Envelopes

SIC 2677

Companies in this industry

Industry report:

This category includes establishments primarily engaged in manufacturing envelopes of any description from purchased paper and paperboard. Establishments primarily engaged in manufacturing stationery are classified in SIC 2678: Stationery, Tablets, and Related Products.

Industry Snapshot

The envelope category is classified as a converting operation, since it transforms a finished product (rolls and sheets of paper and paperboard or synthetic materials) into envelopes. According to the Envelope Manufacturers Association, U.S. manufacturers produced 177.5 billion envelopes in 2008. This figure represented a decrease from 190.4 billion in 2007 and 194.5 billion in 2006. Value also decreased, although not as significantly, from $3.74 billion in 2007 to $3.61 billion in 2008.

Approximately 209 envelope manufacturers operated in the United States in 2007, according to the U.S. Census Bureau, down from 228 in 2005. Employment in the industry dropped from 19,400 in 2005 to 17,606 in 2007, and approximately 80 percent of employees were production workers.

The envelope industry is an obvious major consumer of paper. Envelope converters utilize paper and paperboard in their manufacturing processes, primarily uncoated freesheet and kraft paper. Recovered paper is increasingly consumed by the industry, as recycling technology and popularity increase. Mailing and in-house envelopes, which use adhesive seals, metal clasps, or string-and-button closures, are another important segment of the industry, as are heavy-duty padded shipping envelopes and mailers.

The chief threat to the envelope industry is alternative means of transmitting information, from such media as the Internet, fax machines, voice mail message systems, electronic mail, and other electronic communications systems. Despite these threats, some industry observers point out that new technologies rarely eliminate "old" technologies; they simply move them into new applications. Just as television did not eliminate radio broadcasts, electronic communications are not likely to completely eliminate the use of "old-fashioned" mail.

Organization and Structure

Envelope manufacturing is widely distributed throughout the United States and basically involves folding, gluing, and printing on high-speed converting equipment. There are many companies involved in envelope manufacturing, including numerous small producers. As in other industries though, the envelope industry is consolidating as larger, more efficient producers buy up smaller entities or force them out of business.

While paper envelopes have traditionally been made from 100 percent virgin fiber, many converters have reacted to public demand for more environmentally friendly products by introducing standard business and specialty envelope products that contain varying amounts of recycled materials. Since the products themselves can be recycled, they hold an advantage over newer plastic and olefin envelopes. In fact, some municipal collection programs collect "junk mail," giving paper-based envelopes an environmental bonus. Most paper envelopes are made from uncoated freesheet, one of the largest grades produced by U.S. paper mills.

Specialty Envelopes.
While standard business and commercial stationery envelopes account for the majority of envelopes produced in the United States, specialty envelopes emerged in the mid-1990s and have remained the fastest-growing segment of the envelope industry. This growth has been spurred by several factors, including the proliferation of specialty "quick-print" shops and home-based envelope printing. Many quick-print shops use personal computers and laser printers to create custom-printed business forms, stationery, and envelopes.

Envelopes for the specialty market must be capable of supporting the output of laser printers, which use dry plastic toner ink that is fused to the paper in a heating process similar to that of copier machines. Specialty envelopes also require special adhesives and cannot use windows, snaps, buttons, or clasps. They must be made of paper, since nylon, plastics, and olefin cannot accept the dry ink process.

Shipping Envelopes.
Another growing market for envelope converters is the parcel delivery industry. Providers of overnight services, such as the U.S. Postal Service, FedEx, and United Parcel Service, offer shipping envelopes free to their customers. These envelopes are made from several materials, including paper, paperboard, nylon, spun-bonded olefin, plastic, and plastic resin.

Catalog services are a major market for shipping envelopes as well. Aided by the vast expansion of credit cards and toll-free telephone numbers, catalogs exist for every imaginable consumer need. Each catalog order must be shipped in envelopes or paperboard boxes. More recently, e-businesses operating on the Internet have expanded the market for home shopping, adding to demand for shipping envelopes.

