David Savastano, Editor11.21.16
There has been a tremendous amount of consolidation in the publication printing market over the last 10 years. Companies like Quebecor World, Banta, Consolidated Graphics, Valassis and Vertis have been acquired. Today, RR Donnelley (sales of $11.6 billion) and Quad/Graphics (sales of $4.8 billion) are the dominant players in the field.
One might think that the ink industry would follow a similar trajectory as their customers, but that hasn’t been the case, at least until this year. For the most part, any ink acquisitions have been in the more profitable packaging and digital ink markets.
Of course, this may have been driven by the fact that three of the four main publication ink sectors - heatset, news and publication gravure - are already consolidated down to two or three companies. In North America and Europe, Flint Group and Sun Chemical are the largest heatset and news ink suppliers. In North America, Flint Group and CR/T (a division of Quad/Graphics) are the publication gravure ink manufacturers. In Europe, Siegwerk is a leader in publication gravure. The publication sheetfed ink market is fragmented, while packaging sheetfed ink remains solid.
The lack of consolidation changed in Europe in 2016, though, as witnessed by two acquisitions:
• February 2016: Flint Group acquired the web offset business of Siegwerk Druckfarben.
• August 2016: Sun Chemical acquired Flint Group’s European publication gravure ink business.
In the Flint Group-Siegwerk move, Flint Group acquired Siegwerk’s heatset and news ink lines, clearly showing Flint Group’s commitment to these segments. Meanwhile, Siegwerk can focus on its core packaging ink business while keeping its strong European publication gravure ink operations.
The Sun Chemical-Flint Group transaction is noteworthy, as it is a rare case of the two largest ink manufacturers making a deal. In this case, Sun Chemical is strengthening its position in the publication gravure ink field in Europe.
By selling off the publication gravure ink business in Europe, Flint Group can focus on its core web offset markets on the Print Media side.
There is no question that consolidation among printers as well as among ink companies is having an impact on the market.
Jörn Bartelheimer, head of publication gravure at Siegwerk, said that in general, market consolidation is an answer for companies in order to better serve the market.
“In matured business segments, companies have to combine operations and streamline offerings,” Bartelheimer noted. “Also in the printing market, consolidation is a way for companies to survive and overcome current market developments and challenges.
“Going forward, consolidation among printers and ink companies will further take place like already shown by several recent examples in our industry,” Bartelheimer added. “In the end, the fittest companies will be the remaining players in the market. Ink suppliers feel the need to generate and maintain economies of scale.”
Michael Podd, VP heatset for Flint Group, said that consolidation of printers has a domino effect throughout the supply chain.
“For ink manufacturers, printer M&As can provide sales gains or losses, depending on the printers involved and who supplies them,” Podd noted. “For other manufacturers, such as printing press OEMs, printer consolidation can result in fewer purchases, as consolidators take out any overcapacity and maximize their best equipment, potentially resulting in fewer presses as a result. As printers have consolidated, the ink manufacturing segment has become more challenging.”
Mike Dodd, president, US Ink (A Division of Sun Chemical), said that consolidation among printers has increased the competitive activity in the market.
“This has a direct effect on prices, which has therefore compressed margins at the converting and the ink level,” Dodd added.
“This increase in competition puts more emphasis on technology and product differentiation. Product differentiation is becoming increasingly difficult as the supply chain also consolidates since the selection of options in raw materials decreases. Sun Chemical’s commitment to the publication sector is strong as reflected by its recent acquisition of Flint Group’s European publication gravure ink business.”
The Publication Ink Market
The various segments of the publication printing market - magazines, catalogs, annual reports and most dramatically, newspapers – have been hard hit by economic conditions and changing consumer tastes. In turn, this has impacted the publication ink field.
“Over the last years, the demand for publication and commercial printing inks has been further slowing down due to a decreasing global print media market, which has shrunk to less and less suppliers,” Bartelheimer observed. “You could observe a consolidation trend along the whole supply chain. As only few ink suppliers are still serving the publication printing field, the competition stays intense among the remaining players at the market.”
“While newsprint tonnage has settled into high single-digit decline, newspapers continue to consolidate,” Dodd said. “This year has seen major acquisitions of medium, small and large publications. Consolidation results in planned regional print centers. This ends up being a double win situation for both the acquired and the acquirer. Also, due to economies, we see situations that a decade ago were unimaginable. Competitors are utilizing both distribution networks and production facilities in the same market.”
Chris Parrilli, VP, publication heatset for Sun Chemical, added that dynamics in the heatset market are similar to last year.
“A combination of excess capacity and sustained lower crude oil prices continues to put pressure on pricing,” Parrilli observed.
“The regionally focused printer had growth opportunities this year and many of our customers enjoyed successful years in terms of sales growth. Continued consolidation and shutdowns are a norm that continues, and we don’t expect to see that end anytime soon.”
Flint Group’s Podd said that major trends in the publication sector have been consistent for some time.
“Consolidation of our customer base and shrinking demand has driven consolidation of suppliers,” Podd reported. “In the heatset segment, we continued to see steady yet manageable shrink overall. We’ve also seen more regionalization of publications, as publications aim to increase their appeal to consumers.”
The newspaper industry has been suffering in recent years, and 2015 was particularly difficult, according to the Pew Research Center.
“For newspapers, 2015 might as well have been a recession year,” the Pew Research Center reported in its State of the News Media 2016. “Weekday circulation fell 7% and Sunday circulation fell 4%, both showing their greatest declines since 2010. At the same time, advertising revenue experienced its greatest drop since 2009, falling nearly 8% from 2014 to 2015.”
