Office Stationery Manufacturing in the US Industry Report

8/10/2019 Office Stationery Manufacturing in the US Industry Report

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WWW.IBISWORLD.COM Office Stationery Manufacturing in the USMay 2011 1

IBISWorld Industry Report 32223Office StationeryManufacturing in the USMay 2011 Caitlin Moldvay

Paper cuts:Competition from the internet andcheap imports will hurt demand

2 About this Industry

2 Industry Definition

2 Main Activities

2 Similar Industries

2 Additional Resources

3 Industry at a Glance

4 Industry Performance

4 Executive Summary

4 Key External Drivers

6 Current Performance

8 Industry Outlook

10 Industry Life Cycle

12 Products & Markets

12 Supply Chain

12 Products & Services

14 Demand Determinants

15 Major Markets

16 International Trade

19 Business Locations

22 Competitive Landscape

22 Market Share Concentration

22 Key Success Factors

22 Cost Structure Benchmarks

24 Basis of Competition

25 Barriers to Entry

26 Industry Globalization

27 Major Companies

27 Cenveo Inc.

28 MeadWestvaco Corporation

30 National Envelope Corporation

33 Operating Conditions

33 Capital Intensity

34 Technology & Systems

35 Revenue Volatility

36 Regulation & Policy

36 Industry Assistance

38 Key Statistics

38 Industry Data

38 Annual Change

38 Key Ratios

39 Jargon & Glossary

www.ibisworld.com | 1-800-330-3772 | [email protected]


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Operators in this industry processpurchased, uncoated paper andpaperboard. Companies produce a varietyof stationery products that are used for

writing, printing, ling, artwork and

similar applications. Industry productsare sold to stationery wholesalers andretailers and directly to large enterprises.End users include businesses, students,home ofces and households.

The primary activities of this industry are

Converting paper and paperboard into office supplies

Manufacturing envelopes of any material, including combinations

32212 Paper Mills in the US

Paper mill operators manufacture paper from pulp and may convert the paper they make into stationery.

32213 Paperboard Mills in the US

Cardboard mill operators manufacture paperboard from pulp and may convert the paperboard they makeinto stationery.

32229b Labels, Egg Cartons & Other Paper Product Manufacturing in the US

Operators in this industry convert purchased paper and paperboard into finished products and pulp into eggcartons, food trays and other food containers from molded pulp.

42212 Office Stationery Wholesaling in the US

Wholesalers of office stationery purchase the products from manufacturers and sell them to retailers ordirectly to customers.

45321 Office Supply Stores in the US

Office supply stores purchase stationery from manufacturers or wholesalers and sell them to end consumers.Some commercial customers may purchase directly from wholesalers or manufacturers.

Industry Definition

Main Activities

Similar Industries

Additional Resources

About this Industry

For additional information on this industry

www.afandpa.orgAmerican Forest and Paper Association

www.envelope.orgEnvelope Manufacturers Association

www.nam.orgNational Association of Manufacturers

The major products and services in this industry areDie-cut office stationery

Envelopes

Stationery, tablets and related products


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Downstream demand from officesupply stores

SOURCE: WWW.IBISWORLD.COM

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Revenue Employment

Revenue vs. employment growth

Products and services segmentation (2010)

44%Die-cut office stationery

42.7%Envelopes

13.3%Stationery, tablets and

related products


Key StatisticsSnapshot

Industry at a GlanceOffice Stationery Manufacturing in 2011

Industry Structure Life Cycle Stage DeclineRevenue Volatility Medium

Capital Intensity Medium

Industry Assistance Low

Concentration Level Low

Regulation Level Medium

Technology Change Medium

Barriers to Entry Medium

Industry Globalization Medium

Competition Level High

Revenue

$7.6bnProfit

$151.5mExports

$1.2bnBusinesses

406

Annual Growth 11-16

-0.4%Annual Growth 06-11

-

3.5%

Key External DriversDemand from officesupply stores

Price of writing andprinting paper

Trade-weighted index

Number of broadbandconnections

Nationalunemployment rate

Market Share

Cenveo Inc. 14.1%

MeadWestvaco

Corporation 10.2%

National EnvelopeCorporation 8.1%

p. 27

p. 4

FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 38



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Key External Drivers Demand from office supply storesThe majority of the stationery produced

by industry operators is sold to end usersthrough ofce supply stores. Activity inthe ofce supply retail industry isimportant to manufacturers because itindicates changes in demand for theproducts and in price levels. If the retaildivision experiences an increase inrevenue, this factor is expected to reectpositively on demand for products frommanufacturers. This driver is expected toincrease during 2011, which is a potentialopportunity for the industry.

Price of writing and printing paperThe domestic price of writing andprinting paper represents the price ofpaper rolls produced by mills. Paper andpaperboard are the main material coststo the industry. Some small operatorsmay not be able to pass increases in theprice of paper on to consumers, in effect,lowering their prot. Even if largercorporations are able to compensate for arising cost of production, the markup isgenerally reduced. This driver is expectedto increase during 2011.

ExecutiveSummaryReading this report from a computerscreen, rather than paper or stationery,effectively illustrates the primarychallenge that the Ofce StationeryManufacturing industry faces. The risinguse of electronic communication hasreduced the demand for traditionalpaper-stationery products, such asenvelopes, letters and le folders. As aresult, industry revenue contracted at anaverage annualized rate of 3.5% to $7.6

billion from 2006 to 2011. Revenuedeclines were substantial during the

recession, with reduced business activitynegatively affecting the demand for paperin the workplace. Furthermore, per capitaincome declined during the recession,

which reduced consumer purchases,meaning businesses bought fewer paperrolls for cash registers. Combined with

ever-increasing internet use, industryoperators faced considerably curtaileddemand during the recession. Revenue,however, has begun to increase over thelast two years, as rising business activity

and household incomes spur increasedspending on paper products. During2011, revenue is expected to rise 3.5%.

Even with some renewed demand,prot margins are expected to fall from2.6% in 2006 to 2.0% in 2011. Unstabledemand conditions, growing input pricesand difculty in passing rising costs ontocustomers have led to volatile protabilityfor the average industry operator.Companies have been forced to shutdown, consolidate, merge or be acquiredover the ve years to 2011. As such, the

total number of rms declined at anaverage rate of 2.4% per year to 406. Notsurprisingly, many producers have movedoperations offshore to take advantage ofcheaper labor and operating costs.

The outlook for ofce stationery is notgood: Over the ve years to 2016,IBISWorld expects revenue to decrease atan average annualized rate of 0.4% to$7.4 billion. Low protability and furtherdownsizing and consolidation areexpected over the coming years.Stationery will not completely disappear,

however, because it is a complementaryproduct to many electronics. To offsetdeclines, companies will increasinglyexplore offshore markets for exports anddevelop higher-quality niche products.

Industry PerformanceExecutive Summary | Key External Drivers | Current Performance

Industry Outlook | Life Cycle Stage

Renewed business activity will spur increaseddemand in the short term


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Industry Performance

Key External DriverscontinuedTrade-weighted indexThe trade-weighted index (TWI) is ameasure of the value of the US dollarrelative to the currencies of its largesttrading partners. It is an importantmeasure of the relative price of theindustrys products in the global market.If the TWI decreases, this factor leads toa lower relative price of exports and moreexpensive imports. Industry operators

benet from a weak US dollar, partlythrough an increase in demand forexports and partly through weaker

import competition. This driver isexpected to decrease during 2011.

Number of broadband connectionsThe widespread global prevalence of theinternet has had a negative effect on theindustry. The internet has reduced the

demand for letters and envelopes as wellas administrative paper support. Anyfurther penetration by internetconnections is expected to continue totake away from stationery consumption.This driver is expected to increase during2011, a potential threat to the industry.

National unemployment rateThe demand for stationery depends on thelevel of business activity and householdexpenditure. The unemployment rate isindicative of both: a low unemployment

rate is usually connected with solideconomic growth and increasedconsumption. When unemployment rises,the demand for stationery is negativelyaffected from both the business andhousehold sectors. This driver is expectedto decrease during 2011.

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Downstream demand from office supplystores


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The Ofce Stationery Manufacturingindustry suffered over the ve years to2011. Since the majority of the industrysproducts are sold to the commercialmarket, a drastic fall in economic activityduring the recession negatively affecteddemand for stationery products. Theindustry, however, beneted from robustexport growth during the period, whichtempered revenue declines. From 2006 to2011, revenue declined at an averageannualized rate of 3.5%. However,renewed activity in the commercial

sphere, along with rising employment, hasincreased demand for ofce stationeryproducts, resulting in 3.5% revenuegrowth to $7.6 billion for 2011.

