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Services are Helping Ink Companies Maintain, Increase Margins



By Sean Milmo, Ink World European Editor



Published October 29, 2009
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Services have become a major means of maintaining or improving margins for ink makers in Europe at a time of relentless pressure on product prices.

The objective is to provide printers with a lot more than just a drum of ink, and even more than basic advice on technologies and application methods.

“Some ink companies seem to be focusing more on services than inks because they can’t make a decent profit out of inks any more,” said a marketing executive with one ink producer.

Increasingly, ink companies are moving into areas of services which overlap with those of other suppliers to the printing sector.

Thus in the search for improved profitability, ink makers are having to compete with operators outside the ink sector, including printing equipment manufacturers and pigment producers.

Providing Services



The need to expand into services is affecting a lot of players in the European printing market because of the slow growth or even decline in output in many sectors. There is a such a lack of opportunities for increases in selling prices that the priority for many companies is to find ways of stemming price decreases.

For ink makers, one option is to raise margins by developing innovative inks. Another strategy is to offer customers distinct packages of products and services.

“In recent years, volume output of printed products in Europe has gone up by an average of only 1 percent to 1.5 percent per year, while revenue has actually declined by a few percentage points annually,” said one printing industry consultant. “In these conditions, it is virtually impossible for anyone in the supply chain to push up their prices. So producers of conventional inks will have to seek to add value to their products through services.”

“New products will generate higher prices but there is not much scope for innovation in printing inks,” he added. “The biggest opportunity for innovation is in digital inks and toners, whose prices can be considerably higher than those for conventional inks.”

The outlook for the rest of the decade is a continued contraction of the European printing sector. Hence, for ink producers, the building of a strong services franchise is essential.

“A good product is not enough. Added value has become crucial to sales success,” said Peter Heimerzheim, Siegwerk Group’s head of corporate communications. “In the future, ink manufacturers will to a great extent be measured in terms of the additional services required by customers.”

Not surprisingly, some leading ink companies will be introducing both new ink products and new services to customers at next month’s Drupa in Dusseldorf, Germany.

Sun Chemical is presenting at Drupa a service called Total Cost to Print, which helps raise the competitiveness of printers and converters. The service will assist printers in the use of data analysis to identify savings opportunities in the application of materials and procedures.

“Experience has shown us that printers often see these opportunities to improve their operations only after extensive data collection,” said Chris Morrissey, Sun Chemical’s vice president, corporate marketing. “Sun Chemical will work with them to select proper materials that meet specifications or tighten procedures that can be very beneficial.”

As part of a strategy of providing a “Total Solution” to printers, Sun Chemical is now manufacturing and selling a wide variety of materials used in the printing process, such as fountain solution, blankets, web conditioners, safety gear and color measurement tools.

“Printers are beginning to rely on single-source suppliers for a variety of their supply needs, not just because it is easier to order but because Sun Chemical offers an integrated package of materials designed to work better together than they work separately,” said Mr. Morrissey.

BASF’s inks business, the second largest in Europe after Sun Chemical’s, takes advantage of the BASF group’s backward integration into research and development, raw materials, know-how management, paper chemicals, process technology and environmental services.

“Currently BASF Printing Systems (which includes the inks operation) is offering a wide range of services for its ink customers like in-plant operations, all kinds of technical services at the press and in the lab, vendor managed inventories, customer training and so on,” said Stefan Wegener, head of global business management, printing inks for the print media.

Following its recent takeover of Color Converting Inc. (CCI), the second largest player in inks for high-quality packaging in the U.S., Siegwerk is developing global services for its worldwide packaging customers.

The acquisition has given Siegwerk production facilities for packaging inks in the U.S., Europe and Asia, and also an international on-site consulting and services operation.

“Sustainable differentiation on the market is only possible with services which offer true added value for customers,” said Herbert Forker, Siegwerk’s chief executive. “Through the purchase of CCI, we can offer a unique service portfolio to the major packaging companies and also to smaller customers, who are very important to us. Siegwerk is contributing (to its merger with CCI) its global consulting competence along the entire value chain of the packaging printing process.”



Managing Color



Siegwerk’s acquisition of CCI has also strengthened its position in color management, particularly in the provision of on-site consulting on color issues in printing works. The combination of the two companies will enable them to supply 10,000 color formulas in the packaging segment.

Color management is seen by ink makers in Europe as a key area in which they can expand their services to customers.

Sun is currently rolling out across Europe an integrated system, called SmartColour, which is designed to ensure color consistency.

The system, whose software measures and visualizes choices of color, can lower printers’ costs by improving press availability and reducing waste, while boosting sales through the offer of certified color guarantees, according to Sun Chemical.

It also cuts costs for brand owners by speeding the approval process and eliminating guesswork on color selections.

“Consumer product companies have built brands with high recognition that people turn to throughout the world because they identify them as valuable,” said Mr. Morrissey. “Color is integral to brand building because it offers instant recognition. Slight variations in ads, packaging or other promotions can diminish the value of the brand.”

Flint-Schmidt provides customized color match systems which cut waste and also enable printers to respond more quickly to their customers’ requirements. It cites the example of one Dutch package printing house which, with the help of Flint-Schmidt’s color quality control, reduced ink waste by as much as 20 percent per print run.

However color management is also a services segment in which other operators in the supply chain see opportunities for expansion.

Ciba Specialty Chemicals, a leading pigment and dye manufacturer, has recently extended into the printing sector a color matching service it originally provided to masterbatch customers in plastics.

The company’s Colibri QuickMatch system provides formulation recipes, integrated color catalogs and libraries and the interpolation of test results to specific substrates.

In March, Ciba launched a new Colibri version which allows the matching of metallic colors and ink shades for printing on metallic surfaces without the need for a multi-angled spectrophotometer.

“We believe that we’ve got the best color matching software in the world,” said Hermann Angerer, Ciba’s global head of coating effects. “It is not only extremely versatile but also very user-friendly. In areas like packaging the market for this service is wide open.”



Partnerships



Some ink companies have been forging alliances along the printing supply chain to develop new services and products. These act as a channel for innovations to benefit both printers and their customers.

“(Admid) an ongoing integration in the printing value chain, cooperations between press makers, ink and paper manufacturers are strongly gaining importance,” said Mr. Wegener.

In some cases, partnerships of printing industry suppliers and operators have linked with end-users like publishers and consumer product manufacturers to develop new products.

As an integrated manufacturer of inks, paper chemicals, pigments and printing plates and chemicals, BASF is well positioned to help form these alliances. The company was instrumental last year in putting together a partnership between Axel Springer AG, a large German magazine and newspaper publisher/printer; Omya AG, a paper pigment manufacturer; Voith Paper AG, a paper machine maker; and BASF’s printing systems and paper chemicals businesses.

A recently established partnership comprises BASF, Sappi, a paper maker and Heidelberg. It aims to improve the quality of each of the participants’ products for 8- to 12-color press technology.

“(It is) intended to create knowledge for the cooperation partners which will then be translated into an added value for the customer,” Mr. Wegener said.

One of BASF’s latest initiatives has been Print Plus, a series of seminars in Germany which are aimed at helping people throughout the graphics sector.

Among the subjects being covered by the meetings are the integration of color management processes into modern printing ink technologies and the basic principles behind color quality tests.

Perhaps in the future, ink producers wanting to become providers of good services will have to see themselves as suppliers not just to the printing segment but a broad spectrum of the graphics industry.


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