Quad/Graphics: The Next Generation - An Interview with Joel Quadracci

By Cary Sherburne, Senior WTT Editor

January 12, 2005 -- Effective January 1, 2005, 35-year-old Joel Quadracci became President and COO of Quad/Graphics, the third largest printer in the United States and the world’s largest privately held printing company.

During a recent visit to Quad/Graphics’ Sussex WI headquarters, WhatTheyThink Senior Editor Cary Sherburne spent time with Joel to learn more about his background, the current state of the company, and his vision of the future for both Quad/Graphics and the industry at large. This is Part One of a two-part interview.

WTT: Joel, thanks so much for taking time to visit with me today. Perhaps you could provide us with a brief look into your background and experience at Quad.

JQ: I came to work at Quad/Graphics in 1991, starting out in our administrative trainee program. Participants in this program work in every part of the plant to learn the process first-hand. Of course, I had been informally doing this program during college and high school, working in different areas during school breaks. I went the sales route early on, starting in Boston and later moving to New York . Then I headed up Northeast sales for a short period before returning to Wisconsin about three and a half years ago. My role just prior to this was Senior Vice President of Sales and Administration.

WTT: What would you say is the general business philosophy at Quad/Graphics?

JQ: Quad has a unique model that I believe is different than the industry as a whole from the standpoint of not only our size, but our investment strategy as well. We have always believed in “ greenfield ” growth, growing the business one client at a time. We build plants and add equipment as we bring new clients on board. The strength that brings us is in maintaining a young, cost-efficient manufacturing platform. We spend quite a bit in capital investment—$275 million this year, and $300 million next year.

WTT: Can you sum up your investment philosophy and how that came about?

JQ: You can look at equipment in two different ways—its mechanical life and its economic life. From the perspective of mechanical life, I can run equipment for as much as 40 years; but the economic life perspective says, “Yeah, but you probably should not.” At some point in time, you can buy a new press that is so much more productive than the old press that it doesn't make sense to keep old press around.

WTT: You placed a huge equipment order at drupa 2004, in the neighborhood of $200 million. Can you tell us a little about that, in particular the new 2x8 wide web presses?

JQ: We will add 12 total 2x8 wide web presses in all plants over the next three years, with five here at the Sussex plant. Our current strategy with those presses is not just to add capacity, but to have the right capacity. So we embarked on an aggressive plan to take out 28 Heidelberg M1000’s in the same timeframe. By itself, the format of the new presses allows us to double output, and with the added efficiency, one of these presses is equivalent to about 2.5 of the older models. We have maintained the average age of our platform at about eight to nine years. This will bring that average age down significantly.

WTT: And with the price erosion we have seen in the industry, you still can justify those investments?

JQ: Yes. The low-cost producer always wins and this investment strategy puts us—and our customers—in the position to be the low-cost producer. The industry has always seen pricing degradation, but we have always been able to offset that with productivity gains. In the past three years, we have seen a more significant drop. Typically it has been about 1% degradation per year. In last three years, we have seen price degradation as high as 10%. The reality is, you can’t easily offset that level of price degradation. This is something the industry really needs to pay attention to. As publishers have had a harder time and catalogers have wanted to get more bang for their buck in terms of response rates, you have to have a platform that allows you to rationally invest in technology to be able to deliver what customers are asking for.

WTT: So how does this play into the whole discussion about keeping print as a viable communications option?

JQ: We need to worry about the ability of the players in the industry to deliver what customers are asking for at a price point and with ROI metrics that make sense. Increases in the cost of printing and distribution affect both the printer’s and the publisher’s ability to be the low cost producer. People will flock to ink on paper as long as they can justify the ROI. At Quad, we are trying to change the vocabulary for ROI metrics from cost per impression to cost per response. Three percent is a good response rate for the catalog industry, but it is going south. That is not a good model. We need to continue to invest in ink on paper as a medium to make it more responsive. We need to be able to take data that our clients have about their customers to deliver more targeted pieces, placing the right image on the right page at the last minute as it goes in the mail.

WTT: And how do you see digital printing technologies fitting into your platform, if at all?

JQ: The problem with digital printing in the high volume sector is that it is very expensive to do a full four-color variable print, and there is no advantage to it in very high volume environments. From my perspective, just give me a small variable image area, maybe two inches square, so I can do a product placement at time of print with postpress inkjet. For example, if you just ordered shoes online, I might want an image of socks that go with those shoes with an offer attached. Inkjet heads are not yet at the cost point they need to be to do full variable four-color. But they will get there.

WTT: Do you think inkjet will displace a lot of offset volume?

JQ: I don’t really see inkjet replacing offset on a large scale; it will be complementary.

This Interview was conducted by Cary Sherburne. She can be reached via email at cary@sherburneassociates.com, online at www.sherburneassociates.com and by telephone at 603-430-5463.