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Catalina rides electronic coupon trend

Manufacturers' attempts to overcome their addiction to supermarket coupons has been good news for Catalina Marketing Corp.

At least that's the spin being put out by the high-flying St. Petersburg company that churns out coupons from checkout counters of 10,000 supermarkets across the nation.

"We think it has been the driving force behind our recent increased contract backup," Catalina president George Off told shareholders at the company's annual meeting Tuesday. "Manufacturers are looking for more efficient ways of spending their marketing dollars. This trend already has moved business our way."

A few industry giants have been trying to drain some of the profit-gobbling sea of discount coupons that consumer products makers use to push their brands.

Four out of five consumers say they use coupons regularly. But only about 2 percent of the 300-billion coupons distributed annually are cashed in. So some big players are trying cut rising coupon costs.

Proctor & Gamble Co. cut off all its coupons in Buffalo, Rochester and Syracuse, N.Y., this summer in a test that included lowering its prices. Kellogg Co. chopped coupon distribution by a third this year, and many cereal makers have shrunk the length of time their coupons are valid. General Mills cut $175-million from its coupon promotion budget two years ago and lowered prices by 11 percent. Clorox Co. and Kimberly-Clark Corp. both planned so-called zero coupon tests this summer but later backed out.

Under particular scrutiny is $7-billion used to promote products through mass media such as newspapers and direct mailers.

Officials at Catalina, a so-called data base marketer that claims a redemption rate about four times as high as mass media, think the company's growing array of more targeted services are becoming a more attractive alternative to manufacturers.

So far, Catalina coupons are used mostly to get consumers to change brands. Buy a pack of Winstons at a supermarket, and Catalina's dispenser will print you a coupon for a competing brand. As a result, mass market media coupon distribution remains by far the preferred choice of most marketers and retailers who use coupons to prospect for new customers and reward loyalty.

So Catalina is trying to broaden its appeal. It also is offering other services ranging from an instant sweepstakes suitable for individual store promotions to a system that tries to predict consumer behavior. Both are aimed at consumers outside the store.

It has built a data base that tracks the supermarket shopping habits of 18-million households in big city markets. The system, still in its early stages, links purchases to a household address through credit card, check cashing card or shopper loyalty programs. The system, for instance, can be programed to send a coupon to a buyer of toothpaste a week before the last tube they bought in the same store runs out.

Indeed, Catalina has the attention of giants among consumer products companies. The company was founded with the help of Proctor & Gamble. It now distributes coupons for more than 130 consumer products companies ranging from Nestle to Kraft and Campbell's Soup.

In its 13-year history, Catalina has grown into one of the world's largest in-store coupon marketers. Currently, it employs 580 people.

Catalina's revenues topped $134-million in fiscal 1996. In the past three years, its annual revenue increases averaged 23 percent and earnings per share grew by 40 percent a year. The company's stock doubled in value in 1996 before sliding more than $4 a share in the past week.

Catalina's stock closed Tuesday at $42.87{, up 75 cents.