Premium Paper

INDUSTRIAL CODES

NAICS: 32-2121 Paper (except Newsprint) Mills Manufacturing

SIC: 2621 Pulp and Paper Mills

NAICS-Based Product Codes: 32-21217 and 32-21213461

PRODUCT OVERVIEW

Paper is made of pulped fiber that is mixed with water, screened, drained, and dried. The art of papermaking is generally attributed to Ts'ai Lun, a private councilor in the court of Emperor Ho Ti in southern China around 110 AD. Ts'ai Lun beat hemp and cotton rags into a watery pulp. Thinly-spread pulp was left on a framed screen to dry, resulting in a flat writing surface.

The method of making paper from pulp spread slowly. Europeans preferred parchment paper made from stretched animal skins. Only within the Catholic Church did living conditions allow monks the time to carefully copy manuscripts using calligraphy. Around 800 AD, monks used parchment paper for the 680 page Book of Kells, an Irish religious manuscript with intricate calligraphy surrounded by magnificent decoration. Parchment was deemed the only proper paper for sacred words and images.

Italians became the first adopters of paper from pulp. They made paper from cotton rags that were boiled and then pounded into pulp. By 1250 Italians were European leaders in making paper from cotton pulp and dominated the market for 100 years. The French began producing paper from cotton pulp around 1350. Germany contributed to the spreading demand for paper made from cotton pulp another 100 years later when, around 1450, a German named Johann Gutenberg invented the letterpress. Letterpress printing involves a reusable metal alphabet that can be arranged into paragraphs, locked in place, inked, and pressed onto paper. Gutenberg's first large-scale project took him two years, printing 200 copies of a 2-volume bible to sell in Frankfurt in 1455. Roughly 50 Gutenberg bibles exist today. They are in spectacular condition due to the consistently high quality of paper made from cotton pulp.

The availability of the letterpress for printing replaced the need to carefully copy manuscripts using calligraphy. Printed material became more available. Literacy increased, as did the demand for paper. European papermakers modified the oriental method of drying pulp on the frame. A 1568 woodcut depicts a solitary artisan working over a round, wooden, waist-high vat. He is preparing to pull a screened wooden frame through the cotton pulp in the vat in order to form one sheet of paper. The screened frame, or mould, lets water drain, allowing the artisan to express the sheet off the mould, and then return to the vat to make another sheet. The woodcut also shows that early papermakers needed a paper press to squeeze water from sheets to hasten drying time, and an apprentice helper. The vat, the mould, the press, and the apprentice allowed the paper artisan to make an unlimited number of sheets from a single wooden frame.

Around 1700, a shortage of cotton rags affected papermaking for approximately 150 years. The critical shortage contributed to the view of paper as rare, expensive, and valuable. It was not a common household product to be tossed into the trash. An anonymous poem from the 1769 Boston Newsletter demonstrates the importance of cotton rags for papermaking:

Rags are as beauties which concealed lie, but when in paper, how it charms the eye! Pray save your rags, new beauties to discover, For of paper, truly, everyone's a lover. By the pen and press such knowledge is displayed As wouldn't exist if paper were not made.

In 1850 a German solved the cotton rag shortage problem when he devised a new way to make pulp from a readily available renewable resource: the trees in Germany's forests. Wood was chipped, beaten with water into a pulp, screened, drained, and dried. By the early 1900s, the dominant definition of modern paper became paper made from wood pulp. Trees could be made into paper cheaply and efficiently. Only a few American mills continued to pulp cotton rags to make high-quality cotton paper the old-fashioned way. By the turn of the twenty-first century, paper made from cotton pulp was a premium product.

Money is printed on cotton paper. The first European money was printed with the Gutenberg letterpress in the early 1500s. Watermarked money was issued in 1666 by the Stockholm Bank in Sweden. European money is cotton paper with a multi-tone watermark. U.S. money is 100 percent cotton paper with colored fiber and security thread. Watermarks, fiber, and security thread protect against counterfeiting. All U.S. money is made by one company that still makes paper the old-fashioned way, Crane & Co., headquartered in Dalton, Massachusetts.

In the 1700s and 1800s, calling cards printed on cotton paper were in vogue. They were deemed a proper substitute for paying a personal visit on acquaintances. Calling cards established a private image and symbolized elegant living. Etiquette governed their design and use. Ladies' cards measured exactly 90 by 65 millimeters, while gentlemen's calling cards measured 90 by 32 millimeters. Rules governing their use were rigorous. Unmarried daughters were not allowed cards but were instead listed on their mothers' cards. Sisters without parents used cards with their names listed in order of seniority. Ladies folded down a corner of their card to indicate that it had been personally delivered. Single gentlemen never left calling cards in case unmarried ladies were alone in the house.

Cotton content paper is still used for calling cards, more commonly called business cards. It is the basis for money. Cotton content paper still establishes an image, whether private or professional. Just as it was during the 1700s, cotton paper is once again rare, expensive, and valuable.

MARKET

Cotton paper is referred to within the industry as super-premium paper. Cotton paper is used for business cards, letterhead, stationery, envelopes, and invitations—both private and professional. It is elegant and crisp. It communicates prestige. For those reasons, it is often used for corporate identity packages. Because super-premium cotton content paper is tree-free, it is often chosen to convey a message of environmental stewardship. Another high-quality paper is premium paper, which is referred to in the industry interchangeably as premium paper and text and cover paper. Premium paper is typically used in annual reports, for marketing, and as book covers. Premium and super-premium papers are used when there is a need to enhance an individual or corporate image, elevate a message, or clearly convey the importance placed on one's correspondence.

