03 September 2018 Print Companies

Howard Hunt makes a strategic shift

Howard Hunt managing director Danny Clarke is welcoming the arrival of an inkjet web press, an investment that will open new opportunities for the business to deliver innovative options for its direct mail customers and help print retain its value against other marketing channels.

The builders are in at Howard Hunt. The Dartford company is having a warehouse extension added to what it calls H3, the factory unit that currently houses its expansive finishing operation. The work is needed to prepare for installation this month of an HP T240 inkjet web press and all the associated handling systems around that.

It will also house the three Xerox iGens that have been located in H2 along with a ten-unit KBA Rapida sheetfed offset press. H2 is being cleared by the development.

This is not the first inkjet web press for Howard Hunt. It was the pioneer of this technology, installing a Kodak Prosper 5000 as the UK beta site for the press. It didn’t work out. “But we both learned a lot,” says managing director Danny Clarke. Howard Hunt learned to take its time and with the installation now underway, Clarke deems that the time is right for the business to return to high volume digital print.

The business is expanding, not just in terms of space. Group sales are expected to come in between £75-80 million this year, split between service and manufacturing. The manufacturing is currently in Dartford, close to the infamous Dartford Tunnel and Queen Elizabeth II bridge. It moved here more than 20 years ago from the Old Kent Road, a move effectively along the A2 Dover Road.

Martin (Nod) Pigott who had started the business remains an engaged chairman while son Luke is chief executive. Clarke is not a family member nor has a family background in print. Instead he wound his way through sales jobs in the industry to arrive in Dartford first as sales director, then joint managing director and ultimately two years ago becoming the managing director of Howard Hunt (City), the name on the plaque at the front door of the main building. This plant houses offices, meeting rooms and is the offset factory, equipped with three Mitsubishi 16pp machines. Each is a six-colour press, running either to a rewind unit to a sheeter.

Over the years the presses have been upgraded with colour and register controls and in return they have proved to be reliable workhorses. The inkjet press will now take some of the strain from these, but web offset will continue to handle the bulk of the work that the company produces.

This is firmly in the direct mail space, either inserted into envelopes or delivered via door drops in vast quantities. This can be for clients like pizza chains, Sky Television or smaller customers from across the board: financial services, charity, travel and the high street.

Clarke says: “We have seen a big drop in demand from retail as it has contracted over the last few years. But we have see a rise in new customers who are new to mail; we have seen FinTech companies come on board and start using significant amounts of direct mail.

“It’s a balanced portfolio where there is not a major exposure to any one sector. I would like to claim it has been a deliberate strategy, but it hasn’t.”

Almost everything else is more deliberate, carefully planned if not necessarily achieved within the time frame. The aim is to take group turnover to £100 million. This was originally set for 2018. It is now 2020, says Clarke, and he knows the company will need acquisitions to get there. Discussions are already underway and while Clarke is not divulging names nor timetables, he will say that the company will not be straying from its roots in direct mail.

Expect therefore an acquisition in the service space, covering design, data handling and print management, and one in manufacturing, probably a digital print company able to cope with the shorter production runs than are suited to web printing.

“There are lots of acquisition options available. I am always confident of our ability to grow organically, but if we want to break the £100 million barrier we are going to need acquisitions. If we want to get there organically we would need to be very good at winning new business, so if we really want to grow, acquisition is the best way.

“We are looking at both the service space and manufacturing space. The market is very interesting in terms of consolidation that is going on and there are some nice digital printing companies out there. We want to stick to commercial printing and direct mail with added value services – more of what we currently do. We don’t want to be a jack of all trades.”

He is clear that the strategy is to achieve 50% of revenue from services, 50% from print manufacturing. One of the service businesses, Celerity runs from Dartford with international offices in Boston and Madrid. This is a data software consultancy business, taking lists and working with them to help clients better target prospects and understanding what messages to deliver to customers at what point to improve customer retention or reactivate a dormant customer.

Celerity now employs 90 from a total headcount of 502 across the business. There are a further 80 in the ORM agency side, a business that had revenues of £2 million when Howard Hunt acquired it. It now books sales of £10 million, has more than 80 people in premises in central London and is growing 20-25% year on year, Clarke says.

The third leg of the service operations is Graft, its outsourced print management operation. This was started because customers started to ask Howard Hunt to source styles of print that the company itself did not produce.

“It is a lead supply model,” says Clarke. That trust and those relationships have built to a business with revenues of £13 million with a customer base that includes print managers as well as agencies and direct clients. “There will be a lot more cross selling and pollination of services,” Clarke explains. “Some of our print customers are also using ORM and data services.”