While domestic demand brieyourished during 2006, due to robust

business activity and increased householdexpenditure, the spike was short-lived.Industry revenue declines were consistentfor the next three years due to businessclosures and continued competition fromthe internet, which reduced demand fortraditional stationery products. During

2008 and 2009, amid declining demandfor paper products from businesses and

consumers, revenue decreased at arespective 6.5% and 12.6%.

Reduced demand for stationeryproducts reects rising competition fromthe internet and increasing environmentalawareness. Each new generation is likely

to further reduce the use of paper forcommunication, and anti-loggingcampaigns and lobbyists protesting theuse of wood in paper production haveincreased environmental concerns among

businesses and consumers. Paperlessofces have become more prevalent anddo-not-mail legislation has beenintroduced in 16 states. In the past few

years, most major airlines have ceasedprinting paper tickets and started usingelectronic tickets instead. These changeshave resulted in a gradual decline in

demand for stationery products in theUnited States.

Declining profitability Industry protability is expected to beweak in 2011, with prot marginsaveraging 2.0%. In contrast, protaveraged 2.6% in 2006. All the majorplayers in the industry reported increasesin the cost of production during the pastve years, which has restricted protlevels. The average price of paper rose atan annualized rate of 2.5% during the ve

years to 2011. While large stationeryproducers are able to pass the full priceincrease along to consumers, smalloperators have not been as successful.

According to a survey by the NationalAssociation of Manufacturers, only22.0% of operators managed to pass onthe full price increase in 2007.

Prot margins were also hampered byincreased commodity prices during thepast ve years. Oil prices spiked during2008 and have continued to rise in 2011.Meanwhile, the price of electricity has

been growing each year since 2004,raising operating expenses for ofcestationery manufacturers and reducingprot margins.

CurrentPerformanceBusiness closures andcontinued competitionfrom the internet have

been hurting revenue


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Entering the globalsphere

The industry is increasingly moving intothe global frontier. As domestic demand

falters, industry operators are focusingmore on new markets to sell theirproducts. While the majority of industryexports are destined for Canada andMexico, due to favorable tradingconditions under the North AmericanFree Trade Agreement, the fastest-growing market has been the EuropeanUnion. Production levels have fallen inthe region, prompting increased exportsfrom the United States. A key driver forindustry sales is the trade-weighted index(TWI) of the dollar: A lower TWIincreases exports, whereas a higher TWIincreases imports. The general trend overthe ve years to 2011 has been adepreciation of the dollar, driving exportsales growth of 4.2% per year.

Competition from imports hasremained a consistent challenge forindustry operators. US manufacturers areincreasingly threatened by the presenceof cheap imports in the market due to the

lower production costs that overseascompanies enjoy. However, over the ve

years to 2011, the depreciated US dollarcaused imports to be relatively moreexpensive for US businesses andconsumers, which caused imports todecline at an average annual rate of 3.5%.Currently, Portugal has the highest levelof imports at 26.3% of ofce stationeryproducts coming into the United States.The countrys stationery exportsincreased at an impressive averageannualized rate of 13.0% over the pastve years, largely due to increasedinvestment in the countrys exportindustries. Brazil was the top importer tothe United States in 2009, and itcurrently holds the number-two spot,

with 22.6% of total industry imports.Major companies in the industry have

continually turned their attention abroadover the past ve years. Major playerNational Envelope Corporation enteredinto a strategic alliance with otherinternational companies in 2008 to

Firms pack up and go Plagued by declining industry revenueand corporate protability, manycompanies were forced to exit, merge or

be acquired by other operators duringthe ve years to 2011. The number ofcompanies in the industry fell at anaverage annual rate of 2.4%, to anestimated 406 enterprises in 2011. Plantclosures were slightly more modest,declining at an average annual rate of2.3% during the same period.

Companies in the industry were forcedto close poorer-performing

establishments in order to reduce theiroperating expenses. Merger andacquisition activity was also prominentover the ve-year period, particularly

with major player Cenveo Inc. Thecompany acquired label manufacturer RxTechnology Corporation in 2006, givingCenveo a leading position in the

pharmaceutical-label manufacturingbusiness. In 2009, Cenveo also acquiredmajor competitor Nashua Corporationand in February 2011 acquired theenvelope segment of MeadWestvaco,making Cenveo the largest player in theindustry. Additionally, the National

Envelope Corporation, another majorcompany, acquired the Atlantic EnvelopeCompany in 2006. These acquisitionshave led to an overall increase in themarket share held by the top fourcompanies. From 2006 to 2011, marketshare among the top four playersincreased from 30.3% to 36.4%.

M&As have been commonas major players look toincrease revenue


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Entering the globalspherecontinued

create a global single-source supplyagency for companies with internationalmailing and delivery requirements.

Another major player, MeadWestvacoCorporation, recently acquired GracaLtd, a stationery manufacturer in Brazil,

and opened a manufacturing plant inChina. As domestic demand falters,companies in the industry are continuallyfocusing their sights on new markets totake advantage of large consumer basesin emerging economies.

Profits expected torise slightly

Although protability is expected to be ata low point of 2.0% in 2011, protmargins for the industry are expected toexpand to 2.3% in 2016.

Despite weak domestic growth, theindustry will become increasinglyproductive. Technological improvementsand growing capital investment are likely

to contribute to increasing productionvolumes of higher value-added industryproducts. Increased capital investment

will reduce the reliance on labor over thenext ve years; therefore, the number ofemployees is expected to rise justmarginally an average annualized rate of0.2% to 28,215.

IndustryOutlook

The Ofce Stationery Manufacturingindustry will continue to face difcultconditions over the ve years to 2016.Industry revenue is projected to fall at

an average annualized rate of 0.4% to$7.4 billion. Relative to the past ve

years, conditions will improve slightlyfor industry operators, with revenuedeclines slowing over the period.

Increases in business and consumerspending will fuel some positive growthfor the industry, specically in 2012;revenue is projected to expand 3.0%during the year. However, the prevalenceof electronic alternatives, such as e-mail,

video-conferencing and credit-cardscanners, will continue to lower demand

for stationery products. While ofcepaper will continue to be used in the

workplace, other stationery, such asnotebooks and letters, wil continue toface declining demand.

Increased import competition fordomestic operators is likely to push theindustry to produce more innovativeproducts, such as stationery made from

higher-value grades of specialty paper orrecycled paper. Increased productinnovation will allow companies to raisethe prices of their products to combatdecreasing sales volumes.

Larger rms will drive much of thedevelopment as they acquire smallerinnovative rms, in addition to having agreater capacity to nance research anddevelopment. Strategic alliances

between domestic and international

operators within the industry could alsobe an important driver for new productdevelopment. National EnvelopeCorporations partnership with theGlobal Services Group is an example ofsuch an alliance; it will enable theNational Envelope Corporation to workcooperatively on research, developmentand global marketing for new products.

Rising imports will spurdevelopment of higher-

margin niche products


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Global frontier Over the next ve years, companies will

continue to move into the global realm.With saturated domestic demand,internationally based companies will lookabroad to foster demand for industryproducts. Because Asian and Latin

American sales have sufferedcomparatively less than the UnitedStates, the regions are likely to be targetsfor operations over the coming ve years.During the ve-year period, industryexports are projected to rise at an averageannual rate of 1.9%, making up 17.1% ofindustry revenue by 2016.

IBISWorld expects that the USindustry will lose a share of global ofcestationery production. Large and low-cost paper-product sectors in China,Brazil and Portugal are expected toincrease production volumes. The loweroperating expenses abroad will result incheaper imports, which will challenge thecompetitiveness of US ofce stationeryproducts. As such, import competition is

expected to rise over the next ve years toan estimated 8.8% of total demand. USmanufacturers will be aided slightly by a

weak US dollar; however, the dollarsdepreciation will slow over the next ve

years. The dollar is forecast to depreciateat an average annualized rate of 0.4%over the period.

ConsolidationcontinuesIncreased merger and acquisition activityis expected to continue over the ve

years to 2016 as larger companiesattempt to improve prot margins, whileother companies leave the industryaltogether in favor of more protableendeavors. Consequently, the totalnumber of companies operating in theindustry is forecast to decrease 1.6% per

year to 375 companies. Plant closureswill continue as the industry facesdecreased demand for ofce stationeryproducts. The reduction will be muchmore modest than the past ve years,however, with the number ofestablishments projected to decrease atan average annualized rate of 0.7% to474 in 2016.

