog Company.
Reader's Digest said it will expand the current nine catalogs and
enhance the Good Catalog business with Reader's Digest branding,
promotion, database management capabilities and a strong Internet
presence.
"Substantial research shows that the Reader's Digest brand can be
extended to other product and service categories -- chiefly to
those where trust and selection are true benefits. There are
enormous non-publishing opportunities," Mr. Ryder said today.
Consumers 50+ Targeted
Mr. Ryder said several new product development and marketing
strategies, such as the introduction of branded health and
financial service products, would focus first on consumers age 50
and older, a significant component of Reader's Digest's database
of names and customers. He told analysts, "We celebrate our
strength with this demographic," noting the growth in the
population age 50+ and their ownership of 70% of the nation's
wealth.
Geographic Expansion
Reader's Digest plans to continue its successful global
expansion. The company has experienced rapid growth in Eastern
Europe, South America and the Far East and expects to continue
growing in these markets as well as identifying new markets for
growth.
Ryder said that following recent visits to China, it is likely
that the company will have a partnership in place to open a
direct market book business by fiscal year 2000.
Reader's Digest currently has the most extensive global
infrastructure in the publishing business, publishing magazines
in 48 editions and 19 languages. To leverage further its global
infrastructure, the company said that it also would seek to enter
alliances in which it would take other companies' products into
markets where Reader's Digest has a presence, acting, in effect,
as an agent.
New Marketing Channels
Mr. Ryder said the company would pursue new marketing channels in
addition to its traditional sweepstakes-connected direct mail
because, "We were missing many people who like our products, but
are not interested in sweepstakes."
The company said it has substantially expanded its efforts in
direct response television campaigns, which focus on the
company's flagship Reader's Digest magazine in the U.S. This
initial effort is designed to generate new customers not reached
by sweepstakes and to build the image of the magazine by
providing people with a contemporary understanding of its
content.
The company is also testing non-sweepstakes direct mail, and said
it plans to market all of its new, non-publishing products
without sweepstakes.
Internet Strategy
Mr. Ryder outlined an Internet strategy with four elements to
fuel the company's growth:
- - Making strategic investments in websites that fit the Reader's
Digest brand and strategy and then using the company's magazine
and direct marketing capabilities to drive traffic to those
sites, which would be re-branded or co-branded with the Reader's
Digest name. The company will invest at least $100 million in
such sites.
- - Using Reader's Digest's unique experience and marketing data
to help launch top U.S. sites in other markets.
- - Using the Internet to enhance the company's other new
businesses.
- - Enriching the content of the company's 20 existing websites
and enhancing their interactivity to make them on-line
communities of interest for Reader's Digest customers.
"With all of these on-line activities, we will constantly learn
more about our customers, their interests and their needs," Mr.
Ryder said.
Mr. Ryder said that a number of the initiatives he outlined today
were already under way. "We are balancing the urge to `get out
there' with the need to test and to find the right value
propositions, partners and talent to help lead our initiatives.
Once we have done so, we will rapidly expand and migrate these
concepts to other markets around the world."
The Reader's Digest Association, Inc. is a global publisher and
direct marketer of products that inform, enrich, entertain and
inspire people of all ages and all cultures around the world.
Worldwide revenues were $2.6 billion for the fiscal year ended
June 30, 1998. Global headquarters are located in Pleasantville,
New York.
