WhatTheyThink, an online media organization, reported that 2009 North American commercial printing shipments were $88 billion, a 10 percent decline on a year-to-year basis.
Globally, the trend is similar. According to a 2009 study by Pira International, a Leatherhead, UK-based consultancy, the global market for sheetfed litho printing will fall from $155.7 billion in 2006 to $142.7 billion in 2014, a drop of some 8.5 percent.
For ink manufacturers, 2009 was equally difficult.
Brian Breidigan, vice president of product management for commercial inks, North American Inks, Sun Chemical, said that 2009 was a challenging business year for the sheetfed printing industry and for the ink market.
“The commercial sheetfed market especially struggled in the midst of the recession as print buyers reigned in on discretionary spending, such as advertising displays and brochures,” said Mr. Breidigan. “The folding carton sheetfed packaging market did not drop off as dramatically, since there is regular consumer demand.”
John Copeland, president and COO of Toyo Ink America, said that 2009 was a very difficult year for commercial printing.
“The sheetfed market is still down,” Mr. Copeland said. The slower economic conditions continue to cause corporations to slash advertising budgets, resulting in a shift from print media to electronic media in advertising and marketing communications. As for Toyo Ink America, our business held steady relative to others in the industry. Due to a sluggish US economy, few printers were adding new accounts. Overall print volume was down.”
“We saw dramatic volume declines in the traditional commercial market,” Bryce Kristo, CFO and senior vice president, general affairs, INX International Ink Co. “Customers either shut down their commercial advertising budgets or sought electronic or digital alternatives.”
“For Superior, 2009 began with a significant drop in customer demand, which led the company to take steps to weather what was expected to be an extremely difficult year,” said Rich Czarnecki, Superior Printing Ink’s senior vice president and chief technical officer. “Fortunately, the sales drop in early 2009 eased as we moved into the spring, and we ended up the year better than originally anticipated. Printers who sold into the automotive markets were, not surprisingly, one of the hardest hit categories this year. We were able to recover our sales volume by growing sales in areas where we have had excellent market success in the past, including our UV curable product portfolio and Biolocity, our product for printers that require more environmentally friendly product.”
“It was a pretty tough year all around, although we had a better year than 2008,” said John Toigo, president of Grand Rapids Printing Ink, which also owns Columbus Printing Ink and Ohio Valley Printing Ink, and also president of Print Suppliers Group, a consortium of regional ink manufacturers. “We’ve been fortunate. Like everybody else, we have seen a lot of contraction among printers, and there seems to be an overcapacity of metal out there.
“The market is flat at best,” said Dennis Curtin, president of Press Color and a member of PSG. “We are seeing some bankruptcies among printers, and margins are eroding. We are trying to stabilize the market.”
Mr. Copeland noted that new technology has also fundamentally changed the way in which print media buyers buy printed material.
“As digital technology evolves, people are connecting and communicating in new ways,” Mr. Copeland said. “The printing industry will continue to face pressure from the integration of technology and the emergence of various forms of communications media.”
While the commercial side has suffered in recent years, the packaging sheetfed business is doing better, as folding cartons remain a strong market.
“Packaging and package printing have fared better than commercial print and many other business sectors,” Mr. Copeland noted. “Relative to the depressed commercial printing market, packaging demand in 2009 was either flat or up slightly from 2008.”
“Packaging follows GDP, although consumer spending was off. Packaging remained more stable than the commercial business,” Mr. Kristo said.
“The commercial printing market was impacted more severely than the packaging market,” Mr. Czarnecki said. “We see a trend where our business will shift volume away from our traditional commercial customer base to the packaging printing market.”
Merger and Acquisitions
As a result of the recession and the changing nature of the printing industry, there is much overcapacity in the market. This has led to consolidation, through mergers and acquisitions as well as bankruptcies. For ink manufacturers, this leads to their own overcapacity issues.
“Mergers are creating fewer but larger printing companies,” Mr. Copeland reported. “This has resulted in further overcapacity and price erosion in the printing inks market. Fewer opportunities for ink manufacturers to move product has also led to lower sales and margins.”
“Merger activity has been quieted by the economy. Most of what we are dealing with today is a result of post-2008 activity,” Mr. Kristo said.
“While mergers and customer failures did have some impact on our 2009 business, we were able to replace the vast majority of lost business with new, more financially stable customers,” Mr. Czarnecki said, adding that Superior continually evaluates potential acquisition targets that will increase sales.”
Mr. Breidigan noted that printers are adapting to te changing marketplace.
“As expected, mergers are an indication of the shrinking marketplace,” Mr. Breidigan said. “Companies are looking for ways to either offer other services to their customers or to grow their business through acquisitions. This helps them compete on a different level within their respective territories, because all printing, off-line coating, laminating, laser imaging, binding, direct mail and fulfillment can be done under one roof. Very large consolidations have helped companies share work between their various locations across the country. In some cases, this has helped printers become more competitive from a job cost standpoint.”
What Printers Look
For from Ink Suppliers
As sheetfed printers struggle to succeed, they are looking to their ink suppliers to provide excellent service at low pries. That can be a tall order, as sheetfed ink manufacturers are facing their own pressures.
“Customers are looking for price decreases, which is frustrating, because at the end of the day, we all need to make money,” Mr. Curtin said. “As ink makers, we can diagnose problems on press, and adjust formulations. We bring a lot of technical expertise, hiring people right out of the pressroom, and I don’t know if printers can get the same value from supply houses that sell ink as well as urinal screens.”