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Revenue vs. exports



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Industry PerformanceLife Cycle Stage


30

25

20

15

10

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0

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1010 100 205 155 25 30

%

Growthofprofit/GDP

% Growth of establishments

DeclineCrash or Grow?

Potential Hidden GemsFuture Industries

Quality GrowthHigh growth in economicimportance; weaker companiesclose down; developedtechnology and markets

Time WastersHobby Industries

MaturityCompanyconsolidation;level of economicimportance stable

Shake-out

Shake-out

Quantity GrowthMany new companies;minor growth in economicimportance; substantialtechnology change

Key Features of a Decline Industry

Revenue grows slower than economy

Falling company numbers; large firms dominate

Little technology & process change

Declining per capita consumption of good

Stable & clearly segmented products & brands

Paper Mills

Printing

Electric PowerTransmission

Paperboard Mills

Paper WholesalingOffice Stationery Manufacturing

Industry value added is underperforming the economy as a whole

Competition from substitute electroniccommunications has restricted demand growth

Participation in the industry is falling due toimport competition and low protability

Technological developments are largely cosmetic

Per capita consumption of ofce stationery is declining


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Industry Life Cycle The industry is in the decline stage of itseconomic life cycle. Indicators of thestage include: declining industry valueadded, decreased revenue, a fallingnumber of companies and establishmentsand decreased employment levels.Industry value added is projected todecrease at an average annualized rate of1.6% over the 10 years to 2016.Comparatively, GDP is forecast toincrease at 2.0% over the same period,

which indicates that the industryscontribution to GDP is shrinking over

time. Industry value added has fallenbecause of declining protability,employment and capital investment.Prot margins contracted because ofincreasing commodity prices on top ofthe weak demand conditions. Capitalinvestment has been falling for years dueto companies downsizing operations andrms leaving the industry because of lowprot margins.

Over the past ve years, businesses andconsumers have been increasingly buyingless domestically produced stationery,

resulting in falling production volumes.With reduced demand for ofce stationeryproducts, many companies have beenforced to exit the industry. Over the pastve years, the number of companies isestimated to decline 2.4% per year.

Although ofce stationery is a well-established product, there has been somenew product development in the past ve

years. Developments include newenvelope styles and different grades ofpaper. Such changes are consideredcosmetic, however, and do not necessarilyprovide the industry with new markets.The product mix has also diversied,nearly eliminating outdated calculatorrolls and single-line printing papers.

Considering that the vast majority ofsales are through domestic channels,

developments in alternative exportmarkets have provided some growth forindustry operators. The weak US dollaraided industry exports, since US products

were relatively less expensive ininternational markets. Between 2006 and2011, industry exports began making up agreater share of revenue, rising from10.4% to 15.1%.

The ownership structure of companiesoperating in this industry has not changedsignicantly in recent years. Although theaverage enterprises size increased slightly

over the past ve years due to merger andacquisition activity, most are small tomedium-size private corporations. Theseconsolidations were on the back of risingcost pressures, weak prot levels anddownsizing of plant operations.

This industryis Declining


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Products & Services

The industry manufactures a range ofproducts, including le folders, paperrolls, envelopes and other stationeryproducts. The value of sales for each

product and product segment isdependent on the quantity sold and theprice of those items. The quantity sold isprimarily inuenced by demand factors,

Products & MarketsSupply Chain | Products & Services | Demand Determinants

Major Markets | International Trade | Business Locations

KEY BUYING INDUSTRIES32311 Printing in the US

This industry purchases stationery to print on.

42211 Paper Wholesaling in the USThis industry purchases printing and writing paper from office stationery manufacturers anddistributes it to retailers or directly to consumers.

42212 Office Stationery Wholesaling in the USThis industry purchases paper and paperboard stationery products from manufacturers anddistributes it to retailers or directly to consumers.

45321 Office Supply Stores in the USLarge office stationery retailers with significant purchasing power may negotiate contractsdirectly with manufacturers.

KEY SELLING INDUSTRIES

22112 Electric Power Transmission in the USAll manufacturing industries require a reliable supply of electricity in order to maintainproduction.

32212 Paper Mills in the USOffice stationery manufacturers purchase paper rolls to convert into paper products.

32213 Paperboard Mills in the USOffice stationery manufacturers purchase paperboard to convert into paperboard products

33329b Printing, Paper, Food, Textile & Other Machinery Manufacturing in the USOffice stationery manufacturers purchase machinery for use in production of paper products.

Supply Chain

Products and services segmentation (2010)

Total $7.3bn

44%Die-cut office stationery

42.7%Envelopes

13.3%Stationery, tablets and

related products



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Products & Markets

Products & Servicescontinuedwhile product prices reect input pricesand the cost of production. The OfceStationery Manufacturing industry has

been experiencing a drop in domesticdemand, and consequently, revenue levelshave fallen across all segments of theindustry. These declines have led toproduction mix changes that cater toshifting demand trends and competitivepressures.

Die-cut office stationeryThe die-cut stationery segment is the

largest in the industry and accounts for anestimated 44.0% of total sales. Die-cutstationery includes le folders, reportcovers, letters and paper rolls for businessmachines and cash registers. During thepast ve years, revenue growth from theseproducts was more favorable compared toother segments. Robust economic growth,strong consumption and expanding

white-collar employment increaseddemand for paper for business activity. Inaddition, strong consumptionexpenditure growth during the economic

boom resulted in buoyant growth inregister roll usage. Despite the fact thatthe recession has caused falling demandfor such items, the decrease has been lessdrastic compared to the rest of theindustrys products. This fact is evident inthe price of die-cut ofce stationery,

which is estimated to increase at 3.1% peryear during the ve years to 2011.

In the future, this product segment islikely to experience a slowdown in sales,largely due to the many industries goingpaperless. Many airlines and otherticketing businesses, such as shows,movies and sporting events, have alreadyscraped paper tickets and are opting forelectronic ticketing. In the future,shopping is also expected to become lessreliant on paper and more electronicallymanaged, reducing the demand forpaper rolls in registers.

EnvelopesThe industry produces envelopes forbusiness and personal letters, direct mailand packages. This segment used to bethe biggest seller in the industry;however, it has lost part of its share ofthe market over the past ve years.Currently, this segment contributes42.7% of total sales. Althoughdevelopments in online shopping andpaper advertising have increaseddemand for shipping and direct-mailenvelope production in the past decade,

commercial and personal letter envelopeuse has declined because of the growinguse of electronic communication. There

was also a sharp decline in direct-mailadvertising during the recession,particularly during 2009. Furthermore,the price of envelopes has experiencedlower-than-average growth in the ve

years to 2011, increasing at an estimated2.1% per year. This rate is lower than theaverage price of industry products, whichis projected to expand by 2.5% annually.

The most recent data from the

Envelope Manufacturers Associationshows that the total number of envelopeshipments declined by 3.8% per year inthe ve years to 2009, falling to 154.0million. This claim is supported by the2008 US Postal Service HouseholdDiary Study that reported thathousehold correspondence has declined

by 14.0% since 2002. Direct-mailadvertising accounts for about 57.0% ofall mail received by households, and the

volume of these letters declined by 4.4%in 2007 and 1.0% in 2008.

Stationery, tablets and related productsThe stationery, tablets and relatedproducts segment of the industryaccounts for 13.3% of industry revenuein 2011. This segment includes bondpaper, school and art supplies, loose-leafllers, notebooks, paper pads, writing


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Products & Markets

DemandDeterminants

The demand for ofce stationery ispredominantly affected by changes in

business needs and educational activity aswell as everyday personal and household

use. The commercial sector accounts forthe majority of stationery consumption;therefore, employment levels, companyprots and business activity are the maindeterminants of commercial stationerydemand. In times of economic prosperityand falling unemployment levels, demandfor this industrys products grows. Theopposite is expected during a downturn.

Activity in the retail sector affectsdemand for register rolls and credit carddockets. During times of highconsumption expenditure, demand forthese paper products is buoyant becauseretailers print receipts for morecustomers. However, a slowdown in thelevel of consumption results in retailersdemanding less register tape, which willcreate a drop in demand for theseindustry products.

Schools and colleges also provide astrong source of demand for stationery.Even though there has been an increase

in electronic means of communication,traditional paper-based educationalsupport remains integral. With a higheremphasis on the importance of education

in the future, solid annualized growth inthe number of elementary and secondarystudents is forecast. The education sectoris projected to continue supportingstationery product demand, adjustingtoward technology-complementingsupplies like printing paper.

