Business paper merchant NOR Paper reports that it is aiming to become a R1-billion company by 2013, up from about R650-million at the end of last year.
New company MD Ronnie Oeschger says that NOR Paper plans to achieve this through a combination of strategic key account growth, while simultaneously focusing on acquisitions.
“We are looking at acquiring more warehousing facilities to expand our national footprint and enable us to target local business more actively, thereby rendering a better service to our customer base,” he says.
Oeschger adds that NOR Paper is currently acquiring additional conversion equipment, for paper converting and guillotining, to assist in expanding its Johannesburg operations.
Further, the company also plans to continue its expansion into sub-Saharan Africa, where it already has a significant footprint in about 21 countries.
Meanwhile, Oeschger admits that the indus- try is still facing challenges as a result of the after effects of the global economic recession and the cautious outlook of both customers in the print and office markets. This has resulted in an overall reduction in the volume of paper that businesses use.
He adds that the challenges the paper indus- try had to deal with in 2009, such as exchange rate issues, pulp price increases and strikes at the country’s ports, spilled over into 2010. This has made it difficult to get business back to prerecession levels.
The industry is left with two consequences of the recession. Companies significantly reduced their spend on marketing and advertising, and many businesses introduced print manage- ment policies to limit the volume of paper being used in offices.
It would seem that a trend has developed whereby companies first cut back on marketing and advertising when the economy is under pressure, which does not make sense, owing to the need to spend more money to attract customers, Oeschger says.
“The effect of lower demand for paper is that competition among rival paper suppliers is intensifying. We are all competing for the same slice of the available market.
“This, in turn, results in paper price cuts, lower profit margins and a negative downward spiral,” he explains.
Oeschger cautions that, once a company has reduced its margins, it is extremely diffi- cult to increase these again, as customers are extremely resistant to price increases.
“However, the market seems to be turning, with slight increases in activity. This is possi- bly ascribable to businesses again starting to market themselves more aggressively,” he says.
Further, Oeschger says that, although there was reduced activity in its order book, NOR Paper managed to retain its key account base during the recession. The company continues to differentiate itself from competitors by focusing on providing best-in-class service delivery.
“These days, it is becoming increasingly difficult to maintain long-term customer relationships, necessitating the company to look at strategies to add value to our product,” he says.
To this end, he reports, factors such as good turnaround times, efficient stock-holding and providing the appropriate range of brands are critical.
NOR Paper also offers a customisation service, where it converts sheet paper to any size and format its customers require. He says that this enables customers to limit keeping excessive paper stock, as they are able to order paper on demand.
Meanwhile, the company reports that the advent of digital media has had an impact on the paper industry. However, he believes that paper will not be phased out soon, if ever. “People still like to hold a printed piece of paper in their hands,” he says.
Further, Oeschger believes that digital media has not had a significant influence on the local print industry, when one considers the vast growth rate of digitally available information, compared with the growth seen in the printing industry. Another factor in this trend, in South Africa and Africa, may lie in the fact that not many people have access to digital media.
“There is a trend, however, that one medium may drive another – for instance, when a magazine reader turns to the Web to further research a topic,” Oeschger says.
Meanwhile, he reports that he is astounded at the level of environmental responsibility the local paper industry has achieved in recent years. These days, the major paper mills have programmes to rehabilitate and re-establish wetlands, once destroyed through irresponsible forestry practices.
“Trees are being planted faster than they are being harvested, and local communi- ties are increasingly being drawn in to help with the environmental work, thereby boosting rural job creation. Further, paper mills are increasingly becoming more self-sufficient in providing their own water and energy, as well as recycling the by- products created in the papermaking process,” he says.
Meanwhile, Oeschger believes that paper is, in general, seen as a grudge purchase, owing to most of it ending up in the bin. Because of this, there seems to be significant resistance among local companies to pay a premium associated with environment-friendly paper.
“South African businesses are far behind their European counterparts, who are happy to pay for more expensive environment-friendly paper in the knowledge that they are contributing to preserving the environment,” he concludes.