While the service side has been the faster growing and has the greater potential for growth as it is not restricted to one medium, manufacturing remains important. "We have invested almost £4 million,” Clarke says. As well as the HP this has included the UK’s first Böwe Fusion inserter, able to fill envelopes at 28,000 an hour. It has joined a fleet of Buhrs and CMC lines that will also handle inserting tasks. These are at the end of a finishing process that starts with delivery of the print from the first factory.

There are four Polar guillotines, each with full handling systems. There are both Stahl and MBO folders and there are two Scheffer lines for processing the web offset printed reels fitted with inkjet heads.

These are wonders of slitting, folding, perforating, glueing, ink jetting and creating single piece mailers that get a response. But with a set up time that can be half a day, such technology is suited to long runs and longer lead times rather than to the shorter runs and faster turnarounds that some customers are looking for.

This is where the investment in the HP T240 comes in. “We have a lot of customers committing work to this equipment” he says. “I can see that we will probably end up with two HPs in the not too distant future. It has always been part of the strategy,” Clarke says.

The rise of personalisation and of customisation, splitting a long campaign into several chunks that create greater affinity with prospects, is responsible. It has taken a while to get here, one of the reasons why the Prosper project failed, but is now happening in spades. “At the time we were probably too early to market,” says Clarke. “But it delivered a lot of learnings for ourselves and from Kodak’s point of view. It has taken a while to get back into the market.”

This has perhaps allowed others to get ahead or at least to build the market for digital printing with variable content. Clarke sees Howard Hunt’s investment as offering a viable alternative. “We already have iGens for smaller volumes but now we are seeing demand for medium to long runs of variable content direct mail and print on demand. This is where clients see their spend is focused with speed to market being a key element. The HP is going to help us reduce lead times and to offer increased personalisation.

“Clients are always slow to change. A lot of them continue to do what they have done for quite a while. But now people are looking for a lot more innovation and we need to offer creative ways to offer added value.”

It is not clear whether the continuous tapping about what digital print can do has finally opened this door or to what extent external market changes such as GDPR have led to a change in thinking. Certainly there has been a pause in activity with the arrival of GDPR, says Clarke, but is one that the business had planned for.

“GDPR has had a short term impact on the business, but this is something that we had anticipated and forecast in the early part of last year. We are now coming out of that period and as a business we are busy from now until the end of November.

“Some customers have restricted their mailings because of GDPR when there is no reason to. We explain to them that mail is one of the most secure channels that you can use.”

The World Cup also slowed activity while the continuing rise in the price of paper also risks damaging the value of print by making it too costly for the ROI they receive. For Clarke the counter argument is about proving the intrinsic value of printed mail. “We still have to talk about the value of mail and take away the concerns that people have about GDPR, to promote the value of mail rather than be frightened by GDPR.”

Howard Hunt has been involved as part of the Strategic Mail Partnership with the development of partly addressed mail. It is still in the test phase and has not yet been approved as a product. “We want to get a product to market that will work for our customers and drives volume into the acquisition channel. We are quite excited about what it might do. The frustration is about getting it to market as quickly as possible.”

The opportunity this represents, the understanding around GDPR and from discussions across the business, Clarke says he’s “pretty confident about 2019.

“Once the price has hit the bottom, we need to come up with creative ways of adding value,” he says. “People need to talk more about the value of mail, the impact rather than the cost per thousand mailings.”

The investment in the inkjet press offers that opportunity. “We all know price is important for all our clients, but a lot of clients have had huge success building parts of their business through use of direct mail.” For the future that means ensuring that direct mail remains appealing and relevant.

The solution to that problem for Howard Hunt lay with high volume digital. Clarke says there was a thorough investigation of what was available to printers, and while the success that others had had with the technology was a consideration, it was not a case of buying a me too product. “Four-colour variable print is not new to this business, not new to the staff,” he says. Nevertheless there has been extensive training, workshops across the group for sales, the operational management team and client services.

“The training has been first class. HP has been very supportive, which was one of the reasons we chose them as a partner, their scale, infrastructure, number of machines they have supplied worldwide.

“And we are excited about the product quality, the up time and running speeds. What we have seen so far has a given us reassurance and confidence. We have done a lot of testing with key customers and feedback has been that they have been very impressed and want us to go live on the machine as fast as possible.”

There is an aspect of being the alternative supplier in the market, offering clients the choice of supplier that provides additional reassurance that they will not be held to ransom by a monopoly supplier. He explains: “In the four-colour space there have been limited options until now. There’s a pent up demand where people are waiting for other suppliers to come to market.”

If the continuing rise in the price of paper is a barrier to faster adoption of direct mail and is perhaps holding back volumes, another barrier is the lack of skills and the shortage of recruits to the industry. “The skill set has gone out of the industry,” he explains. “It’s down to us as suppliers to fill the skills set around print.”

