‘This Is a Growth Product.’ Scratch-and-Win Lottery Ticket Sales Are Going Gangbusters
Amid the relentless march to all things digital, a 110-year-old Canadian company has found a golden ticket in its printing presses.
Shares of Pollard Banknote Ltd. have more than doubled this year as demand for its instant scratch-and-win lottery tickets surges. The company, the world’s second-largest producer of instant tickets, expects the boom to continue as it eyes expansion in the U.S. and explores new markets such as Brazil.
Scratch-and-win is the fastest growing part of North American lotteries, Doug Pollard, 47, co-chief executive officer, said in an interview at the company’s Winnipeg, Manitoba-based offices. The tickets are largely protected from the move to online sales as the age and location of winners needs to be verified, which can take 24 hours on the Internet.
“It’s an impulse buy and you find out whether you win right away,” Pollard said.
In North America, every Canadian province and 43 U.S. states offer government-operated lotteries and most offer instant or scratch tickets, according to the North American Association of State and Provincial Lotteries. U.S. scratch sales rose 7.4 percent to $44.7 billion in 2016 from a year earlier while sales for Canadian lotteries rose 4.8 percent to $2.2 billion, according to the industry group.
Annual scratch sales grew 24 percent worldwide from 2010 to 2015, according to industry publication La Fleur’s World Lottery Almanac.
“We know the growth in the overall economy has generated greater rates of disposable income, which contributes to the sales growth,” Charlie McIntyre, president of the NAASPL, said in an email. “With instant ticket sales on the rise, lotteries are tailoring their marketing initiatives accordingly, continuing to build sales momentum.”
Pollard Banknote is one of a handful of competitors in the scratch ticket market, which is a growing portion of the U.S. lottery business, said Bloomberg Intelligence analyst Brian Egger. Competitor Las Vegas-based Scientific Games Corp. has surged more than 280 percent this year year while International Game Technology Plc has gained 8.5 percent.
While Pollard Banknote still prints everything from scratch-off crosswords to PAC-MAN games, they also sell inventory-management systems to ensure lotteries never run out of stock, develop apps for mobile phones and create digital products such as a ticket that gives purchasers a second chance to win online, said Doug’s brother John Pollard, the other co-CEO.
The Pollard family holds about 74 percent of the company, according to data compiled by Bloomberg. The shares fell 0.6 percent to C$16.83 at 10:38 a.m. on Friday, near a record high, for a market value of C$396 million ($307 million).
The company expects growth to continue as it eyes new contracts coming up for renewal in U.S. states such as Florida, Pennsylvania and New York and countries such as Brazil move to privatize its instant lotteries. Sales of some of its products, including its booklet of scratch games, are becoming top sellers in markets such as Texas and more states are offering non-exclusive contracts, John said.
The Pollards fell into the lottery business by pure luck. Saults & Pollard, which started out as a general printer for everything from business cards to vaudeville posters, hit a crossroads in the 1970s as photocopiers and new technology threatened their core business. Father Lawrence Pollard decided to change the company’s name to Pollard Banknote so they could start printing banknotes.
While the release of the $1 coin in Canada, dubbed the loonie, stymied that plan, the name stuck.
“He said stop the presses, cancel the order on the new equipment,” said Doug. “We continue to be known for a product we’ve never produced.”
The family shifted into printing items such as bank checks, postage stamps and pull-tab lottery tickets sold in legion halls. Their big break came in 1985 when the Western Canadian Lotteries Corp. awarded them a contract for scratch tickets. The company grew steadily in Canada and the U.S., which now accounts for more than half of total sales, and went public in 2005. Doug was inducted into the Public Gaming Research Institute’s Lottery Hall of Fame in 2015.
While most sales happen in convenience stores, the company is hoping to broaden its retail footprint with the help of vending machines in Canadian grocery stores and other retailers to offer scratch tickets at checkout in the coming years.
“They are the star of the lottery world,” said John. “This is a growth product.”