Is a Paper Shortage Coming?

Written by Travis Mlakar

Is a paper shortage coming, as a popular blog may suggest?  No.  What is coming, however, is a seismic change that, in order to ensure a proper flow of material, will require a commitment from the entire industry – from mill to merchant to printer - to align more closely with each other for the future. Let me explain…

As the industry continues to wrestle with secular decline, it is starting to accept reality.  The prices at which paper has been selling are too low.  Too many mills, particularly on the coated side, are not making money. (Look at Verso and NewPage who both reported massive losses in the first quarter of this year, as well as Sappi, who had to make adjustments by reducing 5% of its US workforce).  So mills are facing a situation where they must make more money to be financially viable, and they must do so while selling fewer tons into a market with declining demand.  That simply means their price per ton must go up.  This isn’t wishful thinking; this is survival.

What the rest of the industry must now accept is the lowest price is no longer necessarily the best price.  The lowest cost (and there is a huge difference between price and cost) of a quality product that one can get from a financially viable supplier (and this is true for mills and merchants) is the best solution.

So, why are some analysts saying there could be a shortage?  Simple economics are forcing mills to reduce capacity to bring supply and demand into line and ultimately drive up “per ton” prices to sustainable levels.  When mills do this, what “tons” are they walking away from?  The simple answer is: the lowest priced and least loyal ones.  Mills are walking away from transactional business. I just talked with one of the largest manufacturers in North America who said 10 years ago, 30% of their volume was from spot or transactional orders.  Today that volume is under 10%.  Producers are no longer willing to play in that arena because they realize the price on those tons is completely unsustainable.  This may lead to a “shortage” per say for buyers who are used to bouncing their business from supplier to supplier to find the lowest price.  They can still try to do this…but their orders will fall to the bottom of the priority list, pushing ready dates out and creating the impression that “there isn’t enough paper.”

The key now is to align tons with a set supply chain.  Manage costs, not prices.  Find ways to lower total procurement expenses (cost to quote/acquire product, freight, inventory, invoicing, etc.).  Develop and maintain a steady, sustainable supply chain that will help you turn orders quickly and service your customers consistently.

Remember, you get what you pay for.  Isn’t it time to start paying for sustainability, reliability, service and support? If not, don’t be surprised to find customers looking elsewhere for partners who do.

Print Plays a Role at SXSW 2014

The last thing you'd expect a tech company to create in terms of marketing for an interactive conference would be a print magazine - that's exactly why it works.

 Laura Lorek, founder of Silicon Hills News created a print magazine for this year's SXSWi conference happening this week in Austin. The magazine highlights techresources and entrepreneurs in Central Texas. To fund it, Lorek ran a Kickstarter campaign, which brought in US $9,300, beating her fundraising goal by more than 25%.

Why a print product for SXSW? Last year, at a session on startups, she received a magazine and thought it was a great idea. Another news site also did a newspaper last year. They handed it out every evening. She remembered thinking how cool that was. "It's basically nostalgia for a print product."

SXSW has been experiencing a resurgence in print & paper marketing. The pendulum has swung from the old days when the gift tote bags were so full of paper that attendees complained and the recycling bins overflowed with marketing materials. So now few companies hand out paper. That's where an opportunity exists to put something physical into the attendees hands, especially local people who will bring it home or back to the office and share the magazine with others. That paper drives traffic to the website. Eventually, she'd like to publish a monthly digital magazine available in PDF form online and produce a paper magazines for special events.

This is theme we're seeing over and over again in the industry. Just a few days ago the Wall Street Journal did a front page story on our friends at Mohawk and how they are turning a commodity into a keepsake with their business strategy. Lorek's experience at SXSW is just one example of proof it's working. When print and paper are positioned as a commodity, the conversation can only boil down to one thing - price. So why is the industry having such a hard time shifting the conversation?

Morton Salt Logo Redesign

The iconic Morton Salt girl got a slight makeover recently in honor of the brand's 100th anniversary.  The changes to the iconic brand figure are so subtle, one wouldn't even notice. Not the case with the update to the wordmark. The new logo features a more current font yet still holds onto the strength of original wordmark - note the bold, all-caps type. The major change lies in the letter "R" which now has a little kick to it, mimicking the Morton Salt Girl's step.

Two New York, NY-based agencies were involved: Pause for Thought designed the new logo and packaging (not shown, yet) and Addison developed the master brand positioning and 100 anniversary branding.

Just Ask

Written by Gregg Schuliger, Director of Packaging, Millcraft

In my everyday conversations with customers, one thing I find common across many industries is that companies are doing more with less. Whether it’s manufacturing, service, fulfillment, or distribution, these sectors have employees stretched to the limit when it comes to multi-tasking.

One area that often gets overlooked in each of these industries is the costs associated with packaging. Why? It’s not that companies don’t place a priority on packaging--- ever seen the packaging for food, liquor, toys, or cosmetics? It’s high-end, high-quality, and high-dollar!