At the paper mill and in the paper industry, super-premium paper is denoted by its cotton content. As befits its super-premium status, paper with a cotton content of 25 percent or more is tracked separately by the U.S. Census Bureau. Cotton-content product shipments were $762 million in 1997, part of what was at that time a $40 billion per year paper industry. As of 2002, the paper industry grew 3.2 percent to $41.2 billion per year, according to a U.S. Census Bureau report titled "Paper, Except Newsprint Mills, Manufacturing: 2002." Data were withheld in 2002 for cotton-content product shipments because of the Census Bureau's policy of withholding data that may disclose operational details of a single company or establishment. Consolidation within the ranks of U.S. super-premium paper producers has shrunk to a point where data on this subset of the industry is now withheld.

Premium paper is part of what the paper industry refers to as uncoated freesheet cover and text paper. Between 1997 and 2002, product shipments of cover and text paper dropped 25 percent, from $899 million to $674 million. The market for premium cover and text paper is almost 7 percent of the total uncoated freesheet market of $10.5 billion. In May 2006, Graphic Arts Monthly estimated the total U.S. uncoated freesheet market at 12 to 14 million tons per year; less than 1 million tons of which is in the premium category. The rest of uncoated freesheet product shipments comprise premium paper's poor cousins such as copy paper and large rolls of paper for commercial lithographic offset printing.

Hard facts about the U.S. super-premium and premium paper segments of the paper manufacturing industry are hard to come by. According to the most recent Census Bureau data, product shipments from mills hovered around $1.5 billion wholesale in 2002. The commitment of the few remaining mills to acquisitions, new equipment, and new product introductions supports predictions for both segments to remain viable. Trade publication statistics have traced the industry in some detail since the last full Economic Census from 2002. These trade publication data support Mohawk's assessment of a robust market. First Research, a Raleigh, North Carolina, research firm, reported booming paper sales in September 2005. First Research reported that wholesale paper products were up almost 21 percent from November 2003 to November 2004, to $7.16 billion. First Research did not differentiate premium paper from its cousins. copy paper and commercial printing paper, which make up the bulk of the industry.

In March 2007, Marketing Week reported a resurgent respect for quality paper products. Super-premium and premium products were in demand in part due to increased competition from electronic communications. Material printed on premium paper was once again seen as unique. Marketing Week reiterated that high-quality paper will always be more expensive, but is worth it because it looks, prints, functions, and feels better than lower grade paper. Premium paper has a tactile quality that helps produce an emotional response to printed materials. Super-premium and premium paper does not necessarily need to be more expensive. For the Volvo Ocean Race 2008–2009 campaign, marketing managers used premium paper with an earthy tactile quality that reflected the rawness and discomfort of ocean sailing. The paper choice saved Volvo money while still conveying its message.

The market for super-premium and premium paper is sensitive to general economic growth. Increases in consumption derive from general business expansion as new companies form or existing ones expand. As companies become more established, they require more corporate identity packages, marketing materials, and direct mail. In 2001 industry publication Quick Print Products reported that quick printers cited text and cover grades as best sellers.

Business connections improve when professionalism is expressed by super-premium and premium papers. The aphorism "Nothing breeds success like success" is still true, and super-premium and premium papers announce "success." Quality paper is vital to communicating a corporate identity. Within the premium segment, the general sentiment is that companies tried to cut their premium paper budget to reduce costs, but soon returned to the quality market. Business Week deduced in December 2006 that even given the electronic technology era, paper will always appeal to those who find it easier or more elegant to use. An example of the ongoing love of paper is global sales of the Filofax day planner. Its sales soared 20 percent since 2001 to $65.8 million and continue to grow at 5 percent per year. Some 68 percent of Filofax users are under the age of 45. Day Runner, Day Planner, Franklin Covey, and Filofax report that former users of electronic scheduling systems are switching back to paper in the middle of the first decade of the twenty-first century.

The super-premium and premium market is robust. Jerry French, the president of French Paper Co. in Niles, Michigan, pointed out that the market is characterized by pockets of people who will pay more for premium products. He suggested in May 2007 that the "Wal-Marting of America" had changed purchasing patterns. For many, "everything old is new again" so the authenticity of traditional papermaking resonates deeply. For others, the numbing effect of the increasing barrage of electronic communications imbues old-fashioned modes of communicating with renewed importance. Printed communication on premium paper is seen as inventive and original. Some even yearn for old-fashioned modes of communicating on a personal level.

The paper industry underwent significant restructuring from 2004 to 2007. In the $41.2 billion per year U.S. paper industry, two top manufacturers divested their fine paper business units. International Paper and Kimberly-Clark purposefully exited from the super-premium and premium business. Kimberly-Clark divested its premium text and cover business. As a result, at the end of 2004, a new high-end paper company, Neenah Paper, Inc., was created. International Paper divested its fine paper business unit to Mohawk Fine Papers, Inc., in 2005. Neenah, Inc. bought Fox River Paper Company, LLC, in February 2007.

