Direct Mail league tables
In the first of a new series of league tables, Peter Crush looks at the Top 20 companies in the fast-growing direct mail sector.
Failing companies, margins being squeezed and new business being hunted like vultures to a carcass. It's a familiar story in many areas of print, but perhaps not direct mail, which many believe to be exempt from stagnation. Of all print's sectors, direct mail has – on the surface, at least – remained just about as solid as it ever has been. According to the latest census from the Direct Marketing Association (DMA), expenditure on mail grew by 6% during 2002, rising to pounds 2.2bn, which is equivalent to nearly 5bn items of post.
This money is all feeding its way through to printers one way or another.
And that's why PrintWeek is launching its first Top 20 League Table by sales for the biggest direct mail printers (we've done our best to extract the DM turnover from the total sales of the larger print groups, though in some cases this has not been specified), but the picture is not quite so harmonious as some figures seem to suggest. The battle between the one-stop-shops and the specialists is intensifying. There is fear of jobs being lost to overseas printers, and then there is the involvement of the middlemen, driving down margins, and all looking for a nibble of the spend too. As a spokesman for third-placed Communisis sums it up: 'We're battling, we're chasing everything that moves. These are very lean times.'
The incongruity of the market (high mailing volumes, but unsettled times for its printers) is demonstrated by two of the largest printers, Polestar Direct and Vertis, both seeing dents in sales (the former by over pounds 12m), while the smaller companies below are beginning to build volume.
While the DM industry is blooming, it seems that in the drive to cut the cost of mailpacks, it is the printers who are left to bear the brunt.
'Last year we were experiencing cuts in our margins in direct mail print by 15-20 says Kevan Coleman, chairman of K2. 'Today we are seeing the full impact of what we call 'reverse auctions' – where you start off with a figure, but instead of it going up, it is going down. It's setting new rules for pricing, and I think ultimately, the client is missing out on added value.'
Rise of the intermediary
Coleman says the rise of dedicated procurement businesses is having a dramatic effect, particularly on direct mail print, where there are many more processes involved that can suit going to different houses to complete the job. According to David Laybourne, managing director of DPS Direct Mail, the rise of the intermediary has been one of the factors that has seen the company working 70% through agencies and 30% direct. That said though, he argues that if the model is there, nimble printers will work their way around it.
'Because we print less than 2m mailers at a time, the average being more like 250,000, we can offer lots more segmentation services – printing variations of the mailings with different messages, and the buying departments seem to like this,' he says. DPS has won several large DM contracts – Esure, Vodafone and The Teacher's Council – all through the procurement pitches, and Laybourne believes that while the process is a draining one, once you have won the business, the working relationship does settle down after that, and everyone in the process is after a long-term commitment.
Just how the bigger printers are suited to this is debatable. According to some, the problems of the larger houses (or at least the decline in sales) is indicative of the fact that their prices are no longer as competitive as other suppliers. Peter Frings, managing director of Target Direct, says: 'A few years ago, you'd be going to the likes of Vertis to take away the uncertainty, but I'm much more interested in the likes of the smaller specialists – Howard Hunt and John Blackburn.' Frings says he will place work with printers like Mail Solutions if a job needs extra capacity, because although it isn't the biggest, Frings believes companies like Mail Solutions are more likely to own 'cutting-edge technology'.
The view from those agencies that also buy print services is mixed. 'Selecting a partner depends on the job, but ideally we'd prefer to go to a single source to handle it from start to finish,' argues Steve Fox, production partner at DM creative agency Tequila/London. One of its largest accounts is all the direct mail for Barclaycard and Barclays. Here Communisis does the entire job. Other agencies however, WWAV Rapp Collins included, prefer the mixed approach.
One thing all agree on is that print quality is no longer the USP printers must sell themselves on. After all, while every client wants a good job, no one who actually receives a piece of direct mail on their doormat thinks about how wonderful the print quality is.
'Our response is to have excellent customer service,' says Mike Hughes, chief executive of Mail Marketing International, which handles the print for Lloyds Bank and Hospital Plan. Last year Lloyds sent 57m pieces of direct mail, a figure that made it the second largest direct mail spender behind MBNA. He adds: 'We can help customers reduce costs not necessarily by cutting costs but by purchasing other parts of the printing on their behalf. This is a response to clients telling us that they are being pressurised to squeeze costs too.'
