No one can deny that 2007 was an eventful year, testing the business savvy and agility of some of the industry’s most seasoned players. Last May’s postal rate jump (with another increase slated for May this year) coupled with a weak U.S. dollar presented significant challenges for catalogers trying to maintain control of production costs.
Next to postal rates, paper poses the greatest challenge to most catalogers. The dip in the value of U.S. currency and the strength of the Canadian dollar have led to considerable downsizing among paper mills. Last year, Domtar, Fraser Papers, Tembec Coated Paper Group, UPM-Kymmene Group and Wausau Paper all announced mill closings.
Barring fluctuation in monetary exchanges, the driving factor behind these developments is simple supply and demand. “There’s been a balance strongly in favor of demand for some time now with a lot of excess supply. That has now changed,” says Peter Wilson Jr., vice president of paper procurement and supply chain at printer Quebecor World.
The price increases were also triggered by historically inadequate returns on investments for paper suppliers. “Paper companies have been losing money in many cases, if not most,” Wilson says, “and they need to get to a reasonable rate of return for their investors. They’ll raise prices accordingly if they can.” As a result, supply and demand is in a position where the suppliers are raising prices.
Then again, rising paper prices aren’t necessarily demand-induced. Michael Wade, vice president of business development at Wade Paper Corp., argues that paper price hikes are due to the cyclical nature of the business rather than any significant demand increase.
“Mills aren’t making money, and clients that need paper are confronted by their own challenges, such as postal increases,” Wade says.
Trim, Trim & Trim Some More
Catalogers have responded in familiar fashion by trimming the sizes of their publications in combination with decreasing basis weights. In reaction to prior price increases, catalogers printing on 70-lb and 80-lb free sheets moved down to coated blend and mechanical products, points out Don Wallace, vice president of commercial printing sales at paper supplier AbitibiBowater. This is happening again. Those who were printing on 40-lb coated mechanical can now explore their options on supercalendered (SC)-A and SC-B. (SC paper is calendered groundwood paper made using alternating chrome and fiber rollers that makes a very smooth, thin sheet.) Or those on coated free sheets can drop to coated mechanical products.
Some catalogers choose to target only specific pages within their books to reduce basis weights. For instance, many catalogers once used uncoated, 50-lb, white, offset free sheets for order forms. One way to cut the weight of that order form is with a hybrid sheet, which features a blend of kraft pulp and mechanical pulp.
Same Feel, Less Paper
Jim Colwell, vice president of national accounts at AbitibiBowater, which manufactures a hybrid sheet, explains that the kraft pulp gives strength and brightness to the paper, while the mechanical pulp yields more fiber from a tree and thus uses less fiber to make the same amount of paper.
Colwell says the paper’s feel doesn’t change between 50-lb and 45-lb, but you use less paper. A 1,000-ton job, for instance, would use 10 percent less paper — or 900 tons. Beyond order forms, some catalogers mail sales supplements at lower grades, but they’re still bound into their traditional books.
Customer response to lighter grades of catalog paper has been mixed. Wilson says some catalogers “seem to be clever enough — or their customer base isn’t as sensitive — that they can lower their basis weight, the brightness of their grade, and essentially reduce the overall quality of the paper without materially impacting their response rates.”
Some catalogers have tested the waters by using different paper grades for different geographical markets, points out Wallace. Catalogs sent to New York addresses, for example, may be printed on coated mechanical, while those distributed in rural regions are printed on SC-A.
Though customers may not notice a difference in quality, catalogers still might not get the same results if they downgrade. A 40-lb #5, for example, isn't going to deliver the same brightness and surface characteristics as a 45-lb #3. This requires catalogers to work with their printers to determine how to achieve the best image quality possible.
Wade suggests that catalogers seek mills that actually profit from the basis weight papers they provide. If the paper grade you purchase serves as a loss leader for a mill, the paper’s quality might be questionable.
Non-Paper Savings Options
Not all paper-related savings should come directly from paper purchases. Improved list hygiene, tighter prospecting, versioning, changing book size, co-mailing, co-binding and other cost-saving techniques are equally important according to Wilson. And Wade notes that many of his clients had their greatest successes through list cleansing and target marketing: “A lot of our clients have already reduced their basis weight to the point where they feel they're going to affect their branding image.”
White Flower Farm, a Torrington, Conn.-based plants and gardening products cataloger, focuses on making the best use possible of the company’s Web site. “You have to evaluate whether all of those products you put in print deserve to be in print, and you tie that in with your Web site,” says President/CEO Lorraine Calder. “We’re looking at that, as well as how many books go in the mail [and] how frequently to remail the housefile. Or, if we can effectively let people know about the product in a smaller amount of print space, then they can go to our Web site for more details.”
By doing this and through its lucrative program supplying plants featured on pages of Meredith Corp. magazines, White Flower has averted the need to downgrade paper quality. What’s more, while Calder doesn’t rule out downgrading its catalog paper, she’s leery of doing so since it might compromise the company’s brand image. For now, as is the case for many of her peers, the emphasis is on mailing smart.
“We have to find a way to sell product without putting as many books in the mail,” Calder says. “We have to get that response through one major mailing and the other marketing initiatives, whether that be print ad reminders or e-mail campaigns.”
When catalogers do seek better pricing on paper, they need to go to the bargaining table with a set of standards, says Richard Holben, paper sourcing manager at Allentown, Pa.-based business-diary/planner cataloger Day-Timers. “We’re always looking for different paper stocks that are available for substitution when needed,” he says. “That new stock of paper must meet the quality specification for each product, however.”
Tougher to Negotiate
Day-Timers works with vendors who've arranged competitive pricing, but Holben notes that price negotiation is becoming harder. “That challenge will be with us for the next three to five years,” he predicts. “It seems that the remaining paper companies will be in the driver’s seat, and we customers will be paying more if we purchase the same paper.” Day-Timers’ strategy is to buy as much standard paper as possible, avoiding specialty papers whenever it can.
Before committing to a full-blown change in paper quality, Wilson encourages catalogers to conduct test runs at the end of regular runs. This way they can determine how far they can go in downgrading paper quality while still achieving maximum returns.
Rather than changing anything, Wilson suggests adding it onto an existing run on the end “as long as the press doesn’t have to go through a major setup change. Then see how it performs.” The printer will know what can be done with various paper stocks to create the best possible printed image.
Some sacrifices have to be made in print image as lower quality paper stocks replace better and heavier paper, Wilson notes. “If those trade-offs don’t negatively affect the financial results for the catalog client, then everyone wins.”
Carolyn Heinze is a freelance writer/editor based in Vancouver, B.C., Canada. You can reach her at carolynheinze.blogspot.com.
- Companies:
- Bowater Inc.
- Quebecor World Direct