The threat of a national postal strike increased yesterday after unions told Royal Mail it would ballot its members on strike action at the end of this week.
The Communication Workers’ Union said it would ballot 160,000 postal workers, with a result expected early September.
If approved, the industrial action would be the first national postal strike in seven years and would represent a blow to Allan Leighton, the Royal Mail chairman.
Read MoreP&O Q2 2003 Trading Statement
Read MoreIn 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
Read MoreWith its £9m acquisition of Weaver Pallet Express, parcels firm Business Post has shaken up the pallet industry. Dominic Perry looks at the implications.
Until very recently football club Chelsea was, relatively speaking, struggling. Although occasionally challenging for success, the team had not been among the big boys of the English football game for several years. It also lacked the financial clout to do anything about this situation, or pay its extensive debts.
Second division
Then suddenly all this changed. Following its takeover by a wealthy Russian multi-billionaire, money has become no object at the club and it has begun to invest heavily in a new team. It’s perhaps not too tenuous to draw an analogy between Chelsea’s revival and what has happened at Weaver Pallet Express.
The firm was considered by most analysts as the industry’s fourth-largest player in the pallet business. Although it posted a pre-tax profit in the year ending 31 March 2003 of £1.2m, it was always viewed as being in the ‘second division’ of pallet firms, someway behind the big three of Pall-Ex, Palletways and Palletline. Indeed, although most of its member firms said they were happy with Weaver, some had expressed worries that there was a lack of capital there to accelerate growth in order to compete with the big three. Then up steps a rich benefactor in the form of Business Post and suddenly all the problems appear to have vanished.
Business Post, already one of the leading players in the overnight parcels market, bought Lichtield-based Weaver two weeks ago for an initial payment of £9m plus a performance-related £35m due in March next year. The firm will be re-branded as UK Pallets and is due to re-launch in November this year.
Three-year plan
As Paul Carvell, chief executive at Business Post, explains, the purchase was part of its three-year plan: “We identified a number of sectors that had demonstrated high growth had and complementary customers, such as the technical courier industry. We had already invested in that with our purchase in February of BXT. The other area we identified was the pallet business which, as a sector, is growing like crazy at more than 30% per year and we thought we’d like to be a part of it?
Carvell says Business Post actively looked at all the pallet networks, and although he refuses to name names, he says this included the big three most likely Pall-Ex and Palletways simply because there is no member shareholder issue as is the case with Palletline. After a year of discussions with Weaver, it was chosen, he says, because “while it was number four, it was best placed for us to develop it and take it to number one in terms of quality With 3,000-5,000 pallets per night, it has enough critical mass to give us a core base to build on.”
It is also thought that Weaver was attractive because none of the partner companies own or have invested in the hub firm, making them effectively a network of independent hauliers, tied loosely to the hub. Business Post therefore needed to acquire only the hub to gain control.
The other key reason for buying into a successful network, says Carvell, is the opportunity for different divisions within the Business Post group to offer new services to its customers. He adds: “We have around 22,000 customers for our parcels service and obviously they have pallets that we don’t move at the moment. Equally, Weaver has customers that send parcels with other networks. We can now offer a comprehensive overnight solution.”
Equally enthusiastic about the takeover is Business Post’s commercial director, Guy Buswell. He comments: ‘We are now in the second year of our three-year strategy and this purchase makes a statement that, from our perspective, we see it as an opportunity.
“The market is growing in the pallet industry, which means we don’t have to try and take market share from our competitors; the parcels industry is such a mature market that you end up fighting with
Read MoreUnion bosses meet to discuss the way forward after talks aimed at resolving a dispute over postal workers’ pay ended in failure.
Leaders of the Communication Workers Union met Royal Mail managers throughout the day at the conciliation service Acas in a bid to settle the dispute which could lead to the first national strike in seven years.
But the meeting ended without agreement and the union will now press ahead with a ballot of 160,000 postal workers for strikes.
Ballot papers will go out next week and the result will be announced next month.
The union will have to give a week’s notice of any industrial action.
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