“Printers are not only looking for a consistent product at an economical price, but also high-level service and support,” Mr. Copeland said. “When it comes to sophisticated print jobs, our customers rely on our on-site service and technical support to ensure that they get high quality, high-performance printing. We constantly strive to find ways to improve productivity and provide innovative solutions to our customers that will ultimately enhance their value.”
“You need service and quality to get into the business, and that allows the regional companies to stay in business, while the larger companies do an exceptional job with the larger accounts,” Mr. Toigo said.
“Color control and management throughout the print process – from the creative vision to the actual printed piece – remains the defining issue in print today,” said Renee Etiopio, corporate marketing manager, INX International Ink Co. “With regards to sustainability, green issues are still highly visible but few companies are willing to pay more to be considered green. Most companies don’t get past the substrate level when considering green approaches. That said, printers are looking for ink suppliers to help them reduce waste by getting up to color faster.”
Mr. Breidigan said that Sun Chemical is looking for ways to help their customers reduce their operational costs.
“Our customers are relying on Sun Chemical to maintain an intense focus on value and cost,” Mr. Breidigan said. “In response to the economic environment, we have revisited our operating plans for this year and recast them in view of more recent volume projections. We have intensified our cost reduction efforts by tightening our belts even further. Simultaneously, we are raising our focus on the customer by helping them grow their businesses and succeed through partnerships with companies that support our efforts offering programs, such as the GFI Dispenser Program specifically targeted at commercial printers, as a way to decrease their operational cost and reduce their expenses. That means working for our customers everyday to further improve our performance on the essentials of our business such as quality, service and innovation in ways that drive productivity or enhance value.”
Mr. Czarnecki said that Superior Printing Ink has chosen not to cut back on its branch operations.
“Superior’s business model has always been focused on the printer who demands quality and consistency, but who also finds value in the services and technical support that we offer,” Mr. Czarnecki said. “Despite the economic recession, we continue to operate 16 full service branch locations. In 2009, we launched our Stimulus process set as a way for our customers to reduce their costs while still printing with a high quality American-made sheetfed ink. We will continue to introduce new products that offer improved overall value to our customers in 2010.”
2010 and Beyond
With all of these factors occurring, ink manufacturers are under
“Indicators suggest that there will be a slight improvement in 2010,” Mr. Copeland said. “It is difficult to tell exactly when the market will bounce back and by how much.”
Mr. Copeland said that green technologies will be a growth area. “At Toyo, we believe that demand for eco-friendly products will continue to grow. Toyo Ink has been expanding its green product offerings, such as UV and non-VOC ink lineups,” Mr. Copeland added. “We have recently introduced the next-generation HyPlus 100 series of zero-VOC inks that offer excellent printing results as well as environmental advantages.”
“We expect that demand for commercial sheetfed ink will remain flat in 2010, with some gradual improvement as we move into 2011 as the economy improves,” Mr. Czarnecki said. “Longer term, we anticipate that the overall commercial printing market will shrink as the packaging market continues to grow.”
Mr. Breidigan said that 2010 will continue to be a challenging year for commercial printing, Sun Chemical and the ink industry as a whole.
“The cost of raw materials will likely continue to increase, however, Sun Chemical has taken steps to better meet the needs of its customers and offset these costs,” Mr. Breidigan said. “Sun Chemical wants to continue being known as the company that truly works for its customers. To be able to achieve this, our customers have to know that we are here to help them with their problems. We’re optimistic that Sun Chemical’s investments in quality, service and innovation will help our customers succeed. In the current challenging market conditions, our solutions are designed to help customers operate more efficiently without sacrificing quality or service to their customers.”
Ms. Etiopio said the top commercial print industry trend is the transition to digital technology.
“Digital presses have become the norm in commercial printing, and industry growth is coming almost entirely from digital printing,” Ms. Etiopio said. “The commercial printing industry is shifting to faster production of smaller order quantities with more color. That’s because this is the major benefit of digital printing compared to offset and other printing methods. While digital inkjet printers began at the small end of printers, technology is increasingly able to provide digital printers with greater capability.
“Commercial printing has traditionally been a manufacturing industry,” Ms. Etiopio added. “While it maintains this focus, it is evolving into a service business. Smaller print runs, subject to customers’ changes, edits and faster deadlines, are becoming the norm. Almost all of the industry growth is coming from companies with digital printing capabilities, who are able to respond to smaller runs and changing customer needs quickly. With the increasing conversion of images to the digital format before printing, some commercial printers are providing digital inventory services. Some printers, in an effort to expand their services, are capitalizing on their expertise in the transfer, manipulation and storage of digital images, especially in the front-end CAD process, Web page design, CD production, generally in document and information management and distribution.
“Not since offset entered the letterpress world has the printing industry experienced such a transformation akin to the digital evolution now under full momentum,” Ms. Etiopio said. “It’s a profitable way to think about with short runs, short times to market and even shorter cycle times. It’s an expanded way to think of operational flexibility that can broaden manufacturing capabilities. To help commercial printers transition or adapt to digital capabilities, INX Digital can provide full workflow solutions for a wide variety of commercial print environments. Our unique experience of innovative design development with inkjet systems makes it possible for us to offer customer-driven solutions for inkjet printing, production workflows and material handling.”