As was the case in 2001, 2002 has been a difficult year for the printing ink industry. Sales have slumped, and concerns over raw material pricing and the possibility of war in the Middle East remain.
Still, there are some signs of encouragement. In its quarterly survey, the National Association of Printing Ink Manufacturers (NAPIM) found that while year-to-date printing ink sales and volumes are down for 2002, third-quarter results improved significantly over the second quarter.
“Both the second and third quarters have shown improvement over the previous quarter,” said James Coleman, NAPIM’s executive director.
Overall ink sales for the first nine months of 2002 declined 4 percent in volume and 5.2 percent in dollars from 2001. Packaging inks have fared better, with volume down 2.7 year-to-date and sales declining by 1.8 percent. Publication and commercial inks are down 4 percent in volume and 7.3 percent in dollar value.
“Packaging ink is definitely holding up much better than publication or commercial,” said Mr. Coleman.
The good news is that the third quarter showed total ink volume increasing by 7.2 percent over the second quarter, with sales for the period increasing 4.8 percent. Compared to third-quarter 2001, 2002’s volume was down 0.7 percent and sales were off 3 percent.
Does this signify a trend? It’s difficult to say, as the economy has yet to clearly rebound. However, it does provide some hope.
|From left, INX International Ink Company president Rick Clendenning, chairman Mitsuo Matsuzawa and Bryce Kristo, vice president, finance and business development.|
While there was a sense that the industry was making slight gains, the economy continued to fluctuate and the anticipated recovery never really took hold.
“The business environment in 2002 saw productivity and industrial production levels rising, but slower than expected,” said Wes Lucas, Sun Chemical’s president and CEO. “Declines in consumer spending, lower corporate profits and concern over corporate accounting practices hampered the recovery.”
Until 1998, the ink industry tracked the gross domestic product (GDP) index, but that is no longer the case.
“The ink industry is no longer tracking GDP as closely as in the past,” said Kathy Marx, Flint Ink’s vice president, marketing and strategic planning. “In fact it seems to be trailing it now by about three months. Interestingly, the NAPIM report indicates that the gap may be the result of a shift to digital printing. But there are other factors as well, not the least of which is changing advertising expenditures and competition from alternative media.”
According to Mike Murphy, senior vice president and general manager, Sun Chemical Inks (GPI), the industry had a challenging year in 2002, with some sectors experiencing declines. “From my perspective, I believe the recovery will be slow but steady throughout 2003,” Mr. Murphy said. “In 2002, we’ve seen our energy curing and flexible packaging business grow basically because of new products or enhancements to existing product offerings. We expect that growth to continue as we challenge ourselves to meet or beat customer expectations in all of our markets.”
“From what I have heard from others in the industry, we are all facing the same things,” said Rick Clendenning, INX International Ink Company’s president. “Some are struggling more then others depending upon which market segments they are serving. The one thing that is very apparent, no matter which market segment you look at, is everyone is out there aggressively looking at ways to capture more business.”
|Wes Lucas, Sun Chemical’s president and CEO.||Leonard D. (Dave) Frescoln, Flint Ink’s president and COO.||
Ronald T. Barry, Color Converting Industries’ chairman.
“The first half of 2002 showed continued signs of a weak economy but sales seemed to have bottomed out,” said Bryce Kristo, vice president, finance and business development at INX International. “The second half has been slowly but steadily improving. Packaging applications certainly did better than commercial print due to the downturn in advertising dollars. We expect the commercial business to rebound, but we are hesitant to say to what extent.”
Packaging provided the brightest spot for mainstream ink companies.
“The packaging segment seems to be somewhat of a mixed bag,” said Ronald T. Barry, Color Converting Industries’ chairman. “We feel fortunate to again have experienced double-digit growth. Our 2002 growth has been across all product lines. We see especially strong growth for us in 2003 in solvent laminating and energy cure applications.”
“As in years past, the packaging segment continues to be a strong area, along with energy curables, which are crossing several segments,” said Ms. Marx. “The Asia Pacific market is also a good performer.”
Controlling costs remains essential to the financial health of ink companies.
“Printers and converters around the world are under extreme competitive pressure.
