R&D Holds the Key For Specialty Ink Makers
Specialty ink makers can’t afford to cut back on product development due to fears about the economy.
By Mike Agosta, Associate Editor
You don’t need a degree in economics to know that these are not the best of times for business. If you watch the evening news or glance at a newspaper, you can see that the greatest period of economic growth in history is rapidly coming to a close. More and more companies are issuing profit warnings and announcing layoffs, and everyone is searching for ways to cut down on spending.
In a time like this, the reaction of many companies is to scale back on spending and wait for better times. One of the first places many corporations cut back is research and development. Larger companies will rely on well-established products while they wait for the money to start coming in again.
Not all companies can take this line though. Companies that provide products to specialty and niche markets need to continually advance their products to keep up with the demands in their markets. For them to make money, they must spend money on development. Companies like E Ink Corp., Allied Photo Chemical and DayGlo Color Corp. know that their success lies in continuing to make their specialty products better and better. Whether the economy is boom or bust, they will continue to do so.
“Despite the current economic climate, E Ink is investing heavily in R&D and is poised for dramatic growth next year,” said Jim Iuliano, president and CEO of E Ink, Corp. This is a bold statement, considering the fact that Cambridge, MA-based E Ink won’t even begin shipping its first products until February 2002.
The company’s products center around the use of its patented electronic ink, which has all of the characteristics of regular ink, but with one important difference: electronic ink changes its look and color when exposed to an electric charge.
Suspended in electronic ink are thousands of tiny microcapsules, which contain a mixture of dye and pigment chips. These pigment chips respond to an electrical charge. Sending a charge to tiny circuitry that is printed underneath the electronic ink will change the display.
According to the company, electronic ink has several features that provide benefits over current display methods with which it will compete. Because it’s made from the same basic materials as regular ink and paper, electronic ink retains the same superior viewing characteristics as paper, including high contrast, wide viewing angle, and a bright, paper-white background. The ink can be printed on almost any surface and printed cheaply, making it extremely versatile. Electronic ink only requires power to change the image, and does not need to be backlit for viewing. As a result, very little power is required to operate the systems.
The first product to be released by E Ink is Ink-In-Motion, which the company will market to retail companies for Point-of-Purchase (POP) and other signage applications. In this incarnation, Ink-In-Motion products have the look of paper, but with the ability to continually change the message displayed.
According to media industry merchant bank Veronis Suhler, more than $17 billion is spent annually in the U.S. on POP media, making it one of the largest and fastest growing marketing services categories.
Lower spending by consumers recently has not worried E Ink, which expects retailers to continue to spend a great deal on POP advertising.
“Consumer spending in the types of categories that we target is reasonably steady,” said Russ Wilcox, co-founder, vice president and general manager for E Ink. “POP budgets are expected to continue to grow because POP has demonstrated its effectiveness due to its proximity to the purchase decision. Within the POP budget, we expect to achieve solid penetration, because brands will get greater value from their POP dollars by using Ink-In-Motion to animate POP displays and lift sales.”
E Ink sees great potential in its electronic ink and has no intentions of stopping at making signs. The company has entered into a partnership with Philips Components to create active matrix electronic ink displays that can be used in products like cell-phones, PDAs and computers. According to E Ink, this next generation of displays is the technology that designers of electronic devices have been waiting for. The electronic ink technology will enable companies to create smaller, lighter, more energy efficient devices that have better display capabilities than are currently available.
Fears of the economy have not deterred E Ink from working its hardest to continue to develop its products and make advances that will expand the capabilities of electronic ink into new areas.
“We are still spending heavily on research and development to cement our leadership position,” Mr. Wilcox said. “E Ink benefits from the unique attributes of its products. We will see substantial economic growth next year regardless of tough economic conditions.”
Allied Photo Chemical
The focus of Allied Photo Chemical has always been the environment, be it the economic environment or the more traditional. Allied Photo Chemical is a formulator of 100 percent solid inks, coatings and paints. All of the company’s products are certified to contain no VOCs and the production and curing processes result in no byproducts, said Stewart McKenzie, vice president and general manager of Allied Photo Chemical.
The company, which was founded in 1998, recently expanded due to excellent sales. “The company is growing in leaps and bounds,” said Mr. McKenzie. “The industry growth rate is around 10 percent. We are well above that.”
According to Mr. McKenzie, “large companies can fall into commodity type business situations when the economy goes bad,” and the whole focus becomes on saving money to make money, rather than spending it, as the old business adage states. “As a smaller, specialty provider, Allied Photo Chemical doesn’t think that way,” he said. “We aren’t slowing R&D.”
Surprisingly, Mr. McKenzie doesn’t see the slowing economy as a concern for Allied Photo Chemical. “We see it as an opportunity,” he said. “People are looking for cost savings and easier and cheaper ways to do things. That’s exactly what our products provide.”
The inks produced by Allied Photo Chemical are slightly more expensive than other inks, but Mr. McKenzie says they can still save companies money. “On an application basis our inks are cheaper because less ink is needed to cover an area. We can save up to 30 percentin production costs for companies that way,” Mr. McKenzie said.
According to Mr. McKenzie, Allied Photo Chemical will continue to spend money to provide its customers with new products that can make production more efficient while still protecting the environment. “We’ve just expanded our plant and hired a new sales and marketing manager. We are expanding the sales force,” he said. “Our R&D will continue at full speed. We are going after the development of anything and everything we consider feasible.”
DayGlo Color Corp.
DayGlo Color Corp, Cleveland, OH, may be the world’s largest supplier of fluorescent color, but it knows that its success lies in the unique properties of its products, and that it must continue to improve them to stay on top. DayGlo is not only continuing to develop and launch new products, but has even added a new marketing strategy. The company, which normally sells to manufacturers, is now marketing products directly to consumers.
“We are looking for larger rewards at retail,” said Michael J. Frothingham, manager of ink jet and e-commerce at DayGlo. “This is a $3 billion market growing at 40 percent a year.A small percentage of the market equates into tens of millions.”
DayGlo’s big direct consumer product is its new line of ink jet cartridges, enhanced with fluorescent dyes for brighter, bolder and better color than conventional products. The DayGlo cartridges are made for use with most Canon, Epson and Hewlett-Packard brandprinters.
“The cartridges are intended for everyday print jobs, and not just special fluorescent projects or temporary installation,” said Mr. Frothingham. “These inks enhance the color of all print jobs including photographic images, charts and graphs and desktop publishing projects like greeting cards.”
According to Mr. Frothingham, the current economic situation is a concern, but will not force the company to cut back on its new plans. “It is a challenge to place new products in a down retail environment, but retailers have to constantly reinvent themselves,” he said. “This is an exciting time for DayGlo, with many new products hitting many new channels.”
DayGlo was founded as a result of experimentation in the lab, and Mr. Frothingham believes that continued commitment to this will allow DayGlo to weather a difficult economy. “Business basics need to be adhered to, but investment in R&D cannot be stopped or the company will be marginalized,” he said.
For specialty and niche companies new products and innovation hold the keys to financial success. The companies here, like all niche companies, know that the uniqueness of their products will help to keep their companies going strong. As Mr. Frothingham put it, “If one holds back, one will be left behind.”