Print Focus: In sickness and in health

Even in France, where many suppliers have been credited with having a negative impact on the UK paper and print sector in recent years, uncoated fine paper manufacturer Pont Sainte Maxence (PSM) was forced to call in the administrators.

These body blows aren’t the only strikes to be felt by the sector and, as speculation continues to circulate of redundancies at print firms throughout the country, doubts remain over the industry’s long-term stability.

However, there are some firms that continue to buck the trend. In the paper sector, Tullis Russell, for example, recently reported underlying profits had almost trebled to £1.4m. It’s news that should give heart to others operating in the field and it appears success is there for the taking – although it’s going to take a lot of hard work to get there.

Fighting

“The market is very difficult,” says Angus MacDonald of Glasgow-based printers, CCB. “We’re all fighting for the same piece of cake and the pieces are certainly getting smaller for everyone.

“Those that are picking up their slice of the business are doing so by selling aggressively and by being cost-effective. I have to say, I don’t recall the market ever being so tough.”

MacDonald admits that CCB has been hit by the current market conditions. He says the firm’s estate agency portfolio has reduced by almost half, but reassuringly, other areas of the business remain strong. However, he believes the fate of businesses rest on how they’re run and that a well-organised team should be able to overcome any trials they’re put through.

“We could all blame the economy, but it wouldn’t have hit print firms this fast. I’m absolutely positive that in the case of the printers that have been forced into administration, there have been other issues that have contributed to their downfall. It’s a real shame for the sector – no print firm takes pleasure from seeing a fellow business collapse.”

Kevin Creechan of J Thomson Colour Printers says the competitive market has seen high levels of capital expenditure, which has led to rising debt levels, which could be catastrophic for the sector.

“When times are good companies have a chance of recovering enough to cover this debt, but as soon as there is a recession of sorts the cash dries up and there is nothing left to pay the debts off. The result of this is that companies in trouble chase volume and further depress the market in an effort to survive. Over capacity still remains an issue although the number of printers has contracted of late due to the current economic climate.”

However, another print specialist with a theory as to the current conditions is Simon Bucktrout of Team Impression, who believes it’s the companies that devalue the service which will crash and burn.

Too cheaply

“The main reason firms are struggling, without question, is that they’re offering their services too cheaply,” he says. “They treat print like it’s a commodity, so inevitably their selling point is about price. This has been a trend for quite a while and it does have a big impact on the market. To an extent, it’s dictating the price the rest of us have to charge.

“If you talk to a print buyer, they’ll point out things like loyalty, relationships and service as major factors in their purchasing habits, but if they’re offered a £5,000 print job at £1,000 cheaper, eight out of 10 would take that option. However, in most cases, it’s the printers that offer this that eventually find it difficult to compete against printers that can offer a wider number of services and continue to invest in their skills and facilities.”

Matt Emmott of ProCo, agrees that there will always be people that take a dive on price to win work, but believes that it’s just a case of holding your position whenever you can and seeing it through. “You hope buyers will recognise the benefits you offer beyond price and that they stay with you,” he says.

“Occasionally, we have had to lower prices here or there, depending on the situation, but because of the type of work we do - such as campaign management - we’re usually able to hold firm.”

So is holding firm on price the only way to overcome the challenges of the sector?

Graham Congreve of Evolution admits the market has been up and down for the fledgling firm, but says new business is healthy at the moment. “The common factors making life difficult are increases in commodity prices that are difficult to pass onto our customers. Add to this the rising costs and availability of credit and finance for capital projects. You get through it by tightening belts and controlling costs – looking at all our costs and re-negotiating where we can. We’re really working with our clients to maximize budgets for projects – they are in the same boat as us. We’re constantly seeking out new and more niche markets.”

Differentiation

Frederick Pollock, managing director Scotland and Ireland, for RR Donnelley is also ready to dish out the advice when it comes to pushing forward and fighting off the market hazards.

“In a highly commoditised market, vendors have to focus on developing value adding propositions to their clients in order to differentiate themselves. Investing in an end-to-end communication management portfolio is difficult if you only have a print or print management base to start from and many companies are faced with price reductions as their only competitive tool and this, of course, is not sustainable.

“Clients now also want closed-loop solutions that control both outbound and inbound communication management so vendors will need to be able to manage both of these components. This will require significant investment and, in many cases, will be outside of their core competencies.

“The market will continue to evolve from commoditised print and print broking to encompass more sophisticated communication-oriented propositions.”

Emmott, however, believes there’s another type of investment that is easily overlooked, but which could hold the key to a fruitful future.

“It boils down to investment in people,” he argues. “The way printers look after their clients is really where they are made or fall down. Too many struggle to grasp the challenges faced by their customers. To help customers with this, printers need to be flexible. You also have to be lean. Three years ago we invested in new premises and after such a big investment, we needed to run a tight ship. Because of this, the organisation is well suited to operating in a tight financial climate. You never know what’s round the corner, but being lean perhaps puts us in a better position than most.”

The businesses that are continuing to eke out profits may have differing views on the route causes of the difficult market and on the solutions for overcoming them, but as Bucktrout concludes, there is one thing they’ll all agree on.

“In the end, all you can do is hope that the cream will rise to the top. We need to stick to our guns, and ideally our prices, for as long as possible and hope that clients see the value in what we provide.”