Possibly the biggest influence in recent years has been the amount of consolidation within the ink sector and within the print industry as a whole.
“The big guys have been getting bigger and everyone else has been getting smaller,” said the head of one U.K. distribution company. “In this sort of economic climate, it has been very difficult for the independent distributor of ink to survive because they have been squeezed on all sides. Even the profits of the large ink producers have been under such pressure that they have not been able to offer distributors a decent enough margin to run a proper business.”
The increasing concentration within the ink segment has left gaps in the level of services to printers, particularly at the local level, which have provided new openings for more flexible distributors.
New players such as print equipment manufacturers have moved into consumables and ink distribution, as they pursue a strategy of becoming service providers.
These trends are compelling ink distributors to broaden their portfolios so that they cover not only ink but a full range of consumables as well as hardware for pre- and post-print work.
Perhaps one of the biggest alterations for distributors in many parts of Europe has been their expansion into secondary manufacture of inks through the mixing and matching of colors and production of specialty inks.
“Distributors can no longer make a living out of the supply of full color process inks,” said Gary Penfield, managing director of Stehlin Hostag Ink U.K., Nottingham, England. “They have to be able to provide special Pantone colors because the margins are generally better.”
There are even predictions that with a broader platform from which to operate and by gaining new skills, distributors will be able to position themselves in some European countries as the main channel of inks supply for small- and medium-sized printers.
“The large ink manufacturers will serve direct their big customers while the distributors will look after the smaller customers because they can do it most cost effectively,” said Tony Halker, managing director of Openshaw Ltd., Todmorden, England, one of the U.K.’s largest ink distributors. “But to do that, distributors will often have to offer an extremely broad range of products and services.”
Multinational ink producers in Europe have been gearing themselves up to focus their own distribution resources on their big accounts.
BASF, has been setting up an e-commerce operation to enable its major international customers to become fully integrated with its own ordering and delivery software through an enterprise resource planning (ERP) system.
It has national sales organizations in the larger European Union states like Germany, France, U.K. and Italy. But even in these countries, it supplies small customers through distributors.
“We do service directly some smaller customers, some of whom we use to as reference points to know what is going on in specific markets,” said Stefan Wegener, BASF’s global business manager, printing inks for print media.
“But on the whole, we don’t want to handle small orders because for us the administrative and logistical costs are relatively high,” he added. “A distributor can deal efficiently with orders of 100 to 200 kilograms because they can be more flexible and they are less cost intensive, so they are in a better position to provide a first level of support to small customers. From the amount of orders now going to distributors, I think you could conclude that they are getting more business.”
A Fragmented Business
The tendency has been for the larger ink manufacturers to conduct a higher proportion of their sales through distributors. But this is by no means a uniform pattern.
BASF itself appeared to be going against the underlying trend in the European ink market when it recently acquired Simpex GmbH Druckfarben, a distributor in northwest Germany. This is a business dedicated to the fast delivery of specialty colors and UV products in Germany and also in neighboring markets like France.
“In these parts of the market, a just-in-time delivery capability is essential,” said Mr. Wegener. “Simpex is a highly flexible company which is well organized for the quick delivery of products like spot colors and low-odor inks for the packaging sector.”
A few years ago, Huber Group of Germany purchased the U.K. distributor of the inks of Stehlin + Hostag AG, its Swiss-based ink producer. The move was partly prompted by the success of the U.K. dealer in gaining a relatively large market share in the U.K. for Stehlin + Hostag products. But it was also a defensive maneuver at a time when Sun Chemical had been acquiring operations in the country with a strong service capability.
Stehlin Hostag Ink U.K. Ltd., Nottingham, England, distributes not only inks but also a range of pressroom chemicals, blankets and plates.
“We had done so well in building up the U.K. sales of Stehlin + Hostag that at the time of the acquisition we were taking approximately 40 percent of the company’s Swiss output,” said Mr. Penfield. “Obviously because of our position in the market and Sun’s expansion in the country, it made a lot of sense for our supplier to take us over. We now focus our activities on large- and medium-sized customers in the country.”
Huber supplied smaller printers in the U.K. through Keane Graphic, an independent distributor in Ashford, Kent, southeast England, which marketed the inks under the Hostmann-Steinberg brand name.
This arrangement has continued even though Keane was last year acquired by Ultrachem, which like many other distributors of consumables was seeking to enter into the ink sector.
“The large printers now want to use distributors who can provide them with a complete package, covering not just ink but a wide selection of consumables as well,” said Mr. Penfield. “There are similar demands from the smaller printers, so we have a very effective distribution system in the U.K.”
Pressure on margins is leading to more concentration among distributors. But even in countries like the U.K. where there has been more consolidation in the printing sector than in most other large European countries, the distribution segment still remains comparatively fragmented.
Openshaw is big enough to distribute ink for Flint-Schmidt, Flint Ink’s European operation, and for Bousfield, its own ink maker. Litho Supplies, Openshaw’s main rival, distributes both BASF’s and Van Son’s inks.
“Besides Litho and ourselves, there are not many other big distributors,” said Mr. Halker. “In the press room area, distribution is much more fragmented than in the pre-press segment, where there has been a sharp decline in sales in recent years.”
Smaller distributors are continually having to reorganize themselves because of changes among their suppliers. Some have moved out of distribution altogether.
AFA-Graphica, formerly a distributor in northwest England of SICPA’s offset inks, has now become an ink maker itself after its supplies were affected by restructuring in the ink sector.
“We’re specializing in making Pantone inks with a 40 percent extra color strength, which enables printers to achieve the right shade at lower volumes,” said David Hartwell, AFA’s managing director. “We do our own distributing and generally the work is more satisfying and certainly more profitable.”
In many European countries, the supply of ink tends to be separated from the supply of consumables. Consolidation is taking place more slowly in some areas of Europe than in others.
“In Italy you may need as many as 20 distributors to cover all small printers in the country,” said one ink sector executive.
Nonetheless, against this background of numerous small distributors continuing to serve relatively small localities in some countries, there are signs the printing sector could soon be in an era of large distribution networks providing a single European source for equipment, inks and other consumables, digital systems and other items.
The impetus is coming from printing equipment manufacturers like Heidelberg and from cross-sector alliances like PrintCity in which MAN Roland, Heidelberg’s rival, is a leading participant.
Heidelberg has already created a structure for distribution of equipment, ink and consumables to customers.
“The sort of distribution service we provide depends on the nature of the national market,” said Hans-Dieter Ziegfried, Heidelberg’s head of communications. “It also depends on the customers. There may be cases where a customers wants some inks as part of a package and we will arrange the delivery of those inks to him. It is a service targeted at the small operator because 80 percent of our customers are small printers.”
PrintCity, now with approximately 40 members including Sun Chemical, has reached a stage where it will soon be drawing up offers of turn-key packages for printers.
“Some companies like ourselves and MAN Roland have distribution operations which could be used by PrintCity members,” said Larry Lampert, Sun Chemical’s heatset director in Europe and chairman of PrintCity’s web systems group.
“But sooner or later we’ll have to bring in independent distributors,” he added. “By the time of the next Drupa exhibition in 2008, we should have a distribution network in existence. But the distributors will have a big capability because the way things are going in the printing industry, distributors will have to be like one-stop supermarkets.”
PrintCity has just completed a survey showing a high level of discontent among printers and other customers in the graphics sector about the quality of services from suppliers. One big question is whether the creation of large distribution operations will help suppliers improve the standard of their technical support and specialty technical advice.