Consequently, ink companies have had to work hard to control costs so they, too, can be competitive. At Sun Chemical, we believe an ink company must continue to provide innovation and service even during tough times such as these,” Mr. Lucas said. “Many customers recognize how much value this adds and understand that working with a strong partner is essential to their long-term growth.”
“2002 was a very difficult year for the economy and, in turn, the ink industry,” said Joe Cichon, senior vice president, product and manufacturing technology at INX International. “Demand for commercial and publication printing was off significantly. With decreasing demand, all ink companies were faced with difficult actions such as downsizing and reducing the number of facilities needed to complete the business. The good news is that all of us had to become lean and mean.”
Ink company leaders still aren’t hearing too many words of encouragement from their customers.
“In sheetfed, the first half of the year was pretty slow, but the past four months have improved, and we’ve been busier on a more regular basis,” said Jim Leitch, CEO of Braden Sutphin Ink. “There are niches in printing that are busy, but I don’t get a sense from our commercial sheetfed customers that we’ve turned the corner.”
“I can only speak with confidence for Gans Ink and to that, our business has been soft,” said Jeff Koppelman, president of Gans Ink & Supply. “With a national presence in the small- and medium-sized commercial print shops around the country, the impression I have received from our field representatives throughout the year is that these shops are struggling for consistent work.”
Outside of the U.S., markets were soft for the most part.
“The U.S. didn’t see the recovery we’d hoped for this year, and certain markets in the rest of the world had their problems as well,” Ms. Marx said. “The Latin American economic crisis in Argentina and Brazil obviously had a big effect. Europe had some softening. Asia was and continues to be a bright spot. Currency fluctuations played havoc this year.”
In keeping with the economy, 2002 was a fairly quiet year for acquisitions, with Flint Ink making the only significant move by announcing a merger and acquisition agreement with Germany-based Gebr. Schmidt Druckfarben, as well as establishing a joint venture with four major Chinese newspapers to build a state-of-the-art news ink plant in Beijing.
|Jim Leitch, Braden Sutphin Ink’s CEO.||Harvey Brice, Superior Printing Ink’s president.|
“The integration within Flint-Schmidt is progressing nicely,” said Leonard D. (Dave) Frescoln, Flint Ink’s president and COO. “Although operational decisions are ongoing, we are pleased that the marketplace seems to have accepted the merger very well. We are working to get approvals to begin construction of our news ink plant in Beijing. It’s a slow process, but we’re hopeful that we’ll be able to break ground before too long.”
In particular, the publication ink market in the U.S. has fallen off dramatically. According to NAPIM, publication and commercial inks were down 10.4 percent in volume and 7.5 percent in value from 2000 to 2001, and the trend continued during the first half of 2002.
“Whenever there is economic uncertainty, advertising seems to be the first place businesses cut spending,” said Bill Miller, vice president and general manager, North America publication for Flint Ink Corporation. “That has certainly been true over the past year or so, and the resulting reduction of advertising pages has dramatically affected the publication market. We don’t foresee much improvement in the near term.”
“As far as the U.S. market is concerned, some estimates show that so far in 2002, print advertising has been off between 6 percent and 7 percent versus 2001,” said Dave Mistretta, marketing manager, web offset heatset, Sun Chemical Ink (GPI). “Growth in the publications market is largely dependent on advertisers coming back to print in a big way. That won’t happen until the economy improves and consumers regain enough confidence to increase spending.”
“The publication market had a tough first half but showed improvement over the second half,” Mr. Kristo said. “Our hopes are that the market will continue to improve. There is some hesitancy in predicting strong improvement depending upon whether corporate profitability and consumer confidence have strengthened to levels that will generate renewed advertising.”
The publication ink market followed a similar trend in Europe.
|Jeff Koppelman, president of Gans Ink & Supply.||Dr. David Hill, senior vice president, business improvement and chief technology officer at Sun Chemical.||
Dr. Joseph Raksis, Flint Ink’s vice president, research and new market development.
“In Europe, pagination declined from the second quarter in 2001 and ended the year 7 percent down on the year 2000,” said Charles Murray, Sun Chemical’s vice president and group managing director, U.K. news ink, heatset and publication gravure. “After Sept. 11, 2001, advertising space was squeezed further and this trend continued in 2002.”
