In 2005, print revenue in the commercial market appeared to continue the downward trend begun in 2001, said Mark J. Levin, president, Sun Chemical North American Commercial Group.
As a result, the U.S. sheetfed ink market, which Ink World estimates at $650 million in annual sales, was impacted by the changing market. While pounds of ink consumed were up slightly, price erosion continued during the first three quarters of the year, according to the National Association of Printing Ink Manufacturers (NAPIM). Only after multiple natural disasters pinched the raw materials and fuel markets were ink makers able to make price increases stick, Mr. Levin said.
Kathy Marx, vice president, chief marketing officer at Flint Ink Corporation, said that sheetfed packaging ink sales are down in volume but up in value, while commercial sheetfed ink sales are up in volume and flat in value.
“Overall, the market was the same as last year,” said Tak O’Haru, president of Toyo Ink America, LLC. “We don’t see market growth in this field. We are very fortunate that we grew more than 10 percent this year in sheetfed sales, because the high speed and cutting edge technology of sheetfed presses requires high performance and extremely consistent consumables in order to improve its productivity.”
Mr. Levin said the sheetfed market will be challenged for the next several years. A decline in the number of commercial printers is expected to continue due to overcapacity, rising costs and increasing bankruptcies. In addition, he said the North American commercial market is facing increasing competition from offshore printers using the latest technology, as well as from digital printing, which is making inroads in the short-run and direct mail markets.
On the packaging side, tonnage shipments for folding carton weakened during the first half of 2005, said Tony Bean, marketing manager, folding carton for Sun Chemical, adding that this was due to weakening market conditions in some key end-use markets and inventory reductions by buyers in these same markets. According to a Paperboard Packaging Council study, total tons of folding cartons shipped is projected to drop 2.5 percent for the year, but the total value should remain roughly equal to 2004.
Mr. Bean said that same study projects a better 2006 and 2007, since it appears that the deterioration in demand during 2005 was due largely to cyclical factors. However, the growth is expected to remain well below the pace recorded in 2003-2004, since carton producers will face increased pressure from alternative packaging products.
As is the case with the ink industry, the sheetfed printing industry is suffering from overcapacity and is undergoing consolidation.
“Both the commercial and packaging sheetfed markets were marked by overcapacity and consolidation in 2005,” said Daryl P. Collins, vice president, national sales and regional operations, Wikoff Color Corporation. “Our sense is that package printers made a slight rebound. Perhaps consolidation and the closure of old plants and the retirement of old equipment led to a slightly better year for this segment of the industry.”
Regional ink manufacturers are seeing similar results.
“Business is doing very well, and things seem to be busier than in recent years,” said Doug Stanley, president, American Printing Ink. “In particular, commercial is picking up. We’ve had our closures, but in general, our accounts are doing well. The printing industry is doing very well, and the Southeast deserves a lot of credit.”
“The sheetfed printing industry has held steady for the year,” said Steve Miller, vice president of Ink Makers Inc. “We’re staying fairly busy. We need to have price increases, but it’s tough to pass on any price increases. Customers demand more service because of the competitive nature of the market.”
“The ink market in New England has been shrinking for the past 10 years, and most smaller companies have either been folded into larger companies or gone out of business,” said Bob Arzilli, vice president of Three-Dimensional Chemical.
The Changing Market For Sheetfed Printing
The sheetfed printing market has undergone major changes in recent years. Sheetfed printers face tremendous challenges, including overcapacity, increased competition, rising costs, desktop publishing, consolidation and overseas competition.
“Overcapacity, offshore competition and digital printing technology all are serious threats to the sheetfed commercial market as we know it today,” Mr. Levin said. However, he noted that many of these printers can be quite entrepreneurial, and have begun to adjust by adding new services or digital equipment to help them compete.
“There is a fairly large gap between total capacity and demand in the sheetfed printing industry,” Mr. O’Haru said.
“In addition to overcapacity, sheetfed printers have to be concerned with printing moving overseas and are challenged with ever-increasing graphic reproduction improvement from their customers,” Mr. Collins said. “This is where our expertise in specialty inks can help.”
“A lot of jobs have gone overseas,” said Brian Gobbell, president of Bowers Printing Ink. “If it’s a long run job and does not have a quick turnaround time, companies are shipping it overseas to be printed, particularly in the folding carton industry. We’re making money, but we are having to run much harder for it.”
The Need for Higher Prices
The price of crude oil, natural gas and other raw materials has skyrocketed in the past year and a half, which has had a major impact on the costs of essential ingredients for sheetfed inks.
While ink companies held the line for as long as they felt they could on pricing and took out as much as they could from their own costs, most ink makers announced price increases.
According to ink industry leaders, sheetfed printers have reluctantly accepted the need for higher prices.
“Sheetfed printers have had their margins squeezed by declines in print demand and fierce competition due to overcapacity,” Mr. Levin said. “Nonetheless, they have recognized the need for ink price increases because of the rapid run-up in raw material costs and continuing shortages of some materials that have been well documented.”
“Customers realize the ink industry’s need for price increases in the face of raw material cost increases,” Mr. Collins said. “However, they are reluctantly accepted because printers have a hard time passing increases through. Although ink prices have increased, they have not increased by as much as material costs in the past one and a half years.”
“For the first time that I remember, prices are the number one concern, and we’ve been forced to raise prices,” Mr. Stanley said. “It’s an unfortunate necessity for every ink company, but to be a valuable supplier, we have to make some money. We absorbed quite a bit.”
“The market is still stagnant,” said Bernie Van Camp, sales manager for Rainbow Inks. “Printers don’t want to see price increases, because they can’ t get price increases themselves. Companies are increasing prices to us, but we have a hard time passing these increases along.”
