Analysis

Over the past decade, the magazine sector has been one of the toughest markets for UK printers. In terms of its consolidation, it is probably second only to monochrome book printing.

Following New Jarrold Printing’s (NJP) demise in 2006, only eight big web-offset printers remained: Cooper Clegg, BGP, Polestar, Southern­­print, Quebecor World, St Ives, William Gibbons & Sons and Wynde­ham, while in the gravure market only Polestar and Prinovis had a UK presence. Today, there are just seven web-offset printers, following Quebecor World’s demise in January.

In many ways, this is a surprising state of affairs. Few would have bet on Cooper Clegg surviving this long and, but for its surprise acquisition by Pindar in March 2007, it surely wouldn’t have. However, just 18 months later and despite £5m worth of investment, Pindar announced its decision to sell Cooper Clegg, citing overcapacity and “unsustain­­able pricing” as its motives.

Again, the Tewkesbury-based web-offset printer looked to be on the brink, only to be rescued once more by ‘turnaround specialist’ John Wood. Whether he will be able to achieve more than Pindar with the struggling printer remains to be seen, although few in the industry are crediting Cooper Clegg with even a fighting chance.

Unsustainable pricing
Overcapacity, for a decade or more the bane of the web offset sector, has taken its toll on many a UK printer. It was one of the causes of NJP and Quebecor World’s demises and of Cooper Clegg’s sale to Pindar, since when more capacity has actually gone into magazine printing than has come out. For example, BGP has put in two new 72pp Manroland Lithoman presses at its Bicester site, taking its total to four.

Meanwhile, although competition from mainland Europe may have lessened due to the strength of the euro, the worsening global economy has taken a severe toll on advertising revenues and circulation figures, generating ever-greater downward price pressure from UK publishers. Pindar cited this very phenomenon in announcing its decision to sell Cooper Clegg.

The company said: “Pindar believes that Cooper Clegg can be a profitable business, but the current market conditions in publishing and the long-term investment required to remain competitive, mean limited returns for shareholders.”

Group chairman Andrew Pindar went a step further and specifically blamed the cuthroat nature of the sector and its competitors for the fierce conditions and “unsustainable pricing”.

Group chief executive An­­drew Dalton added: “I think that while there are still printers out there who are prepared to quote at huge discounts below their cost price in the main publishing marketplace, magazine printing is not a sector that we would want to re-enter until margins improve.”

Market conditions
While there can be no argument that pricing in the sector remains fiercely com­­petitive, many would point out that this has been the case for long enough to ensure anyone buying into the market has no illusions about the dogfight they’ll be getting into.

BGP group sales director Bob Caley says it is pointless to complain about unsustainable pricing when the publishers themselves are also under tremendous pressure. “Magazine prices are at their most competitive ever and it is difficult to see that publishers can sustain better prices in the current market conditions. Publishers are suffering the same as everyone. They’re experiencing falling advertising revenues and falling circulations and it’s no solution to say prices have got to go up, because, from their point of view, the prices can’t go up,” he says.

Caley adds that BGP is, in his opinion, one of the only UK magazine printers to have a sustainable business model, thanks to its £25m investment in the latest 72pp presses. “At BGP, we can sustain the current market prices because our business model allows us to do that,” he says. “Because our sales strategy does not rely overly heavily on any one sector, we can have a spread of prices across the business, which allows the current magazine prices to be sustainable for us. I believe we are the only printer in the UK market that has got a sustainable business model in this way.”

Getting worse
The problem for Cooper Clegg is that, unlike BGP’s, its presses are among the oldest of the seven big players in the market. In addition, if the conditions are bad this year, they’re only going to get worse when the seemingly-inevitable recession hits in 2009.

“Next year’s going to be massively difficult for everyone,” says Caley. “We’ve got a low-cost business model that works and publishers should be very wary of committing to those printers that say prices aren’t sustainable because those printers are either going to be going out of business or will be looking to put up their prices.”

For now, Cooper Clegg’s future has been secured and, for the staff’s sake, one can only hope Wood proves to be the turnaround specialist he has been hailed to be.

Cooper Clegg could not be reached as PrintWeek went to press.