The Packaging Report
A look at one of the most demanding and most rewarding segments of the ink industry.
As its been made painfully clear to everyone by now, it has not been a good year for the economy. People across the nation have been spending less and sales are down almost across the board. Most people in the packaging ink industry will tell you that packaging’s use closely mirrors what is happening in the economy. This makes sense, because basically everything comes in some sort of package.
Some packaging ink executives spoke with Ink World, and gave their thoughts about the current state of the packaging ink industry.
It’s hard to say that out of a bad economy can come some good for an industry. The slumping economy has, however, had the effect of helping to stabilize prices for raw materials. “Early in the year raw material prices were rising, but have since stabilized, I think due to the slowing economy,” said George Sickinger, president and CEO of Color Resolutions International. There is no guarantee, unfortunately that prices will remain stable. A large number of products in the ink industry use oil and oil products. The oil market has been anything but stable and predictable in the last few years, and the increased tensions between the U.S. and oil producing states in the Gulf region in the wake of the attacks of Sept. 11 makes the oil market even more unsteady.
“The wild card in all of this is the cost of oil,” said Michael Impastato, vice president, market development, packaging division, Flint Ink Corporation. “If oil prices jump unexpectedly, it will certainly put additional pressure on many of the materials used in ink manufacturing.”
While it is nice to have stable prices, the poor economy that caused it also means that sales of finished products are likely down as well, and that can mean that ink prices may have to rise to make up for the lack of sales. Mr. Impastato said that prices have increased modestly at Flint Ink in the last few years and believes that any additional materials cost will have to be passed onto customers as well.
“Ink manufacturers have absorbed numerous cost increases over the last five plus years, and have reached a point where no additional cost increases can be absorbed. I believe ink suppliers will have to pass on any future cost increase to their customers,” Mr. Impastato said.
According to Mr. Sickinger, Color Resolutions is making an effort to try and prevent such cost increases. “There is a good deal of pressure to standardize products being offered and reduce waste in an effort to cut costs,” he said.
Combating the Economy
Cutting costs is only one part, albeit a major part, in a bigger picture: weathering the economic slump. Keeping the customer happy is also an important piece of the puzzle. Rigid cost control and keeping the customers happy with good products and service are necessary actions, said Mr. Sickinger.
Chris Morrissey, vice president of sales and marketing at Sun Chemical, agrees. “Wherever possible, Sun Chemical has tried to take costs out of the system to lower production costs and be as competitive as possible on pricing,” he said. “We continue to test raw materials that might reduce costs without affecting consistency or quality. We believe that if we continue to offer a quality product at reasonable prices, we will emerge an even stronger competitor as the economy rebounds.”
Mr. Impastato said that most companies are currently taking a wait and see approach to the economy. He said that Flint Ink is still looking ahead, but is being careful in the current climate. “I think the best approach we can take is to think strategically, but manage expenses to match current business levels until we see the economy turn around,” he said.
Another important tool in combating the economic slump is to form a good relationship with suppliers.“Our approach has been to deal with capable suppliers and develop long-term relationships in areas where supply concerns exist,” said Mr. Impastato. Mr. Sickinger agreed, stating that Color Resolutions had instituted a purchasing initiative to reduce the number of suppliers used. By doing so, Color Resolutions hopes to “be more important to fewer people and have better leverage with volume,” he said.
A good relationship with a supplier is key, but what makes for a good supplier? “Stable pricing, consistent quality and value added service, such as laboratory support and testing,” said Mr. Sickinger. The list is much the same for Mr. Morrissey, who also adds product availability to Mr. Sickinger’s list. “In addition, Sun Chemical expects its suppliers to be innovative, helping us find new solutions for our customers–just as we attempt to help our customers meet the packaging end-users’ needs,” said Mr. Morrissey.
Mr. Impastato agreed with his fellow executives, but, interestingly does not include price among his major requirements. He believes that price must be looked at in accordance with what you get from a supplier. “You may have noticed, I didn’t mention price,” he said. “Price must be viewed as being relative to all the other parts of the offer, and the competitive nature of the market.” In other words, value.
Research and Development
According to Mr. Impastato, packaging ink is the most technically challenging segment of the ink market. In order to keep up with demands, companies must continue to evolve their inks. This is impossible without constant and dedicated research and development.
“We see performance criteria continuously evolving, and innovations that push packaging into new and more demanding areas,” he said. “A strong R&D capability is essential to being a supplier to the packaging ink market.”
Mr. Morrissey points out that packaging has two functions: to protect the product and to help sell the product. The ink is what helps make the product stand out on the shelf. “Each converter and end-user uses the package to differentiate himself in the market. The competitive advantage of a new substrate or process may not last long. Our laboratories must constantly innovate to meet these evolving needs in packaging,” he said. “The packaging industry must always reinvent itself to stay viable.”
Serving the Customer
R&D, supplier relationships and controlled pricing all have one goal in common: the end result is to better serve the customer. Despite the rigors of the economy, this goal has not changed.
It is not unusual to have many different types of relationships with different customers, said Mr. Impastato. “Some customers are looking for simply a quality product at a competitive price. More often, I see customers that want the right amount of the right ink, delivered to the right press, at the right time, for the right price,” he said. This simplicity of this statement is deceiving, he said, and it takes a great deal of knowledge, time and organizational ability to accomplish. This, he said, is what customers are really after.
The goal is to make it a joy to do business with us, said Mr. Sickinger. “We must anticipate our customers’ needs and make the whole buying process transparent.”
“Sun Chemical’s goals are succinctly stated in one of our key corporate values,” said Mr. Morrissey. Our aim is to provide every customer with products and services of uncompromising quality–error-free, on time, every time.”
The packaging ink market is one of the most demanding, yet most rewarding, sectors of the ink industry. Like all segments of the industry, packaging ink is being hit by the economic slowdown. To weather this storm, ink companies must look for ways to cut back on spending, but at the same time must remember that dedication to customers through quality products, service, research and development and stable pricing is key. It is also important for companies to cultivate and nurture relationships with suppliers, to further ensure that customers are provided with the best that ink companies can provide.