What marketers should now consider when it comes to print sourcing for leaflet delivery campaigns in Europe!
After the long lockdown, retail is committed to minimizing the sales losses from the first half of the year through sales campaigns, special discounts and location-based marketing of offers in the midsummer of 2021.
The time of reluctance to advertise is over and visitor footfall, e.g. in pedestrian zones is approaching pre-Corona levels. For branch-based retailers, leaflet delivery and inserts in free advertising newspapers will continue to be an indispensable means of activating customers locally in 2021. The high demand for this medium will now meet a unique situation in the printing industry, which must be considered for future media planning.
Fall in demand for graphic papers and paper mill closures
According to the CEPI - Confederation of European Paper Industries - the pandemic accelerated the structural decline in the production of graphic grades starting in the year 2020 but stimulated the production of packaging qualities as well as hygiene and household papers. Total production of graphic products including newspaper printing decreased by 19%. Furthermore, during this period, the demand from publishers, offices and commercial printing companies fell dramatically. At the same time, the producer prices in the paper industry in Germany are approaching the high point of 2018 again (index value 109.8 regarding the producer price index with a May index level of 107.0 according to the German association DIE PAPIERINDUSTRIE e.V.).
Industry experts consider it very likely that prices will reach and even exceed the 2018 level by the end of 2021 and the beginning of 2022. On the manufacturing side, announcements of the closure of paper mills are increasing, for example Stora Enso recently announced the closure of paper mills in Finland and Sweden for reasons of “falling demand” as part of a longer-term trend. In addition, the supply is becoming even more scarce, as the agreement to sell the Stora Enso Sachsen paper mill in Eilenburg, Germany provides for a transition from the production of newsprint to the production of corrugated base paper. The boom in e-commerce can therefore be seen as a mirror image of the challenges in stationary retail.
Raw material shortages and supply chain problems
In addition to these reasons, general problems in the procurement of raw materials also affect the market. The transport capacities for pulp are still partially limited by the effects of the global Corona crisis. Due to the boom in demand on the wood markets, new market participants are increasingly starting to replace wood fibre insulation materials with cellulose or sheep's wool. The gain in importance of alternative building materials is therefore another factor that affects the procurement markets.
How can advertising companies react?
People in print purchasing and in the agency sector agree that the situation described above will not only have short-term effects on print projects, but will also be accompanied by medium to long-term changes.
Alexander Süß - Head of Business Customers and Marketing Print and Commercial Services from Oberpfalz Medien (Germany) on the tense situation in the paper markets:
“As things stand now, we can fulfill all of our customer orders in 2021. Due to the current paper shortage, we unfortunately had to reject individual new enquiries. The best media planning is useless if it fails in the end due to the availability of paper. We are therefore advising our customers intensively about resource planning. The immediate planning of the respective leaflet strategy by the end of 2022 is essential, as we can only secure the required volume of the desired newsprint with the appropriate advance notice. Leaflets and newspaper inserts will continue to be an indispensable advertising medium."
In summary, marketing planners - especially for projects with circulation of millions of copies - have to deal with the following points in order to secure the campaigns:
Timely communication of planning for new campaigns in 2022; with the print buying agency or the print service provider
- Show greater flexibility in the choice of graphic grades - a pure focus e.g. on newsprint can lead to a dead end in the current situation
- Securing the conditions and a careful study of the contract annexes regarding the paper provider's exit clauses are required
Whether it will lead to closer networking on the demand side in order to create new production capacities dedicated to newspaper, magazine and supplement printing is currently not foreseeable.
Since print advertising continues to play an important role in the communication of offers in Europe and is an image carrier - both singularly and as a base load for local digital advertising placements based on it - increased commitment on the part of demand is now required to ensure the functionality of this channel for the market participants in the future.
A comment by Sebastian Mitter, Director Marketing & Sales at prospega GmbH.