Wisconsin’s commercial printing industry faces several challenges, including the need to continually reinvest in new presses and technology, a tight labor market, increasing foreign competition and rising costs for materials.
However, the industry still has a bright future, according to many people who have been fighting to compete in the business for years. Many companies are seeing the benefits of having managed print services for cost reduction and sustainability of their businesses.
“The printing industry isn’t going to go anywhere,” said Jim Sandstrom, president of Milwaukee-based HM Graphics. “The paperless society that everybody predicted, I don’t know if that will ever be here.”
The Wisconsin Department of Workforce Development projects that there will be about 33,120 workers within the sector in the state by 2016, said Dennis Winters, chief of the office of economic advisors with the DWD. The relatively flat employment essentially projects growth in the area because companies continue to print higher volumes with fewer workers through lean initiatives and improved technology.
“It does suggest growth, but not necessarily in the number of firms or establishments,” Winters said.
While several prominent commercial printers have struggled in recent years, many others are meeting their challenges head on. Their solutions include keeping up with the latest technological changes within the industry, acquiring other companies with complementary services or geographies, adopting lean manufacturing and other continual improvement principles and focusing their businesses on high-growth niches.
Tech winners
High-tech advances have played a pivotal role in the success of HM Graphics, Sandstrom said. The company, which has about 200 employees, has posted double-digit revenue growth over the last two years, despite a somewhat smaller workforce.
HM Graphics now runs two presses 24 hours per day and a third during one shift. Ten years ago, the company was running five presses 24 hours a day.
“We’re doing two-and-a-half times the business that we did 10 years ago,” he said. “We’ve had double-digit growth for the last two years. We have fewer people, but it has nothing to do with the state of the economy.”
Later this year, HM Graphics will add a new six-color printing press that will replace its oldest press, Sandstrom said. The new press will enable the company to print onto plastics and offer services such as ultra-violet curing capability.
Sussex-based Quad/Graphics Inc. looks at the economic output its presses are producing to help it determine when to replace its systems, said Joel Quadracci, president.
“It isn’t one size fits all. It’s about understanding the drivers of your business,” he said. “How much labor does it add or how much does it take out? That all goes into the calculations.”
Technical advances at Quad/Graphics are not just about how fast the company runs its presses. The company is now seeking to add more steps and additional complexity to its work, which will generate more dollars per hour but slower run times, Quadracci said.
“We want to sell more complicated (products) but that runs against running your machines as fast as you can,” he said. “It’s not just about putting in the equipment. It’s using the new technology as an excuse to reinvent the process.”
Quad/Graphics places an equal emphasis on continual process improvement, whether it be the tenets of lean manufacturing, Six Sigma or other systems, as it does on updating its technology, Quadracci said.
“That’s where a lot of people make mistakes,” he said. “The process is almost as important as the technology itself. It’s great to have a Ferrari, but if you’re only going to drive it at 45 mph, it’s not that great.”
M&A and investment growth
HGI Company has grown its sales by nearly 25 percent this year through its diversification efforts, said Craig Faust, president and chief executive officer. HGI Company has made several acquisitions in recent years. The company acquired Plus Digital Print in 2007 and Inland Graphics in 2004.
Hi-Liter Graphics, HGI’s original company, is in Burlington. Plus Digital Print and Inland Graphics are in Menomonee Falls.
“We have the capabilities of a national printer, yet we’re small to mid-sized,”
Faust said. “We’re seeing market shifts, but our sales are up 24.5 percent. That’s a combination of our incredible customer base, market diversification and client diversification. We’re seeing an evolution where there is a blend between the electronic media, web enabled technology, combined with print.”
Quad/Graphics has acquired several companies in recent years, including: the Milwaukee direct mail firm OpenFirst LLC in 2006; Craftsman Press West, a Nevada commercial printer in 2006; and QuadTech (a Quad/Graphics subsidiary) purchased Vigitech, an Irish print inspection technology firm, earlier this year.
Quad/Graphics also expanded its West Allis plant and Menomonee Falls distribution center earlier this year by 192,000 and 388,800 square feet, respectively.
The company invested about $35 million in QuadWinkowski, a Polish print operation that Quad/Graphics acquired a majority stake in last December.
“I wouldn’t count us out (of other acquisitions),” Quadracci said. “But it’s not our main strategy. We’re looking for the next 10 to 20 years of where we want to grow our company. And the Polish investment is one of the places where we want to grow the company.”