In addition to catalogs and e-business, telemarketing and television shopping networks are major users of shipping envelopes and mailers. Envelopes and mailers for catalog and direct mail orders must meet strict shipping requirements and thus are heavier and more expensive than other envelopes. They come in a wide range of shapes, sizes, and combinations of base construction materials.

Direct Mail.
Third-class, direct mail advertisers are another major market for envelope converters. Consumers responding to direct mail solicitations often trigger an avalanche of paper use, including the paper and envelope for the solicitation, the paper and return envelope containing the order, and the envelope or box in which the product is shipped to the consumer. Direct mail experienced an enormous boom in the 1980s that continued through the mid-2000s, despite perceived negative consumer perceptions about the practice. While costly, direct mail allows manufacturers to target their marketing efforts directly to consumers most likely to purchase their products, avoiding the "waste" of traditional mass media, whereby many consumers reached by an ad are unlikely to buy the product or service it promotes. The expansion of consumer databases and the ability by marketers to more closely define certain market niches have enabled marketers to fine tune their direct mail solicitations, leading to long-term growth in this advertising and marketing vehicle.

One of the major costs of direct mail advertising is postage. Postal rates rises as the U.S. Postal Service (USPS) attempts to come closer to recouping its actual costs for each class of mail. Direct mail advertisers attempted to reduce costs by using "lightweight" envelopes, which are made with either lighter paper or with lightweight plastics or composites. Envelopes made from nontraditional materials are more resistant to tearing and puncturing as well as contact with water. However, traditional paper envelopes still dominate both the standard and specialty envelope sectors because of their low cost and other properties, such as high strength, rigidity, and resistance to curl and fold.

The U.S. Postal Service (USPS) remained the dominant carrier of envelopes in the mid-2000s and played an integral part in sustaining the envelope manufacturing industry. According to The Household Diary Study, the USPS delivered 213.1 billion pieces of mail in 2006. Although that figure was an increase of 1.4 billion pieces since 2005, the portion of first-class mail continued its steady decline. First-class mail is primarily comprised of correspondence and transactions, including bill payments, bill statements, donations, rebates, and purchasing orders. The volume of single-piece first-class letters fell from 53.9 billion pieces in 1987 to 42.1 billion pieces in 2006. Rising postage prices may account for a portion of this decline, yet it is largely attributable to both the proliferation of electronic communication and a societal trend away from written correspondence.

Standard mail, on the other hand, was flourishing. For the most part, standard mail is advertising mail. Between 1987 and 2006, standard mail volume nearly doubled, from 59.4 billion pieces to 102.5 billion pieces, respectively. Of the 155.5 billion pieces of mail received by households in 2006, more than 65 percent consisted of standard mail. For envelope manufacturers, these figures highlight a niche in the direct marketing industry, which requires specialty envelopes with full-color graphics aimed at catching the interest of consumers.

Recycling products represented another market for manufacturers. Beginning in the late 1990s, many envelope manufacturers worked to dramatically increase their purchases of envelope stock containing recycled fiber in order to accommodate increased consumer demand for recycled products. (Paper used to make "recycled" envelopes typically contains a mix of recycled fiber and virgin fiber.) Federal agencies and state government are required by law to choose recycled paper products, including envelopes, if they are available. As a result, converters developed and aggressively marketed new recycled/recyclable envelopes and mailers. National Envelope Corp., for example, offered recycled and recyclable products, as well as product lines made with soy-based ink and biodegradable materials. In June 2007, the Envelope Manufacturers Association (EMA) launched the "Please Recycle" campaign to encourage consumers to recycle envelopes, cartons, and packaging. "Most people know that newspapers are recyclable," said Maynard Benjamin, president of EMA, "But they don't know that some envelopes and packaging are recyclable."

