Like so many other markets in the ink industry, the offset market did not have a banner year in 2001, as sales were not what many hoped they would be. “If anyone said they had a good year, their nose would probably grow like Pinocchio,” said Harvey Brice, president of Superior Ink Company. “We did not meet expectations due to the recession we all fell into. It has really had a ripple effect throughout the industry. It’s probably been one the worst years I’ve ever seen, both in general and for us specifically.”
Mr. Brice is not alone in this assessment. “For both the heatset and sheetfed markets, sales have been soft in 2001,” said Chris Morrissey, vice president of sales and marketing at Sun Chemical Company. “Given the state of the economy, this is not surprising. Total advertising in all media has plummeted.”
“I believe the industry as a whole experienced challenges,” agreed George Polasik, senior vice president, offset division, INX International Ink Company, Inc. “The normal business growth expected this past year did not accrue.”
Prices and Expenses
There is always a great deal of emphasis placed on trying to gain market share in an industry, or at the very least, to maintain the share a company already has. The offset market is no different. When times go bad economically, this pressure is increased even more. Sometimes, in an effort to maintain or increase market share, companies will cut prices to entice would-be customers.
“If ink markets have, indeed, shrunk due to a decline in printing during 2001, all ink makers will be looking to maintain share and revenues,” said Mr. Morrissey. “Choosing a strategy for dealing with this challenge could have long-term effects on ink markets.”
“Prices in the industry have not remained steady this year,” said Mr. Brice. “A lot of companies lowered prices in response to the tremendous pressure to keep or expand their market share in response to the poor economic times. We have not lowered prices, and we have lost some business because of this. Instead, we have tried to increase our service to customers.”
Despite this pressure to lower prices, it is dangerous to think that doing so alone will help a business to maintain its viability. “Cost-cutting by itself cannot sustain a business,” Mr. Morrissey warned.
It is hard to look at pricing without thinking of costs as well. After all, maintaining a margin between the two is essential to a company’s viability. As prices have dropped by some companies, interestingly, so have costs.
“Our expenses have come down, actually,” said Mr. Brice. “We’ve instituted a constructive cost saving plan to lower our expenses in every part of business. We continually are tracking this plan. Every company needs to do something like this.”
Mr. Morrissey and Mr. Polasik both agree with this sentiment. “Like any prudent business, Sun Chemical is making every effort to keep costs under control so we can continue to offer quality products at competitive pricing,” Mr. Morrissey said. “We need to continue to seek other efficiencies to stay competitive.”
“INX has concentrated on driving costs down and becoming more efficient in all areas of our company. I believe all companies are continuing to look at ways of driving down their costs also,” Mr. Polasik said.
No one currently knows when the economy will take a turn for the better, so no one can safely say for sure what is going to happen to costs and prices in the coming year. Everyone has their own opinion as to what costs and expenses will do, though.
“Sun Chemical has seen costs continue to creep up slowly, and we expect that will continue,” Mr. Morrissey said.
Mr. Polasik took the opposite opinion, stating, “We do not see any significant changes (in costs and expenses) in the near future.”
Mr. Brice seems to agree with Mr. Polasik. “I don’t think costs and expenses will go up next year,” he said. “We are trying to come out of a recession. Inflation hasn’t really been a factor, and I don’t think it will be next year either.”
Trends in the IndustryThe pricing and cost pressures placed on printers and ink manufacturers in the offset market are just one of several trends visible in the market. Consolidation, niche printing and technology advances are among the others mentioned.
“There will be continued pressure on printers to reduce the overall cost of the printing process without sacrificing quality. Printers will extend this pressure to suppliers of printing materials,” said Mr. Morrissey.
This pressure voices itself in another fashion as well: consolidation. “I think there will be a continued consolidation of printing companies, as well,” he adds. “Plants will be closed as printers look to expand their most efficient facilities, while inefficient facilities with less productive machinery and higher cost labor must justify their existence.
“Niche printers will continue to grow, using combinations of new technologies to differentiate themselves in the marketplace,” he said.
Mr. Brice agrees that technology advancement is a trend that will continue in the industry, but he is worried that the quest for speed will sacrifice quality. “Most people are looking for technology; better, faster, quicker methods,” he said. “They are moving away from quality, sacrificing it for these other things, and for profit.”
It is clear that new technology is an important factor in the offset market. One new technology, UV and UV hybrid inks, was repeatedly named as something that can have a major impact in the market.
“UV and UV hybrid inks helped us a lot in our sheetfed business,” said Mr. Brice. This was the only bright spot for us in our sheetfed business. It had a positive effect on this part of our business.”
“Sun Chemical’s next-generation hybrid inks, called Hy-Bryte Max, will continue to set the standard for this type of product,” said Mr. Morrissey. “These inks use a combination of UV curing materials and oil-based conventional offset materials. This combination results in an ink that is cured with UV energy but also will post cure with the conventional materials, producing excellent print characteristics.
“We are also seeing increased interest in single-fluid inks,” he added. “These waterless and water-washable inks produce higher print quality with virtually no dot gain and higher color intensity. They also provide faster start-ups and wider temperature latitude, while their clean-up does not require solvents.”
Mr. Brice also added that he sees more ink jet and non-impact printing coming in the future.
So far as presses are concerned, Mr. Morrissey sees advancements in this area playing a role in the near future as well. “All press manufacturers are trying to incorporate technology that will reduce down time and make ready time, because time is money to printers,” he said. “For instance, KBA’s 74 Karat sheetfed press probably will grow in popularity because of perceived benefits in reducing makeready costs and fast turn-around times. That technology, coupled with waterless short run reduced waste to the printer, will be important,” he stated.
Digital technology will also play a role in the future, though not as large as some people might believe. “Offset printing will continue to rely on digital technology to increase printing speeds, lower waste, reduce costs through the elimination of steps in the process and shorten makeready times,” said Mr. Morrissey. “However, we expect digital technology’s major impact to continue to be on the front end of the printing process in plates and scanning.”
“In the 1960s,” said Mr. Brice, “the transition from letterpress to offset came quickly, and now there is almost no more letterpress printing. I don’t think this will happen with digital and non-impact printing and offset printing. Offset printing is here to stay for a long time yet, unless something unforeseen and major happens.”
Concerns for the Future And Predictions for the Coming Year
The economy is uncertain at best right now, and that leaves a great deal to be concerned for the offset industry.
“I have many concerns for the coming months,” said Mr. Brice. “Not knowing what the future holds for the international climate is a major one. No one can predict what will happen there, and who knows what effect it will have on the industry.”
“Obvious concerns for 2002 include the erosion of ink pricing in the marketplace,” Mr. Morrissey added. “Printing volume is directly linked to the performance of the economy. If consumers have confidence and are willing to spend, advertising will increase and printing goes up right with it.
“Although history has shown that printing markets are affected very quickly when the economy begins a slide, printing activity also tends to lag slightly behind a recovery. If the U.S. economy begins a recovery by mid-year, full recovery to 2000 printing levels is not likely until 2003,” he said.
Mr. Polasik agreed that recovery in the offset market is not likely to happen until late 2002 at the earliest. “It is hard to predict the market for the next year, but all indications show another difficult year with the economic downturn continuing into the third or fourth quarter,” he said.
“I wish I had a crystal ball,” said Mr. Brice. “I hope we come out of the recession and that things flatten out a bit. I’m also concerned about the world climate. With the war on terror, it’s a completely new era for business and the world. We can’t predict anything anymore. I’m not pessimistic, but not optimistic either. Just cautious.”