Packaging costs sometimes get overlooked because as costs for these expense retails packs rise, the focus, unfortunately,  shifts to packaging material costs. And, this is where your opportunity to do a lot more with less gets fun!

Sure, you can place your packaging spend out for a competitive bid or third party “on-line” auction. Next, you’ll have at least 6 packaging suppliers providing you a price on similar, if not equal, materials.

In essence, you’re bidding out the opportunity to industry packaging experts to “get what you’ve been getting!” And, in return, what do you get? What do you really get? A low price!
To really expose and reduce your packaging costs, you must address the many underlying costs that creep up on companies and become the “hidden costs” of packaging. Costs such as product damage, re-work, excess material, shipping, and procurement can invisibly escalate when packaging goals are not understood.

Packaging can make or break your product’s success and your company’s bottom line! Ask for a free packaging evaluation from your Millcraft packaging specialist and we’ll help you uncover the hidden costs of packaging while showing you how a product-neutral approach benefits your company’s goals.

Want to make more money and better understand packaging? Just ask Millcraft.

Print: You Touch it, it Touches You

Earlier we told you about the newest promotional piece from our friends at NewPage - Ed 15: Interactive Print. If you haven't seen the piece, you have to ask your Millcraft rep to get you one - in the meantime, check out this short video detailing the highlights of the piece. This is must see video for the marketing team.

It’s OK to be a LOSER!

Written by Gregg Schuliger, Director of Packaging, Millcraft Paper Company
Recently, I was called into a large manufacturing company to learn they had contracted out their packaging spend to a consulting firm. When I asked them questions relative to their goals and how they were going to measure their client’s success, the consultant simply said, “We’re going with the lowest price on each item.”
Scenarios like this play out every day as companies line up at the starting line to participate in what I call, “The Race to Zero.” Here’s my advice- BE A LOSER and refuse to WIN the race to zero!

During our discovery phase, the large manufacturing company thought they were paying for one item and, in reality, were paying for something else. Older equipment and tight workspaces did not allow an opportunity for an increase in workflow, resulting in status quo productivity. In essence, though they had low pricing on packaging items, their cost of manufacturing actually rose! Lowest price per product was preventing them from maximizing their profit per product! Hence, they were racing to ZERO!
There are options available to you other than spending millions of dollars to hire outside consultants only to have them tell you to put your packaging expenditures out for auction. In our time with clients and prospects, we help you uncover impactful opportunities that save money, increase productivity, and positively impact profit.

Often, accepting the status quo can be human nature’s enemy! The first question you must ask yourself is how does your packaging fit into your company’s long and short-term goals. The second question is do you really want to win the race to zero?
Refuse to WIN the Race to Zero--- the one race where it’s OK to be a LOSER!

Another Epic Logo Re-design Fail

What happens when a logo-redesign fails? If you're JCPenney, the CEO gets fired and a former exec reclaims the post as was the case after its epic logo debacle.

Back in 2011, in an effort “to become America’s favorite shopping destination for discovering great styles at compelling prices,” the retailer announced it would be celebrating with a “bold new logo”. That new logo was designed by a third-year graphic design student at the University of Cincinnati.

Nevermind that the winner was crowdsourced, an unsettling trend but one that doesn't seem to be ending any time soon - this was a $17 Billion company thumbing their nose at the process. Fast forward to three years of massive layoffs, alienated customers and a near BILLION dollar loss and they end up right back where they started. (I still don't get how they couldn't see how closely it resembled the Gap's logo redesign - and we know how well that went over).With its new former CEO at the helm and its tail between its legs, JCPenney issues an apology ad

After thoroughly confusing its customers and itself, they dropped JCP and go back to being JCPenney.  I don't know about you, but I've never heard anyone reference it as "JCP," but I have heard "Penneys."  Additionally, the  retailer nixed the "jcp" square logo, and dropped the all lowercase lettering and go back to the logo of 2011. In the end it looks like they're playing it safe - at least for now.

How Will Limited Resources Impact Your Business?

Written by Travis Mlakar, President, The Millcraft Paper Company

We are in a world of limited resources.  Limited time, limited capital and limited capacity.
Our industry is in the process of being turned on its head.  Gone are the days of good and plenty -  where there was enough capital, customers, resources, time, suppliers and tons to go around.  Now, we are in a world with limited choices on the supply side (count the number of domestic coated suppliers today versus 20 years ago).

In the last few months there have been three significant changes in the uncoated free sheet market (UFS) which will impact your business:
  • First, IP closed down their Cortland Alabama facility taking 750,000+ tons out of the market. 
  • Second, Boise was purchased by PCA and has announced capacity reductions of just over 100,000 tons. 
  • Third, Georgia Pacific has also made changes in their facilities and network which resulted in just under 100,000 tons being removed from the market.
What's the impact?  In 2014 the UFS capacity in North America will 10,500,000 tons to 9,578,000 tons.

