Article: EMGE Conference: 'Riding the transition'
| 30 October, 2015
Martin Glass, CEO of EMGE, opened the conference by explaining that the paper industry was in the process of transition between its old legacy and new opportunities. This was expanded upon by main sponsor Mondi in the keynote speech given by Johannes Klumpp, Marketing and Sales Director. Klumpp told delegates that Mondi no longer describes itself as a Paper and Packaging Company, but as a Packaging and Paper Company. Packaging is now the biggest division of Mondi Europe,
In a backdrop of declining demand for woodfree paper in Western Europe, Klumpp stressed that companies in the paper industry need to focus on successfully managing the transitions taking place in the market. One of these is the opportunity of digital printing, which is expected to achieve double-digit growth over the next five years. In contrast, offset printing has declined by 40% in Western Europe over the last ten years, although part of this is due to some production moving to Eastern Europe. Despite the production challenges of digital printing, throughout the conference it was stated as an important growth area for the printing industry. Herbert Hennig, General Manager, NorService, described it as a ‘Blue Oean’ of opportunity for the sector.
Klumpp concluded his speech by underlining his optimism for the future of paper in the digital age, providing the product portfolio is right. To achieve this, he emphasized the importance for all the value chain, from production to resale, to work together in order to bring products that meet the needs of today’s end users.
ADVEO highlights trends in the office supplies channel
The EMGE conference is a perfect forum for the paper industry to find out the latest trends at every level of the value chain. With the first morning focusing primarily on digital printing and new inkjet technology, Casper Luyten, Corporate Director of Business Development and Strategy at ADVEO, took to the floor as one of the afternoon speakers to give insights into how the office products market is evolving. Luyten explained that the market has moved from economic free-fall to recovery, even if this remains weak in some areas. He pointed to globalisation as an important trend, highlighting the first direct freight train to connect China to Madrid last December. This is particularly relevant for relatively low value goods such as office supplies because they can now be transported long distances at low cost. It was no surprise that digitalization was mentioned as another driver for change. However, despite the affects of digital technology in the office environment, Luyten revealed estimates for the French market showing that stationery and consumables will remain important. Stationery and consumables accounted for 73% of the French market in 2014 compared to 27% for other products (Equipment, Furniture, Jan San, Security, Printing and Packaging). In 2020 stationery and consumables is expected to be 60%, which is still the majority of the market. This shows that the best way forward is a combination of digital and traditional products.
Luyten was also confident in the continuing relevance of office supplies in the workplace. A questionnaire carried out November 4-19 with 1750 people who work in an office showed that 94% of those questioned considered office supplies as essential to company success and 87% believe office products contribute to the well-being of employees. Although unsurprisingly competitive prices drove buying decisions (31%), the quality of products (21%) and a wide choice (21%) were high on the list.
Traditional media remains relevant
The continuing relevance of paper and traditional media was underlined by MGA Metro Group. As a major paper user in Europe with buying volumes of €500 million, Metro is well-placed to observe trends in the market. Clemens Hadstein, CFO and Marie Elter, Head of Paper Procurement told delegates that print media remain the basis of its advertising budget with personalised campaigns gaining importance. By looking at individual buying habits, Metro is now able to print a personalised catalogue. Concerning office paper, Elter added that an important trend is taking place concerning buying habits for different grades of office paper. A-grade and C-grade paper have both seen an increase in demand, whereas B-grade is now losing relevance. She added that the quality demanded by customers is increasing.
Looking at the importance of paper quality at a European level was the theme of a thought-provoking speech given by Jean-Pierre Coene, Consultant, Itim International. He argued that culture influences the cut-size business, based on UAI (relationship to uncertainty) scores. Research into UAI in Europe has categorised countries such as Denmark, Sweden and the UK as ‘Relaxed, countries’ as opposed to Italy, France and Greece, which are labelled ‘Anxious countries’. There are a number of differences between these groups, such as end user choice, which is driven by security in Anxious countries, but is more free in Relaxed countries. Coen argued that Relaxed countries with a lower UAI score will have a bigger ‘C’ segment, while Anxious countries could have a higher ‘A’ segment.
Not just another commodity
Thirawit Leetavorn, Senior Executive VP from Double A Paper was equally positive concerning the importance of quality in the modern workplace. He explained that Double A has invested heavily in branding, instead of selling paper as just a commodity. He showed the audience one of the Thai company’s amusing advertisements on French television aimed at educating the market to show that office paper is not all the same. The results of Double A’s marketing campaigns have led to an increased prompted awareness of the brand, from 3% to 32%.
Leetavorn also said that he was touched by the loyalty of French workers at the Alizay mill, which Double A acquired from Metsä Board in 2013 in order to move closer to the European market. Double A is looking to mirror the success it has achieved in Asia, where it has established itself as a leader in markets such as Korea, and a strong presence in the Middle East.
The benefits of a full waste paper basket
During a Round Table Open Forum Heidi Stockum, Procurement and Business Development, MGA Metro Group, made an interesting observation that new media does not replace existing ones, but adds to them, with examples such as television and radio. Therefore, digital media is complementing paper rather than replacing it. Professor Richard Harper, Social Shaping Research Ltd., also argued that office workers work best with paper alongside computer screens. He made an interesting observation that a full waste paper basket in the office is a good sign of productivity and that the paper industry as a whole has not argued this point strongly enough.
The declining market share of paper merchants
Martin Glass of EMGE concluded the conference with a look at distribution channels and brands, along with the trends for office paper. One important statistic, in a year involving the collapse of PaperlinX in Europe and other structural changes, is that the paper merchant channel now accounts for only 48% of sales, falling under 50% for the first time. Glass also presented statistics showing positive short term growth, but believed cyclical changes in the European economy would mean challenges further ahead.
This report has only touched on themes from a selection of speakers at the 2015 EMGE Conference. The next edition is scheduled to take place in 2017 and will have a lot to live up to following the success of the speeches and discussions this year. EMGE is also the paper industry’s source for forecasts and research. Details can be found at www.emge.com.