KN22092

KEY NOTE Plus : GREETING CARDS : AUGUST 2002

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This report covers: greeting cards, birthday cards, Christmas cards, New Year cards, Easter cards, everyday cards, spring season cards, personal stationery market, Ladder Club, 4C, Charity Christmas Card Council, penetration by category of card, electronic greeting cards, text messaging penetration

Companies covered include: Carlton Cards, Clinton Cards, Hallmark, International Greetings,The Paper House Group, UK Greetings, Gibson Greetings,Kingsley, Simon Elvin, Birthdays Group, Cardfair, Card Warehouse, Paperchase Products,

EXECUTIVE SUMMARY

The UK greetings cards industry is a mature one, in which competition is intense and the value of retail sales is in excess of £1bn annually. The two US giants of Hallmark Cards and American Greetings dominate the UK market, particularly after a spate of acquisitions in the late 1990s, as indeed they dominate the global market. There is, however, a myriad of small operators. Over a quarter of UK publishers, of items other than newspapers, currently have turnovers of less than £50,000 while just 1.6 percent achieve sales of £5m. The industry might expect to suffer from the forthcoming rises in National Insurance contributions and the minimum wage because of the number of small operations. A cut in corporation tax for those making little profit, and a raising of the threshold below which companies may pay a flat rate of VAT, should alleviate some of the bureaucratic burden.

The face of the retail market for greetings cards is changing with the rapid expansion of the discount chains of Card Warehouse and Cardfair. The former, for example, is intent on expanding its present chain of 210 stores to 500. UK consumers like their brands and independent specialists may well find that the way forward is in participating in the From The Heart and Hallmark Gold Crown branding initiatives. Independent specialists also face further threat from the involvement of supermarkets in greetings cards, particularly now that the grocery multiples are concentrating on returning to the High Street in their smaller convenience formats.

The UK has an established card culture with a recent survey finding that only 1 percent of respondents never send cards while electronic greetings and text messaging also pose a threat, but a smaller one than once feared. Brand awareness is low and main media advertising expenditure relatively small. Hallmark is to return to TV advertising in the run-up to Christmas 2002, which is likely to benefit the industry as a whole rather than raise awareness of the Hallmark brand. Advertising by the Royal Mail is also of benefit to the industry while the well-publicised problems of its postal service, temporarily named Consignia, certainly are not. The future success of its `creeping privatisation' is debatable and increased postal charges likely. The greetings cards industry is particularly concerned about the ongoing threat of format-based pricing, which will penalise other than standard sized envelopes.

With the UK market at saturation point, many publishers are looking to expand overseas with the ones willing to trade in euros likely to be at an advantage. The UK has a favourable trade balance in greetings cards but one that is diminishing rapidly, from £37.4m in 1997, for example, to £18.8m in 2001. The value of exports increased during that time but not in pace with imports, the value of which more than doubled. Overall, Key Note anticipates that the retail value of the market for greetings cards is not expected to enjoy annual growth of much more than the 1.3 percent seen from 2000 to 2001 as the discount chains strengthen their hold on the marketplace and retailers continue to offer `three-for-two' promotions. Nevertheless, the UK remains world leader in innovative greetings cards by the constant introduction of thousands of new designs every year and consumers buy more per capita than in any other country.

TABLE OF CONTENTS

Text © 2002 Key Note

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