Penguin paperback book empire turns a new page to restore its profitability

Just about every second, someone somewhere in the world buys a Penguin book. With annual sales of 50 million copies around the globe, the London-based Penguin Books Ltd. has become one of the largest and most powerful forces in British publishing, accounting for more than one-quarter of book production in the United Kingdom.

Its bright, orange-bound volumes are a staple of most paperback fiction shelves, and the company is a cultural institution, publishing titles on everything from George Bernard Shaw's works to John Hersey's essay ``Hiroshima.'' Penguin has become virtually synonymous with the word paperback.

But the company hasn't always been a stunning success story. The publishing industry has changed dramatically since Penguin was founded nearly 51 years ago. While the tubby little Penguin, the firm's logo, has lasted through the years, poor management and stiffer competition in the marketplace in the early 1970s depressed sales.

To revive Penguin's popular appeal after years of drifting, Peter Mayer, a British-born American, was brought in as chief executive in 1978. He turned around the company's finances and under his leadership, Penguin has embarked on a more hard-hitting campaign to sell books to a wider readership.

``Penguin is much more aggressive and under better financial control,'' said Derek Terrington, an analyst at Grieveson Grant & Co. ``Ever since Mr. Mayer has taken over, the company has gone from strength to strength.''

For several years, though, the goal of Penguin founder Allen Lane -- producing good books at affordable prices -- was not enough to keep the company going in the face of tough competition, particularly from big American companies. It had become a stodgy British institution that was not really commercially oriented.

``Its reputation was a little bit staid and reserved, and not strong on marketing,'' said Tony Pennie, a market analyst at James Capel & Co.

Mr. Lane passed on in 1970 and the company was bought by Pearson PLC, the conglomerate that owns the Financial Times and the Longman publishing group. The company floundered for eight years, facing financial difficulties as the public branded Penguin an elitist publisher.

``Penguin was viewed as a company that published books that . . .your parents and teachers told you to read,'' said Mr. Mayer, a large and rumpled man who operates in an office in which virtually every bit of of every wall is covered with bookshelves.

Shortly after Mayer's arrival, the British publishing industry experienced its worst slump in years, a result of an overvalued pound, rising domestic costs, inflation, high interest rates, and a large number of takeovers.

``Penguin had a number of problems which centered on the strength of the pound,'' Grieveson Grant's Mr. Terrington noted. ``The unrealistic level hit book publishers hard.

``Penguin hadn't been amazingly well managed. A squeeze like that on the export market and fast-rising printing costs put pressure on its domestic margin.''

Mayer sees his main challenge as attracting a wider range of readers to Penguin, and he has not been bound by traditional British publishing methods to do so. In an industry that tended to believe that making a large profit is unseemly, he introduced sharply revamped marketing tactics.

Mayer pruned the list of published titles, cut staffing levels, and concentrated the company's marketing efforts on a few key books.

His strategy produced impressive results: from a loss of 381,000 (now about $533,000) in 1979, the company turned in a pretax profit of 11.3 million in 1984.

``He has taught books to shout off the shelf a bit more at the customer,'' said James Capel's Mr. Pennie. ``Penguin is more aggressive in pricing. If Mayer thinks a book is popular and will sell well, he will price it accordingly.''

In addition, Mr. Mayer has put greater emphasis on creating new paperback originals commissioned specifically by Penguin instead of relying primarily on sales of reprints from its backlist, which runs to 5,000 to 6,500 titles.

Among Mayer's most controversial moves, however, has been his decision to publish best sellers like ``The F-Plan Diet,'' about high-fiber diets, and ``Jane Fonda's Workout Book.''

But for literary critics, the greatest offense that prompted them to charge that Penguin is moving away from quality was the publication of ``Lace,'' a novel about four women which is spiced with power, money, and sex.

``It's a poor book by any standards,'' said Richard Hoggart, a prominent literary commentator. ``Penguin is much more middlebrow than the romanticism of memory makes it seem. Its reputation is less respected than it used to be. Mayer made some tough decisions to pull the company out of the trough, but I'm not happy about the methods he has used.''

Mayer, who previously held important positions at both Avon Books and Pocketbooks, is unapologetic about his marketing tactics.

`` `Lace' has been very good to Penguin in many ways,'' he says. ``The most obvious is it earns money.

``Publishing a few books with mass appeal has made our identity open to readers of every kind and to book-selling accounts of every kind,'' he asserted. ``The mass sellers have performed a major role in making us a paperback publisher truly to the public and not just to a portion of the public.''

With Mayer at the helm, the company has come a long way since its original beginning in 1935.

Returning from a weekend in the country visiting Agatha Christie, Mr. Lane, Penguin's founder, was unable to find something good to read at a railway station on the journey back to London.

He then decided to make high-quality books at cheap prices available everywhere. He and his brothers used a mouse-infested church crypt as a warehouse and, in the face of formidable opposition, sold 1 million books within six months.

The first Penguin book ever published was ``Ariel,'' a biography of Percy Bysshe Shelley by Andr'e Maurois, the French writer. Other noted authors on the company's initial roster included Ernest Hemingway and Agatha Christie.