Technology friend or foe?It seems as though the electronicrevolution is taking over all means ofcommunication and entertainment. Butcan technology and tradition coexist?Ofce stationery has had its share ofcompetition with the world of electronics;however, it has also beneted from newopportunities that technology has created.

Developments in personal computersand the internet created robust demandfor printing paper, fax paper andassociated stationery. Direct-mailadvertising also created a growingdemand for envelopes, with the ability to

Products & Servicescontinuedtablets, ofce paper for printing andphotocopying and similar products.

Within this sector, technologicaldevelopments have led to thesubstitution of writing paper withprinting paper. While printing paper is apopular product among consumers, for

both commercial and personal use,demand for it has also fallen over thepast three years. This decline is due tothe sharp increase in unemployment

between 2008 and 2010, which led toless demand for commercial printing

and declining sales for the industry.Before the economic bust, there wasgrowth in the printing papers segment,

but it was offset by a decline in the use ofwriting tablets, notebooks, paper padsand similar products. The price of

stationery, tablets and related productsis estimated to have increased at anaverage annual rate of 2.7% during theve years to 2011.

Printing paper is currently usedregularly in ofces and governmentdepartments, something that maychange in the near future, however. InOctober 2009, the Senate vowed to makeits ofce paperless for a month in anattempt to make a positive impact on theenvironment and encourage otherdepartments and businesses to do the

same. They used electronic options formany of the printouts that they requiredin their day-to-day business. WithGeneration Y consumers entering the

workforce, the goal of a paperless ofcemay be more achievable.


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Products & Markets

Major Markets

The majority of the productsmanufactured by the industry arenished and ready for use. They are thensold to wholesalers for domestic andinternational distribution, retailers ordirectly to large corporations. Stationeryis also sold to other industries, such asthe Printing industry (IBISWorldindustry report 32311).

The middleman is shrinkingWholesalers that distribute to thedomestic market purchase the largest

proportion of manufactured stationery.They are a crucial link betweenmanufacturers and the nal consumers,providing an easy and effective means ofdistribution to retailers. However, duringthe ve years to 2011, middlemancompanies have lost some of their marketshare. In order to cut costs and attainmore control over purchases, retailershave increasingly purchased directlyfrom manufacturers, bypassing thedistributors. Adding to this trend aretechnological improvements, such as

DemandDeterminantscontinued

create multiple copies of letters beingmore cost effective. Envelope demandalso grew as online shopping becamepopular through eBay. At the same time,fax machines, e-mail, video conferencingand similar applications are reducing theneed for traditional letters at work and inthe home. Writing paper has lost itsappeal compared to printing paper, anddiaries are often electronic. Consumersare growing increasingly environmentallyaware too, substituting paper forelectronics when possible. Environmental

concerns about cutting trees for paperproduction have pushed someorganizations and businesses to reduce

their use of paper and replace it withelectronic alternatives.The overall effect of technology on the

Ofce Stationery Manufacturing industryhas been an expansion in the number ofproducts offered; however, industryrevenue has become more and morelimited by the strong prevalence ofelectronics. Demand for industryproducts has shifted away fromenvelopes, writing paper, letterheads andrelated products and focused more onprinting paper, business forms, ling

materials and register rolls. There hasalso been a demand shift toward recycledpaper products.

Major market segmentation (2010)

Total $7.3bn

63.7%Wholesale trade17.4%

Retail trade

14.3%Export

4.6%Other

industries



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Products & Markets

International Trade The majority of domestically-producedofce stationery is consumed locally, withonly a medium level of trade. The industryhas traditionally been a net importer;however, during 2002, the tables turned.This was largely due to increased exportsto Canada. The Canadian dollar began toappreciate signicantly beginning in2002, making imported US stationeryproducts relatively less expensive toCanadian consumers and businesses.Between 2002 and 2008, the Canadiandollar appreciated against the US dollar

by 60.0%. Demand for exports has alsobeen favorably impacted by thedepreciating US dollar relative to its majortrading partners, which makes exportsrelatively cheaper and imports relativelymore expensive. The US dollardepreciated consistently between 2003and 2008 and again during 2010 and2011, favorably impacting the US ofcestationery trade balance.

ImportsThe total value of imported industryproducts is forecast to decrease duringthe three years to 2011 at an averageannualized rate of 3.5%. Importsdeclined considerably during therecession due to decreased domesticconsumption of ofce stationeryproducts. Furthermore, the dollardepreciated at an average annual rate of

Major Marketscontinuedonline ordering, which have madeordering and distribution more costeffective for retailers.

Stationery retailing is dominated by afew large-scale companies, includingStaples, OfceMax and Ofce Depot.These companies have a high degree ofpurchasing power, allowing them tonegotiate lower rates based on the

volume of goods that they buy. Thesetrends have resulted in fewer sales to

wholesalers over the ve years to 2011.

Industry connectionsLarge corporations with signicantpurchasing power also purchase directlyfrom manufacturers. These companiesreside in other industries that consumesignicant volumes of paper andstationery, such as governmentdepartments, schools and similar publicorganizations. However, over the ve

years to 2011, this market has reduced its

share of industry product purchases.Increasingly, these customers are optingfor electronic alternatives.

ExportsThe export market has provided somefavorable trends over the ve years to2011, with the percentage of sales fromforeign buyers increasing from 10.4% in2006 to 15.2% in 2011. The growth indemand has been aided by the weak USdollar, which has depreciated almostconsistently since 2003. Because of weak

demand domestically, manufacturers areincreasingly exploring foreign markets.Strong economic growth and largeconsumer bases in developing countrieshave contributed to the growing demandfor exports, a trend that is likely tocontinue with the domestic shift towardelectronic communication. (For moreinformation on exports, please refer tothe International Trade section).

Level & Trend

Exports in theindustry areMediumandIncreasing

Imports in theindustry areMediumand

Decreasing

The Bigger Picture

Of the 692 industries inthe US economy, 119 havemedium exports and 62of those are experiencingan increasing trend asis the Ofce StationeryManufacturing industry


17/40


Products & Markets

International Tradecontinued1.0% during the three-year period, whichmade imported ofce stationery productsrelatively more expensive. Importpenetration is forecast to decrease from8.8% of domestic demand in 2008 to8.6% in 2011.

Portugal is the top stationery exporterto the United States, accounting for26.3% of total industry imports. The

value of imports from Portugal increasedat an average annualized rate of 16.1%over the three-year period. Imports fromPortugal increased dramatically in 2010,

largely due to a high degree ofinvestment in the countrys exports,

which the government hopes will aid thePortuguese economy as it scales back itsgovernment spending in other areas.Brazil was the top stationery exporter tothe United States as of 2009, but itcurrently holds the number-two spot,

with 22.6% of total industry imports.Brazils paper industry has developedsolidly in the past decade, leading tocompetitive products and prices and

rising industry imports.

ExportsAlthough the value of exports is forecastto increase at an annualized rate of 0.8%over the three years to 2011, export saleshave been particularly volatile during thepast three years. During 2009, exportsplummeted, largely due to the

Imports From...

Total $521.0m

34%Other

26%Portugal

19%Brazil

13%Canada

9%China

Exports To...

Total $1.1bn

72%Canada

13%Other

9%Mexico

3%Netherlands

3%United

Kingdom

Year: 2010SIZE OF CHARTS DOES NOT REPRESENT ACTUAL DATA SOURCE: USITC

$millions

1500

1000

500

0

500

1000

1602 04 06 08 10 12 14Year

Exports Imports Balance

Industry trade balance



18/40


Products & Markets

International Tradecontinuedappreciation of the US dollar during thatyear as well as weakening demandconditions globally. Following that,however, export growth had beensubstantial, driven by a cyclical

weakening of the US dollar. This hasencouraged operators to move into globalmarkets, where they can offer a wide

variety of products. More than 80.0% ofall industry exports are destined forCanada and Mexico due to the lack of

tariffs from North America Free TradeAgreements implementation anddecreased transportation costs due to thetwo countries proximity. The fastest-growing market in the past three yearshas been the European Union, whereproduction levels have fallen,encouraging export growth from theUnited States. Exports as a share ofindustry revenue currently account for15.2% of industry revenue.