Meanwhile, the biggest commodity paper behemoth grew even larger: Domtar acquired Weyerhauser during the first quarter of 2007. The new Domtar towers over other freesheet makers, controlling an estimated 60 percent of the commodity market. In order to remain profitable, the paper giants have to focus on what they are good at—paper from wood pulp that can be efficiently made in large runs that fully utilize their expensive equipment. The giants focus on producing paper for the largest consumers. They choose to focus on the poor cousins of premium paper, copy paper and commercial printing paper, known generically as uncoated freesheet, where volumes are at least 12 times larger than in the premium market.

Because of the wave of industry consolidations in the 1990s that created multi-billion dollar companies, the commodity paper behemoths are no longer set up to operate in the rarified world of super-premium cotton-content paper and premium text and cover paper. While the commodity giants use their large uncoated freesheet equipment to produce value brands of premium paper to sell to copy shops and copy paper merchants, they no longer compete at the small mill level for the super-premium and premium segments. The large companies divested them-selves of cotton content paper and premium paper because it takes a different distribution channel, a different approach, and a different orientation. For instance, most paper giants are vertically integrated. They own either forests or affiliated mills that provide wood pulp for their paper machines. They have to make commodity paper. Since the restructuring of 2004–2007, when people want high-end premium paper, they must turn to the small mills because large mills can no longer meet the need. Because small mills are not vertically integrated, they can buy the materials they want to make a broader assortment of special products: non-wood fiber paper, high recycled content paper, and textured paper.

The divestment of fine paper business units by the major players in the industry opened up the super-premium and premium market. Since the restructuring, small mills have geared up, acquiring assets, more technology, and more machines. The challenge in the premium segment is to combine the art of traditional papermaking with cutting-edge technology to be profitable. Since the 2004–2007 restructuring, the premium business is returning to its roots to be more closely connected to clients. Smaller mills can do special make/mill direct requests. Because fashion trends affect premium paper style and color, small mills can better respond to changing trends. Only the small machines can readily shift production to rapidly respond to boutique trends.

Super-premium and premium paper products are classic nondurable goods. Nondurable goods are purchased for immediate or almost immediate consumption and have a life span ranging from minutes to three years. Nondurable goods are destroyed by their use so users need to repeatedly replenish their supply throughout the year. The nondurable goods market is characterized by a large variety of similarly priced products to tempt users. Brand loyalty for super-premium and premium paper is generally high because users often view it as a unique product that reflects their individuality. Those who identify with French Paper's Construction line are willing to part with around $50 for one ream of 500 sheets of cement-green colored 80-pound cover weight paper. Comparatively, an entire carton of ten 500-sheet reams of plain copy paper costs $30.

KEY PRODUCERS/MANUFACTURERS

The top manufacturers of super-premium cotton-content paper and premium text and cover paper in the United States are few. The remaining mills are Mohawk Fine Papers, Inc., Neenah Paper, Inc., and Wausau Paper Corp. Two family-owned mills—Crane & Co. and French Paper Co.—still make paper the old-fashioned way. Small mills are proving that paper is not passé. Each is profiled in alphabetical order.

Crane & Company

A family-owned mill in Dalton, Massachusetts, Crane & Co. still makes paper the old-fashioned way, from 100 percent cotton and flax pulp. Its chief executive officer is a great-great-great-grandson of the company's founder. Crane gets its cotton from garment cuttings within the textile industry, also known as gin trash, and from fibers removed during extraction of cottonseed. Crane is well-known among consumers for fine stationery, but 60 percent of its 1,200 employees are involved in the day-to-day production of currency paper. In 1770 Stephen Crane took over Massachusetts' first paper mill and named it The Liberty Paper Mill. In 1775 Stephen Crane sold paper to engraver Paul Revere to print the colonies' first paper money. By 1806 local and regional banks began printing currency on Crane cotton paper. Official government proclamations, permanent public records, and stocks and bonds followed.

In the mid-1800s, with the advent of the envelope and the postage stamp, Crane began to make 100 percent cotton social stationery that had become fashionable in Europe. In 1850 a banker coined a term when he contacted Crane for bond paper to use for letterhead. A U.S. national currency was introduced in 1862. Since 1879 Crane has produced all U.S. currency paper at two facilities in Dalton, Massachusetts. It ships the cotton and flax paper by truck to its client, the Bureau of Engraving and Printing, an arm of the U.S. Treasury. At its two printing facilities in Washington, DC, and Fort Worth, Texas, the Bureau of Engraving and Printing produces 35 million notes a day with a face value of approximately $635 million. Crane has held the U.S. currency contract since 1879, for more than 125 years. When it was up for renewal in the spring of 2006, the contract was estimated at $400 million.

Crane's 100 percent cotton text and cover papers include 70- and 80-pound text and 134- and 179-pound cover weights. Crane's Crest is its top brand and it supports six lines: business stationery, flat paper, unwatermarked business stationery, unwatermarked flat paper, business envelopes, and unwatermarked envelopes, all available in colors like fluorescent white, natural white, pearl white, azure blue, and moonstone grey. Crane still sells its original 1850 bond paper in ivory and blue.

French Paper Co.

The family-owned French Paper Co. was established in 1871 in Niles, Michigan. By 1895 production of their specialty, paper plates, was $6 million per year. Although paper plates had kept food on the table, in 1931 the mill starting making premium text and cover paper. The mill stayed solvent through the great depression. By 1945 the premium French Linen line was a bestseller. French introduced Parchtone in 1949 as a printable, animal-free, imitation parchment paper. Its texture and depth mimics classic parchment paper. It is sold in 13 colors including white, fleece white, natural, storm, aged, camel, salmon, green tea, sage, mist, sky, gunmetal, and relic gold. In 1955 French introduced Speckletone, one of the first premium recycled papers and the very first with intentional flecks and specks, a style now widely copied.