Mr. Murray believes that the U.K. newspaper industry may finally be coming out of its decline.
“Regarding newspapers, the national press was more affected than the regional press, where the strong real estate market due to low interest rates held pagination,” Mr. Murray said. “Color pagination slightly increased; black pagination was the most affected over the period. However, since September 2002, we have seen a slight improvement in pagination, and we expect stronger growth in 2003.”
Mr. Cichon said that some publication business has been lost due to the rise of other media.
“Some of this market may never return,” Mr. Cichon said. “A good example that we all have seen is in the computer software that we purchase. A box of software used to weigh in at about two pounds, and today the same software might come in at about three ounces. The box and the printing is still the same (packaging), but the publication that used to be in the box is now gone and may never return. It is now on the CD. Digital publications and images may not replace all printing, but there is no doubt that it has already replaced some.”
Packaging ink sales have been more stable than the publication and commercial side, although growth has slowed in the past few years.
“The packaging market has shown modest growth during 2002, reflecting activity in the U.S. economy,” said Chris Parrilli, vice president of branch operations and packaging sales, Sun Chemical Ink (GPI). “Packaging’s growth rate has been stronger than other print markets, but below its historical growth.”
“Of all of the business segments, packaging enjoyed the most activity,” said Paul Howes, vice president and general manager, North America packaging for Flint Ink. “Even here, however, economic changes have brought consolidation to the industry. We’ve shifted our focus accordingly and look forward to continued – though conservative – growth in 2003.”
“The packaging area, such as flexible packaging, label and other items related to packaging, has been more resilient, and I expect to see these recover a little ahead of other printing demands,” Mr. Cichon said.
“The packaging segment in total appears to have been relatively flat in 2002 with at least some slight growth,” Mr. Barry said. “We believe that 2003 will trend upward but do not expect anything beyond a 3 percent overall market gain.”
The news has been similar in the corrugated business, where business remains sluggish.
“According to our customers and industry statistics, volume has been flat or slightly below last year in corrugated,” said George Sickinger, chairman, CEO and president of Color Resolutions International. “We have had a good year, which I would attribute to our being on the favorable side of acquisitions, our focus on key niches in the corrugated industry and our very aggressive cost controls. Still, everybody is very cautious about next year.”
Packaging inks are faring better in Europe, where innovative products are finding new opportunities.
|Jack Benson, director of materials, North America for Flint Ink.||Ken Collins, senior vice president, corporate purchasing and supply chain management at Sun Chemical.||
Kathy Marx, Flint Ink’s vice president, marketing and strategic planning.
“In Europe, the packaging business is growing at a rate slightly higher than GDP – both in liquid inks and sheetfed. Particular growth areas are flexible retort packaging replacing tin cans, shrink sleeve labels replacing wet glue labels and new tobacco packaging to incorporate new health warnings,” said Richard Pettifor, Sun Chemical vice president and group managing director, Sun Chemical Europe.
As is the case in Europe, one key for converters is developing new technologies. For example, drink pouches were virtually unheard of a few years ago; now they are commonplace. Ink companies have to be ready to help meet those needs.
“Converters continue to develop new innovations in packaging with very demanding ink applications,” Mr. Parrilli said. “Market segments such as stand-up pouches, shrink sleeves and retorts should continue to grow. In addition, packaging designed for convenience will be a driver for the ink market. This means we will be seeing more single serving packages or larger pouches that are recloseable. This type of packaging relies heavily on bold graphics and laminated barriers to help sell its contents.”
Raw Material Outlook
The state of the printing and ink industries has affected all segments, and for the most part, suppliers have kept prices stable to try to weather the economic storm. Still, increasing crude oil prices and problems with imports are taking their toll.
According to Ken Collins, Sun Chemical’s senior vice president, corporate purchasing and supply chain management, “During 2002, prices for key printing ink components such as rosin resins, hydrocarbon resin, solvents and nitrocellulose have, for the most part, been stable. Several areas exhibited pricing pressures in the third and fourth quarters of 2002: pigments, phthalic anhydride, styrene acrylics, ethyl acetate, ethyl alcohol, methanol and acetic acid.”
