Saying Goodbye to Israel's Beloved Notebook

For more than 60 years, the Dafron company dominated the local notebook market. But that market barely exists anymore, and Israel can't compete with Asia on cost. The story of a family business that became obsolete.

One look at the Hebrew word mahberet - notebook - arching in print on thin brown paper brings back countless memories of school days. From now on it will be possible to see such notebooks only among keepsakes in storage, for those who have had the sense to keep them. This summer, for the first time, the Dafron company's trademark brown notebooks will not be sold on the back-to-school market, after more than 60 years. The decline in demand, in the wake of the transition to computer technology, along with cheap imports of paper notebooks from the Far East and Hebron, have made their production in Israel uneconomical. Dafron's two major competitors, Daftar and H.M.N., both shut down more than a decade ago, and now the largest manufacturer has also given up after production drastically decreased over the past decade.

"All those years we were very connected to the plant. After the children and health, that was the most important thing in the world," says CEO Joseph Dubrovsky," whose father Rafael founded the family business. "Even when we started losing money we didn't believe we couldn't restore the business to its former glory. We didn't want to believe something you're so connected to would cease to exist. There is something magical in the idea of the family factory, and in recent years we fought for it tooth and nail. We lost year after year, and we reached a point in which raw materials accounted for 70 percent of expenses, which is when we realized there was no point in continuing. We closed with a heavy heart, but we knew we were doing the right thing because it was simply impossible to go on like that."

Eyal Toueg

Dubrovsky was speaking in his modest office in the Segula industrial zone in Petah Tikva. The place is exactly suited to the old-fashioned style of his company's notebook: broad iron chairs with cheap black upholstery, torn in places, around a Formica table. Nearby is a cupboard holding disorganized piles of books and notebooks from which Dubrovsky takes out various types manufactured by his plant over the years. In the corridors, which are reminiscent of an old Histadrut-owned factory or a government ministry, hang pictures from the company's first days, and certificates from the Jewish National Fund, showing donations made in the name of the family by friends to mark the various 10-year anniversaries of the plant's founding.

A few weeks ago, Dafron sold to a foreign company the last of the machines that turned out the brown notebooks. It also sold its envelope-manufacturing operation, which in recent years constituted 80 percent of its output, to a private investor for NIS 10 million. The investor is expected to keep on a large proportion of the 40 production workers and move the factory to a different site.

Joseph Dubrovsky and his brother Shlomo, who was the technical manager of the plant, will continue to advise the new owners. The land in Petah Tikva, which the family owns, will become another real estate development. Two years ago, most of the family land became a Home Center branch, after a large part of the production operation moved to the settlement of Ariel. There, a small department will continue to operate, manufacturing special products such as spiral notebooks and hard-cover writing pads. This is all that will remain of the splendid factory that at its peak turned over tens of millions of shekels annually.

Dubrovsky takes comfort in the fact that the new investor will continue to manufacture envelopes under the old label: "This eases the bad feeling a little, because the name Dafron has always been a synonym for quality."

Ruler machine for lines

The Dafron factory was established in 1939 by Rafael Dubrovsky, now 96 years old, who came to Palestine with his parents as a boy. He had learned the printing trade in Russia, where his parents had a small, old-fashioned printing press. When he was in his 20s, his parents both died; Rafael decided to take a loan from his uncle to set up a business. He bought a ruler machine for drawing lines in notebooks, and fastened the bindings with his own hands. He did this at a workshop of about 100 square meters in the Montefiore neighborhood of Tel Aviv.

"He loved to tell about how he took the loan when the German general Rommel was at the gates of Egypt and everyone was afraid he would also occupy the Land of Israel. Nevertheless he decided he would invest money, that he would be an entrepreneur," relates Joseph, his son.

Early in the 1950s, Rafael Dubrovsky moved the operation to Ramat Gan. A decade later, he was the first to bring automatic machinery from Germany to Israel, for the production of notebooks, a move that revolutionized the industry. The competing workshops no longer had a claim to exist after that, and four of them joined together to form the competing firm of H.M.N, which also imported automatic machinery for making notebooks. Later the Daftar company was also established; its owner had worked for Rafael Dubrovsky in his youth.

At the end of the 1960s the two eldest sons - Joseph, an industrial and management engineer, and Shlomo, a practical engineer - entered the business. The former became the plant's director, and the latter was responsible for the technical management. Over the years they were joined by their brother-in-law Stanley Schreiber, who is married to their sister, Leah

In the 1970s the company looked for export markets and found Africa to be a convenient location for development, in particular Ethiopia. In the early 1980s the company won a large contract from the government in Addis Ababa to market about 2 million notebooks, which were transported in dozens of containers. In Ghana too the company won a large government contract.