As of April 30, 2007, the mill's sales were up 45 percent in volume over the prior year, according to president Jerry French. French's volume growth seen since September 11, 2001, is due in part to its decision to spend more money on advertising as a percentage of sales. For instance, the 10-page spread for its Smart White line ran in industry publications like How magazine for the graphic design market and Print magazine for the commercial print market. Smart White is an ultra-bright natural feeling paper that holds ink well without being glossy or greasy. Smart White is perfect for printing because of its lack of personality. The advertising spread featured color photographs of stereotypic characters known for specific personalities: a "white trash guy" and a "white bread nerd," among others.

French has one paper machine with a capacity of 31,000 tons per year. French has 100 employees and runs its machine 24 hours per day. It rebuilt its machine in 1990 with constant upgrades since then, including a new color system in 2006. In addition to premium text and cover paper, French sells a line of paper products called Pop.Ink; pop for visual art and humor, ink for the typical use of paper. Products include decorative wrapping paper in 20 patterns printed on 70-pound Smart White paper (19.5 by 27 inches), 4 styles of 10 by 10 inch cocktail napkins on 3-ply tissue paper (20 per pack), and 12 styles of 4.5 by 6 inch notecard sets (16 count).

Dur-O-Tone Utility brand was rolled out in 1993, followed in 1995 by the Construction line. Originally based on the construction paper used in grammar school, the lines' colors are culled from the constuction industry and include pure white, recycled white, whitewash, cement-green, tile green, factory green, fuse green, safety orange, brick red, charcoal brown, slate blue, and steel blue. In early 2007 French rolled out its biggest line ever. Called Pop Tone, this line introduces 24 new colors inspired by popular taste in art and music.

Neenah Paper, Inc.

The high-end publicly owned Neenah Paper, Inc. was created in 2004 when paper giant Kimberly-Clark divested its premium text and cover business. The new company's first independent sales report was $775 million, up from 2003. Neenah Paper is headquartered in Alpharetta, Georgia, and has North American manufacturing operations in Wisconsin, Michigan, and Nova Scotia, Canada.

Neenah Paper was founded in 1873 in Neenah, Wisconsin. Its first mill watermark, Old Council Tree Bond, was introduced in 1908. It introduced Classic Laid in 1962. Classic Laid is produced using a painstakingly hand-knotted dandy roller that imparts an intricate pattern that is the secret to its beauty. Neenah premium papers are a part of uncoated freesheet product shipments. Its mill uses its freesheet equipment to make letterhead paper, business stationery, resumé paper, business card stock, brochure paper, and envelopes, along with scrapbooking and rubber stamping paper.

In 2007 Neenah acquired Fox River Paper Company, LLC, of Wisconsin, to strengthen its premium paper business with added scale in the marketplace, better prospects for growth, and the ability to offer a broader array of products. Fox River Paper had 2004 sales of $140 million. Neenah plans to make money by optimizing the combined operations and product portfolios of the two companies. With its acquisition of Fox River, Neenah picked up writing paper brands like Neutech, Fox River Select, Capitol Bond, Gilbert Cottons, Starwhite, Coronado, Sundance, Esse, Oxford, and Howard Linen. Fox brands Fox River Bond, Correspond Recycled, Chadwick Cotton, and Gilcrest will be maintained but not promoted. Neenah discontinued Fox Realm and Confetti brands. Fox River recently relaunched its Fox River Select brand of text and cover papers that features 25 percent cotton and 100 percent cotton papers.

Neenah focuses on super-premium cotton-content paper and premium text and cover paper with brands including Classic, Classic Crest, Classic Linen, Classic Laid, Classic Cotton, Classic Columns, Neenah, Neenah Bond, and Atlas Bond. Environment is its recycled paper product line. Many Neenah brands carry Green-E, Green Seal, and Forest Stewardship Council certifications.

Mohawk Fine Papers, Inc.

Independently owned Mohawk Fine Papers, Inc., is headquartered in Cohoes, New York. Mohawk has 800 employees and the company has an annual capacity of 175,000 tons. Since its 2005 acquisition of the fine papers business of International Paper for $65 million, Mohawk operates three mills (six paper machines) including an International Paper mill in Hamilton, Ohio, with an annual production capacity of approximately 65,000 tons; two converting centers with state-of-the-art cut-size, folio, and roll converting capabilities; and four distribution centers strategically located to deliver product to major North American printing markets. Mohawk anticipates slow and steady growth in the segment. The acquisition more than doubled Mohawk's size and made it the largest premium paper manufacturer in North America.

Mohawk's roots are in Waterford, New York, at what became known in 1872 as Frank Gilbert Paper Company. By 1878 it employed 40 people who produced three tons of paper a day using cotton rags. It built a second mill in 1917 in Cohoes, New York, just south of the junction of the Erie and Champlain canals. The grandfather of Mohawk's current president bought the mills in 1931 and named them Mohawk after the Mohawk River, which runs through Waterford. In 1946 Mohawk developed Mohawk Superfine, its first premium line. During the 1950s and 1960s, Mohawk built a reputation among the advertising and printing markets in New York, Boston, Philadelphia, and Washington, DC. In the 1970s and 1980s, Mohawk made capital investments of more than $90 million including a new paper machine in Waterford, along with a rebuilt Cohoes machine with the addition of high-speed metering and on-machine coating, calendering equipment, and a state-of-the-art electric drive.