Diversification is key
What many of the Top 20 have in common is the fact that they don't just print, but handle much more of the direct mail service as well, from postal address verification, enclosing, fufilment and database management. In tougher times, all agree that diversification is key. Print only comprises 15% of DPS's pounds 9m turnover, with the rest spread between data processing and management.
Andy Fry, managing director at Nova Direct Mail, shares the same strategy.
'We have realised that in the direct mail market, the key to our future and prospects for growth comes from data. This is what we think will lock clients into us.' He also cites being able to fulfil orders on a quick turnaround as one of the key ways printers can differentiate themselves.
'We don't intend to grow at the same pace as some of the bigger companies either, because that's when you become too many things to all people and a specialist in nothing.' He may well have a point.
Of course, how any printer should reach outside its core expertise is debatable. Not all believe it is the best path to follow. 'Vertis is trying to lock people in by getting hold of their data,' says Frings, 'with others offering their print in a loss-leading way to get hold of the data side.
This is risky. Also, most mailers understand data from a production point of view, but I ask how well they can really do complex database segmentation.'
And the obvious result of all this is that investment in actual printing equipment could be sidetracked in favour of investment in computer software.
Spreading investment so thinly across so many services could be a boon to the amount press can offer, but actually detract from the quality of that offering – especially when margins are so tight and the outlook so unpredictable.
So is anyone actually in a buoyant mood? The answer is yes – at least if you talk to Mark Souster, commercial director at Mail Solutions. 'At the moment we are running at overcapacity and are installing a brand new Muller eight-colour press next week. As far as we know, we are the first printer to be doing this in the UK.' According to Souster, who describes the company as having separate solutions that can pull together as the client wants it, it is not the cheapest operator, but it is turnaround time that he can offer to his client base.
'We have a revolving job board system in place,' he says, 'so that if the artwork for a direct mail piece comes in late, another one can be slotted in quicker. It means we can fit the client in again very efficiently, rather than saying 'sorry you were late, it's not going to be ready for the next three weeks'.' This year Mail Solutions says it is the direct mail leaflet sector (be that inserts or door drops) that is the major business opportunity over the next 12 months. 'We have really seen the emergence of this and want to attack the market,' he says.
Virtually all the printers PrintWeek spoke to in compiling this table are still investing. However, in tough times, which equipment to invest in is still a big question. 'One area I've expected change in but still not noticed it is in the digital printing area,' argues David Laybourne, from DPS Direct Mail. 'We invested in the technology, but are still waiting for a real catalyst client to use it to its potential.'
Mail Marketing International's Hughes disagrees, however: 'We've seen a real convergence in the digital and enclosing areas – such as personalisation of utility bills and the like. We've invested more than pounds 1m in print equipment in the past year and will consider investing more in digital print equipment.
We believe that there is a market here, but you have to promote its uses to clients. We're doing a massive amount of work personalising mailers for Sainsbury's. We're not just personalising text, but also printing maps of people's nearest stores, and variations of message according to the data.'
Customer demand
Half of it comes from regular contact with the client to find out exactly what they need, the other half comes from second-guessing. 'Are clients measuring creativity, the finish, the turnaround, the money saved by a particular campaign, or the accuracy and timeliness gained?' asks K2 Direct's Coleman 'What's certainly the case is that clients need persuading. In the last few months, we launched Link2, a division for personalisation.
We've proved a return on investment of 25% on some mailers, but this still needs to filter through to clients.'
Naturally, different clients want different things. K2 works for the likes of Abbey National and HBOS, where the average print-run is 3m-4m.
DPS, on the other hand, with its smaller runs, says it is proud about its mailers from a finishing point of view. 'We've recently done a lovely piece for Mazda, which is silver and needs varnishing to lift the colour,' says Laybourne. 'Clients do expect quality,' he adds, 'this Mazda piece was the real – excuse another car – Rolls Royce treatment, which is good to see in direct mail.' Peter Crush is deputy editor of Marketing Direct.
