Wednesday, April 30, 2008

The Myth of the Yellow Pencil

With the recent 150th anniversary of the patent of the eraser tipped pencil, I have seen several new references around the web about pencils and a few indicating that 75% of pencils sold in the United States are painted yellow. At our site we explain the history of why so many pencils are painted yellow in the US. It's not clear to me where this estimate of 75% comes from however. Our site simply states that a majority of basic graphite writing pencils sold in the US are painted yellow and given today's market that may be generous. I have not checked Henry Petroski's book as it certainly has a reference to the genesis of painting pencils yellow although I can't recall if there is some figure stated for proportionof market as yellow painted pencils. Even so that book is now roughly 20 years old and market conditions have changed dramatically over that time. So perhaps it's time for a new look at this old story and the trends in the US pencil market that impact this.

My approach is first to view the US pencil market by it's key product category components & sub-components which include:
  • graphite pencils for office, school & home use
  • color pencils for school, home or artist use
  • carpenter pencils
  • cosmetic make-up pencils

Of these the last two groups are relatively small segments on a unit volume basis. Based on my knowledge of the industry I've estimated these two segments would not be much more than 5-7% of the annual unit volume of pencils sold in the US. Although with a higher average sales value per unit than graphite or color pencils it may be perhaps 8-10% of the wholesale sales value. Virtually none of these pencils are painted yellow though some proportion of carpenter pencils may be yellow the most comon colors are white, red, blue and orange. So a conservative estimate removes 5% of all US pencil consumption from being painted yellow.

The next challenge is to break out color vs. graphite pencils. Historically there has been an approximate ratio of 20% color pencils to 80% graphite writing pencils. I conducted a reasonably thorough review for 2005 of US production sources and import sources of pencils. By dividing each country of origin and US producer out into known and/or my best estimate figures for color vs. graphite pencils I calculated a weighted average of 28.7% for color pencils for 2005. Of particular interest is that only a very small small portion of US pencil production is color pencils. My estimate is just 5%. With about 1/3 of today's pencils being produced domestically in the US and a full 2/3 imported from overseas this means that about 39% of the imported pencils are color pencils.

This data supports the growth of color pencil consumption in the US over the past 15 years or so. This has been driven initially by the entry of Crayola into marketing color wood cased pencils in the early 1990s. These pencils are all produced in Brazil or Costa Rica by Faber-Castell. Following the lead of Crayola many other. Of particular interest is that in Europe the ratio of color to graphite pencil consumption is more or less reversed from the US trend as historically color pencils have been the vast majority of pencils produced and sold inthe European market where pens are more frequently used for writing purposes.

Given that color pencils are usually painted the color of the core for each color in general color pencils have a very low proportion of yellow painted pencils. We could either simply discount this group entirely (as non-graphite pencils) or assume that about 1/12 of these pencils on average are painted a yellowish hue given that yellow is a primary color and as pencils are generally sold in multiples of dozen packs this proportion should hold about true as the color pallet expands for 24, 36, 72 and 100+ count boxes of color pencils. Thus at best 2 to 3% of US pencils are color pencils that are painted some form of yellowish hue.

Thus my analysis indicates that perhaps only 66-67% (100% less 5% carpneter/cosmetic less 28-29% color pencils) or approximately 2.9 billion graphite pencils per year are sold in the US today. So even if 100% of graphite pencils were painted yellow only 2/3 of US pencil consumption would be yellow pencils. Adding 2-3% yellow coloring pencils still doesn't get us to 75%. However there are several major sub-categories of graphite pencils including:

  • advertising specialty pencils for custom imprint purposes (hexagonal and round shapes)
  • golf pencils (hexagonal and round)
  • designer theme pencils (includes licensed character/sports pencils, holiday themes, and other decorative themes ( generally round)
  • artist quality graphite drawing and sketching pencils
  • standard branded writing pencils (mostly all hexagonal shaped painted a single color)

It is really just this last group of more standard branded writing pencils that have traditionally had a very high proportion of yellow painted pencils. And frankly it's likely this last group of pencils that the average person is probably thinking about when saying 75% of US pencils are painted yellow. Certainly it may be historically true that 75% of branded hexagonal graphite pencils in the US were painted yellow and it may even still be true today of this sub-segment. However as with the growth in the color pencil market the advertising specialty, golf pencil and designer theme pencils have been the key growth sub-categories of the graphite pencil market over the past 10+ years. My quick estimate is that something in the range of 50 to 70% of graphite pencils would fall within this last group in the current market and if 75% of those are painted yellow then at the upper end we are looking at just 35% (= 67% graphite x 70% to 75%) graphite yellow painted pencils as a proportion of the total US pencil market. This is a far cry from 75% and even if significantly more than 75% are painted yellow would not get much higher than 40% of all US pencil consumption . Thus it's probably not even technically correct any longer to say that the majority of pencils sold in the US are yellow painted pencils.

In fact within the pencil industry the historical intent of painting a pencil yellow as a reflection of high quality is considered out of date and yellow pencils are increasingly viewed as a low value commodity segment. Certainly some important high quality brands such as Dixon's Ticonderoga , the Mirado (originally the Eagle Mirado now Sanford's Papermate Mirado), to some extent the Mongol (though now discontinued in the US by Sanford) and a few other minor brands have a good quality reputation and retain yellow as the primary lacquer color. Some of these have offered additional paint color options within their brand range. The reality is that today the vast majority of yellow pencils sold in the US are imported low priced pencils. Many of these are private label pencils for the major office supply chains. The Papermate American brand remains one higher volume yellow hex pencil that is still US produced to a large extent, but the quality has been reduced considerably to compete with the imported pencils. Alternate species woods have reduced sharpenability performance, lower standards on lacquer finish reduce the look and feel of the pencil, ferule and eraser quality reductions and graphite smoothness inconsistency, are today unfortunately often the case with common yellow pencils.

While all this means more affordable pencils for general writing needs it's also changed the perception of the yellow pencil over time. Today's standard commodity yellow pencils cost about $0.10 per pencil at retail which is surprisingly the same as the price of a Ticonderoga, a Mirado and other high end brands 40, 50, 60 and even 70 years ago now. When you consider the value of the dollar today vs. it's value over those time periods you'll see common yellow pencils are effectively much cheaper in real dollar terms than they ever were. I'm not sure what milk, gasoline and many other common consumer goods cost that long ago relative to today's prices, but I'm guessing the relative value retention for the yellow pencil has been quite good although the qualtiy on average is just not what it once was and may or may not compare favorably with quality performance of other common goods that have had relatively more infalated values over time on a real dollar basis.

Thursday, April 17, 2008

Sustainable Forestry

It's been awhile since I've posted much related to forestry and the timebr business here. Last night this segment appeared on NBC Nightly News. It features the sustainable forestry efforts of Collins Pine Company which has had a long relationship with our company. Collins is a an important supplier of FSC Certified Incense-cedar used in our ForestChoice pencils and our FSC certified slats sold to other pencil companies around the world.

I do find Brian William's intro statments like "You can't see the forest, because they're gone!" coupled with the use of images of recent clearcuts rather misleading relative to the actual reality of responsible forestry practice in the Pacific Northwest. Collins is clearly a leader in committing all their timber operations to FSC certification process and in the manner in which they run their operations. I applaud them and am happy to be collaborating with them in bringing sustainable wood products to market. However, they are just one example of numerous companies with good sustainable forestry practices.