Pareto’s employees shocked by sudden closure, says former director
October 03, 2013 | Chris Powell | Comments
It began like so many other days at Pareto: calls with clients, working out the seemingly thousands of minor details that go into executing a campaign for a major consumer brand.
It ended with shocked employees leaving the Pareto offices for the last time, the shopper marketing company abruptly shuttered and filing for bankruptcy after more than 10 years in business.
“They were in the middle of serving their clients and then it all stopped,” said former director of marketing Richard Lane, who has emerged as a somewhat reluctant spokesperson for Pareto in the wake of Monday’s surprising announcement.
“It was very unexpected,” he added. “It certainly wasn’t part of a plan to exit or close or shut down over a period of time.”
While the announcement caught staff and clients off guard, many employees continued to work on clients’ campaigns right up until the doors were locked at the end of the day, said Lane. Even into the evening, employees were still on hand at the company’s Richmond Hill, Ont. warehouse facility as trucks continued to pull up to pick up client materials.
“Things were moving quite fast, yet people did not abandon [the company],” he said. “They committed themselves to doing things to help.”
The news was delivered to Pareto management from corporate parent, U.S. private equity firm The Riverside Company, early Monday. It came just as Pareto’s senior management had wrapped up a three-day strategic planning session with what Lane described as an “intense focus” on improving what was admittedly a struggling business.
“We had to do some work to reset who we are, how strong we were going to be and go to market with new strategies; we had new senior leadership that was making great strides and changes and a great plan to move ahead,” said Lane. “Unfortunately that didn’t happen in time to square away some of the other issues that are required to keep the business going.”
The company announced the closure via on online statement that appeared on its LinkedIn and Facebook pages. Written by Lane, the statement said that Pareto had been working to “reset” and create a “better, smarter, faster and further” business model, but that its banking partners decided to “change direction.”
“Within a matter of hours the 10+ year old Pareto marketing machine that grew to over $100 million+ was no more,” said Lane’s post. The closure affects 220 full-time staff at offices in Toronto and Montreal and the Richmond Hill facility, as well as another 1,500 part-time staff.
While it has been reported that Pareto had lost two pieces of significant business in Shoppers Drug Mart and Molson Coors, Lane clarified that it was actually just pieces of those accounts that were lost. It continues to hold the national sampling program for Shoppers Drug Mart, for example, although the status of those accounts is unclear.
In 2011, Pareto was acquired by Riverside, which was one of 14 suitors for the company. The company had been publicly traded, but founder and CEO Kerry Shapansky said that taking it private with Riverside would enable Pareto to better focus on business objectives and client services.
In a prepared statement sent to Marketing on Thursday, Riverside called the Pareto closure one of the “tougher decisions” faced by the company, and said it was made with a “great deal of thought” for employees and the community.
Riverside said that during its ownership of Pareto, the company was hampered by a sluggish economy, increased competition that depressed pricing and profitability, commoditization of its in-store printing services and lower prices driven by renewals.
“Riverside invested in operational and technology upgrades to offset these headwinds and also made management changes, adding new management talent earlier this year,” said the statement. “Riverside invested significant capital and operational resources to help Pareto weather the challenges, but was ultimately unable to turn the business around. As a result, Riverside lost its entire investment in Pareto.”
In March of this year, Pareto named former chief operating officer Michael Bechtol president and CEO as part of what it called a planned succession. Bechtol, who arrived at Pareto in 2011, succeeded Shapansky, who became chairman of the board of directors with an active role in strategic planning.
Lane said that several former Pareto employees have continued to service clients throughout the week, and suggested that some may form their own business to continue serving any clients that don’t defect to rival companies.
“The worst part is that we’ve hurt clients and suppliers and people,” said Lane. “You can imagine how it’s going, vultures are circling, but there are great opportunities. Some very strong services in our company are probably going to come back in new companies.”
But the company’s abrupt closure has also left some bitter feelings among former employees. On a post on Pareto’s Facebook page that has since been removed, one former employee described the past 18 months as “a nightmare,” during which he was forced to endure unpaid overtime and promised promotions that never came.
“I feel I was cheated,” said the post. “I had started looking to get out and Pareto had to one-up me by closing its doors.”
Another commenter wrote: “I am very sad that a company Kerry [Shapansky] built was destroyed in such a short time. I don’t for the life of me [know] what happened, but I hope that we rebuild and a lot of us can be together again.”
Several companies have already listed employment opportunities on both Pareto’s Facebook page and a Pareto employees support page that sprang up in the wake of Monday’s announcement.
“It’s been the most bizarre experience you can imagine, and looking at my LinkedIn activity levels I feel like I’m the most popular person in the world,” said Lane wryly. “Bankruptcy can quickly do that.”
Neither Shapansky or Bechtol responded to interview requests from Marketing.