For the past four years, book manufacturers have gritted their teeth through one tough year after another, holding on to one mantra: wait until next year. This year—bolstered by a booming elhi market and a strong second half in the trade segment—the good times finally arrived.
Ed Lane, president of R.R.Donnelley's book solutions group, affirms that 2005 has been a "very strong year, with pretty consistent demand across most of our segments." Business is up 14% at Malloy, while at Worzalla, president Charles Nason is exultant: "We're having a great year. We bottomed out from the erosion of losing work to China, and some of the things we did to diversify have started to pay off." But less enthusiastic is Bill Long, v-p sales and marketing at Maple-Vail Book Manufacturing, who says sales are not up as much as the company had hoped. Still, Long notes that sales for the last three months have been solid.
Most printers attributed the strong year to the school market, which delivered in a big way. At Banta Book Group, the educational boost has been significant—"probably a 20% increase, and better than we had forecasted," according to president Bob Krieder. Peter Tobin, executive v-p at Courier, says, "We've had a busy year, and a key reason has been the elhi marketplace." Courier added a new four-color press in its Kendallville, Ind., plant last year and presold a lot of the capacity of that press to textbook publishers. "That work has kept us nicely busy," Tobin says. Similarly, Donnelley, Banta, Von Hoffman and Quebecor World all added capacity to meet anticipated demand—investments that paid off this year.
In addition to a marked increase in state adoptions this year, printers have benefitted from the continuing trend toward state-specific materials, which adds a world of complexity to the printing process. Textbooks may require as many as 17 state-specific versions, not to mention city-specific versions, an outgrowth of the No Child Left Behind Act. This makes it a challenge for both printers and publishers. "With all the versions, there's more pressure on our management systems to keep track of the different signatures," explains John R. DePaul, executive v-p at Von Hoffman Corp. The complexity can be a boon to printers, notes Courier's Peter Tobin: "We're seeing customers turn to us for handling components of manufacturing they might have outsourced before—covers, dust jackets, inserts, end sheets. We love it that way, because it gives us the ability to manage a schedule and only be beholden to ourselves."
Potter, of Course
"Thank you, Harry Potter"—that's the way the assessment of the trade sector usually begins. Business is better than last year, and generally speaking, it's been very busy since June. Potter kicked things off, and strong fall lists have fed strong demand, Donnelley's Lane says. Although its four-color children's business slowed down to the point that the company will exit that category at the end of the year, at Offset Paperback Manufacturing and Berryville Graphics, both part of Bertelsmann's Arvato group, "Volume shot up in the second half of the year," reports Randy Xenakis, executive v-p, sales and marketing, for both companies. "We have been going 24/7 until two weeks ago, which was the first weekend the Berryville Graphics guys didn't work on a Sunday. It's a nice problem to have for all of us."
All this activity led to real crunch time on the presses, the first since 2000. As Kevin J. Clarke, president, book and directory publishing services at Quebecor World, puts it, "The good news is that we've been very busy, and the bad news is that we've been very busy. We've had huge peak and valley challenges." And he's not alone. Tight press time has meant that for publishers that haven't planned ahead, it can be difficult to find press time, says Malloy's Upton. It's also making it harder for Malloy to respond to the unanticipated title. Clarke adds, "We choke on it when we have to go to the competition and say, 'help us out'—but we've done that this year, and they've come to us as well."
By mid-fall, the press crunch was not quite over, resulting in one of the latest trade seasons in years. "If there's a sign of strength in the market, it's that we were all at full battle stations and we were 70 days past the usual high-water mark," Clarke says. "We see it going through December."
With business better, a number of printers are upping their spending on equipment. Von Hoffman is adding two wide 32-page web presses to its Jefferson City, Mo., facility, and adding some significant binding capacity as well, while Malloy is adding a new Timson zero makeready press for the 81/2"×11" market next year. Worzalla purchased three new presses and Donnelley bought the assets from Phoenix Color's Maryland facility earlier in the year. Quebecor World is adding new presses in a number of its U.S. facilities, and Courier is adding another Man Roland Lithoman II press in its Kendallville, Ind., plant this December.