19/40


Products & Markets

Business Locations 2011

MO2.5

VT0.0

MA3.8

RI0.2

NJ5.0

DE0.0

NH0.4

CT0.6

MD1.3

DC0.0

1

5

3

7

2

6

4

8 9

Additional States (as marked on map)

AZ0.6

CA12.0

NV0.6

OR1.1

WA1.3

MT0.0

NE0.2

MN3.2

IA0.8

OH7.1

VA2.3

FL4.0

KS1.0

CO1.1UT1.5

ID0.0

TX6.3

OK1.0

NC1.3

AK0.0

WY0.2

TN1.7

KY1.7

GA2.7

IL5.9

ME0.4

ND0.2

WI2.7 MI

3.1PA5.9

WV0.2

SD0.4

NM0.6

AR0.6

MS1.9

AL0.6

SC0.6

LA1.0

HI0.0

IN1.9

NY8.8 5

6

78

321

4

9


Number of Establishments by Region (%)

Less than 3%

3% to less than 10%

10% to less than 20%

20% or more


20/40


Products & Markets

Business Locations The Mid-Atlantic, Great Lakes andSoutheast regions are home to the highestnumber of stationery manufacturingestablishments. Together these regionshold almost 60% of all stationerymanufacturing facilities in the UnitedStates, which is consistent with theconcentration of paper mills (65%).Population density in these regions isanother factor inuencing the geographicspread of industry establishments becausemanufacturers typically locate close tolarger consumer bases.

Mid-AtlanticThe Mid-Atlantic is home to the highestpercentage of industry establishments,estimated at 21.0% of the total in 2011. Inthe Mid-Atlantic, establishments areheavily concentrated in the industrialcenters of the region, i.e. New York,Pennsylvania and New Jersey. Industryoperators choose to locate close to largepopulation centers where many

businesses and individuals purchasestationery products. Furthermore, this

region is home to 17.5% of the countryspaper mills, which produce the raw paperand paperboard materials that arerequired for making stationery paperproducts. Additionally, the regionsproximity to ports facilitates exports toEurope. Since 2006, the share of industryoperators in the region has held fairlysteady, rising only slightly from 20.1%.

Great LakesThe Great Lakes region comes in a closesecond, with 20.7% of industryestablishments located there in 2011.Establishments are fairly evenlydistributed throughout the region; thoughOhio is the most signicant producer, with7.1% of the nations total establishmentslocated in the state. Manufacturers chooseto locate in the region partly because of itsproximity to major paper mills; the regionhas traditionally been one of the largestpaper manufacturing areas in the United

States. Furthermore, its proximity toeastern Canada makes this region apopular destination because Canada is theindustrys largest export market.

The proportion of industry

establishments rose slightly over the pastve years, with the region holding 19.9%of the total in 2006. The rise is largelydue to fewer establishment closures inthe region due to its importance forexporting industry products.

SoutheastThe Southeast has 18.6% of totalestablishments, and Florida dominatesthe region with 4.0% of total industryfacilities. The Southeast has always beena popular destination for paper-relatedmanufacturing due to its availability of

wood chips and access to eastern portsdestined for European markets. TheSouthwest has been expanding itspopulation and the labor force,contributing to developments in allindustries in the region, including paperproduct manufacturing. However, itsshare of establishments has stayedroughly constant over the ve-year

Percentage

30

0

10

20

South

west

West

GreatLakes

Mid-Atlantic

NewEng

land

P

lains

RockyMoun

tains

Southeast

Establishments

Population

Establishments vs. population



21/40


22/40


Cost StructureBenchmarks

This industry has a similar cost structureto other paper product manufacturingindustries. Purchases make up themajority of expenses, with wagesconstituting the second highest expensefor industry operators.

Industry protability has decreasedover the ve years to 2011 due todeclining demand for ofce stationeryand increasing input costs. Largerindustry operators have managed to passthe majority of cost increases on to

Key Success Factors Access to niche marketsA degree of specialization within a rmcan provide access to niche markets, suchas direct-mail envelopes. This abilityenables operators to reduce revenue

volatility over time.

Access to the latest available technologyInvestment in advanced technology willenable companies to have a betterresponse time to changing consumertastes. Technological changes can alsoimprove the efciency of production.

Ability to optimize capacity utilizationEfciency and cost effectiveness dependon the operators ability to maximizemanufacturing capacity. A high level ofcapacity utilization and long productionruns will help ensure a reduction in costsper unit and higher returns on sales.

Provision of superior after sales serviceGood response time to clients needs willhelp industry operators stay competitive.Service is one of the dening factors forrms in a highly competitive industry likeOfce Stationery Manufacturing.

Ability to pass on cost increasesWhen the price of paper or paperboardincreases, operators need to be able tocharge more for the end product in orderto cover rising cost pressures. This can bedifcult in a market where the demandfor stationery is falling.

Establishment of export marketsAs the demand for stationery productsdeclines in the United States, exportmarkets provide new revenueopportunities for manufacturers.

Market ShareConcentrationMarket share concentration within theOfce Stationery Manufacturing industryis low, with the top four producersaccounting for 36.4% of industry revenuein 2011. The level of concentration withinthe industry increased over the past ve

years; in 2006, the top four players heldonly 30.3% of revenue. Over the past ve

years, increased merger and acquisitionactivity by major companies increased theindustrys market share concentrationlevel. Cenveo Inc., in particular, increasedits market share substantially with the

acquisition of Rx Technology Corporationin 2006 and the purchase of NashuaCorporation in 2009. Furthermore, in

February 2011, Cenveo acquiredMeadWestvacos envelope product group,which resulted in Cenveo becoming thelargest company in the industry.

The industry has an estimated 406companies operating in 2011, with themajority employing fewer than 70 peopleand holding less than 1.0% of marketshare. This number is a signicantdecrease from 2006, when 459companies operated in the industry. Dueto falling demand for ofce supplies andrising cost pressures, the industry has

experienced signicant consolidationover the years, which has increased thesize of the average industry operator.

Competitive LandscapeMarket Share Concentration | Key Success Factors | Cost Structure Benchmarks

Basis of Competition | Barriers to Entry | Industry Globalization

Level

Concentration inthis industry is Low

IBISWorld identifies250 Key SuccessFactors for abusiness. The mostimportant for thisindustry are:


23/40


Competitive Landscape

Cost StructureBenchmarkscontinued

customers, which has caused the overallcost of industry products to increase. In2011, however, the price of paper, whichis one of the primary input goods, isexpected to increase 2.4%, which is morethan the price of ofce stationery. As aresult of rising input costs, protabilityhas been challenged. The peak inprotability occurred in 2006, whenstrong economic activity in the businesssector increased stationery consumption.Net prot margins decreased over thepast ve years, from 2.6% in 2006 to

2.0% in 2011. In an effort to enhanceprot margins, industry operators haveincreasingly focused on reducingoverhead expenses by closingunprotable facilities and reducing theirlabor expenses.

Under the pumpThe rising cost of materials, such as paperand paperboard, has challenged industryprotability. As a percentage of revenue,purchases of materials are forecast toaccount for 58.2% of revenue in 2011.

Materials used in stationerymanufacturing are either produceddomestically or imported. Regardless ofthe cheaper price of imports, a weaker USdollar exchange rate over the past ve

years has contributed to growing costpressures by making imported materialsrelatively more expensive. The depreciatedUS dollar is expected to continue raisingthe cost of imported paper andpaperboard products for industry

operators. At the same time, commodityprices skyrocketed in 2008, and havebegun to rise strongly again in 2011.

Labor and capitalBecause labor is an integral part of theproduction process, wages are a signicantcost to the industry. Wages as a share ofrevenue have fallen over the years asoperators have restructured theiroperations in order to achieve greaterlabor efciency and reduce operatingexpenses. Wages have fallen from 14.8%

in 2006 to an estimated 13.8% in 2011.Depreciation expenses are expected to

decrease over the ve-year period as well,from 1.9% of revenue in 2006 to 1.6% in2011. This decline is the result ofdownsizing by companies, facility closuresand falling levels of capital investment inthe industry. Capital expenditure isforecast to decline at an annualized rate of3.5% over the ve years to 2011, fallingrapidly in 2008 and 2009. Capitalinvestment took a hit during the recession,partially due to the tight credit market and

partially to weakening demand conditionsthat created an unstable investingenvironment.

Utilities and rentUtilities account for an estimated 1.1% ofindustry revenue in 2011, increasing from1.1% in 2006. These expenses include

water, electricity, gas and fuels and othersimilar commodities. Although pricesskyrocketed over the three years to

Industry Costs and Average Sector CostsProfitRent

Utilities

Depreciation

Other

Wages

Purchases

Industry

Costs

(2011)

Average Costs

of all Industries

in sector (2011)

2.0Profit

58.213.822.31.6

8.9Profit

58.411.314.93.3

2.1SOURCE: WWW.IBISWORLD.COM

100%

1.1

1.0

1.1


24/40



Basis of Competition The industry is experiencing high levelsof competition from both industryoperators and external inuences. Whennew companies enter the industry, thelevel of competition with existingoperators increases. However, there arecurrently enough producers in themarket to ensure that not one rm hassufcient market power to controlproduction or pricing across the industryas a whole. Companies in the industryalso face competition from importedindustry products, which are increasingly

playing a role in the US market.

