Thanks Warren and Russ for your comments on my last entry. You both make good points, and the bottom line is that mills and printers have a common interest and a common problem. For the mills to push prices beyond what printers can pass on is shortsighted. For the printers to expect the mills to sustain losses year after year, effectively subsidizing printers, is also shortsighted.
So, how do we make the relationship cooperative rather than adversarial?
This story goes back 15 years or more. When I was a mill sales rep with Domtar, I often felt like the printers were the enemy. There was excess capacity. Prices were low, and falling. The mills were losing money, and taking downtime for lack of orders. Sometimes we would get an order, only to have the price renegotiated afterward or the order cancelled entirely when the printer, or maybe the merchant, would get a better price somewhere else.
This was frustrating.
Later, when I was in a marketing role, I had the opportunity to hear Don Gain of Harmony Printing in Toronto speak at an association meeting. Don outlined the problems that the print industry was facing: overcapacity, low prices and declining margins. This sounded all too familiar. I chatted with Don afterwards, and we agreed that mills and printers did in fact have a common problem and needed better communication.
Soon after, I created Domtar’s Printer Advisory Council and invited a number of printers, including Don, to get together once a year to discuss issues of common interest and help us become a better supplier.
No, we didn’t manage to solve the underlying problems, but we did improve communication and understanding.
So, where are we now? Print is declining, losing ground to printers in China and to electronic media. Are paper prices the reason? Part of the reason?
Paper makers have done a lot to reduce costs. Can they go further? The black liquor subsidies effectively were a cost reduction for the mills in the U.S., but this was a temporary respite, greatly needed during the Great Recession. And how much of this was passed on to printers who also needed some help?
These are difficult questions, but one thing is clear: if printers can only survive by forcing the mills to sell below cost, and if mills can only survive by pushing prices beyond what printers can absorb, then we are all in trouble.