"We had excess production capacity and we took advantage of this for export," recalls Joseph Dubrovsky. "May to September was the peak season in Israel, in advance of the school year. Production in the other months was mainly for export. From our perspective every lira, shekel or dollar that exceeded the marginal cost constituted pure profit, and we really did have a very good income in those days."

In 1982, as part of the expansion of operations, the company began to trade on the stock market. The money it raised made it possible to expand production operations to Europe - mainly to Holland, Denmark and Britain. The simple brown notebooks were not sent to those countries, but rather, notebooks with covers the company printed in accordance with a plan it received from the customer. According to Dubrovsky, the brown notebooks continued to be sold throughout the years in Israel because their binding is cheap.

"We got labeled as 'Dafron, the factory for the brown notebook,' but for years we also manufactured other notebooks as well. In fact, from as early as 1969, we had a colorful notebook into the market. At the end of the 1990s, for example, we made a special effort to brand some of the notebooks and to move into unique and designed covers. But that was an attempt that didn't succeed all that well. There were a lot of other importers in the market that sold branded notebooks with children's stars or Walt Disney characters. They'd dump the notebooks at half price and this harmed the whole market."

Indonesia and China

Dafron began to feel the erosion in sales at the start of the 1990s, when huge competitive factories were set up in Indonesia, and the import of notebooks from Hebron and also China increased. As a result the operations in envelope manufacturing, which had started in the 1980s, began to replace the notebooks.

Indeed, even this past year, when sales stood at only NIS 15 million, most of the company's activity came from the envelopes. In 2006, the company decided to leave the stock market. In its final years of public trading, Dafron was traded at a market value of between NIS 15 million and NIS 20 million, but suffered repeated losses.

"Paper for notebooks is relatively thin. They don't like to manufacture it abroad, so we had to buy it at a high price, whereas the Chinese [notebook makers] had an abundance of thin paper," says Dubrovsky. "Today the Western world does not manufacture notebooks. My brother and I visit our father every Friday and he says: 'I don't understand how the state allows imports of notebooks from China. It's destroying the industry.' He is from a generation that thinks differently," says Dubrovsky, who is also well aware of the technological changes that have hurt the company.

"Fifteen years ago I sounded the alarm, when they gave children workbooks and books in which they did their homework directly, instead of in notebooks. In retrospect, that was small change compared to the transition to computers."

What influenced the decline in sales more - the imports or the transition to computers?

Dubrovsky: "The decline in demand for notebooks in the wake of the move to computers is the main thing. Throughout the years we had a horizon, we looked ahead and we could plan. The demand for notebooks grew every year and we could continue to make a profit, despite the imports."

The past decade was also difficult because of the "envelope cartel" affair - a criminal investigation by Israel's anti-trust authority into Dubrovsky and the company, on suspicion of operating a cartel together with other local producers of envelopes, among them Kibbutz Gvaram. The case, which dragged on between 2002 and 2009, and reached the Supreme Court on appeal, ended with Dubrovsky's conviction. He was ordered to pay a fine of NIS 150,000, and the company paid an additional NIS 400,000. Though he, and the other people involved, did not receive prison sentences, the fines did not help the company. To what extent did the affair affect the company?

"During the course of the affair, I managed to cut myself off. I didn't let the trial enter the everyday life of the plant or my family life. But I felt very bad throughout those seven years. It's a moral issue and one of values - not something measured in numbers. We could live with the big fine - the moral damage was harder. Today, fortunately, it is behind me. I feel like someone who has paid his debt to society and can move forward."

Decision to sell

During the past decade the manufacture of envelopes became the main focus of Dafron's activity. However, here too the company apparently did not succeed in adapting to the pace of technological change - one factor behind the decision to sell the operation.

To what extent did the technological changes harm your operations?

"There was damage here in two senses. Today hardly anyone sends letters by mail, and in recent years large companies as well have also begun to send mail via e-mail. The other aspect is that the traditional envelopes have been replaced by envelopes of the direct-mail market. In Israel we've seen development of the 'integral envelope' - a product manufactured by a technology which allows a single piece of paper to fold into an envelope, the letter itself constitutes the envelope. In Israel there is quite a demand for this, because the regulator still compels certain firms, such as banks and insurance companies, to send various types of information by mail to clients. To my regret, envelopes of this sort have already conquered 70 percent of the market, with leading companies like Beeri Print and Orda Print. Incidentally, in Europe and the United States the traditional envelope still rules."

Dubrovsky may be selling his company - but he's not going home yet. "I am 68 years old but it doesn't suit me to retire," he says. "My brother and I will have work as consultants to the new owners. It can't be helped - you have to get used to the fact that things change."