Internal competitionPrice is an important competitive factor,given the high level of competition in theindustry. Because downstream industriesand retailers are always looking todecrease input costs, a rm can enhanceits competitive edge in the market byreducing its prices. Producers that haveeconomies of scale and sufcientpurchasing power can negotiate topurchase paper, paperboard and otherinputs at lower costs, thereby, allowingthem to produce lower-cost products andgiving them a competitive advantage.

Timeliness, speed of delivery andafter-sales service are integral for thegeneration of repeat sales. Retailers anddownstream manufacturers rely on aconsistent supply of stationery materialsand may suffer if services areinterrupted. Therefore, companies must

withhold their contracts, along withproviding exceptional service to theirclients in order to communicate anychanges and delays. The location of amanufacturing facility and its proximityto key customers is also important withregards to meeting delivery deadlinesand reducing transportation costs.

Product versatility and the ability toalter production to meet changingdemand conditions are a largedeterminant of a rms competitiveness.The demand for stationery is changing

along with technology, and companiesneed to provide customers with a greaterarray of products, particularly thosecomplementing technological. Consumersare often looking for diverse and versatileproducts, such as multipurposeenvelopes, and manufacturers with thefastest response to demand may capture alarger share of the market.

External competitionExternal competition has had thestrongest inuence on the industry sincethe mid-1990s. The introduction of theinternet is the single largest factorcontributing to the overall fall in demandfor stationery. Since then, customershave increasingly switched to electroniccommunication from traditional paper-

based. The industry has responded bydeveloping products that complementtechnology, such as diverse grades ofprinting paper. The overall effect,

Cost StructureBenchmarkscontinued

August 2008, widespread plant closuresduring the recession curtailed some of theincreased utility expenditures. The price offuel, however, has continued to risethroughout 2010 and 2011, which hasincreased utility expenses for industryoperators. Rent expense is projected at1.0% of industry revenue in 2011, which isthe same compared to 2006. Other minorcosts associated with running a

manufacturing facility include: taxes,interest on debt, insurance, advertising,general administrative and others.Downsizing combined with merger andacquisition activity has led to signicantrestructuring costs for industry playersthroughout the past ve years. Withrestructuring comes increased legalexpenses, good will write downs andsimilar costs.

Level & Trend

Competition in thisindustry is Highandthe trend is Steady


25/40


26/40



IndustryGlobalizationThe Ofce Stationery Manufacturingindustry has a medium level ofglobalization, which is in line with otherconverting industries and paper mills. Dueto the start-up costs and different rulesand regulations in foreign countries, themajority of the small and medium-sizeoperators is domestically based. However,major companies, such as InternationalPaper, MeadWestvaco and Cenveo,operate in numerous countries abroad inorder to take advantage of emergingmarkets with large consumer bases.

Emerging markets that show stronggrowth potential include Asian and Latin

American countries.Globalization is increasing noticeably

within the industry and trade penetrationhas more than doubled over the past 10

years. Import penetration is estimated at8.5% in 2011, and exports as a percentageof industry revenue are estimated at15.1%. Although the depreciated dollarcurrently favors domestic producers,

given the input cost advantages thatforeign manufacturers hold, USproducers are consistently threatened bycheaper import products. Exports havegrown as a percentage of revenue becauseof weakened demand conditions in theUnited States.

Another facet of globalization is anincrease in international alliances. Forexample, National Envelope Corporationentered a strategic alliance in February2008 to create a global single-sourcesupply agency to supply companies with

international mailing and deliveryrequirements. Increasing globalization isexpected to provide a competitiveadvantage by creating new consumermarkets and providing access to cheaperlabor costs. The industry is expected toincrease its focus on global markets overthe next ve years, which is likely toresult in increased acquisition andmerger activity in foreign markets,especially in Asia and South America.


Trade Globalization Going Global: Office Stationery Manufacturing1998-2011

Exports/Revenue

Exports/Revenue

200

150

100

50

0

200

150

100

50

0

Imports/Domestic Demand Imports/Domestic Demand

0 040 4080 80120 120160 160

International trade is amajor determinant ofan industrys level ofglobalization.

Exports offer growthopportunities for firms.However there are legal,economic and political risksassociated with dealing inforeign countries.

Import competition canbring a greater risk forcompanies as foreignproducers satisfy domesticdemand that local firmswould otherwise supply.

Export ExportGlobal Global

ImportLocal ImportLocal

Office StationeryManufacturing

19982011

Level & Trend

Globalization inthis industry isMediumand thetrend is Increasing


27/40


Player Performance Colorado-based Cenveo Inc. is one of thelargest diversied printing companies inNorth America. The company is the

successor of Mail-Well Inc., which datedback to 1921 and was reincorporated in1997 as Cenveo. The company hasoperations spanning the United States,Canada, Latin America and Asia. As of2010, Cenveo employs an estimated8,700 people worldwide. The company isheadquartered in Stamford, CT.

Cenveo operates two businesssegments: the envelopes, forms andlabels segment as well as the commercialprinting segment. The envelopes, formsand labels segment includes

manufacturing and printing customizedenvelopes for billing and direct-mailadvertising as well as business forms andlabels. The segment operates 34manufacturing facilities in North

America, and segment sales are forecastto account for 53.0% of company sales.The commercial printing segment has 37manufacturing facilities as well. Throughthis segment, the company prints annualreports, car brochures, brand marketingcollateral, specialty packaging andgeneral commercial printing. Thecompanys operations in the OfceStationery Manufacturing industry iscarried out through its envelopes, formsand labels sector, excluding revenuesfrom labels.

The company has made a number ofprominent acquisitions over the ve

years to 2011. In July 2006, it acquiredlabel manufacturer Rx TechnologyCorporation, which was integrated into

its envelopes, forms and labels businesssegment. The acquisition of RxTechnology gave the company a leading

position in the pharmaceutical labelmanufacturing business. In 2007, thecompany made four strategic acquisitionsto enhance its existing operations,including Printegra in February, Cadmusin March, Color Graphics in July andCommercial Envelope in August. Cadmusand Color Graphics were integrated intothe commercial printing segment of thecompany, while Printegra andCommercial Envelope were adopted intothe envelope and business formmanufacturing operations.

In May 2009, Cenveo announced thatit was buying major competitor NashuaCorporation for $49.7 million, with thesale completed in September 2009.Nashua was a prominent manufacturer,converter and marketer of labels andspecialty papers with annual revenue ofabout $265 million. The acquisitioncaused the companys market share toincrease substantially in the OfceStationery Manufacturing industry.Furthermore, Nashuas acquisitionstrengthened Cenveos position in thepharmaceutical labels market andsubstantially increased the companyscustomer base and raw materialpurchasing power. Cenveo also acquiredClix in February 2010, with annual salesof $16.7 million, allowing the company toexpand its Canadian operations. Inaddition, Cenveo acquiredMeadWestvacos envelope product groupin February 2011. The acquisition

Major CompaniesCenveo Inc. | MeadWestvaco Corporation

National Envelope Corporation | Other Companies

67.6%Other

Cenveo Inc. 14.1%

MeadWestvaco Corporation10.2%

National Envelope Corporation 8.1%


Major players(Market share)

Cenveo Inc.Market share: 14.1%Industry Brand NamesAmerican BusinessProductsPoser Business FormsLawson MardonPackaging


28/40


Major Companies

Player Performance MeadWestvaco is a global producer ofpackaging, consumer and ofce productsand specialty chemicals. The companyhas operations in more than 30 countriesthroughout North America, South

America, Europe and Asia.MeadWestvaco was created in January2002, following the merger of paper andpacking companies, Mead and Westvaco.The companys main focus is onpackaging solutions, which represent70.0% of all production.

The company participates in thisindustry through its consumer and ofceproducts segment, which manufacturesstationery and accounts for 12.3% ofrevenue. The company employs about8,750 people in the United States, and itsUS operations generate about 68.0% ofthe companys revenue.

