Paper Prices Heading North in Second Half of 2012

Jun 02, 2012 1:52 AM  By

Catalog paper prices will definitely be heading north at the start of the second half of 2012, according to several industry experts. Given the market’s unpredictable demand, “there really isn’t a normal pattern anymore,” says Steve Silver, president/CEO of FutureMark Paper Co.

Silver says input costs (transportation, energy, chemicals, pulp) for paper mills have risen, and most of the largest coated freesheet paper players are either in bankruptcy, just out of bankruptcy or rumored to be headed for bankruptcy, “so no one can afford to just absorb rising input costs.”

What’s more, Silver says, the economy is clearly improving. “Look at retailers like Macy’s, their growth numbers for the most recent quarter. The combination this year of both the Summer Olympics and a presidential election can only increase demand.”

Silver says an interesting trend he sees is more people switching from freesheets to suitably bright, lower weight coated groundwood sheets as a means to lower costs. Today’s less expensive groundwood sheets, particularly recycled ones, often have a great deal of freesheet in them, since the paper is made primarily from old magazines and catalogs. “As a result, they give similar results to the virgin freesheets without giving up too much on archival properties.”

Dave Goldschmidt, senior vice president at Midland Paper, says the majority of major paper companies announced groundwood paper price increases ranging from $2 to $3 per hundredweight (cwt) that will take effect on either June 1 or July 1. The coated freesheet paper price increases of $1.50 per hundredweight (cwt) will take effect during the same timeframe.

Goldschmidt is keeping a close watch on the NewPage and Catalyst reorganizations. Hopefully, he says, “they will follow the same path as AbitibiBowater and emerge as stronger companies. Having more options is always in the best interests of catalog, insert and magazine end-users. NewPage had hoped to emerge somewhere within one year of when it filed for Chapter 11 protection in September 2011, and it continues to optimistically shoot for that target. There is a lot of speculation in the marketplace as to whether further equipment shutdowns will be necessary from these companies. Time will tell, but NewPage feels it did the necessary reductions prior to filing.”

Look to production to offset costs

Given the expected paper-price increases for merchants that mail catalogs, what can they do on the production side during the second half of 2012 to save on costs?

Janie Downey Maxwell, publishing consultant for Media Solutions Group and co-founder of Catalog University, says the biggest trend she sees with catalogs on the production side is bringing all color and photography in-house. “There is a big savings there,” Downey Maxwell says.

Bringing color and photography in-house requires a better digital asset system, which most merchant direct mailers have needed for years, Downey Maxwell says. “The cool thing about the digital asset management investment is that it also helps the web, email and mobile folks find shots they need. The amount of photography a direct marketer has to keep track of these days is growing dramatically with the need for multiple views of each shot, and a growing demand for video.”

On the prepress front, Downey Maxwell says: “One merchant I know went from $25 per page to $2 per page when they brought all prepress functions in house. I don’t know how much you can save on bringing photography in house—but you eliminate having to ship product, and have better control of the end product.”

Angie McClure, print manager at J. Schmid & Associates, says printers and co-mailers are becoming more creative with ways to get catalogs into larger pools by destination, which maximizes the postage savings.

McClure cites a creative co-mailing technique used by printer Quad/Graphics. “Due to its multiple facilities, Quad is able to combine multiple co-mail programs together. So instead of a catalog mailing from only one location, the mail file is sorted and then catalogs are mailed from four strategically positioned geographical locations. This allows customers to participate in larger pools, which leads to greater postage discounts.”

Theresa Barrows, catalog and direct mail manager, digital and direct, for Green Mountain Coffee Roasters, says her company is adding a new software program in the second half of 2012.

The program, which is proprietary to Quad/Graphics and is a studio program, aims to reduce the need to access many different programs and systems for product attributes and details. It streamlines a company’s entire catalog production process, while increasing accuracy, accelerating page production and reducing resource-intensive proofing rounds. It also facilitates collaboration between merchandising, marketing and production departments so the entire team can communicate clearly to implement marketing strategies that connect with customers.

Jaimey Wilman, director of marketing for Action Bag, says there are potential cost savings in virtual technologies.

“One large investment can be photo shoots,” Wilman says. “Between various locations, props and stylists, costs can add up quickly. Using webinars and online photo proofing software allows one to attend the shoot virtually. You can be sitting in your office while watching the action, and instantly review each shot taken and speak directly with the photography team for immediate feedback. This eliminates travel expenses and lets you continue office productivity.”

Another tip, Wilman adds, is to create a digital version of your printed catalog for a longer lifespan. “This allows the marketer to send the digital version via email or to share the link on ecommerce and social media channels. No paper, ink or postage needed for instant access to the latest catalog. Technology continues to enhance merchants’ ability to streamline expenses, get to press faster, and mail smarter.”