This is not to say that competition from overseas printers, particularly in the Far East, has gone away. A good portion of the four-color children's business and some labor-intensive Bible business has gone to Asia, as have some ancillary educational materials, like workbooks and guides. But Nason at Worzalla has noticed some of that business returning. Quebecor World and Donnelley are using their global assets to keep the dollars in house, if not in the country. Donnelley completed its acquisition of Asian Printers Group, based in South China, over the summer; it does primarily juvenile business. That addition has expanded Donnelley's China operations significantly. Quebecor World has concentrated on boosting its business using its Latin American plants: four-color children's books are done in Mexico, while the Colombia plants do a lot of educational work, as does a facility in Peru, which also does a lot of hand assembly. "I see us tripling that business," Quebecor's Clarke says.
Pricing Pressures
Pricing pressures have been a major issue with printers in the past few years, and even with presses near capacity, those pressures have abated only a little. Bob Kreider at Banta notes that discussions with publishers now focus on how best to get the job done on time, rather than on getting the best price. At Worzalla, though, Nason says, "We're seeing a continual assault being waged on delivering product at the lowest possible cost." John Edwards, president and CEO of Edwards Brothers, refers to an editorial in the September issue of American Printer, which sets out the new printer commandments, The first two:"1) It's a tough world out there. You're either busy or you're dead. 2) The market sets the price."
Print on Demand/Print to Demand
Print on demand, once seen by printers as the wave of the future, has seen something of a shakeout. Bruce Smith, executive v-p, for the Book Manufacturing Institute, observes, "Eight or nine years ago, everyone was enamored with the very short print run, but ideas were running ahead of technology. Now they are focused on what is going to be their sweet spot, what will let them make money. The larger players are focusing on 500+ [copies], but leaving the 100—500 range to others."
Certainly the major players in this field continue to do well and expand. Edwards Brothers' Digital Book Center is the fastest-growing segment of the company, in terms of titles produced. And Lightning Source is expected to hit a benchmark soon—25 million copies printed since its inception, even as the average print run is still about 1.8 copies. Lightning Source head Kirby Best says that some of the company's big customers, who had been reluctant to use POD to keep their slow-moving titles in print, have come around to embrace the strategy, and he expects even greater use of POD next year.
For Bill Upton at Malloy, the biggest need now is in the 200—500-copy range, and the company is beta-testing a program that it calls Print to Demand. "This will enable publishers to reprint older titles in small quantities and still allow them to make a profit," Upton explains. Malloy hopes to have the program going full tilt in the spring.
If POD isn't the next new thing, what is? Charles Nason at Worzalla is looking to eliminate film as a medium. "Hopefully, by the end of fiscal year next March, we will have worked through with our publishing partners and determined which of the film we've been holding on to all this years will be converted to a digital format." John Edwards at Edwards Brothers, on the other hand, wants to convince more of his customers not to ship books to the U.K. or Europe, but instead, have them print those books at the Edwards shop in the U.K.
Quebecor World is watching with interest the introduction of the larger mass market paperback format. "Some of our publishers are going into it with a tremendous commitment," says Clarke. "How it translates to the consumer level, I don't know, but from our perspective, we're seeing significant volume. We're seeing forecasts for double or quadruple the volume of last year."
Courier is starting to do online invoicing with its publishers, which saves time on both sides, and wants to get into receiving orders online.
The collaboration project among publishers, manufacturers and paper merchants, once called Tambora and now called XBITS, is starting to gather momentum; it uses open-source software to facilitate online business connections.
Distribution is becoming more significant for some printers. Maple-Vail has seen more significant growth in the distribution side of the business and has added several university presses to its list of clients. Worzalla also has a strong fulfillment center. "We now do more drop-shipping to bookseller and publisher warehouses," Nason says.
The improved business climate in 2005 has, at least for the moment, returned some optimism to the printing sector. As Nason notes, because of increased sales, "business has become fun again."
