Two of a Kind

Tom Quadracci, president and CEO of Quad/Graphics, preferred to address the publication and catalog markets together. He provided a combined outlook for the industry segments in a brief Q&A exchange.

PI: What is your outlook for the publishing and catalog industries in 2004?

Quadracci: I am confident that the economy will gain momentum in 2004, which will strengthen sales of magazine ad pages, as well as the size (i.e., page counts) and frequency of catalog and retail insert events. In fact, I am so confident in an economic rebound that I am having Quad/Graphics prepare for an increase in business now. We are rapidly expanding our newly opened Oklahoma City plant to more than 600,000 square feet, which will make it the largest print production facility west of the Mississippi River by next fall.

In addition, we're installing new equipment across our network of plants. In fact, some of the equipment is industry-first technology that will provide our publishing and direct marketing customers with significant productivity, efficiency and flexibility advantages.

For example, we are installing two ultra-wide web offset presses to be production-ready by the fall of 2004. In a double-web configuration, these presses will be able to deliver a total of 64 pages in four unique 16-page signatures at one time without increasing in-line color compromises.

By next fall, we'll also have two new "Jack Rabbit Gravure" presses production-ready in our Oklahoma City plant. These presses, built to our specifications, are completely automated—from cylinder loading through signature delivery—elevating the industry's gravure production capabilities to a new level of speed and efficiency. We've also purchased two fully automated cylinder engravers for Oklahoma City. These engravers—the first such engravers put into live production in the world—will support "lights out" manufacturing, meaning they'll require very little human intervention.

PI: What issues are publishers and catalogers focusing on with regard to printing/production services?

Quadracci: Given the economy, publishers and catalogers continue to be aggressive with negotiating prices, and pushing to make print a commodity. It's unwise for commercial printers and the customers we serve to compete strictly on price, given the capital-intensive nature of our industry and the aging base of equipment. Printers need decent margins in order to update capabilities, which, in turn, will provide real value to publishers and catalogers through revenue-generating opportunities.

Of course, printers need to continue to find ways to reduce manufacturing cycle time in order to help publishers and catalogers be more competitive. At Quad/Graphics, we have removed entire days from the production schedule, with no compromise in quality or service, through a variety of initiatives, including fully integrating production capabilities, not only among divisions, but also between our nationwide network of plants and with our clients.

PI: How has your company's implementation of co-palletization been progressing?

Quadracci: Quad/Graphics has been co-palletizing mail for years through our sophisticated co-mailing program, which combines multiple magazine titles into a single mail stream. The palletized product earns sizable pre-sort discounts on behalf of our clients. While we are in the process of certifying our software for the USPS' co-palletization program, we don't anticipate earning significant additional discounts because we already have been palletizing all the mail that could be palletized through our co-mail program.

While we always have been very aggressive in securing the greatest amount of postal discounts on behalf of all our clients, palletizing all mail is not cost-justified at this time. In other words, the savings of palletizing all bundles of mail don't necessarily offset the costs. When greater discounts become available and/or the postal service moves to true cost-based rates, we will re-evaluate the time and resources we dedicate to palletizing that mail not part of our co-mail program at this time.

PI: What's behind the mini boom in new gravure press installations?

Quadracci: We are expanding our gravure capabilities hand-in-hand with web offset capabilities to provide our clients with the greatest number of options. Up until this point, our gravure operations have been concentrated east of the Mississippi River. Now, we are expanding gravure capabilities west with the opening of our Oklahoma City plant and the installation of "Jack Rabbit Gravure" presses.

Over the past few years, gravure has become more economical for mid-size runs. In turn, more catalogers and publishers can reasonably consider gravure for all or part of their jobs. We are enhancing our gravure capabilities to meet current and anticipated demand.