Scrapbooking: Capturing Memories And Profits –

Theres no doubt that scrapbooking has officially become a craze. The hobby has been given its own National Scrapbooking Day (May 7), universities such as Ball State have created scrapbooking clubs and there are even reports that high school seniors are bypassing the normal after-prom festivities for scrapbooking parties. Nevermind the endless tour of scrapbooking conventions, retreats and expos that take place every weekend.

The statistics backing this trend are even more staggering. The industry generates roughly $2.55 billion in annual scrapbook related sales, according to Creating Keepsakes magazine, with one in four households in the U.S. taking part in the hobby. Moreover, 75% of croppers, as enthusiasts are called, spend at least $25 on supplies each month and, on average, the estimated value of stocked supplies scrapbookers own comes out to roughly $1,853.

The only remaining question is, does this trend have legs? There has been some speculation that scrapbooking will eventually peter out like the fads that once engulfed Beanie Babies and Tupperware parties. However, if private equity interest can serve as any sort of indicator, than the smart money is betting that scrapbooking is here to stay.

Advent International is the most recent firm to put money into scrapbooking with its acquisition of Making Memories, a former Peterson Partners portfolio company. Meanwhile, FdG Associates has built up its scrapbooking platform with acquisitions of Colorbk Inc. and Quincrafts Corp., and J.W. Childs Associates has seen its Esselte office supply portfolio company expand into the hobbyist markets through its Xyron subsidiary. Also, North Castle Partners and Tarrant Venture Partners (the Texas Pacific Group-backed VC firm) have an investment in, an online arts and crafts business.

It is and has been a terrific industry, said Steven Collins, a principal at Advent. Scrapbooking has been growing rapidly for the last five years or so It has become fashionable and really seems to have grown, as people have become more family oriented following the September 11th [terrorist attacks] and the dip in the economy. Also, the general population is getting older, and thats generally when people start taking stock of their life.

Moreover, the introduction and proliferation of the digital camera has also goosed this trend, making it easier to take and develop pictures.

Looking for that green-tinted, cotton-based paper

Even if growth does wane, there are already a number of folks that have profited on the craze. Peterson Partners, which sold Making Memories to Advent, reaped gold out its two and a half year investment. The firm acquired a control stake the company in January 2003, and in March the following year, acquired the balance of the company that it did not already own.

Making Memories was founded in 1997 by Bridgette Server. The company began as a retail store, and then early in its existence morphed into a reseller of scrapbooking products. It manufactures and sells books, papers, tools such as paper piercers and universal eyelet setters, cards, stickers and hard and soft embellishments.

At first Peterson partnered with Server, but eventually the firm brought in Fiskars Vet Steve Ruelle to run the company. Peterson Partner Rick Stratford, for a time, served as interim CEO during the three months it took Peterson to find Ruelle.

Under Peterson, Making Memories focused on growing its customer base and building its infrastructure to handle the rapid growth. When we first came into the business it was more of a mom-and-pop operation, Stratford told Buyouts. It was run by some very good entrepreneurs, but we helped institutionalize the company and added the infrastructure necessary to keep up with its growth. The company now sells its products to such retailers as Target, Michaels, Jo-Ann Fabric & Crafts and Office Depot, as well as a number of independent stores. Also, the company has just started a pilot program with Staples.

The sales during Petersons ownership grew from $19 million annually to $45 million today, and EBITDA expanded by a robust $350%, although no numbers could be disclosed. When youre working in an industry that is growing so fast, in the double digits, the biggest concern is being able to manage that growth, Stratford said.

Stratford did not disclose how much the firm was able to profit on the sale of the company, although he did indicate the investment yielded a more than triple-digit IRR and return multiple that was a lot more than 10x the investment.

Going forward, Advent’s Collins believes the industry and Making Memories will continue to see steady growth. Its not like this has happened overnight. The growth rate has been in the low double digits and it has building gradually. There are still plenty of retailers out there that dont offer scrapbooking products today, so we believe there is plenty of saturation left to go. In regard to the overall industry, he added, I dont see this trend peaking and then just going down. That would be akin to people overnight just stop playing golf.