Manufacturers of digital printing equipment (OEMs) currently account for the vast majority of sales in the ink jet ink and laser toner market in Europe.
Now their domination of one of the fastest-growing sectors in European printing ink is under threat. Producers of conventional inks which have tended to keep clear of the digital market because of its high entry barriers are slowly making bigger inroads into it.
Consumer and small-business groups have also been claiming that lack of competition is maintaining digital ink prices at high levels, which could lead to anti-trust authorities taking steps to ease the grip of the OEMs on the ink market for small office and home office (SOHO) equipment.
The European Commission, the European Union’s executive responsible for implementing EU competition regulations, has recently revealed that it intends to investigate possible anti-competitive practices in the sale of ink cartridges.
Opportunities for Ink Companies
The whole digital ink marketplace, where at one stage traditional ink producers seemed destined to remain outsiders, now seems to be offering new opportunities for growth for ink companies.
Their main objective is likely to be to gain share from OEMs in the fledgling digital ink segments in sectors like commercial, packaging and security printing. Some European ink producers have already been tackling the difficult but booming market for inks for desktop and home printers, even though it requires consumer-type marketing rather than the business-to-business selling to which they are accustomed.
“Not a lot of conventional ink makers are involved in the low end of the market, possibly because it is not a market they understand,” said Norah Seery, director of the European communications supplies service at consultants CAP Ventures Inc.
“Instead, they are becoming more active in the industrial side of the digital market,” she added. “It has a lot of potential. But it is in the early stages of development and will present a steep learning curve for ink producers.”
OEMs, led by Hewlett Packard, Canon, Seiko’s Epson and Lexmark International, are prepared to put up a stout defense of their position in the SOHO ink market, particularly since this is where they derive a large proportion of their profits.
“Ink jet inks are relatively high margin products, although the level of profitability will depend on the distribution channel,” Ms. Seery explained. “We’ve been tracking digital ink prices for end-users in Europe since the mid-’90s and have found that they have stayed much the same.
“On the other hand, prices of the hardware have plummeted so that the OEMs are no longer making money from the sales of the equipment,” she continued. “Instead they are earning their money from the supplies for the running of the equipment, especially the inks.”
CAP believes that in the SOHO sector, refills, which are the main means for non-OEM ink providers to gain access to the segment, have about 13 percent to 14 percent of the European end-user sector for ink jet inks. But their share has remained static for the last few years. By contrast, non-OEM toner supplies account for 23 percent to 25 percent of the laser equipment market.
“One difference between the two markets is that toners have been around longer,” said Ms. Seery. “Since toners tend to be used in large offices, it is an easier sector to penetrate than the retail market for ink jet inks.”
OEMs have been able to gain a powerful competitive edge in digital inks by keeping ahead technologically. This has been achieved through partnerships with technology companies specializing in printhead design, formulators and ink producers, especially those with expertise in dyes and pigments.
Furthermore, some of them have been packaging their inks in cartridges which can be difficult to replicate for applications in their machines.
OEMs have also held sway over distribution channels, not only for hardware but also consumables. As a result end-users have had little choice but to rely on the OEMs’ outlets for new supplies of ink.
But the command of the OEMs is becoming less formidable. As the conventional ink suppliers become more knowledgeable about digital ink, they are quickly catching up with the expertise of the OEMs and their partners.
Now that digital equipment is beginning to make inroads into industrial printing, ink jet technologies are becoming more easily available. There are already approximately 10 tier-one OEMs making digital machines for the industrial digital segment – twice the number in the SOHO sector.
Developers of printheads are licensing out their designs to a broad range of industrial users. Furthermore, the level of sophistication and capacity of printheads for industrial applications is far higher than for small office equipment. At the same time, the distribution channels are more varied.
With printers comprising most of the potential customers for industrial digital equipment, ink companies are confident that by exploiting their long-established skills in the application of ink, they can give the OEMs a much tougher time in this market. They argue that OEMs opened up a wide gap between themselves and third-party suppliers in the toner sector because most of their customers have not been printers with expertise in ink.
