Outlook for 2018: A Message from our Ownership Group
Dear Clients,
Many of you have asked for our take on the state of the print industry as well as the state of Modern Litho and how we are positioning our company to serve you in the future. It’s an interesting time for sure, as we see some shift in economic and industry trends that will impact us all.
Here is our commentary on a few topics you have asked about:
Paper Cost. The cost of paper is increasing and the upward trend is expected to continue. After a decade of poor operating margins, the paper manufacturing industry has been “rightsizing” for the past few years. With the shuttering of two North American mills in 2017, the surplus of paper in the marketplace has evaporated. As supplies tighten, prices have risen and are projected to continue.
Large print projects will require more preplanning as print buyers can no longer count on ready paper availability. Last minute or unplanned orders that stretch the printer’s supply chain may be delayed, perhaps significantly, while paper is sourced. The key to minimizing cost and ensuring timely production is communicating early with your printer.
There is a bright side to higher paper costs as all of us who incorporate print products for marketing, packaging, publishing and communication benefit from a healthy and profitable paper industry. With profit comes reinvestment…with reinvestment comes efficiencies…with efficiencies come stable and long-term controlled costs.
Keep in mind that paper is a sustainable and renewable resource. All of the paper Modern Litho purchases is sourced from managed forests where new plantings outpace harvested trees by a significant multiple.
Postage Rates. The U.S. Postal Service announced a rate increase effective January 21, 2018 that reflects an approximate 2% increase across all mailing services and about twice that for shipping services.
Industry Trends. According to Idealliance, printing industry sales (all sources) increased 1.1% during the first half of 2017 and should have finished the year with at least that much growth. Sales now total $84.4 billion, up 8.8% from the 2011 low, but still down 14.5% from the pre-Great Recession high.
Direct mail’s place in the marketing mix continues to evolve as more marketers are adding it to their array of integrated strategies. Engagement is growing as mail box clutter declines and ROI remains strong when delivered to a well-targeted audience. Relevance is key to success.
Print editions of niche catalogs and magazines are growing segments and a preferred channel for reaching all generational demographics….including millennials. The tactile and tangibility of the print piece brings inherent value resulting in increased viewing, readership, shelf life, and response. We produced and mailed a record number of catalogs in 2017 and would guess you received many this holiday season.
The number of printing companies will continue to decrease. Those who have chosen not (or been unable) to reinvest in technology, modernized equipment, efficient workflows and a strong workforce are not surviving. Of equal importance is the ability and mindset to react nimbly and bring extra value, new products and additional services to the marketplace. Sometimes, it’s not so much about serving the customer, but rather about serving the customer’s customer.
Our Company. We’re staying focused on you. 2017 marked our 80th year, yet we are not the same company we were five years ago, nor the same company we will be five years from now. The products and services offered by Modern Litho going forward will be a reflection of opportunities to serve you better.
We continue to reinvest in our company and our people and are fortunate to have a growing and loyal client base throughout the nation who take advantage of our central U.S. location.
On behalf of our ownership group, we are honored to work with you as we enter the New Year.
With gratitude and appreciation,
Darrell D. Moore
President