Private equity investors also have become interested in Wisconsin-based commercial printing companies. TouchPoint Print Solutions Corp., a printing company acquisition platform sponsored by Huron Capital Partners, a Detroit private equity firm, purchased Hartland-based Commercial Communications Inc. earlier this year and bought CoakleyTech LLC, a Milwaukee document process outsourcing firm, last year.
TouchPoint, which owns two other printing-related companies in Ohio and Colorado, is seeking to develop a complete printing service solution, said Victoria Fox, managing director with Emory & Co., a Milwaukee investment banking firm who helped facilitate both acquisitions.
“They’re developing a portfolio that can do everything a customer wants,” she said. “CoakleyTech has done a lot of work for GE, has a digital print shop and has found a specific niche. Commercial Communications has a document management system to managed print services globally for its clients. That’s a huge area.”
Niche players
Investing in growth areas of printing such as direct mail has helped HM Graphics post steady growth over the last two years, Sandstrom said. A large part of the company’s work is in high-end catalogs and other direct marketing materials.
“These are glossy, unique, image-conscious pieces for image-conscious customers,” Sandstrom said. “And it’s the fastest-growing segment of the printing industry.”
Direct mail has been a significant growth area for Quad/Graphics, as well.
“Direct mail continues to grow at a pretty steady rate,” Quadracci said. “It’s projected to grow 3.5 percent higher than GDP. It’s a healthy part of the industry, even with slower growth than we expected. It does work, and you see a lot of people getting into it that didn’t do it before.”
Smaller printers such as LPI, which specializes in foil stamping, embossing, die cutting and related work, have created niches for themselves that have resulted in long-term growth. The company routinely creates highly specialized printed labels, including holograph and gold-embossed pieces.
“That’s the name of the game,” Young said. “The market has become so commoditized – if you’re putting regular ink on paper, (your customers) can go anywhere. (Many small printers have) got to come up with a unique product or a proprietary product of their own.”
Rick Mandel, president of Mandel Co., a Milwaukee-based commercial printing firm, began moving his company away from “classic offset printing” about seven years ago toward custom print jobs.
“We had a few divisions in the company, and we decided to divest from the more commodity lines,” he said. “We had a really good first half of the year. We’re fairly focused (now) on what our business is, which is more on the custom side of the business, more on the web to print, large and small format type business.”
Personnel puzzle
Many commercial printers have long complained about the difficulty in finding workers, especially for entry- level positions.
“We have three openings now in skilled areas for over six months,” Sandstrom said. “There has been a labor shortage in the industry and it’s worse now than it’s ever been. This (the printing industry) is one of the largest employers in the state of Wisconsin. We have done a horrible job of marketing ourselves to young people and explaining the opportunities to them.”
However, several local printers have found ways to circumvent the problem.
Faust said his company’s growth has been a direct result of finding, hiring and retaining the company’s more than 200 employees.
“We’re working with local high schools, technical colleges and four-year colleges, where we’re starting to recruit and develop our future talent,” he said. “We’re really emphasizing internal training. There’s talent out there. We process a lot of applications.”
To help it deal with the difficulty in finding entry-level workers, Quad/Graphics has heavily invested in automation over the last 10 years, Quadracci said.
“With automation, we’ve decreased labor as a percent of our sales dramatically,” he said. “It still continues to be really hard to find good entry-level people. There tends to be a higher turnover rate.”
Quad/Graphics routinely sends its recruiters into high schools and job fairs, Quadracci said. In 2007, the company donated $1 million to the Waukesha County Technical College’s printing and graphic arts center, which was renamed the Harry V. Quadracci Printing and Graphics Center.
“We’re the biggest printer in the area, but there’s a tremendous number (of other printers) around here,” Quadracci said. “We felt we should be a leader in (helping develop the next generation of workers in the field). My father always believed in that – believing in the industry and taking a leadership role there.”
Bringing it back
High transportation and energy costs have helped some local printers win back business that went to China and other Asian countries in recent years. HM Graphics has seen some overseas work return, as has HGI Company.
“We’ve spent a lot of time brainstorming with our clients, coming up with creative partnerships,” Faust said. “We’ve brought some work back from Asia, largely by working with the customer, our suppliers and ourselves.”
The company’s quick turnaround times have played a key role in winning back overseas contracts, Faust said.
“Our lead times have continued to improve through lean, process improvement, looking at turnaround times and attention to detail,” he said. “We’re looking at the total cost of the job and analyzing what is the difference between (domestic) and overseas competition.
“Technology is also creating opportunities. Technology is strengthening our industry, which equates to a healthier industry even though there is some short-term pain. It is a good industry, but like any mature industry, it’s going through some changes.”