In 1991 with $80 million in annual sales, Mohawk differentiated itself from competitors by exploiting its longevity in the segment and targeting designers; revenues for 1991 rose 7 percent, reversing a three-year decline. Its paper is popular for annual reports; the World Wildlife Fund and General Electric have used it. Harry Potter book covers were made from Mohawk paper.

Flagship grades include Strathmore, Superfine, Beckett, BriteHue, Via, and Mohawk Color Copy. Since its 1944 introduction, Strathmore has been a premium writing, text, and cover line. Strathmore supports three styles: the super smooth Elements line, the textured Grandee line, and the Pastelle line with deckle edges. Strathmore Elements is 20 percent post consumer fiber available in 28-, 70-, 80-, 100-, and 110-pound weights. Elements is a broad line characterized primarily as letterhead paper. It is sold in three solids (ultimate white, bright white, and soft white) and features a choice of six subtle patterns: lines, squares, dots, grid, grain, and zigzag. Grandee is 20 percent post consumer fiber available in 80-, 88-, and 100-pound weights. Grandee is a broad line characterized by its textured tactile richness and felt finish. It is sold in five whites, three grays, and rich-looking black, kimono red, tartan green, Ming blue, Bordeaux purple, Nordic blue (slightly green), Balboa blue (very navy), and Marina teal. Two of the newest Grandee colors are Greenbrier and Blazer blue.

Wausau Paper Corp.

Wausau manufactures value segment premium paper. In December 2004 Wausau Paper acquired Missota Paper Co., LLC, to grow in the premium paper value market. Missota was an idled groundwood commodity freesheet paper mill. Wausau restarted one machine to push out more of its value premium paper. In February 2007 Wausau Paper earned Forest Stewardship Council (FSC) certification on all items within its 12 major premium paper brands. The FSC certification of more than 680 stocking items covers all products in all eight Royal brands, plus all items in four additional lines: Astropaque opaque, Astroparche parchment, Creative Collection scrapbooking line, and Professional Series fine business stationery. The certification of the 12 brands comes after mill and converting locations in Brainerd, Minnesota, and Groveton, New Hampshire, as well as a converting facility in Appleton, Wisconsin, achieved FSC certification in August 2006. The Brokaw, Wisconsin, mill and converting location was certified in 2005, along with Exact Eco 100, Wausau's 100 percent recycled postconsumer fiber paper. Wausau also earned the capability to make custom runs of FSC-certified papers with FSC-certified wood fiber.

Wausau sells the broadest assortment of Green Seal-certified paper on the market. Green Seal applies to approximately two-thirds of Wausau's total 1,600 stock keeping units, including the entire Exact Eco 100 line and offerings in 15 other brands. Approximately 80 percent of Wausau premium papers contain a minimum of 30 percent postconsumer fiber. It utilizes more than 45,000 tons of postconsumer fiber each year, reducing landfill usage by over 150,000 cubic feet—approximately 2,250 semi truck loads per year. In April 2006 Barron's reported that Wausau shares showed dismal results. As a result, Wausau imposed some product price increases and announced plans to sell 42,000 acres of timberland.

Wausau's Exact Eco 100 product line contains 100 percent postconsumer fiber. Nine product lines contain 30 percent postconsumer fiber: Astroparche, Exact Multipurpose, Exact Opaque Colors, Exact Opaque White, Royal Complements, Royal Cotton, Royal Fiber, Royal Laid, and Royal Marble. Other product lines with some items containing 30 percent postconsumer fiber are: Astrobrights, Astrobrights Glisten, Exact Digital, Exact Index, Exact Tag, Royal Linen, Royal Metallics, and Royal SilkPlus. Its most popular brands include the Royal lines. Royal Bond is 25 percent cotton with 30 percent postconsumer fiber.

MATERIALS & SUPPLY CHAIN LOGISTICS

Papermaking is an energy-intensive process. It is one of the most resource-intensive industries in the world. For instance, paper manufacturing consumes more water per ton of product than any other manufacturing process. It is also an industry that is a frequent target of environmental activists. As a result, paper manufacturers tend to tout environmentalism as part of their public relations campaigns. Most small premium paper manufacturers make a special effort to promote environmental activities, since the premium and super-premium segments tend to be environmentally and socially conscious.

Neenah Paper, Inc. elevated the industry's profile with an appearance on the History Channel's Modern Marvels program in January 2007. Neenah was featured in a segment about recycling. The program followed Neenah's process of manufacturing recycled paper and converting the wastewater into beneficial uses. Each year, 5,000 tons of sludge is converted to steam, electricity, and glass aggregate. Neenah then purchases the steam back to dry paper and heats its mill in Neenah, Wisconsin. For instance, in 2006, it re-purchased 350 million pounds of steam. The company estimates that using the steam, known as green steam, reduces its natural gas consumption and carbon dioxide emissions by 80 percent annually. Decreasing carbon dioxide by this amount is equivalent to planting 250,000 tree seedlings, which naturally remove carbon dioxide from the air. Neenah's use of green power makes it a Green Power partner. Other partners include Fortune 500 companies, local, state, and federal governments, trade associations, and colleges and universities, all involved in a voluntary program advocating green power as a way to reduce the risk of climate change.

