Bostic drew on fast food as his model. Consumers surveys had reinforced his conviction that competing over how fast a processor could deliver a finished picture had gone past the point of diminishing returns. Overnight was fast enough for most people -- now they wanted the same assurance of quality and choice that they could get from symbols like the golden arches. APG's processors would offer it by way of a gold seal on every package of prints. And APG's customers were provided with marketing materials that leaned heavily on the association with Kodak, its "Colorwatch" computerized processing system, and the use of Kodak paper and chemicals. And like the fast-food chains, APG showed its customers how to get people to spend more on every transaction. "Not everyone wants a plain hamburger," Bostic would explain, "so we'll give them doubles and Big Macs, too." In addition to the traditional three-by-five prints, there were four by sixes, four by sixes with a border, photo posters, even photo jigsaw puzzles -- anything that would raise margins and attract hard-pressed retailers to APG.
"We grow because our customers' sales grow," is how Bostic sees his business, and he took care to see that this spirit of partnership was reinforced by his newly acquired companies. Each customer, he decreed, would be provided with a detailed marketing plan complete with a survey of the local competition, a suggested product mix, an advertising and promotional calendar, and detailed financial projections. A customer was allowed to choose a store brand name or one devised by APG -- American Image in one market, American Heritage in another. All were supported with advertising slicks and extensive point-of-sale materials developed by the ad agency that Bostic also had acquired. APG even provided videotapes and workbooks so that retailers could train their clerks to be "certified photo specialists."
It was an ingenious and ambitious program, by all accounts brilliantly executed. But Bostic never expected to reach his goal of a billion-dollar company simply by processing film -- the market was too small for that. Instead, he'd planned to use APG as a base to push the company into broader photographic and consumer products. The only problem -- the big problem -- was liquidity, he admitted to me during my trip to Atlanta. After 10 highly leveraged acquisitions, he said, "We're on a financial high wire with no net."
On the day of my visit, American Photo Group's Atlanta headquarters was an orderly place. People were busy but quiet, and the undertone of chaos I usually hear at INC. 500 companies was nowhere present. Bostic himself was relaxed, reflective, and candid. His only reticence was in talking about Kodak, which was both a principal supplier and marketing partner, and one of his major competitors, having bought the Fox Photo Inc. processing net work the year before.
The next day I found out the reason for his hesitation: American Photo Group had been sold to Kodak. Bostic had found his safety net -- a cash deal, terms not disclosed. Industry analysts estimate the selling price at around $45 million.
Selling APG to Kodak had been a strong possibility from the beginning, Bostic admitted after the sale. Convinced that "there needs to be a national network for picture making," he was never sure how large he could build APG before he ran out of money or the ability to borrow it. Besides, the marketer in him was always equally convinced that, once the network was created, "ultimately -- logically -- Kodak ought to own it."
The specific catalyst for the sale had been Kodak's buying the Fox processing network, about the same size as APG. Bostic had bid for Fox as well, one of seven would-be buyers, convinced he needed the acquisition to achieve the economies of scale his growth plan required. But Kodak outbid him, and within two months Fox had taken $2 million in sales from APG. Bostic felt "boxed in" and became convinced he would have to negotiate a sale.
Despite Fox's inroads, Bostic was negotiating from a position of relative strength. In the aftermath of the Fox sale, several foreign and two domestic companies had asked if he would consider selling APG. "It became evident that a network of photo labs had a high value to people in the Far East and Europe -- and Kodak did not want to see that network go away."
The processing industry was changing again, and the consolidation Bostic had anticipated and helped to accelerate had now caught up with him. In a way, the industry seemed to have come full circle. Kodak, once stripped of its role as the leading processor, was now buying its way back, aided and abetted by Washington's decidedly relaxed attitude toward antitrust.
In its own announcement of the sale, Kodak praised Bostic for his marketing savvy and entrepreneurial drive, but left vague what role it saw for him in the new arrangement. "After the transition, his role depends on what his intentions are, and where we end up taking the photo-finishing business," declared Wilbur J. Prezzano, a Kodak vice-president.
Bostic says his intentions have never changed: "to build a $1-billion marketing company, and control it." A long-term commitment of Kodak, he says, "is not in the cards." For him, it's a question of risk -- and he remains convinced that the biggest gamble is in working for somebody else.
He's already out assembling a capital pool with some friends in investment banking. Now that he's refined his skills in the areas of acquisitions, marketing, and operations, and now that he's gathered unto himself a small fortune, his goal is to duplicate APG in a different business -- only this time on a larger scale.
"That billion-dollar company is closer now than it ever has been," Bostic insists. If he turns up on the INC. 500 five years hence, we won't be surprised.