Current Conditions

According to Dun and Bradstreet's 2009 Industry Reports, 234 establishments operated in this industry in the late 2000s. About 70 percent of these businesses employed fewer than 100 people. States that employed large numbers of people in the envelope manufacturing industry included California, New Jersey, Pennsylvania, and New York. New York accounted for largest percentage of sales, with $114.3 million of the total $857.1 million in revenues for the industry. Other top-earning states were Minnesota ($96.1 million), Pennsylvania ($87.5 million), Florida ($84.5 million), and Massachusetts ($69.0 million).

Industry Leaders

Unlike other paper categories, where paper manufacturers also control most of the converting operations through integrated subsidiaries, almost all of the leading envelope converters are independent of paper producers.

National Envelope Corporation was the world's largest envelope manufacturer in the late 2000s. The firm produced more than 50 billion envelopes each year, or 200 million envelopes each day. The company was founded in 1952 by William Ungar, a Holocaust survivor who arrived in the United States aboard a refugee ship. Based in Uniondale, New York, National Envelope was owned by Ungar and his four daughters, making the company one of the largest female-owned businesses in the United States, as well as one of the top private companies in the state of New York. Approximately 5,000 employees worked at its 21 manufacturing facilities in Canada and the United States.

Cenveo Inc. manufactured one out of every four envelopes used in the United States in the late 2000s. It also produced other packaging materials as well as such stationery products as business forms and labels. Commercial printing operations include catalogs, journals, magazines, and marketing materials. In August 2007, Cenveo completed the acquisition of Commercial Envelope Manufacturing Co., one of the largest envelope manufacturers in the United States. In 2008 Cenveo reported revenues of almost $2.1 billion with 9,700 employees.

Another industry leader, Tension Envelope Corporation, manufactured 11 billion envelopes per year. Named after a type of envelope used during the 1880s, Tension produced standard envelopes, windowed envelopes, CD and disk packaging, and a variety of specialized envelopes. This private company, headquartered in Kansas City, Missouri, had annual sales of around $185 million in the mid-2000s.

America and the World

International trade in envelopes is relatively small, since envelopes tend to be manufactured close to where they are ultimately used. Nonetheless, U.S. converters have expanded their exports, mostly to nearby trading partners such as Canada and Mexico. The United States imported $73.4 million in envelopes in 2008, according to Supplier Relations US LLC, an increase from $66.4 million in 2006. Canada and Mexico were the top two source countries for these imports. U.S. exports decreased slightly between 2006 and 2008, from $78.4 million to $76.4 million. Canada and Mexico again topped the list of trading countries, accounting for nearly 93 percent of exports.

Research and Technology

As the speed of the envelope converting equipment increases, new problems emerge. Previously, for example, most paper was produced using an acid process. However, due to the desire to reduce costs and improve the life of paper products, nearly all mills producing fine paper, which is used in many envelopes, have converted to the alkaline process.

Alkaline paper is usually produced with a synthetic "sizing" product, such as alkylketene dimer (AKD), to improve the surface of the paper. AKD is used to produce many fine paper grades, including envelope paper. On newer, high-speed precision converting equipment, AKD paper has been known to "slip," causing runnability problems. However, research has prompted the development of new sizing products that allow envelope manufacturers to use alkaline paper without concerns about runnability. Such innovations have helped improve efficiency and keep the industry competitive.

Envelope converters clearly face competition from electronic personal communications and electronic data interchange. For example, electronic bill payment and the use of e-mail for personal and business correspondence continued to rise in the late 2000s, reducing the demand for envelopes. Still, while envelopes may be a smaller percentage of the total communication market, their use is expected to continue as the entire market grows even faster. In addition, the fact that envelopes are still a very low cost, attractive way to send information means that the envelope market will remain stable, or at least not experience massive declines, for the foreseeable future.

© COPYRIGHT 2018 The Gale Group, Inc. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. For permission to reuse this article, contact the Copyright Clearance Center.

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