French Paper Co. has a history of environmentalism as well. In 1922 it built a hydroelectric dam. Since 1922 the French mill has operated primarily on hydroelectric energy from the St. Joseph River. Jerry French estimates that the dam his grandfather built annually saves the equivalent of 14,000 barrels of oil, 7,000,000 pounds of coal, or 88 million cubic feet of natural gas. Its hydroelectric plant generates in excess of 10,000,000-kilowatt hours of power each year. When not running the paper machine equipment, energy generated by the dam is transmitted for use in the community to supply electricity to homes and businesses. By using renewable hydroelectricity to generate power instead of fossil fuels, French avoided adding 8,370 tons of carbon dioxide to the environment in 2006 alone. French Paper Co. asserts that environmentalism is common sense.

Mohawk Fine Paper, Inc. is another key producer of super-premium and premium paper that has shown interest in environmental conservation. In May 2007 it announced that four of its paper lines were going carbon neutral. It purchases wind power renewable energy credits and combines them with verified emissions reductions credits to offset all of the thermal energy used in the production of four premium paper brands: Strathmore Writing, Strathmore Script, Beckett Concept, and Beckett Expression. Mohawk announced in 2003 that it was the first major manufacturing company to derive a significant amount of its electricity from renewable windpower through its purchase of renewable energy credits.

Wausau operates using renewable sources of energy. Its premium paper mill in Groveton, New Hampshire, converted to a natural gas/electrical co-generation process that significantly reduced air emissions and eliminated the need for purchased power. Its Brainerd, Minnesota, mill has a hydroelectric dam that produces approximately 30 percent of its electrical energy.

In addition to energy, the Census Bureau reported that in 2002 the entire U.S. paper manufacturing industry used $15.1 billion worth of materials to produce $41.2 billion worth of shipments. The value of materials used declined by 14 percent between 1997 and 2002, from $17.6 billion to $15.1 billion. During the same period, the value of products shipped grew 3.2 percent from $40 billion to $41.2 billion. The majority of the materials used to produce paper are organic and inorganic chemicals, woodpulp purchased from paper mills, and pulpwood bolts and logs.

Industry-wide spending for organic and inorganic chemicals decreased 20 percent between 1997 and 2002, from $3.9 billion to $3.1 billion. The industry decreased its spending in every chemical class purchased, save for chalk. Chalk is an inorganic chemical also known as calcium carbonate, used in papermaking as a filler and a pigment. Spending for it increased 6 percent from $262 million to $278 million.

The top three chemicals purchased, in order of 2002 expenditures, are starch, clay, and chalk, inorganic chemicals used primarily to improve paper strength. Starch is used at the wet end of the papermaking process to improve strength and at the dry end as a sizing. Clay is added during the pulping stage to fill in pores of wood fiber to create strong paper. Among all chemicals needed, the industry decreased spending the most for chlorine, caustic soda, and titanium dioxide.

Chlorine purchases decreased 73 percent from $82 million in 1997 to $23 million in 2002. Chlorine is used primarily to make pulp white. Caustic soda purchases decreased 54 percent from $248 million in 1997 to $113 million in 2002. Caustic soda is known by scientists as sodium hydroxide and by laypeople as lye; it is used to hasten pulp cooking and to make pulp white by removing impurities known as lignin. Titanium dioxide is a lustrous, lightweight, pure white pigment used to boost whiteness. Industry-wide purchases for it decreased 39 percent from $366 million in 1997 to $200 million in 2002.

Industry-wide spending for purchased woodpulp fell between 1997 and 2002, from $4.1 billion to $2.8 billion, a decrease of 32 percent. Manufacturers purchase woodpulp from two sources. The largest expenditure is for woodpulp obtained at the market rate from other paper mills. The other source is woodpulp produced at affiliated mills. Expenditures for woodpulp purchased at the market rate decreased 50 percent, from $3.3 billion in 1997 to $1.7 billion by 2002. Expenditures for woodpulp produced at affiliated mills increased 30 percent from $890 million to $1.1 billion.

Spending on pulpwood bolts and logs decreased 11 percent between 1997 and 2002, from $3.0 billion to $2.6 billion. Pulpwood bolts and logs are generally classified as either softwood or hardwood. Softwoods are integral for making high-grade paper products. In order of expenditure value, softwoods are classed as southern pine; chips, slabs, cores, and other mill residues; softwoods such as Douglas Fir and Jack Pine; spruce and true fir; and hemlock. Expenditures for softwoods were $1.5 billion in 2002. Spending in all softwood categories decreased, with the exception of Douglas Fir and Jack Pine. Spending more than doubled in these categories, from $123 million to $259 million, an increase of 111 percent. Softwoods are known by laypeople as conifers. Conifers like spruce, fir, pine, balsam, and hemlock are preferred because they are fast growing, plentiful, easy to grind into pulp, and produce long fibers. Long fibers are favored for premium paper.

Hardwood pulpwood bolts and logs, along with chips, slabs, cores, and other mill residues, are also consumed. Industry-wide spending for hardwood products decreased 20 percent between 1997 and 2002, from $1.5 billion to $1.2 billion.

Finally, the materials needed to package paper for shipping and selling are an important part of the total material input to the manufacturing process. Industry-wide spending for packing material was $1.2 billion in 2002. The types of packaging products used include paperboard containers, boxes, and corrugated paperboard; packaging paper and plastics film; and glues and adhesives.