MeadWestvaco has gone throughreconsolidation and a series ofacquisitions since its inception, lookingfor the perfect product mix and sellingoff lower-performing divisions. In 2005,the company sold its coated and specialtypapers division to NewPage Corporationfor $2.3 billion. In 2008, the companyacquired Eastman Chemical Companythrough its specialty chemicals division.In the same year, it sold two paper millsin North Charleston, SC, and Potsdam,NY, and closed one packaging plant in

Warrington, PA, in order to reduce costs.In early 2009, the company announcedclosures of multiple facilities in theUnited States, including plants in Ohioand Virginia, to limit costs during therecession. In September 2010, theMeadWestvaco sold its media and

Player Performancecontinuedresulted in Cenveo becoming the largestcompany in the industry.

The acquisition of Rx Technology in2006 and Printegra in 2007 contributedto developments in label and businessform products as envelope sales volumesfell. The company expanded the envelopeproduct line with the purchase ofCommercial Envelope in 2007; however,sales of business forms and labelsincreased at a faster rate than envelopes.

Financial performance

During the ve years to 2011, envelopes,forms and labels segment revenueincreased at an annualized rate of 6.5%.This growth is far stronger than theindustry as a whole, which declined 3.4%during the same period. Variousacquisitions, primarily those of Nashuaand MeadWestvacos envelope productgroup, increased the companys marketshare substantially. During the recession,excluding gains from acquisitions, theenvelopes, forms and labels segmentreported lower sales. This was primarily

the result of lower demand and salesvolumes stemming from an increase inpostage rates by the US Postal Service, as

well as a movement toward paperlesscommunication. Overall, however,Cenveo is projected to increase its marketshare from 9.3% in 2006 to 14.1% in 2011due to its expansive acquisition activity.

Operating income growth has beenconsiderable over the ve-year period.Between 2006 and 2011, operating incomegrew at an average annual rate of 7.2%.Economic activity was strong in 2006,

with increased volumes of sales andadditional prots from Rx Technologycontributing to this growth. Furthermore,the company signicantly reducedoperating expenses: in 2006, the companyreduced its number of employees by about900, consolidated seven manufacturingfacilities and closed three printingoperations. During 2009, divisionaloperating earnings improved relative to2008 due to cost-cutting procedures anddecreased input costs, allowing operatingincome to grow by 288.3%.

MeadWestvacoCorporationMarket share: 10.2%Industry Brand NamesFive StarColumbian

Trapper KeeperCambridgeAt-A-GlanceAmCalDay RunnerMead


29/40


Major Companies

Player Performancecontinuedentertainment packaging business. InFebruary 2011, the company sold itsenvelopes business for $55 million,substantially reducing the companysoperations in the Ofce StationerManufacturing industry.

Over the past ve years, the companyhas increasingly focused its attentionabroad in order to take advantage ofgrowing consumer bases in the midst ofdeclining domestic demand. In 2007, thecompany opened a packagingmanufacturing plant in China that is

expected to reduce costs of production,increase economies of scale and open upnew export markets. In 2009, thecompany acquired Graca Ltd, amanufacturer of stationery and ofcesupplies in Brazil. MeadWestvaco is alsodeveloping new product offerings to meetfast-growing demand in India as brandedproducts grow in popularity there

MeadWestvacos operations in theOfce Stationery Manufacturing industryare carried out exclusively through itsconsumer and ofce products division.

The division produces and distributes abroad portfolio of school and ofcesupplies, with brands such as Five Star,Mead, Trapper Keeper and others. Ofceproducts include the At-A-Glance andCambridge brands. The division operates

seven printing centers, seven convertingplants and eight distribution centers.Manufacturing is performed in theUnited States and Brazil.

On January 15, 2009, the companyannounced that it was implementing aseries of broad cost-reduction actions toreduce its corporate and business unitoverhead cost structure. These actionsresulted in 3,000 job cuts during 2009,

which represents 13.0% of the companysglobal workforce. Additionally, thecompany closed or restructured 16

manufacturing facilities during the year.These cost management actions achieved$154 million in pretax savings for 2009,

which exceeded the companys target of$125 million. During 2010, the companycontinued to reduce operation expensesin order to generate target savings ofabout $250 million from facility closuresand overhead reductions.

Financial performanceMeadWestvaco is expected to hold a10.2% market share in 2011. Division

revenue decreased at an annualized rateof 7.5% over the ve years to 2011. This is

weaker performance compared to theindustry as a whole, which is estimated tohave declined 3.4% per year. This ismainly due to the companys sale of its

MeadWestvaco Corporation (consumer and office products segment)

financial performance

YearRevenue

($ million) (% change)Operating Income

($ million) (% change)

2006 1,143 1.6 127 -8.6

2007 1,147 0.3 139 9.4

2008 1,063 -7.3 96 -30.9

2009 1,006 -5.4 133 38.5

2010 748 -25.6 141 6.0

2011* 776 3.7 152 7.8

*IBISWorld estimate

SOURCE: ANNUAL REPORT


30/40


Major Companies

Player Performance National Envelope Corporation is a NewYork-based envelope manufacturer, withoperations in the United States andCanada. The company is the largestenvelope manufacturer in the world,producing 37 billion envelopes in its 9manufacturing facilities throughout theUnited States and Canada. NationalEnvelope is based in Frisco, TX, and wasfounded in 1952. The company employsabout 3,000 people through itsoperations in the United States and

Canada. Its products range from regularofce envelopes to customized envelopesfor direct-mail use. Other productsinclude presentation folders, durablemailers, ne papers and booklets.

The company has about 20 divisions,which include New York Envelope,Williamhouse and Old Colony Envelope.In 2006, National Envelope expanded byacquiring Atlantic Envelope Company, asubsidiary of National Service IndustriesInc. Atlantic Envelope was a full-serviceenvelope converter with sixmanufacturing facilities and 900employees located throughout the UnitedStates. In October 2007, the companyopened a new envelope productionfacility in Ennis, TX. The companysexisting Texas plants, in Corsicana andGrand Prairie, were consolidated into thenew facility in 2009.

National Envelope has increasinglyfocused on environmental sustainability

in order to stay competitive and appeal toa wider base of customers. It was the rstenvelope converter in the United Statesto be certied by SmartWood to produceenvelopes and greeting cards that meetthe standards of the Stewardship Council.Some of the Forest Stewardship Council(FSC)-certied grades offered byNational Envelope include: CougarOpaque, Evergreen 100 and ASPEN 50Natural. The company also offers a rangeof recycled paper products. In March

2009, the company introduced a newcarbon-neutral products program thatproduces envelopes, announcements andholiday cards without additional carbondioxide emissions. The program has beenunder development for two years andinvolved a complete carbon footprintanalysis of the company by the CarbonNeutral Company of London, England.

In February 2008 the companyentered into a strategic alliance to createa global single-source supply agency toservice companies with internationalmailing and delivery requirements. TheGlobal Services Group (GSG) comprisesNational Envelope, German rm Mayer-Kuvert-network GmbH, Spanish rmGroup Tompla and Japans ImuraEnvelope. These companies collectivelyoperate a network of 65 manufacturingfacilities, and the alliance is expected toprovide National Envelope with acompetitive advantage for attracting and

Player Performancecontinuedenvelopes business, which reduced theMeadWests market share. With theexception of the sale of its envelope

business, revenue only contracted by 0.1%Increased competition from imports has

been adversely affecting this segment. TheUnited States as a whole has experienceddeclining sales volume. In 2006, 72.0% ofrevenue was generated through USoperations, but by 2010, that gure haddeclined to 68.0%.

Over the ve years to 2011, operatingincome increased at an averageannualized rate of 3.7%. Strong importcompetition and increasing paper andpaperboard prices resulted in protdeclines during 2008. MeadWestvaco,responded by increasing product prices,enabling positive prot growth. Easinginput prices and cost-cutting actionsresulted in positive prot margin in 2009through 2011.

National EnvelopeCorporationMarket share: 8.1%Industry Brand NamesNew York EnvelopeAlcorWilliamhouseOld Colony Envelope


31/40


Major Companies

Other Companies The industry is comprised of a largenumber of small and medium-sizecompanies, many of which are private,family-owned businesses. The industry iscompetitive with about 406manufacturers. The majority ofcompanies in the industry hold less than1.0% market share.

International Paper CompanyEstimated market share: 4.0%International Paper Company wasformed in 1898, and today is the largestforest products company in the UnitedStates. The company operates in North

America, Europe, Latin America, Russia,Asia and North Africa, selling its productsin more than 120 countries. Thecompanys manufactured productsinclude wood pulp, paper, packaging andplywood, which are produced by vedivisions: industrial packaging, printingpapers, consumer packaging, distributionand forest products. The printing paperssegment manufactures home and ofcepapers, commercial printing andpublishing papers, converting andspecialty papers, industrial papers andpulp. Uncoated papers are sold underprivate label and International Paper

Player Performancecontinuedservicing global clients. Furthermore, theagreement enables members to work

jointly on new product development andresearch projects.

