Schawk Inc. — Sustaining Business and Nature

CONTRARY TO the crooning of Kermit the Frog, being green has not only become easy, but popular. Especially in the business sector.

Perhaps it is the fallout from Al Gore’s “An Inconvenient Truth,” but environmental sustainability initiatives have become trendy—and the printing industry is certainly au courant with the greening movement. The Forest Stewardship Council (FSC) has bestowed certification upon a number of printers, industry manufacturers and other related vendors in recognition of eco-friendly operating practices.

Schawk Inc. is all about responsibility. The Des Plaines, IL-based company, with 151 operations and 3,500 employees scattered across 12 countries in four continents, recognizes its obligations to those whose lives it touches, hence the creation of a global environmental sustainability team. That group has hammered out a list of seven pledges regarding operating practices that impact the environment.

Schawk certainly knows how to take care of its shareholders, and the bottom line. This brand image solutions provider—renown for its packaging prepress capabilities—has grown sales at a 19.3 percent compounded average annual growth rate for the past five years, while its stock has yielded a 14 percent compounded average annual return over the same period.

It is important to note that Schawk, which posted $568 million in sales for 2006, cannot be found on the Printing Impressions 400 list because it is largely not a printer. It offers planning (marketing strategy, message generation) and strategic design (brand strategy, naming and package design), along with retouching, 3-D imaging and prepress services. The offerings fall under a three-tiered business model: Graphic Services & Prepress, Brand Consulting & Design, and Enterprise Products.

Extra, Extra Large

Schawk does boast a commercial printing plant in Los Angeles, which recently welcomed a new eight-color, 73˝ MAN Roland 900 XXL sheetfed model—the press manufacturer’s first eight-color plus coater installation in the world. Here, too, environmental considerations came into play with one of the early products churned off the 900 XXL.

This isn’t the Schawk founded by Clarence Schawk in 1953, but the beauty of the company—not to mention the driving force behind its survival—is the ability to reinvent itself. The founder used his wedding money to get the company rolling, and his son has used the explosion of technology in the 21st century to continue it.

“We went from a traditional craft trade into the digital world. Slowly, but surely, we have progressed into a brand consultancy-type business, more so than a printer or a prepress company,” notes David Schawk, president and CEO. “Changing technology has changed our service offering.”

Schawk counts among its customers some of the biggest names in consumer products, retail, pharmaceutical and advertising, including Coca-Cola, Kellogg’s, Procter & Gamble, Home Depot, Johnson & Johnson, GlaxoSmithKline and Bayer. In fact, 34 of the Fortune 100 companies are Schawk clients. Not surprisingly, internationally known companies leverage the advantages offered in Schawk’s global platform, particularly 90 on-site facilities. These customer-located branches staff anywhere between two and 35 Schawk employees.

It was the world’s largest retailer, Wal-Mart, that helped guide Schawk down the path to environmental sustainability. The retailing giant has pressed its suppliers to move toward eliminating waste and saving money. According to Alex Sarkisian, Schawk executive vice president and COO, the retailer is bullish on looking for new sources for savings.

“Wal-Mart has publicly stated that it can save $3.5 billion by reducing packaging material consumption by 5 percent,” Sarkisian notes. “That’s a gargantuan number, and that’s just for them.”

Beyond the Norm

The business sense is obvious, but Schawk has taken greater steps beyond cutting spoilage where possible. Its seven-pledge program entails the following commitments:

• Use clean production technologies and best practices for environmental protection in worldwide operations;

• Provide goods/services to clients that enable them to meet and exceed regulatory and proprietary environmental initiatives;

• Build/develop relationships with clients, suppliers, product and services collaborators to exchange solution ideas;

• Help clients streamline brand development workflows through the use of best-practice workflows, technology, enhanced materials selection and source reduction;

• Leverage knowledge and experience to innovate new services and solutions that drive environmentally friendly brand development going forward;

• Nurture the climate of innovation inside the company that makes great leaps forward possible; and

• Create a healthy environment in the communities in which we live and work, and to the world community, as well.

“We’ve always been focused on giving back to the community, so the issue of responsibility has been and continues to be there for us,” Sarkisian stresses. “The biggest driving force is consumers, and their direct contact is the retailers, so those companies—Wal-Mart, Target, Costco, Wegman’s, Giant Eagle—are pushing hard for it.”

At press time, Schawk had recently completed a marketing campaign for the Universal film “Evan Almighty,” which was produced with virtually 100 percent post-consumer waste. And, speaking of printing, Schawk’s Los Angeles plant is a large-format printing island unto itself (though Schawk’s Cactus facility in Toronto offers large-format ink-jet printing). Acquired in the Seven Worldwide deal, the L.A. plant has a pair of eight-color, 40˝ sheetfed offset presses; two six-color, 77˝ models; and two super-wide EFI VUTEk ink-jet printers. Not surprisingly, the entertainment industry leverages the L.A. shop’s press arsenal for single-sheet marketing pieces, namely movie posters.

“Our clients design everything around one sheet, and the one sheet is usually the bible for their marketing pieces,” notes Carl Taylor, managing director for the L.A. production facility. “Often times, they would spec eight colors, but there weren’t any large-format, eight-color presses. So we would take those last two PMS colors and create them out of CMYK.”

With a need for an eight-color press in a large format, especially with a pair of aging 77˝ models that had been refurbished, technology and efficiency became the sought-after traits. Taylor’s crew visited several commercial factories in Germany to see MAN Roland runs on the 900 XXL. After extensive testing on various substrates, using Schawk and MAN Roland files, the order was placed.

The large-format press went live in February and Taylor has been “extremely pleased” with its performance. Aside from movie posters, Schawk uses the XXL to do large window signs and static clings for the retail market. Advertising signs on buses and bus shelters—formerly a silkscreen job—are some of the other products it produces.

“Because the technology on the new press is so current, we’re getting a much better product,” Taylor says. “We have 30 percent more capacity now and have experienced 25 to 30 percent in manpower savings. The 900 XXL has a prepress interface; all our files come directly from prepress to the press. That speeds up our makereadies, and we’re probably using 40 percent less paper in the makeready process.

“With the 73˝ press work, that’s essentially walk-up art; people get very close to it. It’s Apple signs, Gap, Old Navy, movie posters. People are really on top of it. It’s the same quality that you get off a 40˝ model.”

Capital Expense

The press represented a fair share of Schawk’s $29 million capital expenditure program in 2006. David Schawk estimates the firm will lay out upward of $18 million over the course of 2007. The Schawk Technical Advisory Board (STAB) provides vendors with a presentation forum to peddle their newest wares.

One of the company’s goals is to double in size every five years, while improving profit margins to the low teens. David Schawk’s aim is to double his company’s design and strategic planning business over the next 18 months.

While growth by M&A has fostered much of Schawk Inc.’s growth over the years, the company is focusing on organic growth, as well. Still, that doesn’t mean the firm is going to take a hiatus from the transactional market. Indeed, its chief exec anticipates some acquisitions.

“This is a difficult business, and you don’t get a lot of visibility for what’s coming down the pike,” Schawk says. “We just have to work on making sure all of our facilities are operating at the maximum productivity level. We need to focus on acquiring new business and growing within existing accounts. We put a lot of money into our new business development team over the last several years, and that’s been paying off for us.

“Long-term, we need to continue to reinvent ourselves as opportunities present themselves within our client base. In 10 years, I think this will be a totally different company; hopefully competing with the IBMs and Accentures and consultancy firms to help with the CPG (consumer product) companies. So, we’ve got to stay on top of our game.” PI