DISTRIBUTION CHANNEL

The distribution channel for premium paper involves paper distributors known as paper merchants. Merchant paper stores are uniquely situated between the wholesale and the retail markets. Examples include Anchor Paper, xpedex, and Unisource. Paper is heavy and is often needed quickly. Paper merchants solve both problems by making paper available at paper stores located around the country, and delivering it next day when ordered. For instance, Mohawk has thousands of stock keeping units, five warehouses, and more than 300 paper merchants. The distribution channel for premium paper can also involve the Internet. Crane & Co. and Finch Pryn both offer online ordering. The PaperMillStore.com offers premium papers from Mohawk, Neenah, and Wausau.

The distribution channel for the super-premium cotton-content paper made by Crane & Co. is different. Crane owns stores. In 2002 Crane had 21 stores. To present its entire brand, Crane chooses major venues like Rockefeller Center in New York, Water Tower Place in Chicago, Pacific Place in Seattle, and The Shops at Prudential Center in Boston, where it opened its first store in 1994. Independent retailers distribute super-premium and premium papers. Kate's Paperie in Manhattan provides strong customer service along with 4,000 kinds of paper. Independent retailers like Paper Source, Patina, and Paper Depot in Minneapolis, Minnesota, serve the stationery market, provide resumé paper and envelopes, and scrapbooking and artists papers. Brides often prefer invitations printed on 100 percent cotton paper using the letterpress method invented by Gutenberg in 1450. According to the spring 2007 In Style magazine, brides can order at Web sites such as miacarta.com, letteredolive.com, and pulpinvitations.com.

Swatchbooks are another marketing tool used by many manufacturers of super-premium and premium paper. Provided free of charge, the typical swatchbook measures six by nine inches. Swatchbooks include sample papers in all colors, weights, and textures available in a line, typically on a line-by-line basis, and often include demonstrations of how well the line works with various printing techniques.

KEY USERS

Three distinct segments of key users exist in the super-premium and premium paper market. Manufacturers market differently to three different user groups. First is the individual consumer who wants super-premium paper for private letterhead for personal correspondence, invitations, resumés, scrapbooks, and art. Businesses are a group of users of premium paper whose uses of such paper are numerous: corporate letterhead, business cards, brochures, folders, marketing mailers, investor presentations, and notepaper. Graphic designers are a third group of users. Graphic designers are in a position to be influential in the paper buying decisions of a broad spectrum of clients and are thus cultivated by the makers of high-quality papers.

ADJACENT MARKETS

Adjacent markets are generally related to ink methods to applying ink to paper. Writing pens can be practical or premium. The Cross Apogee Capped Chrome Roller Ball Pen features a highly polished chrome roller ball with a spring-loaded clip and precision-cut details. Printing equipment, historically used by large commercial printers, is now available to the small office and home office users.

RESEARCH & DEVELOPMENT

The challenge for premium paper makers is to combine the art of traditional papermaking with modern technology in such a way that both a quality product and a profit are produced. R&D in this field involves updating equipment to better accommodate special make/mill-direct requests. During the end of the twentieth century and the first years of the twenty-first century, R&D led small mills away from a focus on commercial printers and toward a focus on graphic designers who influence paper purchasing across a variety of industries. Each year, R&D produces tangible changes in paper color, paper size, and paper uses.

Most recently, mills partner with design firms to conduct R&D relative to trends in color and to develop new colors. Color trends affect premium paper styles, weights, colors, and textures. Some makers change one-third of their product line each year to keep pace with color and fashion trends.

R&D led paper manufacturers to develop new sheet sizes to meet the needs of digital printers. After its 1998 introduction of its Digital Papers line, Mohawk identified a need for converting services to create the smaller sheet sizes required by digital equipment. It opened its world-class converting center in 2001.

In the early twenty-first century R&D efforts led small paper manufacturers into custom paper for packaging premium products. The desire for what is known as shelf presence in consumer products led manufacturers of those products to small mills who can create custom paper to differentiate the product. Consumer products need to stand out among the hundreds of other products on the same shelf. For instance, French has 800 custom colors; custom colors have been made for Hallmark and The Limited, and for packaging paper for Polo and Calvin Klein perfumes.

CURRENT TRENDS

The most current trend in premium paper involves forming partnerships to develop and promote new lines. Crane & Co. partnered with fashion designer Kate Spade. Neenah partnered with the Eames design team famous for its iconic furniture. French Paper, the smallest and most independent mill, partnered with the smallest and most independent design shop, the 6-person Charles S. Anderson Design in Minneapolis, Minnesota. Mohawk, since its 2005 acquisition of the fine papers business of International Paper, the largest premium paper maker in America, partnered with the large international design firm known as Pentagram.

Crane & Co. partnered with designer Kate Spade in early 2006. Kate Spade's fashion designs are characterized by both wit and propriety. The Kate Spade for Crane's line of social stationery includes custom wedding invitations, personalized stationery, and holiday and note cards. The line sells in Crane & Co. stores, Kate Spade boutiques, and online. It reinforces Spade's quirky and feminine 1960s fashion vibe, with vintage floral patterns, black-and-white awning stripes, and colors like bright fuchsia and Kelly green. The Kate Spade for Crane range has special segments for babies, weddings, and save-the-date cards. Accessories include paper scheduling systems.