This is partly because digital marketing has been elevated and has been considered the better space to be in. This means that the industry has to work harder to prove the value of print alongside the alternate channels. “Do I believe print can hold its own?” Clarke asks. “One hundred percent Yes. Print is working incredibly well. Digital is here and is forecast to grow. We can’t stop that. We have to look at the sustainability of what we do and the continuing rise in paper costs will put pressure on the channel. That’s a challenge we face and bring the conversation back to the value proposition.

“We can show we are getting the ROI and that print more than stands up against any other medium.”

The company has the resources and experience to help clients with the analytics to measure whether a campaign has or has not been a success. It has supplied Connector, its campaign management software, to third-party companies where they lack the tools to do this themselves.

While this helps run the campaign once underway, it still needs those who understand print to implement a campaign. The Institute of Direct and Digital Marketing has recognised these, says Clarke, and has created a direct marketing course to help younger people understand how direct mail can be used to keep existing clients and attract new prospects and how to set up and specify direct mail campaigns.

“We do a lot of workshops with creative agencies and clients, marketing executives and anybody and everybody that has a marketing function in any way. We can show the case studies and the metrics around response. We let the numbers do the talking. For me direct mail is and should always be a results driven channel.

“We advise people to test that it is a channel that works for them; to question why it does not work and then if it doesn’t work then do not use it. We want to help them drive out inefficiency from their marketing spend. It’s all about where you get the most value for your pound of marketing budget.”

It is a continuing campaign, Clarke pointing out that the average tenure of a marketing director is just 18 months, meaning that there is a constant churn among customers and a constant need to educate teams. “Education takes a lot of resource from us, but if you get the right conversation at the right level, the numbers should speak for themselves.” That at least is the strategy.

And the rate of change shows no sign of decreasing. What was very much a transactional buy and sell business a decade or more ago, says Clarke, has become much more of a service business. “Service, consultancy and education elements have become more important than ever because clients no longer have those skills in their own business,” he says.

It means that Howard Hunt has to offer these in lieu of the client and making continual investment in training its own people part of the company culture. There is a major effort to bring in youngsters. Howard Hunt will send outreach teams to schools, colleges and universities to catch the young talent before it is snaffled up by other industries.

“It is not so easy to attract young people in to the print space, so we need to promote the benefits of working in the sector and to support this by making sure that when they come in that they are well trained and gain the right skills. There are some fantastic opportunities, but we still do not have enough going blood.

“We run apprenticeships, actively encourage young people to come on work experience. Print needs to evolve and change and needs the best young talent to do that.”

The company also has a good name locally, many staff have worked for Howard Hunt for many years. Clearly the ongoing training across the company and shop floor engagement works.

“We are trying to ensure they have the skills to support the customers,” he says. Production staff are part of the process, with workshops to keep them fully up to speed, monitors on the walls of the factory to relay company news and acceptance of ideas for improvement coming from below.

“We are quite a young board and we want to continue to grow what is already one of the largest privately owned businesses in print. There is so much happening in the marketing space, you just have to look at what is happening at WPP to see that the market will be very different in the next two or three years.”

There is a continuing spend on software and technology, on the MIS and applications to continue to improve the process. Much of what middle management used to do has been automated, “and we have been able to reduce head count in non added value areas” he says. “This a very technology led business.”

There has been consideration of how AI might be deployed to improve the marketing process and there has been investment in cloud based software and applications. “We think that AI will be able to help automate back office processes and compared to other industries print is still lagging behind in that space, but print is very much a relationship based by its very nature.”

Technology can help widen the pool of customers and then to sell them more services through innovation and added value products, “but you can only do that if you truly understand your clients’ business. It’s by understanding your customers that you understand the value that you can bring to them, where previously the relationship was purely a transactional one.

“This is going to be a different industry in the next five to ten years. I’m very excited to see what that is going to look like.”

Gareth Ward

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Danny Clarke says that customers are pressing to have their work on the HP T240 digital press as soon as possible .“We have a lot of customers committing work to this equipment. I can see that we will probably end up with two HPs in the not too distant future. It has always been part of the strategy,” he says.

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Howard Hunt continues to invest in manufacturing, says managing director Danny Clarke. While the service side of the company's operations has the potential for greater growth, manufacturing remains important. “We have invested almost £4 million,” Clarke says.

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Howard Hunt is expanding. Group sales are expected to come in between £75-80 million this year, split between service and manufacturing. The manufacturing is currently in Dartford. The extensive finishing capability is separate from litho printing, where three 16pp Mitsubishi web presses are the main firepower.

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