“With industry demand down in 2002, existing capacities were more than adequate to meet raw material requirements,” said Jack Benson, director of materials, North America for Flint Ink.
“Pricing remained relatively stable and the few attempts by some market segments to move pricing up could not be sustained due to excess capacity in the supply base and weak demand in the industry. The price of crude oil in 2002 steadily rose to the upper $20s per barrel, putting pressure on basic feedstocks prices that producers will likely seek to recover at any sign of an upward turn in the economy.
“Should demand firm up in 2003, there may be short-term tightness in some segments due to producers’ needing to add back or restart capacity taken out in response to the economic downturn,” Mr. Benson said. “This will be most acute with raw material producers having significant market participation in areas outside the ink industry, such as the automotive and paint markets.”
The price of naphthalene is increasing, which will affect a number of key pigments, particularly rubine red.
“Expectations for 2003 would appear to mirror 2002, and barring any geopolitical events that would cause crude prices to rise higher, we expect the raw material market to remain stable with one exception,” Mr. Benson said. “The decline in naphthalene supply in Asia has resulted in very significant cost increases for naphthalene derivatives used to manufacture red organic pigments. Naphthalene, a by-product of the steel making process, is in short supply due to declines in Chinese steel production and an increase in demand for naphthalene derivatives used in the construction industry in China. This is having a global ripple effect and we expect to see higher prices for select organic pigments in 2003.”
|Richard Pettifor, Sun Chemical’s vice president and group managing director, Sun Chemical Europe.||Charles Murray, Sun Chemical’s vice president and group managing director, U.K. news ink, heatset and publication gravure.||
Mike Murphy, senior vice president and general manager, Sun Chemical Inks (GPI).
“Naphthalene has become short in supply due to the fact that steel production is down in China because of increased U.S. tariffs on imported steel,” Mr. Collins said. “Several steel mills have been closed, reducing the naphthalene supply derived from the coke industry, which is produced to manufacture steel. Naphthalene pricing has increased dramatically in the last 60 days.
“The shortage of naphthalene is expected to continue due to the fact it is also used in the cement industry, and the Chinese government has made it clear that what material is available will be utilized to continue the installation of new highways and building versus use in the pigment industry,” Mr. Collins said. “This will surely cause rubine pigments (requiring beta napthal and Bona) to have a great deal of pricing pressure in the first quarter of 2003.”
“The recent announcements of decreases in production of naphthalene from China and its effect on price and availability of classical red pigments and DNA orange will impact several ink formulas globally,” Mr. Barry added.
The impact of imported raw materials such as pigments and intermediates from China has led to reduced costs, but there are concerns that are becoming readily apparent.
“There is some evidence of increase in cost of materials in 2003 due to availability and increased costs of certain intermediates,” Mr. Barry said.
“A factor to watch out for is the growing impact of intermediate supply countries like China,” Mr. Cichon said. “As this country shifts and grows its economy, they can easily consume large amounts of materials that might have otherwise been exported to the U.S. This, in turn, will at least for a short while drive costs to the U.S. buyer to a higher level.”
“There has been a constant effort from overseas companies to introduce ink raw materials to U.S. markets,” Mr. Barry said. “Pigment seems to be most available from Asia and has compressed the prices of available pigment in the U.S. Several U.S.- and European-based pigment manufacturers believe that due to less stringent governmental and environmental regulation in Asia, the products can be made economically and brought to U.S. at a much lower cost. U.S. producers have been under pressure to meet the competitive threat.”
There are other concerns in the area of pigment price increases.
“DCB, feedstock for yellows, may cause some increases in classical yellow pigments,” Mr. Barry said. “Blue crude is at its lowest in 2002. There may be a possibility of increase in price of blue pigments due to increased price of phthalic anhydride next year.”
There has been price escalation in certain raw materials during the third and fourth quarters, with further pressure foreseen in the first quarter of 2003.