Service and Margins
Service is one area that is under scrutiny. With already small margins shrinking due to increasing raw material prices, ink companies have cut back on areas such as local branches.
With the market where it is, how does a company find a balance for providing service, such as branches and in-plants, and the need to improve margins in the face of higher raw material and production costs?
“This is an issue that we are all grappling with,” said Ms. Marx. “We are actively looking to reduce costs and may look to customers to absorb some of them in order to maintain current service levels.”
“First, any company must decide who they are and what they are all about in order to effectively serve their customer base,” Mr. Collins said. “Then the services provided must be valued and paid for by the customers that a company targets.”
“Service needs to be adjusted accordingly,” Mr. O’Haru said. “It is a very simple practice. We all need to take pride in what we do everyday. If we always consider what is best for the customer, they will know what we are doing. Price will always follow the value you provide.”
Mr. Levin said many of the most successful and profitable printers in the market are growing based on their ability to provide high quality printing and service, utilizing the best technology available. These printers recognize that choosing the right ink – based on value, not price – will allow them to exceed the needs of their customer and create a differentiated result.
With some branches being closed, smaller ink manufacturers are finding new opportunities.
“Service is how we are keeping our business,” Mr. Van Camp said. “The big companies are trying to serve whole regions with one branch, where we used to have to compete with two or three branches.”
Digital printing has emerged as a serious competitor to sheetfed. A quick walk around major trade shows such as Drupa 2004 and Print 05 shows that digital printing is indeed a growing field, and conventional printers have to decide what approach they will take.
Some industry forecasters predict the commercial market will decline anywhere from 5 percent to 7 percent over the next five years, Mr. Levin said, while at the same time, digital printing is likely to grow at least 5 percent. Computer-to-plate and other digital prepress technologies are helping printers compete.
“Sun Chemical continues to develop inks that can be used either on sheetfed or digital ink jet presses, and we expect to be flexible enough to meet the evolving needs of the market,” Mr. Levin said.
“The commercial market is definitely changing,” said Barney Lenhart, president of JKM Ink. “We’re seeing more digital technologies, and some of the smaller shops are drying up while the middle-sized shops are thriving.”
Harvey Brice, managing director of Superior Printing Ink, and Mr. O’Haru said that digital technologies can complement sheetfed processes.
“Diversifying services is becoming very important in printing,” said Mr. Brice. “More printers are offering a full range of services, including commercial, packaging and digital, while some printers are diversifying by merging with other companies. It’s very difficult to be narrowly focused, whether it is printing or ink.
“Digital printing is increasing every year, and while digital takes away a part of conventional printing, it also complements printing,” Mr. Brice added. “Many printing customers are requiring variable data printing. These companies require full service, and some ink companies are moving in that direction by developing their own products or forming joint ventures.”
“Toyo Ink Group has been making tremendous investments into digital technologies during the last 20 years,” Mr. O’Haru said. “We have seen good growth in the area, but I think digital printing can live with conventional printing, like combo printing, which prints the main image on sheetfed and personalizes with a digital machine.”
“Short run sheetfed work is threatened by new digital technologies such as inkjet,” Mr. Collins said. “Digital printing does however offer the chance for sheetfed printers to combine digital and traditional offset technologies as a way to offer unique print products to their customers. The improvements in speed and performance make digital printing a reality for shorter runs, especially run lengths under 1,000 impressions. All large sheetfed press manufacturers introduced major innovations in sheetfed presses demonstrating their belief that offset printing will remain the low cost method of production for run lengths over 1,000 or so.”
The Future of Sheetfed Printing
With so many changes occurring in the sheetfed printing industry, ink companies are watching developments to best help their customers.
“Given the rapid course of changes over just the last few years, I don’t know if anyone is willing to make predictions on what the next decade holds for the commercial printing industry,” Mr. Levin said. “At Sun Chemical, we plan to continue offering innovative inks and local service that printers need to compete. This industry may be mature, but it’s not going to disappear overnight. We expect it to grow, albeit somewhat more slowly and differently than in the past.”
“Larger printing companies that offer multiple technologies (i.e., digital, UV ink jet, sheetfed offset, etc.) will have an advantage in meeting expected increasing demands of print buyers,” Mr. Collins said. “Sheetfed presses of the future will have more print stations and coaters allowing for conventional water-based coatings or more exotic flexographic inks and coatings. These changes will require even more expertise from ink suppliers so while the printing landscape will change, the basics of being a good ink supplier will remain the same.”
Ink manufacturers have developed a series of new products to help their customers succeed in their highly competitive marketplace. Flint Ink’s Arrowstar UV series has drawn much interest, while Toyo Ink’s new Zero VOC and UV inks drew much attention at Print 05
Wikoff Color has been particularly active in creating new technologies.
“We have introduced several products that are doing very well in the marketplace,” Mr. Collins said. “For example, our Hyperset inks are a very fast setting, stay-open set of work & turn inks -- one formula for commercial printers and one formula for sheetfed package printers. These inks also exhibit excellent rub and gloss. Additionally, we have also introduced new water-based inks for milk cartons that exhibit improved press performance and ease of use and a solvent ink-jet ink for high-end graphics, to name a few.”
Sun Chemical introduced Kohl & Madden’s Liberty inks, which are VOC-free and dry almost instantaneously upon printing while staying open on press, were introduced at Print 05 in September. “These inks have generated considerable excitement,” Mr. Levin said. “Literally hundreds of printers have trialed this exciting new technology, and it’s winning new converts almost daily. Sun Chemical is refining this innovative technology and upgrading its manufacturing capabilities to meet demand for this product.”