“We have formed the considered opinion that electro-photography has reached the end of its development curve and will shortly become a mature technology,” David Francis, Flint Ink’s vice president, business development, Europe, said at a recent conference in London on digital printing. “Ink jet, on the other hand, is in its infancy and has infinitely more possibilities than does toner.”
Flint has been setting up its own partnerships with industrial companies and academic institutions with the aim of developing chemical solutions to enable it to corner the market for fast, wide-format color applications.
“Our direction does seem to make some sense when one considers that the majority of our customers are well versed in dealing with ink and its present properties,” Mr. Francis told the meeting organized by U.K.-based consultants Pira International.
With the help of its extensive knowledge of UV technologies and ink chemicals, Flint believes that it can develop UV systems and fast-drying chemical compounds to eliminate problems with drying and the adhesion of ink jet ink to a variety of substrates.
Van Son, the Dutch-based ink maker, is one of the few European conventional ink companies to be involved in the production and selling of digital inks for both the industrial and SOHO segments.
“Lower costs are helping to open up the market for ink jet proofing in Europe,” said Mattyn Heyne, export manager for digital inks at Van Son. “We are using our experience with offset inks to provide a similar wide range of color settings to that in offset.”
However, much of the resources of the company’s digital ink operation are devoted to supplying the SOHO market for refills and OEM-compatible cartridges. It is concentrating on the premium end of the sector where there is less competition from cheap imports.
“There is a lot of digital ink coming in from India and China but it is of inferior quality,” said Mr. Heyne. “Consumers in this market don’t want high priced inks but they do want quality.”
Van Son is focusing on inks for home printers, particularly those used for photographs from digital cameras.
“This is a market which will grow to an enormous size,” Mr. Heyne said. “People are uncertain at the moment about how to have their digital photos processed, but once they are satisfied about the quality of home printing they will use it, since it is cheaper and also more convenient.”
The company, which has developed its own photo-printing kit for digital camera owners, acknowledges the difficulties of trying to market ink to consumers without a recognized brand name. Instead, much of the marketing of its products to end-users is done by distributors and retail chains
“Branding is something we are working on,” Mr. Heyne said. “We are promoting ourselves through computer and specialist photographic magazines.”
The leading conventional ink companies in Europe, like Sun Chemical, Flint and BASF, are poised to become big players in the industrial digital ink sector, while operators like Van Son, with a relatively long experience of digital products, will make up a strong second tier.
However, the traditional ink producers will also have to compete in the industrial segment against companies which have been supplying the OEMs with ink for the SOHO market. Avecia, which has been developing and producing digital inks for OEMs for approximately 20 years, is preparing to become a leading supplier of industrial digital ink. This is despite the fact that the U.K.-based specialty chemicals company, which accounts for about 20 percent of ink sales to the global SOHO market by volume, is little known among printers.
Its initial objective is to rely on partnerships with OEMs in much the same way as it has done in the SOHO sector. But it will also work closely with large printers and consumer product companies. Eventually it may set up distribution channels similar to those of today’s conventional ink makers.
“The industrial market will be a much more open one than the SOHO sector so that printers will have a much bigger choice of inks,” said Giles Branthwaite, Avecia’s business development manager for ink jet printing.
“Our whole strategy for the industrial sector is centered on innovation,” he continued. “Digital inks will become commoditized over a period of time so there will be a need for new products for new models. As both an ink producer and a specialty chemical company which is backward integrated into colorants and resins, we are well placed to meet that need.”
The European industrial market for digital ink is likely to turn out to be as competitive as that for conventional ink, undermining any prospect that its prices and margins will be similar to those presently enjoyed by ink suppliers to the SOHO sector.
European Editor Sean Milmo is an Essex, U.K.-based writer specializing in coverage of the chemical industry.