“Phthalo blue pigment pricing has been stable throughout 2002,” Mr. Collins said. “With the most recent explosion of Clariant’s Song Won plant in Korea, there could be pricing pressure on phthalo blue pigment in the first half of 2003. They are not a major factor in phthalo blue crude. High density polyethylene has increased substantially during the second half of 2002 but should stabilize at current pricing in the first half of 2003 as supply and demand come into balance. In the printing ink industry, this has caused increased pricing for packaging materials, such as plastic pails, etc.
|Dr. Graham Battersby, Flint Ink’s vice president, research & development.||Bill Miller, vice president and general manager, North America publication for Flint Ink Corporation.||
Paul Howes, vice president and general manager, North America packaging for Flint Ink.
“Titanium dioxide increased twice during the second half of 2002 and the increases were accepted by the industry, both coatings and ink,” Mr. Collins said. “If the coatings industry continues to improve we could experience further price increases on TiO2 in the second quarter of 2003.
“The TiO2 market has been a little unpredictable,” Mr. Barry said. “Producers had announced an increase in price due to short supply and increased prices of certain oils and TOFA used to make dimer acids. Both producers of dimer acids in U.S. have announced price increase in last quarter of this year. Nitrocellulose suppliers have announced their intentions to increase prices next year to compensate for increased labor and energy cost. Most of the suppliers attribute the necessity of price increases to increase their margins to sustain current business and reinvestment to support new developments and increase demand for customer service.”
Of course, everything pales in comparison to the possibility that further tensions in the Middle East could lead to major price increases and even disruption of oil supplies.
“There are several other areas of concern for 2003, including the cost of crude oil and natural gas, which affect such products as ink oils (news and heatset) and carbon black,” Mr. Collins said. “It goes without saying that disruptions in the Middle East could see crude oil pricing move from $25-$28 per barrel to some estimates of $60 per barrel. There would be a major increase in raw materials derived from crude oil.”
“One of the key things to keep in mind is that most ink raw materials come from a raw source of petroleum base,” Mr. Cichon said. “If anything happens to this supply line, the price of most raw materials will be affected.”
Ink companies are facing tight margins, and raw material price increases would further damage their ability to compete.
“We’re hearing about raw material price increases, and we’re not accepting any from our suppliers,” Mr. Sickinger said.
For their part, key suppliers are working with the industry to help compete in this challenging economy.
“In sheetfed offset, the pressure on the ink industry is tremendous, and suppliers have been helping the industry by keeping prices fairly steady and providing us with new products,” said Harvey Brice, president of Superior Printing Ink. “The quality of pigments has improved. Quality is very important, and the pigment industry is investing a lot of money into that.”
“Raw material companies should be complimented because they’ve been very willing to work with ink companies,” Mr. Leitch said. “They understand that things aren’t great for ink companies, either. Pricing has been pretty stable, and that’s what we are planning for.”
That cooperation is increasingly needed in these uncertain times.
“With the list of materials that have escalated in price to manufacture printing inks, it will be imperative that we work with our suppliers to take cost out of the process to offset price increases,” Mr. Collins said. “We will also work with our customers to share in the increased costs.”
To succeed in business, companies have to keep up with what their customers are doing. The printing industry has had its share of change, and ink companies are working hard to meet new demands in areas as varied as energy curing, hybrid inks, digital inks and improved technology for conventional processes.
“Nowadays every ink manufacturer provides good quality products, good pricing, quick delivery and service to customers,” said Mitsuo Matsuzawa, chairman of the board for INX International Ink Company. “INX’s customers are now looking for products which are a step above in quality, more price competitive, and a product where we, the manufacturer, can help them increase the efficiency of their operations as well as being environmentally friendly. The past couple of years, INX has focused on developing new products, and we have introduced new INX ink in the sheetfed, heatset, metal deco and liquid areas to meet the customer’s requirements. As a result, we have had a very successful year in 2002.”
“From the technology side, the expanded role of polyester substrates in lamination structures has presented a great opportunity for Color Converting due to the development of our patented SealTech series of flexo and roto inks,” Mr. Barry said. “Also, in 2003 we expect significant progress in a number of energy cure applications.”
Mr. Koppelman and Mr. Brice see opportunities in non-impact, UV and hybrid inks.