French Paper Co. is long-partnered with Charles S. Anderson Design (CSA) in Minneapolis, Minnesota. Established in 1989 CSA is inspired by the highs and lows of art and popular culture. CSA designs French's packaging, provides color trend consulting, and prepares its advertising spreads. Its work has been exhibited in museums like the Museum of Modern Art and The Smithsonian Cooper-Hewitt National Design Museum. Its design packaging for French is characterized by visual impact and humor. Its color trend consulting is characterized in the French Construction line it designed in 1995. In its color trend consulting role, it added the cement green color in 2000; cement green is so popular it makes the French Construction line a best seller. CSA's advertising contributed to the development of French Paper Co.'s tag line: "If you hear us talking about improving our stock, you can be sure we are talking about paper stock and not shareholder value."

In 2005 Neenah partnered with the Eames design team known for furniture to launch its first new line in years. The Eames Paper Collection is based on the spirit and design principles of Charles and Ray Eames. The Eames line has three finishes: Architect has a diffused finish, Painting has a canvas finish, and Furniture has a weave texture to resemble textiles. The Architect line includes six colors derived from Eames' case study house: Eames white, Eames natural white, case study red, cobalt blue, palisades gold, and Eames black. The Painting line's canvas finish feels like plastic and comes in two options—primed and unprimed. The seven colors are based on famous Eames paintings and designs: Eames white, Eames natural, brushwork beige, Provincetown blue (a pale sky blue), graphite, brown umber, and primed canvas. The Furniture line is textured and purposeful, like Eames iconic furniture. Colors include Eames white, Eames natural white, Pacific blue, Tivoli green, kaleidoscope purple, and India pink.

In 2007 Mohawk partnered with a New York City-based design firm called Pentagram. Pentagram has done iconic packaging designs for Tiffany and Godiva, among others. It has offices in London, San Francisco, and Berlin. The partnership reveals much about premium paper segment growth in packaging paper to contribute to growing demand for consumer products with shelf presence. The premium paper industry is small. Its size lends itself to secrecy about potential growth segments. Only the remaining handful of small mills are set up to do the custom runs to meet demand for remarkable packaging paper such as that used in perfume packages and Godiva chocolate. For instance, Tiffany jewelry packaging is so well known that just a glimpse of the emblematic turquoise box can produce excitement in the recipient. The new Mohawk-Pentagram partnership leads to the conclusion that, more than likely, Mohawk's small mills produce the turquoise paper required by Tiffany.

TARGET MARKETS & SEGMENTATION

Three distinct segments of the super-premium and premium paper market are targeted. Manufacturers target separately the individual consumer, the businesses and corporations that need corporate collateral, and the graphic designers who are influential in paper buying decisions.

Manufacturers target the individual consumer segment by reminding potential users of the need to define themselves. Makers target potential users with the adage about having only one chance to make a first impression. They target those who believe that form is just as important as content. The segment is characterized by individuals who believe that without the right form, their personal message might get lost or buried among competing messages, whether print or electronic. The effect is that the consumer super-premium and premium paper segments are robust with potential for growth. In the fast-paced world of electronic communications, super-premium cotton-content resume paper speaks volumes before the recipient reads a single word. For instance Crane's 100 percent cotton, 32-pound, bond resumé paper helps ensure that the correspondence stands out from the competition.

Manufacturers target the businesses and corporations that need corporate collateral like letterhead business cards, folders, and brochures. The commercial market for stationery and letterhead is a robust segment with potential for growth. Makers target this segment at three levels. Using the levels within the office skyscraper, at the penthouse level, presidents are concerned about image. Presidents have the power to demand super-premium cotton-content paper for corporate collateral. Super-premium paper is ideal for such corporate identity documents. Because super-premium cotton-content paper is tree-free, it is often chosen to convey a message of environmental stewardship. Executive officers demand premium paper for the annual report. More than likely they will pay more for premium paper with some postconsumer fiber so they can tell a sustainability story and be viewed as good corporate citizens. The marketing department resides on the middle floors of the office skyscraper. It has to balance the corporate image with the cost of promoting it. Marketing departments need large quantities of premium paper closer in price to the value segment, or they may need something unique and may work with a mill for a special mill run. For marketers, one trend is to produce a smaller size marketing communication document to use less paper, but of higher quality. Finally, purchasing departments need commodity paper—cartons containing reams of 20-pound paper for use in copiers and printers throughout the building.

Manufacturers target graphic designers because of their influence in the paper buying decisions of a broad spectrum of clients. Designers contribute the most to a robust segment with potential for growth. They are uniquely situated to encourage the use of premium paper at heavier weights and unique textures. Makers use cocktail parties, art expositions, poster contests, and inventive advertising like the Smart White 10-page spread to target designers. One example is The Black Book. It has become the premiere resource in commercial photography for more than 70,000 global art directors, designers, creative directors, editors, and publishers. The Black Book was founded by Pictorial Offset Printing and Neenah Paper, Inc. In late 2007 it added a special corporate social responsibility guide to recognize the need for environmental sustainability reporting.

RELATED ASSOCIATIONS & ORGANIZATIONS

American Forest and Paper Association, http://www.afandpa.org

Conservatree, http://www.conservatree.com

National Paper Trade Association Alliance, http://www.gonpta.com

National Resources Defense Council, http://www.nrdc.org

Wisconsin Paper Council, http://www.wipapercouncil.org

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see also Copy & Printer Paper