November 26, 2011 Paper Chase

Volume 14 | Issue 3

Norske Skog Pisa, Brazil’s sole newsprint manufacturer, has its work cut out. Like similar print organizations.

With social media flourishing, it’s hard to imagine that a company specializing in production of paper for newspapers can survive, even thrive. However, that’s Norske Skog Pisa’s story. This leading – and only national – supplier of newsprint has been doing brisk business. Why? The Brazilian market for print media has been growing.

“True, the expansion of digital media has created some major challenges for traditional print media,” acknowledges Alex Pomilio, Norske Skog Pisa’s general manager. “However, in Brazil, circulation numbers for newspapers and magazines is rising, primarily as a result of the ascension of the traditionally poorer members of the C and D classes who, now with more disposable income than ever before, are eager for information.”

Pomilio describes his country’s print environment: While major national papers have seen their print readership fall in recent times, over the last five years, a number of cities have had great success with small and medium-sized papers (the so-called “jornais populares”). These periodicals’ low prices and high volumes have led to impressive sales among both old and new readers. Particularly in Brazil’s south and southeast regions, such papers have become quite a phenomenon. For instance, in Minas Gerais Super Notícias has grown so popular that its circulation is neck-in-neck with that of the big ones.

This development is timely for Norske Skog Pisa, considering that small and medium-sized papers have always comprised its main target market. Today, the company has 88 clients. The majority are newspaper and commercial graphics businesses in the aforementioned regions. In terms of newspapers, which represent 80 percent of its business, Norske Skog Pisa supplies 30 percent of the market. Since 2000, the company’s growth has mirrored its production capacity, which has increased from 150,000 to 180,000 tons of annual newsprint. This year, it expects revenues to reach R$240 million (roughly $150 million in US dollars).

MARKET PECULIARITIES
Brazilian market particularities have proved both a boon and challenge to Norske Skog Pisa. Brazil’s newspaper industry has historically been idiosyncratic. In the early 1930s, for example, the beginnings of widespread industrialization coincided with the rise to power of Getúlio Vargas. This dictatorial leader curtailed freedom of the press, enforcing his will by slapping massive taxes upon imported newsprint which, at the time, supplied the majority of the nation’s paper content. His measures – and it’s debated whether these involved censorial control or were meant to provide an incentive to national industries – resulted in newspaper owners seeking the right to freedom of speech. In turn, these publishers became self sufficient in terms of the paper sources.

They succeeded in the post-Vargas era of the late-‘40s with the passage of Article 150 added to the federal constitution. A safeguard against censorship, this article permanently outlawed the imposition of any import taxes on newsprint. At the same time, owners banded together to create their own national newsprint manufacturer. Efforts weren’t immediately or easily accomplished. It wasn’t until 1960 that, spurred on by a state program that provided incentives for reforestation projects, a group led by major papers such as O Estado de São Paulo and Jornal do Brasil, together with the foresting company Plantar, joined forces to start a business in Jaguariaíva, a town located in the southern state of Paraná.

Despite the group’s good intentions, it took 24 years for it to achieve something truly substantial. In 1984, the company known as Pisa (Papel de Imprensa S.A.) finally went into operation. Three years later, Pisa was purchased by the Fletcher Challenge Group, and it remained in the New Zealand-based corporation’s hands until 2000. That year, Fletcher was purchased by the world’s second largest producer of newsprint: the Norwegian-based Norske Skog (total annual production of five million tons). Under new ownership, Pisa changed its name to Norske Skog Pisa and became the key member of an empire that currently boasts the largest global coverage in the newsprint sector.

Notwithstanding the considerable financial and technological benefits of belonging to one of the world’s biggest and most cutting-edge newsprint manufacturers – not to mention the fact that it’s the only producer of newsprint in Brazil – Norske Skog Pisa faces enormous competition. “Article 150 is still in effect, which means that all foreign companies that export newsprint to Brazil enjoy complete tax immunity,” explains Pomilio. “Thus, we directly compete with producers from Canada, the United States and Europe.”

Further compounding matters, the value of Brazilian real has risen to unprecedented heights, while the US dollar continues to sink. For major newspapers such as the Folha de São Paulo and O Estado de São Paulo, it’s possible to import newsprint from North American and European manufacturers, says Pomilio. “Their production costs are lower and they can distribute for less – especially now that the US dollar is so competitive.”

EFFICIENCY AND ENVIRONMENTAL RESPONSIBILITY
Indeed, Norske Skog Pisa doesn’t even try and compete for the big newspapers’ business. The current boom enjoyed by small and medium-sized papers is tailor-made for the company’s unique attributes – which marry a long history and detailed firsthand knowledge of the market with the strategic advantage of being located sur place, right in the heart of the marketplace itself. Pomilio points out, “Our clients aren’t naturally importers. Foreign suppliers deal with large volumes, which are very expensive, not to mention impossible for our clients to stock. Because we’re so close, there’s no need for our clients to spend money on storage warehouses. And we can serve them much more efficiently with our just-in-time production and rapid delivery.”

Meanwhile, a more recent, but surprisingly profitable niche that Norske Skog Pisa has also begun to serve is the commercial graphic market, specifically producers of advertising folders and flyers. Traditionally, these products were produced on higher quality glossy paper, but in recent times, more businesses have been migrating to more inexpensive newsprint. “Today, this market accounts for 20 percent of our business, and it’s continuing to grow,” says Pomilio. “Moreover, we have a big edge due to our FSC [Forest Stewardship Council] certification. An increasing number of important clients – such as Wal-Mart and Carrefour, both of whom print their promotions on our paper – are concerned with how the paper they use is produced.”

From Pisa’s earliest days, environmental sustainability has always been a key issue. Before the company even began operations, its newly hired technicians were sent to Canada and Scandinavia where they researched the latest technology related to the treatment of waste fluids and atmospheric emissions. The paper that Norske Skog Pisa produces – in weights ranging from 48.8 g/m2 ou 45 g/m2 and various levels of brightness – is made with virgin fibers derived from the region’s plantation forests of loblolly pines, all of which are planted in accordance with the most rigorous environmental standards. The mechanical processes involved are very clean, relying on minimal use of chemicals and close to zero pollutants.

In 2007, the company invested in a process called ATMP, a technology created by Norske and Andritz that uses heat and low PH levels in the making of its pulp. Norske Skog Pisa pioneered usage of this technology for the production of newsprint. Now the company boasts one of the best environmental and operational performance records of any of the affiliates in the Norske Skog group. Within Brazil, its record – combined with commitment to projects such as the preservation of endangered native Atlantic rainforest – has earned it a reputation as one of the segment’s most environmentally friendly companies.

Part of the company’s mission is to be an environmentally responsible and efficient producer of paper that always tries to reduce costs while adding value for newspaper publishers who don’t rely on imports, sums up Pomilio. “Brazil is a continent-sized country, and having local access to our clients helps a lot,” he says. “Sometimes foreign companies don’t understand the needs and difficulties of a small, metropolitan paper in Rio, for example. This is something we can do.”

And Norske Skog Pisa does it quite well.

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