“Digital, UV, hybrid and ink jet are all growing applications that are carving out their own niches – some of these technologies to which Gans Ink is already involved, others yet to come,” Mr. Koppelman said. “The most significant development to negatively affect our company over the past several years has been the gradual yet unrelenting change in the ‘quick printer’ market. That business sector, which flourished for two decades in the ‘70s and ‘80s has not entirely disappeared, but what hasn’t been replaced already by entrepreneurial desktop publishing capabilities is ‘morphing’ into a digitally-based, non-offset application. Many of those applications’ ink requirements are replete with difficult barriers of entry.”
|George Sickinger, Color Resolutions International’s chairman, president and CEO.|
Braden Sutphin is one of many companies to work on no-fountain solution inks. “We’re constantly working to improve our technologies to match up with our customers’ needs and the new press technologies,“ Mr. Leitch said. “With our H2Only, Braden Sutphin has been in the forefront of the H20 non-fountain solution inks. We’re trying to get more acceptance in the marketplace.”
Dr. Joseph Raksis, Flint Ink’s vice president, research and new market development, said that Flint Ink has developed a large number of new products, including new radiation-curing inks and print-based security systems.
“UV and EB inks have continued to move into more applications and be better accepted by printers,” Dr. Raksis said. “Flint Ink’s new generation of offset radcure inks have moved us into a leadership position. There is a lot of interest and talk about using print-based security systems to protect against counterfeiting, fraud, channel diversion, etc., but few real examples to date. Flint Ink is monitoring the newly available technologies, forming relationships with technology providers where appropriate (e.g., KeyMaster, and working with potential customers to understand their needs.”
Dr. Raksis said that providing products focused on improved short-term economics is also of great interest.
“A significant theme in the industry is to improve the economics of shorter printing runs for all printing processes,” Dr. Raksis said. “This is driven by the trend to have more customized products. We are responding with an increased commitment within the digital arena.”
In Europe, John Law, general manager of SunJet, Sun Chemical’s unit serving major users of commercial ink jet printing, noted that digital print on demand grew during 2002.
“This trend is expected to continue into 2003 with a compounded annual growth rate (CAGR) of 14 percent to 18 percent,” said Mr. Law. “Investment in new technology is projected to continue to support the development of new digital products that will both complement and replace conventional printing processes.”
Mr. Law also noted that the printing industry in China grew 9 percent in 2001, and the forecast is that it will continue to grow 10 percent to 12 percent over the next five years.
Cost remains a concern, and ink companies have had to develop new technologies while maintaining cost.
“2002 was a continuation of 2001, with customers asking for lower-cost products without any decrease in performance,” said Dr. Graham Battersby, vice president, research and development at Flint Ink. “We continue to develop technology to minimize our customers’ costs by looking at their total printing costs. For example we have new radiation-cured products that are easy to use, are suitable for a wide range of different end uses and have very good mileage. We also continue to provide our customers with value-added services and capabilities like IntelliPrint and GlobalInk, which are aimed at increasing both quality and production flexibility.”
Gains can also be made by improving processes. Sun Chemical, Flint Ink, INX International, Micro Inks and others are working on Six Sigma, while Wikoff Color and other companies are utilizing processes such as Lean Manufacturing.
“In the U.S. and around the globe, companies will look to continuous improvement as a way to enhance their competitive position,” said Dr. David Hill, senior vice president, business improvement and chief technology officer at Sun Chemical. “Sun Chemical is dedicated to a company-wide implementation of Six Sigma, a data-driven continuous improvement program that has been successful in many world-class companies. To reach Six Sigma, a company has to achieve a quality level that represents only 3.4 defects per one million transactions, which means it must become close to perfection. Six Sigma applies to all facets of the business – from manufacturing to accounting to service.
“Throughout 2003, all Sun Chemical employees will be receiving training and using this powerful tool, which is expected to produce measurable improvements in customer satisfaction,” Dr. Hill said. “We expect that the new efficiencies achieved through Six Sigma will make Sun Chemical a more valuable partner for our customers.”
Last year, Sun Chemical initiated a number of joint Six Sigma programs aimed at reducing the printer’s total cost of printing, according to Dr. John Rooney, vice president, technology, Sun Chemical Ink (GPI).
“These projects, which help printers to identify unnecessary costs and remove them while increasing their efficiency, demonstrate the value of the Sun Chemical product and service as we try to build a partnership with our customers,” Dr. Rooney said.