In September 2010, the Gores GroupLLC announced its acquisition ofNational Envelope, which had led for

bankruptcy in June 2010. NationalEnvelope had been consolidatingoperations for the past two years andceased production in its Chino, CA,Union, NJ, Long Island City, NY, and

Houston, TX, facilities. NationalEnvelope is a private company; therefore,no ofcial nancial statistics areavailable. The companys most signicantexpansion was in 2006, following theacquisition of Atlantic EnvelopeCorporation. Since then, sales haveexperienced negative growth due to weakdemand conditions. The company isestimated to have $610 million inrevenue, giving the company a marketshare of 8.1% in 2011.

National Envelope Corporation financial performance*

Year Revenue (% change) Employees (% change)

2006 650 N/C 3,600 N/C

2007 867 33.4 4,500 25

2008 799 -7.8 5,000 11.1

2009 676 -15.4 4,500 -10.0

2010 600 -11.2 3,500 -22.2

2011 610 1.7 3,000 -14.3

* EstimatesSOURCE: IBISWORLD


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Major Companies

Other Companiescontinuedbrand names, which include Hammermill,Springhill, Williamsburg, Postmark,Accent, Great White, Chamex, Ballet, Rey,Pol and Svetocopy. The companycontributes to the Ofce StationeryManufacturing industry through itsproduction of cut-size paper for printers,faxes, photocopiers and writing.

Smead Manufacturing CompanyEstimated market share: 1.3%Smead Manufacturing Company wasfounded in Hastings, MN, in 1906.

Acquired by the Hoffman family in 1916,the company is now in its third generationof family ownership and has been a

woman-owned enterprise since 1955. Thecompany operates as a manufacturer anddistributor of paper ling supplies andrecords management software. Productsare sold only through ofce productsdealers and authorized resellers.

In 2003, the company expanded itsSmead-Europe division, previouslyoperating in nine European countries, byacquiring certain subsidiaries of The

Lindegaard Group, a Norwegian maker ofling and organization products, deskaccessories and stationery products. The

subsidiaries are located in Denmark,Estonia, Finland, France, Norway,Sweden and the United Kingdom. Thecompany has also been at the forefront ofsustainable business practices, divertingused paper from landlls and reusing itin its products. Smead started recyclingin 1989 and many of its most popularitems are available as 100.0% recycledproducts. IBISWorld estimates that thecompanys sales of paper ling suppliesin the United States will account for 1.3%of industry sales in 2011.

Tension Envelope CorporationEstimated market share: 1.2%Tension Envelope Corporation is one ofthe countrys leading privatemanufacturers of envelope products,selling directly to companies andorganizations across the country. Tensionmakes a range of products, from standardenvelope styles and sizes to specialtyenvelopes created for one-of-a-kindmailing and packaging purposes. Tensionproduces more than 11 billion envelopes a

year, with 30 facilities from coast to coast.IBISWorld estimates that the companyholds about 1.2% of market share.


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Capital Intensity The Ofce Stationery Manufacturingindustry has a medium level of capitalintensity, which is similar to other paperproduct manufacturing industries. In2011, for every dollar spent on wages, theindustry will require an estimated $0.12

worth of capital investment. This is aslight decrease in capital intensitycompared to 2006, when $0.13 of capitalinvestment was required for every dollarspent on wages. The change is mainly dueto a sharper decline in capitalexpenditure compared to labor costs

during the ve-year period.Industry-wide capital expenditure has

fallen during the past ve years as aresult of unstable credit markets anddiminishing returns on investment.Firms have also downsized their

operations, which has resulted in lessmoney spent on upgrades or expansions.Considering weakening demand

Operating ConditionsCapital Intensity | Technology & Systems | Revenue Volatility

Regulation & Policy | Industry Assistance

Tools of the Trade: Growth Strategies for Success


LaborIntensive

CapitalIntensive

Change in Share of the Economy

New Age Economy

Recreation, Personal Services,Health and Education.Firmsbenefit from personal wealth sostable macroeconomic conditionsare imperative. Brand awarenessand niche labor skills are key toproduct differentiation.

Traditional Service Economy

Wholesale and Retail.Relianton labor rather than capital tosell goods. Functions cannotbe outsourced therefore firmsmust use new technologyor improve staff training toincrease revenue growth.

Old Economy

Agriculture and Manufacturing.Traded goods can be producedusing cheap labor abroad.To expand firms must mergeor acquire others to exploiteconomies of scale, or specializein niche, high-value products.

Investment Economy

Information, Communications,Mining, Finance and RealEstate. To increase revenuefirms need superior debtmanagement, a stablemacroeconomic environmentand a sound investment plan.

Paper MillsPrinting

Electric Power Transmission

Paperboard Mills

PaperWholesaling

Office StationeryManufacturing

Capital intensity

0.5

0.0

0.1

0.2

0.3

0.4


Dotted line shows a high level of capital intensity

Capital units per labor unit

OfficeStationery

Manufacturing

ManufacturingEconomy

Level

The level of capitalintensity requiredis Medium


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Operating Conditions

Technology

& Systems

Medium levels of technological

development have taken place in theindustry during the past 10 years. Theresult has been improved product qualityas well as considerable improvements inproduction efciency and just-in-timemethods. Operators have been able tointroduce new product lines and improveolder ones at a relatively low cost, while adecline in downtime losses has improvedprotability.

Throughout the paper-convertingsector, computerized production systemshave been widely adopted in recent

years. Such systems make use ofadvanced sensing and photo-detectiondevices to adjust machinery settings andgreatly improve the accuracy and qualityof the production and life span of themachinery. This has led to substantialcost savings throughout the industry.Other equipment enhancements,including the use of fully automated andcomputerized guillotines, collators,folders and binders, have resulted insimilar savings.

The industry has been heavily focusedon meeting environmental regulations,such as reductions in noise levels andsolvent emissions. In March 2009,National Envelope introduced a newcarbon neutral products program, whichis available for all envelopes,announcements and holiday cardsmanufactured by the company. Therehave also been adjustments to convertingmachines to allow recycled paper and

paperboard inputs. The American Forest

& Paper Association leads an industry-wide Agenda 2020 partnership with theUS Department of Energy. Thepartnership aims to improve energyefciency in the industrys manufacturingprocesses and is organized as amembership alliance to accelerateresearch, demonstration and deploymentof breakthrough technologies. Agenda2020 Technology Alliance was initiatedin 1994 and is expected to continue tocontribute toward technologicalalternatives in all aspects of the paper

and forestry industries.Other improvements in general

productivity include smaller print runsand shorter setup times for businessforms, high-capacity web presses, lasertechnology developments, prepresselectronics and high-delity printing.

Innovation and competitionSo far, the Ofce StationeryManufacturing industry has beensuccessful in keeping pace withtechnology developments in othersectors, such as printers, fax machinesand photocopier manufacturing. Laserprinting technologies and multisurfaceprinting has increased the demand forpaper that supports these functions. Inrecent years, industry operators havealso invested substantial amounts indeveloping new and advanced productfeatures, which can be marketed tocustomers to gain a competitive

Capital Intensitycontinuedconditions for industry products, capitalexpenditure is experiencing diminishingreturns, leading to fewer operators

willing to invest in the industry.Labor costs are estimated to fall by

4.9% per year over the past ve years.Investment in new technology systemsand increased computerization hasresulted in improved labor productivity

because operators have reduced theirdependency on labor. At the same time,companies pursued employee cuts inorder to reduce operating expensesduring the recession. As rms battleddeclining demand in 2008 and 2009,layoffs were considerable, resulting inrespective 2.8% and 13.1% reduction inindustry employment.

Level

The level ofTechnology Changeis Medium


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Operating Conditions

Revenue Volatility IBISWorld estimates that industryrevenue experienced a medium level of

volatility in the ve years to 2011, with anoverall declining trend. Year-on-yearrevenue changes averaged 6.0% duringthe ve-year period. Volatility isdependent on price changes as well as thelevel of output that the industry producesand sells. The average price of theindustrys products experienced low

volatility over the same period, with theeffect of higher input prices offset by

weaker demand conditions. The producerprice index for ofce stationery productsincreased at an average

Office Stationery Manufacturing in the US Industry Report

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