TOP 20 DIRECT MAIL PRODUCTION COMPANIES
COMPANY NAME Current sales Previous sales Change
(pounds m) (pounds m) (pounds m)
St Ives Direct Response 186.7 n/s n/s
Polestar Direct 116.26 128.50 -12.24
Vertis 98 103 -5
Communisis 77.6 77.5 +0.1
Howard Hunt Direct 38 34 +4
Howitt 34.9 31.3 +3.6
John Blackburn 28 25.9 +2.m
The Lettershop Group 27.9 26.64 +1.26
K2 Direct 27.5 24 +3.5
Mail Solutions 24 23 +1
dsi digital 22.1 17.7 +4.4
Mail Marketing International 20.7 22 -1.3
Colleagues Direct Marketing 19.5 n/s n/s
Pillans & Waddies 18.5 n/s n
/s
Graphic Inline 17.8 15.5 +2.3
Encore Direct 17.5 15.3 +2.2
4DM 16 15 +1
Anton Direct 15 12 +3
Halcyon DM 14.2 11.6 +2.6
York Mailing 12.7 n/s n/s
COMPANY NAME Sales
DM employees per employee Date of
(pounds) accounts
St Ives Direct Response n/s n/s 08/02
Polestar Direct 450 258,355 09/02
Vertis 857 114,352 12/01
Communisis n/s n/s 12/02
Howard Hunt Direct 350 108,571 09/02
Howitt 268 130,223 12/01
John Blackburn 363 77,135 03/02
The Lettershop Group 300 93,000 01/03
K2 Direct 340 80,882 04/03
Mail Solutions 227 105,726 03/03
dsi digital 381 58,005 07/02
Mail Marketing International 273 75,824 06/02
Colleagues Direct Marketing n/s n/s 03/02
Pillans & Waddies 215 84,418 12
/02
Graphic Inline 130 136,923 03/03
Encore Direct 145 120,689 11/02
4DM 260 61,538 07/03
Anton Direct n/s n/s 07/03
Halcyon DM 80 177,500 04/03
York Mailing 183 69,398 05/02
n/s = not specified, or information not available. Where possible sales figure specified relates solely to direct mail production activities, however in some cases it has not been possible to get an exact breakdown, eg St Ives figure relates to its Direct Response and Commercial division – which accounts for 40% of its group sales. Information has been compiled from questionnaires, the PrintWeek Top 500 and figures filed at Companies House.
1. Halcyon is growing steadily, adding equipment as and when it needs to. Having Adare for a parent certainly helps. The Irish print group has ploughed pounds 3.5m into its DM offshoot in the last two years – its most recent investment was in the finishing room. Halcyon has also spent the last year tweaking its management team, with new managing, production and purchasing directors all joining in the last 12 months.
2. It's been a good year for K2 Direct and its prescient chairman Kevan Coleman, who back in April predicted that direct mail would grow much faster than commercial and general print. Turnover was certainly up for K2. The Manchester-based company can happily report a pounds 3.5m rise in sales from last year's figures. The loss of sales and marketing director Richard Husband to rival Vertis is a blow, but if the company continues to innovate his departure shouldn't have too much of an impact.
3. Dsi was happy to hit a few firsts in 2003. It became the first printer to produce 1m colour pages per month on its brand-new Xerox iGen3, then became the first UK company to put in an order for a second. Sales were quietly bubbling away in the background, of course, with revenues up nearly pounds 4.5m from last year. Things will improve next year too, according to Xerox. The supplier reckons there's untapped potential in digital monochrome.
4. Graphic Inline has spent the year investing last year's impressive revenues. The carbon-neutral printer went direct to plate and bought two more high-speed enclosing lines with read and match facilities. More client wins followed from its decision to run 24/7, plus the opportunity to add some weight to its databases.
5. Encore Direct has a distinct acquisition strategy. Instead of buying companies outright, it takes a 50% stake and retains the old management.
This keeps the continuity going while doing wonders for Encore's turnover.
With the recent stakes taken in Washington Envelopes and Vasey's Fine Colour Printers, Encore's total sales are up to pounds 40m, and rising.
