Q3 Paper Outlook — Beaten to a Pulp

According to the company vice president, a significant percentage of the large retailers buy their own paper for their insert programs. O'Brien says he hopes the Sears deal does turn out to be the start of a trend toward printers playing a larger role in the selection of substrates, whether that means they actually supply the paper or just get to be a key influencer in the purchasing decision. Since they touch on all stages of the supply chain and production cycle, printers are in the best position to find ways to pull costs out of the system, he points out.

"I don't think the focus should be solely on the price component," O'Brien says. "A printer can work with the end user and the paper producer to understand the broader issue of the total cost of a printed piece and do things to reduce contributing costs. That doesn't always mean getting a lower quoted price. If we're able to save a dollar and share it, everyone benefits."

Opportunities for savings can be found in doing things like combining roll sizes from multiple customers to give mills better trim utilization, finding better ways to package and ship rolls, etc., he points out.

One trend in the industry that is directed right at the price issue is the growing use of supercalendered grades (SCA) that compete with the lightweight coated stocks, O'Brien notes. "The quality of SCA has improved, so users can get a similar quality product that throughout the pricing cycle (up and down) will always be on the lower end."

The impact of falling paper prices can manifest in some surprising ways. In its recent financial report for the second quarter, Menasha, WI-based Banta Corp. noted that: "Sales for the quarter were $333 million compared with last year's $339 million. Lower paper prices reduced this year's second quarter sales by approximately $10 million." Despite its lower sales, Banta actually reported a seven percent increase in net earnings for the quarter as compared to 2001.