In terms of the general overall economy in the U.S., the first eight months of 2000 had been bleak enough. One could look at the publication market and see the decline in advertising, a sure sign that the economy was in a downturn. Newspapers and magazines alike were becoming noticeably thinner, as ad declines of approximately 10 percent were generally reported.
For ink manufacturers who specialize in selling heatset and news ink to publication printers, the shrinking ad pages are translating into a difficult year for sales. Their main hope was that the economy would pull out of its doldrums by the holiday season.
Those hopes, however, were quite possibly dashed by the terrorist attacks on the U.S. on Sept. 11.
These attacks have led to an incredible array of ramifications for the U.S. and the world. The loss of life is utterly horrifying; what measures the governments of the U.S. and other nations worldwide will take is not yet fully known.
On the business side, the terrorist attack has led to serious problems for the economy. Many leading financial companies had operations in the towers. The stock market suffered a major downturn, losing more than 14 percent of its value the first week it reopened.
Meanwhile, consumer industries such as airlines, hotels, restaurants and other related leisure activities have suffered major losses as people avoid going out, meaning there is likely to be less money for these companies to use for advertising.
A recent panel of leading experts convened by Advertising Age indicated that the attacks will most likely prolong the economic problems in the U.S.; some panel members said they thought the economic problems will continue into the second half of 2002.
All in all, it is likely to be a tough year for businesses in general, and the publication segment of the printing ink industry is likely to be feeling the pressure.
It should not come as a surprise to anyone that the phrase “writing off the year” is being expressed in many corners. Coming off of many years of economic growth in the U.S., 2001’s downturn has been striking. The reality is that the market had been slowing even in the fourth quarter of the year, when holiday spending did not reach anticipated goals, and has continued its decline throughout 2001.
According to the National Association of Printing Ink Manufacturers (NAPIM), in the second quarter of 2000, ink sales rose 0.5 percent, and volume was up 0.3 percent. By comparison, in the second quarter of 2001, ink sales were down 5.8 percent, and volume decreased 8.8 percent. NAPIM reported that publication ink volume is off by 9 percent.
In terms of advertising, the decline has been across the board.
“The printing market is down 10 to 12 percent,” said Hermann Langweg, senior vice president, sales and marketing at Siegwerk. “This started at the beginning of the year when everyone expected a booming year, but holiday spending was not as strong as expected.”
“We’re seeing a softening of 6 to 15 percent for our customers, depending upon product mix,” said Sue Kuchta, vice president of sales, publication division, for Flint Ink. “The customers I have spoken with said they aren’t planning for an upturn until spring of next year. No one sees any signs of a turnaround in any area in the near future, and our industry is pretty indicative of the general economy. Our customers that are showing the strongest performance are those with weekly inserts for retailers, where there’s less of a flux.”
“The future is still not optimistic,” said Vince Bellini, marketing manager, web offset at Sun Chemical Corporation GPI Division. “According to recent reports, the year may be worse than anticipated for advertising. There seems to be some spikes in the commercial market and there seems to be a little more activity in catalogs and direct mail, but it’s not consistent. This is usually the beginning of the busy season in the market, but we haven’t seen it yet. Consumables and equipment manufacturers are expecting little or no growth in the market place in early 2002.”
“The market place hasn’t been strong, maybe down 15 to 20 percent, and we hear it’s not going to improve until next year,” said Doug Anderson, technical director for Central Ink Corporation. “In the defense of the printers, they are also having difficult years, and I don’t think anyone knew how down 2001 would be last year.”
“Competition has become a lot fiercer,” Mr. Anderson said. “During a downturn, you need to make up volume. Still, we’re having a pretty good year, and we’ve managed to grow.”
The present downturn in spending is also occurring in the newspaper market. Ron Baker, president of U.S. Ink, said that he sees a 12 to 15 percent drop in newspaper revenue.
“We’ve seen a swing in business beginning early this year,” said Norm Harbin, vice president, market and technical development at Flint Ink. “Newspaper advertising volume has significantly declined, perhaps dropping at the quickest rate I can recall seeing. Hopefully the Christmas season will help.”
Newspaper advertising had been on the rise in recent years, due in part to Internet and technology-based companies which had provided a boost in advertising. Mr. Harbin said that the collapse of so many dot coms has had a significant impact on advertising, exaggerating a drop that would be normally expected from a slowing economy.
“The last few years were high growth, but a lot of the recent advertising growth came from dot coms and high tech companies,” Mr. Harbin said “ The bursting of the high tech bubble affected everything.”
For Impression Inks, a new company just entering the printing ink market, it is a time of growth and caution.
“We have our news black operation up and running since the first of July, and it’s been going well for us,” said Jeff Gilliam, vice president, heatset sales at Impression Inks. “We’re just starting to venture out into the market. Newspaper revenue has declined, and we’re seeing some slowdown there. Still, it appears there may be a turn for the better soon.”
Aside from a decrease in volume, there are other unique concerns for the ink industry. As a cost-saving measure, some printers have switched to lighter paper stocks, which can present problems on the presses. Ink companies will be called upon to provide solutions to these problems, even at a time when spending on areas such as research and development are being scrutinized.
“There’s been a slowness in the market,” said Jim Leitch, CEO of Braden Sutphin Ink Co. “We’ve continued to provide a quality heatset product while emphasizing R&D due to the increasing press speeds and other needs of our customers, even beyond ink needs.”
“I would think that the economy has its largest impact on R&D,” Mr. Anderson said. “R&D is most difficult to see on the bottom line, and if there are cuts, you can’t eliminate production. As press speeds increase and new presses arrive, they assume we’ll rise to the challenge. They’re probably right, too, although it is difficult at times.”
After the Attack
Although the immediate result of the tragedy has been a brief spurt in extra editions for newspapers and magazines, the prognosis is not good as consumer confidence is declining.
Mr. Langweg believes the aftermath of the terrorist attacks in New York and Washington may lead to further economic problems in the U.S. “After this week’s terrible tragedy, everybody will likely be more cautious about spending,” Mr. Langweg said.
Like other industry officials, Mr. Baker believes that the tragic events of the terrorist attacks on the World Trade Center and the Pentagon will further depress the economy. “I don’t see any turnaround prior to the second quarter next year, and after this tragedy, there may not be any turnaround at all,” Mr. Baker said.
The events of 2001, culminating in the brutal terrorist attacks on the U.S, have made 2001 a year that has been difficult for all. It remains to be seen whether 2002 will bring a resurgence to the nation’s economy.