For example, Dr. Rooney said that the drive to streamline flexible package printing in 2002 led to the development of Sun Chemical’s proprietary WetFlex printing process and UniQure wet-trapping inks, which involve electron beam curing of low-odor, low-extractable flexo inks without requiring interstation drying. “Customer concerns over the compatibility of printing inks with food packaging applications resulted in Sun Chemical developing a tin-free and TDP-free Flexomax, which does not have problematic catalyst residues or potentially harmful degradation byproducts,” Dr. Rooney added.
New products come at a cost, and at a time when the economy is down, some companies look to reduce R&D costs. Flint Ink chose not to, and waits to see what the future holds.
“It may seem that in such depressed market conditions we would question if our commitment to long-term innovative research was correct,” Dr. Battersby said. “We believe, however, that our R&D group is in a better position than ever to reach commercialization of new product development. 2003 will be a very interesting year, technically.”
While providing value is important, being able to prove that value is even more essential to ink companies.
“We see the more sophisticated customers recognizing the great value of combining appropriate ink technologies with our point-of-use services to increase pressroom productivity,” Mr. Barry said. “This dramatically reduces their through-cost. We now have reliable tracking programs that allow us to accurately frame pressroom data. This takes us from an unacceptable ‘trust me’ offering to a ‘let us prove to you’ offering. This is the only way we know to get a smart buyer to look at more than unit cost. The challenge, of course, is that you have to absolutely perform and effectively reduce cost. Our experience now demonstrates the validity of selling value, a concept that our industry has talked a lot about but hasn’t necessarily been effective in executing.”
Ultimately, providing and selling value may provide the best hope for the ink industry’s health.
“I do see the greatest opportunity for us in 2003 is to get better at framing our value message and successfully executing the services that absolutely take real cost out of our customers operations,” Mr. Barry said. “When we work together with a customer to track actual costs and they are convinced that the savings are real, they realize that these services do cost money and that they are not free. It becomes clear that it is good business to pay for something that assures a high multiple payback in a very short period of time. The caveat is that you damn well better be sure that your service will in fact produce actual cost savings. Experience demonstrates that the potential is real and that through effective execution the results are there.”
What’s Ahead for 2003
For the most part, predictions on the printing industry and the economy in general were unrealistically optimistic throughout the year, and there is a tremendous amount of uncertainty now as world events unfold. Realistically speaking, where will the industry be in 2003?
“I feel that in 2003 we will be facing the same problems we are today,” Mr. Clendenning said. “Most of our customers, no matter which market segment you talk to, are not very optimistic about next year. Most are planning for no recovery at all, but are hoping, as we all are, to see some signs of improvement during the second half of the year.”
“Our business plan for 2003 is conservative with a focus on market segments that match our strengths,” Mr. Kristo added. “We anticipate stability in most packaging segments and continued volatility in the commercial print markets. We remain cautious because economic uncertainty continues to not only linger but change in form. We have been successful over the past two years by implementing improvements that can be readily controlled rather than taking on initiatives that are heavily influenced by improvements in market demand.”
“We don’t foresee a recovery in the U.S. before the end of 2003,” Ms. Marx said. “A lot depends on the political issues that are currently developing and their potential effect on the world economic conditions. To some extent, the world is following in the U.S.’ footsteps, though to varying degrees. We continue to keep a cautious watch on things globally.”
“I am neither optimistic nor pessimistic about the coming year,” Mr. Koppelman said. “For sure, business is not going to burst out, but I ‘sense’ that the general economic cycle is on the other side of the trough and climbing back up. This speaks only of general business, but how that equates to the printing industry cannot be predicted by me, most certainly.”
Harvey Brice, president of Superior Printing Ink, said that while he is more optimistic going into 2003 than he was heading into 2002, he still is wary.
“Compared to 2001, we feel that we have turned the corner and we are much more optimistic that we are going in the right direction heading into 2003,” Mr. Brice said. “If the pattern follows the past six months, I think that 2003 will be a better year. However, we’re still skeptical, since there could be an oil crisis or a war in Iraq, and if the economy is slowed, so will the graphic arts. We’re not out of the woods yet.”
As the ink industry heads into 2003, leaders can only hope that the gains made in the latter half of 2002 are an indication of better times ahead.