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Turning the Page

How the Digital Revolution Is Squeezing Demand for Graphic Paper

December 1, 2010 By Kirsten Lange , Roland Haslehner , and Hannes Pichler

The digital revolution poses a fundamental challenge to the graphic-paper industry. Growth in global demand has slowed significantly as the digital distribution of content has gained momentum. How will this play out over the next decade? Will the trend accelerate or slow down? Will all consumers behave similarly? Will all countries follow the same pattern of demand reduction? And what are the implications for paper companies’ strategies?

In this paper, we seek to answer those questions. We begin by looking at the key elements of the digital revolution that will affect demand—namely e-media; e-devices, such as the Kindle and iPad, which pose perhaps the single greatest threat to demand; e-advertising; and e-archiving and e-distribution. We also examine two tangential forces—changes in consumer thinking and behavior, driven largely by environmental concerns, and cost-cutting moves by companies—that will take a smaller but significant toll on the demand for paper.

We follow that assessment with specific growth-rate projections—both global and regional—through 2020 for different paper grades. We also explain the underlying drivers of demand, knowledge of which is critical to modeling company-specific demand forecasts. We conclude with a discussion of implications and action steps for stakeholders.

The report’s high-level message: although there will be pockets of strength, most notably in Asia and emerging markets generally, aggregate global demand for graphic paper will be essentially flat in the next decade, making for an increasingly challenging backdrop for paper producers. Industry participants will need to thoroughly understand the dynamics affecting their respective markets—not just the factors affecting aggregate demand but also those driving demand for different grades and subgrades of paper and those influencing demand from key customers.

Gaining such an understanding entails more than using a generic forecast as a basis for planning. It requires a real understanding of the drivers of demand and substitution, the key sensitivities, and potential forecasting errors. The past two years showed unprecedented demand volatility, confirming that there is limited value in a demand forecast that lacks full transparency on key assumptions and input factors.

Understanding the range of likely developments, being able to monitor key drivers, and having the ability to react quickly will be key differentiators between good and bad performers in the challenging decade ahead. The time to start thinking about those dynamics and decisions is now.  

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The authors would like to thank Filiep Deforche, Ketil Gjerstad, Frank Jackel, Udo Jung, Tobias Streffer, Peter Strüven, and Jeroen Van de Broek.

Turning the Page