For printers, the enlargement will take place at a time when the European printing sector has begun to become more of a single entity rather than a collection of national markets.
The emergence of this pan-European printing industry is presenting a challenge to all ink makers. Even small ink suppliers now have to think less in terms of being servers of national customers but of being providers to regional printers.
The large multinational ink producers, led by Sun Chemical and BASF, have already well-established Europe-wide production and distribution networks. Now small and medium-sized ink manufacturers are also having to create regional distribution systems and, in some cases, secondary production facilities.
Some of the most promising opportunities for international expansion for smaller ink makers have been in Eastern Europe, where a large proportion of inks are now provided by Western European suppliers.
Eastern European printers are using Western European inks to take advantage of their low labor costs to make inroads into the Western European printing market.
“Europe is becoming one marketplace,” says Richard Edwards, marketing director of U.K. ink makers Bousfield Ltd., Bristol, southwest England.
“The Eastern Europeans are no longer the poor relations of European printing,” he explained. “The standards of their printers are as good as anywhere else. They want the same quality inks and consumables as are being used by Western European printers, so that they can compete internationally.”
Of the eight Eastern European states now due to join the EU in 2004, Poland, Hungary and the Czech Republic have large or vibrant printing sectors. The remaining five – Slovakia, Slovenia and the three Baltic states of Estonia, Latvia and Lithuania – have smaller or less export-oriented printing segments.
However, for ink companies and other printing industry suppliers in Western Europe, the attraction of all these countries is that they tend to have much faster growing economies than those of Western Europe. While the growth in gross domestic product (GDP) of the 12 countries in the euro zone have languished at a rate below 1 percent this year, Eastern European countries have been recording much higher growth figures. Slovakia’s rate this year has touched 4 percent while the average in the three Baltic states is approximately 6 percent.
Since the dismantling of the Berlin Wall and the collapse of communism 13 years ago, there has been a big drive in Eastern Europe to upgrade the region’s printing sectors. Much of the investment has, however, gone into printing equipment rather than factories for making inks and other consumables.
“The Eastern European printing industry took a giant step technologically by leaping from the technologies of the 1950s to those of the 1990s,” said Bertil Ahlberg, marketing coordinator at Akzo Nobel Inks, Trelleborg, Sweden.
“But few people wanted to put money into ink production facilities, which remained old-fashioned,” he said. “Now, many of the ink companies have disappeared and Eastern European printers are relying on Western European ink producers for their supplies.”
Some of the bulk ink makers in Western Europe have modernized ink plants in Eastern Europe after taking them over, giving them a commanding position in commodity ink sales in the region. Meanwhile, gaps have been opening up for the more specialty-focused ink producers in Western Europe.
“We have already been successful in continental Europe in markets such as France and Italy and now we are starting to establish ourselves in Eastern Europe as well,” said Mr. Edwards.
“We have been doing well with our standard products in our core areas of litho and offset, but there are also a lot of opportunities for tailor-made products in Eastern Europe,” he added. “We are not selling purely on price but making full use of our technological expertise and the manufacturing flexibilities of our plant in England.”
The ink producers best placed to exploit the Eastern European printing markets are probably those in Northern Europe, particularly in Germany and Scandinavia. In many cases, Eastern Europe is geographically closer than Southern European countries like Spain and Italy.
“Poland, one of our main Eastern European markets, is only three hours away by ship, and the Czech Republic, our other major market in the region, is another six hours beyond that,” said Mr. Ahlberg. “On the other hand, central Spain is 24 hours away.”
Akzo Nobel, whose key global business is packaging inks, supplies Eastern Europe from a mother plant in Denmark, from which concentrates are shipped to a subsidiary in the Polish capital Warsaw and to a distributor in Prague in the Czech Republic to be modified for local needs.
“We believe that our big advantage is that we were in the Eastern European market before the Berlin Wall came down,” Mr. Ahlberg said. “We are seen by customers as having stayed with them in the good as well as the bad times. In the Czech Republic, we now have more than 55 percent of the market for sheetfed, offset narrow web inks.”
Printers on the Move
Some large customers of ink producers in Northern and Central Europe have been expanding into Eastern Europe, particularly in packaging and publishing.
At the forefront of the drive eastwards have been the big German publishing/printing houses like Heinrich Bauer, Hamburg and Burda Publishing, Munich.
These companies, which are already leading gravure printers in Germany, have been building up big bulk publishing/printing outlets in Eastern Europe, often with a view to using them also as a stepping stone into Russia.
Russia’s last large gravure printing press, operated by Pravda, the Soviet communist party daily newspaper at its headquarters in Moscow, was closed down in 1993.
“With an educated population of around 150 million, Russia has a huge potential as a market for bulk publishing and printing,” said one Western European printing executive. “Yet at the moment there is not even a hint of a Russian company investing in a gravure printing press.”
Instead, mass-circulation Russian-language magazines are printed on gravure presses by companies like Bauer and Burda in Eastern European countries such as Poland and Slovakia. The rise in the cross-border business in gravure printing in Eastern Europe is a reflection of what has been happening in the EU’s publishing sector.
Germany, which has by far the largest number of gravure presses in Europe, has become an international center for the printing of popular magazines and other bulk publishing products like newspaper supplements.
A slowdown in Germany’s economy has prompted gravure printing houses to expand. Schlott Sebaldus, a large German gravure printer, recently took over Broschek of Hamburg, one of its major competitors and one of the printers of the European catalog of the Swedish furniture retailer Ikea, to become the third largest gravure operator in the country.
The change in strategy of the big German printers, not only in the gravure but also the web offset sector, has led to the mounting of counter-offensives by printing companies in other EU states.
John Howitt Group, a U.K. printer, is planning to enter the gravure sector with an investment in a four-press site in England in order to take on competition from continental Europe.
Polestar, currently the only U.K. player in publishing gravure, has invested in a new gravure press in England and four webset presses, two of which are likely to be allocated to its operations in Spain and one each in the U.K. and Hungary.
“There will continue to be increased consolidation in the European gravure sector,” said James Siever, secretary general of the European Rotogravure Association (ERA). “Gravure printers will also be aiming to increase their exports sales because of low growth in their own domestic markets.”
The trend toward greater concentration is not just confined to gravure. While Germany has been becoming a European center for gravure, the U.K. has been building up a leading position in heatset printing in the region.
The two countries now account for nearly half of total printing ink sales in Europe. Along with France and Italy, they make up approximately 70 percent of total sales, according to the European association for paints and inks producers (CEPE).
As the printing industry becomes more pan-European in its structure, trade in ink within the region has risen, although a lot of cross-border shipments are between mother plants and subsidiaries and distributors.
Approximately one-third of inks sales in the U.K., for example, now comprise imports, the vast majority from elsewhere in the EU. Exports have also been increasing as a proportion of sales.
“The U.K. market for printing inks has been shrinking in value terms because of lower prices,” explained Moira McMillan, chief executive of the British Coatings Federation, which represents the country’s ink makers. “Ink companies have to push up their exports to compensate for this decline.”
More Eastern and Southern European countries, such as Bulgaria and Romania, are set to join the EU before the end of the decade and possibly, in the longer term, Turkey may join. For EU ink companies, these new entrants will be welcome outlets for a much-needed growth in export sales for many years to come.