Paper Industry in Transition – May 2022 M&A Activity
SOURCE - The Target Report
Paper-based Industries are in Flux
As a result of the changes occurring in the paper industry, many printing and packaging companies are struggling to procure the paper they need, the grades they require, at the time they would like, and in a sufficient quantity necessary to fulfill customer orders. This is an abrupt turnabout for many companies that have striven for years to increase customer orders, always completely confident that the required paper substrates would be available on a just-in-time basis. Distributors gladly stocked and warehoused multiple grades at their own expense, ready to ship immediately, and often delivered paper on demand with extended credit terms. Some printers even enjoyed paper stocked on their premises on a consignment basis, ensuring sufficient supply without tying up excess working capital.
At least for the foreseeable future, those days of paper plenty are over. Printing and packaging company owners report that they are spending considerable time every day just procuring needed paper stock. The efficiency inherent in longer run lengths is lost when orders are filled with multiple shorter runs requiring repetitive press makereadies. Fussy buyers have lowered their paper standards, accepting lesser grades in order to meet deadlines. Shortages are being filled in with substitute grades, sometimes several different papers are used within the same print run. Distributors are enforcing paper allocation schemes based on prior years usage, hindering the growth of their printing industry customers. Credit terms have tightened considerably, with slow payers cut off or required to adhere to self-liquidating payment policies. Price increases have become routine, which must be passed on to customers who have and will consider other alternative (electronic) communication choices.