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Pushing the Envelope Beyond Ordinary

National’s Demise and the State of the Envelope

Posted by Jerry Velona on Sep 10, 2013 12:10:00 PM

As anyone who works in the envelope and printing industry is aware, National Envelope has recently been acquired by Cenveo and will face liquidation of some sort. As of this writing, it’s still unclear how much of National’s capacity will remain. Cenveo already maintains approximately 20 envelope plants throughout the US and the overall amount of first class mail has been in decline for the past decade so it says here that most of National’s plants will be closed and sold off in order to solidify Cenveo’s leadership position in the market.

National Envelope was one of those great American success stories. Started by William Unger, a Holocaust survivor who arrived in America on a ship for displaced persons after the war, the company  grew to become the largest privately held envelope manufacturer in the United States. National was known as a quality shop with a very solid market position primarily as a wholesaler. At a time when American manufacturing was shifting away from low-tech products in textiles, shoes and other consumables, envelope manufacturing provided solid jobs for thousands with good wages and benefits.

National filed for bankruptcy over three years ago and was acquired by a California-based private equity company called The Gores Group. At that time, Cenveo was making a bid for the company but it seemed that the Ungar family couldn’t stand the thought of surrendering the company to their fiercest competitor so they saw the Gores offer as the better choice.  It was always curious why a private equity company would consider a company like National a candidate for a turnaround and sale for a profit. The company was over $500 million in debt in a declining industry.The fact of overcapacity in the envelope market was as clear then as it is now. But while Gores closed a few of National’s plants and sold off a bunch of its equipment (at bargain-basement prices) it seemed to keep the same low-margin pricing structure that one could argue was one of the prime causes of National’s decline and eventual demise.

Gores tried to impose draconian production controls on some of the plants. This resulted in some adverse publicity and ultimately did nothing to solve the problem. As anyone who runs a factory is aware, treating your employees well makes for a happier and more productive environment. I also had some fun with Gore’s somewhat lame attempts at spinning the purchase of National and wrapping the package in meaningless MBA jargon.

The news about the second Chapter 11 filing by National Envelope and its impending liquidation earlier in the summer was played by most of the press as the end of an era and symbolic of the decline of the envelope and mailing industry.

Those of us in the industry know that's a convenient media angle but ultimately a superficial take on the story. National's problems were mostly self-inflicted. There's certainly been a decline in first class mail in the past decade but there are still billions of envelopes being mailed and the direct mail industry has seen growth during the same period.

It’s truly a shame that thousands of people will likely lose their jobs as a result of the National bankruptcy. If there’s a lesson to be learned, it’s that the model of the large, high-overhead envelope operation selling its product at commodity prices is mostly over.

We believe the future of our industry lies with the smaller, regional companies that provide value and great service to their customers. While first class mail volumes are declining due to the inexorable expansion of the digital economy, direct mail has remained a viable way for companies to promote their products. The percentage of direct mail as a total of the overall postal volume has increased and continues to do so. Marketers are re-discovering direct mail as a solid (literally) alternative to digital information overload.

The envelope companies who keep their costs at a reasonable level with little leverage, stay lexible and responsive to customer demands, use technology to its maximum advantage, constantly add value to their product offerings and aggressively market and sell will stay viable well into the twenty first century. Print and mail isn’t going anywhere anytime soon.

In the meantime, RIP National Envelope and may its many fine employees find productive work either in the envelope industry or elsewhere.

 

Topics: direct mail, declining mail volume, envelope industry, envelopes and printing, printing and envelopes, national envelope

Yet Another Blog Post

From Jerry Velona - co-owner,

Elite Envelope & Graphics, Inc.

Jerry offers pertinent, often useful information on envelope converting and printing, web printing, direct mail, the post office, songs that have to do with mail and letters, digital overload and much more!

(Non-spam) Comments always appreciated.  Spread it around!

 

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