FIVE TO WATCH: envelopes
1. Encore Direct, the former Sunday Times Fast Track 100 firm, has done as much as it can to keep growing. The bespoke envelope printer, which produces over 15m envelopes a week for a host of blue-chip clients, recently bought Wade 2000 and a stake in rival Washington Envelopes.
2. It's early days, but Matt and Brad Horner, the sons of Horner Brothers Dennis and Trevor, hope to make an impression with Sprint Envelopes, a new firm specialising in quick-turnaround envelope overprinting. The Rotherham firm has installed two Halm perfecting presses.
3. SR Communications is known for its innovative and personalised direct mail and envelope printing. Its April RSPCA campaign allowed donors to reply with two pound coins placed in two 'sticky' holes. Other clients include Ogilvy One, British Gas, NSPCC, BT, DP&A and Harrods.
4. Mail Solutions, which makes around 1.2bn envelopes a year, is growing steadily. The pounds 24m group says it recognises the use of envelopes as a marketing tool and has innovated accordingly. Its new Exemplar range for small to medium-sized firms was launched last year.
5. With a total of seven presses running flat out, Surrey Envelopes has the capacity to run off around 4m envelopes per day. It services the fairly standard client mix of agencies, charities and blue chips. It acquired the assets of Nottingham's LHM Print in October 2002, boosting turnover by around one-fifth.
FIVE TO WATCH: digital
1. Dsi digital is the first printer in the UK to own two Xerox DocuColor iGen3s. It is planning to offer variable data colour print to the financial services sector – an area that its parent group, dsi, is already proficient in. Much of dsi digital's early iGen3 sales have come from the holiday market. It plans to drop at least two of its 2060s as soon as the second iGen3 proves its worth.
2. Anton Group is still investing heavily in its direct mail business, Anton Direct. Back in March, the 2001 PrintWeek Direct Mail Printer of the Year splashed out pounds 500,000 on a twin-head Scitex Digital Printing direct mail line. This came on top of its Heidelberg NexPress 2100, which the company uses for personalised direct mailings, such as monthly financial statements.
3. Mail Marketing International bought two Xerox DocuColor 6060s at the start of this year, while at the end of last year it became among the first in the UK to install Screen's PlateRite 4300. The company is still expanding and looks after a broad range of clients in sectors including charity, finance, mail order and insurance.
4. K2 Direct has a healthy digital set-up, which includes four Oce PageStream 440s, two complete Duplex lines and four Xerox DocuTech 180s. This comprehensive line-up helps K2 to send out what it calls 'trigger' mailings. These identify specific events from a person's database and automatically mail out a targeted response. For example, a person moving house could trigger a building insurance or contents insurance mailing.
5. Sussex-based Nova Direct is known mainly for its finishing and fulfilment expertise, but it's slowly building up awareness for its print work too.
Back in May it landed the contract to provide printing and mailing services for directories publisher Yell. It also specialises in quick-turnaround, personalised digital work on a variety of substrates. Clients include Cathay Pacific, Gucci and Fiat.
FIVE TO WATCH: data management
1. Astron added data management to its bow last month with the purchase of Hays Business Process Outsourcing, now known as Astron BPO. This means Astron can now handle data and print invoices and statements for blue-chip customers.
2. Communisis shows how large groups are managing to swallow up entire print requirements for large blue-chips. It handles all Barclays Bank's data, plus the rest of its print requirements. Communisis' online portal allows the client, or its agency, to manipulate data.
3. Vertis also offers an online client portal, allowing internal marketing employees and external marketing agencies access to pertinent data. Recent clients include the Institute of Directors. Vertis also offers response measurement programmes to help clients target more accurately.
4. DPS Direct Mail has its own data processing software, cygnus, which cleans and organises data into a relevant order. It claims to 'de-mystify' the data management process. DPS looks after an impressive set of clients, including Freeserve, Selfridges, Vodafone and Freemans.
5. Among Brann Direct's most recent customers is Volvo, for which it managed the production of a high-quality coffee-table brochure. Other clients include Cadbury Trebor Bassett and Guinness. Brann offers database management services and data maintenance, which basically means it helps clients limit the amount of poorly targeted mail.