If demand declines at just 3% (one of the more optimistic views) then it will fall to 9,091,000 tons in 2014.  That would put our industry, barring new capacity coming online or new entrants, at a 95% operating rate.

What does a 95% operating rate mean?  It means you will have a tough time getting paper.  It means allocation.  It means long lead times.  It means rising prices.  And, it means that those customers who over the years have shown the least loyalty (bouncing their tons between the lowest bidder) will be put to the “end of the line.”  They will find they don’t have the tons available and their prices will go up more than anyone else’s (it's logical in a time of price increases to bring the “bottom” up first).
So, as you look forward it's time to do so strategically.  Stop looking at the future as transactions you need to navigate through.  If you do, then you are bound to get caught in a world where tons, time and capital will be better treated elsewhere.

Can We Stop Talking About Price and Start Talking About Value?

Written by Travis Mlakar, President, The Millcraft Paper Company

The conversation in our industry must change from talking about price to talking about value.  What does that mean?  Let me explain…

Prices reflect the cost of a product.  What you are willing (or what you must) pay in order to get something. The price is irrelevant.  It’s the value that you perceive you are getting in exchange for the prices you are being asked to pay that matters.

Lets take paper.  The price you pay today, for offset, is the same price you paid (in inflation adjusted dollars) 15 years ago.

Source: RISI
The issue is that the perceived value end users are getting from printed material may not be as much as it was 15 years ago.  Why?  Well, that’s simple a lot has happened in 15 years and we have not done a good job of redefining the “value” that print and paper brings to the table.

Consider the fact that over the last 15 years the advertising world and the world of communication has changed dramatically with the advent of the internet.  Things today are interactive and immediate.  They weren't 15 years ago.  So, what do we need to do in order to “re-position” the value that print has in today’s new world that is dominated by interactivity and instantaneous gratification?  How about play up to print’s strengths.

Print allows you to slow the conversation down.  Take your customer out of a world full of distractions and multitasking and allow them to focus on what you are saying.

Have you ever sat with a 8 – 15 year old and had them watch TV?  If your house is like my house they have an iPad on their laps.  They are watching something on that iPad as well as watching the TV (drives me nuts)!  So, my question to you is… how much are they really paying attention?  How much are they really focused on the advertising message that is being delivered during commercials or in the margins of their iPad? Now, watch them when they actually unplug.  Watch them read Harry Potter or a magazine. Amazing they only have one thing they are focused on. One thing that has their attention. Where does your message make a greater impact? The key isn't the cost of the paper or the printed advertisement. They key is the value that your message will receive in an unplugged, focused world versus the multitasking, blinking, distracted world of technology.

So, the next time someone wants to talk about price… ask them about what they value.  Ask them about what is critical to them.  Its not what they are paying that’s important… its what they are getting.

NewPage Launches Ed 15: Interactive Print

NewPage is at it again.  They recently launched the 15th edition of the their Ed series: Interactive Print.  Everyone knows paper has been around forever, it's the original communicator. This new educational promo illustrates just how paper + print keep getting better. Finding new ways to connect not only to the audience but other media, proving yet again, print is more vital than ever.

The promo, printed on Sterling Premium and designed by Froeter Design, is broken up into three sections.  The first is True Interactivity, this section offers great ammo for the print reps out there. It's chock full of good stats and case studies like the direct mail campaign for the Milwaukee Brewers targeting ticket season holders. The Brewers used VDP a few years ago to address lower than normal season ticket renewals. In the second phase of the campaign, they first mailed a card with a photo showing an empty locker with the recipient's name above it (between the team's two star players) with a phone number an invited them to call. It was mailed around Valentine's Day in a red envelope.  The second piece was a puzzle, that when assembled was missing a piece - the ticket season holder. The recipient was again encouraged to call. Over 12% responded, resulting in excess of $1 MM in recovered lost revenue.

The next section is all about touch, featuring some amazing print production.  There's an orange die cut to encourage the reader to peel the orange and see what's behind it. Another one is a promo touting the benefits of sunlight printed using photochromatic inks - so when exposed to the sun the message is revealed.  There's also a good one promoting thermochromatic inks that's sure to leave a lasting impression on a print buyer.

The third section is called the gateway and is all about using print as an effective bridge to other media. Print can leverage its advantages—its accessibility, simplicity, its emotional connection—to steer readers to a website, a video, an e-catalog or other location. Once again NewPage uses the Layar app to illustrate Augmented Reality featuring an example on the Lincoln MKZ literature that agency Latch + Associates created - showing how the creative team took it a step further and enabled users to experience traveling back to the future in vintage Lincoln product shots. Very Clever.

Bottom line is whether you employ traditional print techniques like die-cuts or integrate new technology like augmented reality - print is truly interactive and provides the marketer with the ability to connect to both the reader and other media. How's that for ROI?