Norm Harbin, Flint Group’s business director, News Ink, reported that the newspaper segment in North America is under significant pressure due to the Internet undermining traditional print advertising revenue.
“Among newspaper printers, efforts are underway to develop digital alternatives to the printed newspaper product, but revenue generation from these alternatives are so far coming up short,” Harbin said. “Globally, newspaper conditions in mature countries are experiencing similar trends as in North America. Developing regions, such as India, still have opportunities and moderate industry growth, but even that growth is limited due to strained economies, which limit investment and advertising spending.”
Sun Chemical’s Dodd reported that the effect of consolidation in the market has forced ink manufacturers to also streamline.
“Pounds are down, but there are also less print sites,” Dodd said. “The major ink suppliers have had to consolidate facilities to stay price competitive. The high single-digit newsprint decline being down from the mid-20% decline of 2009 is somewhat of a good sign. Newspapers are aggressively pursuing new marketing ideas regionally and nationally to keep both readers and advertisers. Consolidation creates less individual customers, which makes the marketplace more competitive for ink suppliers.”
Magazine and periodical publishing is steady, with low single-digit declines forecasted. In its report, “Magazine & Periodical Publishing in the US: Market Research Report,” IBISWorld noted an average decline in revenue of 2.1% from 2011-16 to $30 billion in the US.
“We see a steady, slow decline in the mag/cat segment, with some greater declines in Asian countries due to economic concerns and currency fluctuations,” Podd said. “But Asia is not alone. Inflation and instability in Latin America, for example, have decreased advertisers’ appetite for marketing spend and consumers’ appetite to spend discretionary money on magazines.”
Parrilli reported that 2016 was a good year for magazine and catalog printers in North America.
“Specific to North America, we saw 2016 as a bounce-back year, with many of our customers busier than previous years,” Parrilli said. “The Olympics and an election year had something to do with it, but even without those dynamics, business was better. Most of our customers understand the need to be more than just a print partner and have adjusted accordingly.”
For Siegwerk, the publication gravure ink segment is its sole focus on the publication side.
“As the print media market is decreasing, the whole demand for publication inks is correspondingly slowing down,” Bartelheimer said. “This also results in a decline in the publication gravure segment, but on a slightly slower pace than in previous years. You could see big publication gravure printers recently exiting the market, but what impact this will have on the overall market is still unpredictable to a certain extent.”
Outlook for Publication Ink
Overall, ink manufacturers are expecting further declines in the publication printing.
“We forecast a continued decline in both heatset and coldset printing,” Dodd said. “The numbers can be debated, but we believe the magazine/catalog sector will decline in the 3% to 6% range, depending on numerous variables that typically impact the business. Consolidation will continue, as will the shutdown of printers who aren’t positioned properly in today’s market.”
“We don’t expect the news, magazine and related print segments to grow in North America or Europe, though we might see some leveling off of declines in mature regions,” said Bill Miller, president, Flint Group Print Media. “There is some possibility that we’ll see areas of growth internationally if geopolitical situations become more stable. To some extent, online communications leap-frogged print in developing regions, so such nations are not likely to print to the extent that North America and Europe did before declines began.”
For more information on the publication ink market, see the online version at www.inkworldmagazine.com.
One might think that the ink industry would follow a similar trajectory as their customers, but that hasn’t been the case, at least until this year. For the most part, any ink acquisitions have been in the more profitable packaging and digital ink markets.
Of course, this may have been driven by the fact that three of the four main publication ink sectors - heatset, news and publication gravure - are already consolidated down to two or three companies. In North America and Europe, Flint Group and Sun Chemical are the largest heatset and news ink suppliers. In North America, Flint Group and CR/T (a division of Quad/Graphics) are the publication gravure ink manufacturers. In Europe, Siegwerk is a leader in publication gravure. The publication sheetfed ink market is fragmented, while packaging sheetfed ink remains solid.
The lack of consolidation changed in Europe in 2016, though, as witnessed by two acquisitions:
• February 2016: Flint Group acquired the web offset business of Siegwerk Druckfarben.
• August 2016: Sun Chemical acquired Flint Group’s European publication gravure ink business.
In the Flint Group-Siegwerk move, Flint Group acquired Siegwerk’s heatset and news ink lines, clearly showing Flint Group’s commitment to these segments. Meanwhile, Siegwerk can focus on its core packaging ink business while keeping its strong European publication gravure ink operations.
The Sun Chemical-Flint Group transaction is noteworthy, as it is a rare case of the two largest ink manufacturers making a deal. In this case, Sun Chemical is strengthening its position in the publication gravure ink field in Europe.
By selling off the publication gravure ink business in Europe, Flint Group can focus on its core web offset markets on the Print Media side.
There is no question that consolidation among printers as well as among ink companies is having an impact on the market.
Jörn Bartelheimer, head of publication gravure at Siegwerk, said that in general, market consolidation is an answer for companies in order to better serve the market.
“In matured business segments, companies have to combine operations and streamline offerings,” Bartelheimer noted. “Also in the printing market, consolidation is a way for companies to survive and overcome current market developments and challenges.
“Going forward, consolidation among printers and ink companies will further take place like already shown by several recent examples in our industry,” Bartelheimer added. “In the end, the fittest companies will be the remaining players in the market. Ink suppliers feel the need to generate and maintain economies of scale.”
Michael Podd, VP heatset for Flint Group, said that consolidation of printers has a domino effect throughout the supply chain.
“For ink manufacturers, printer M&As can provide sales gains or losses, depending on the printers involved and who supplies them,” Podd noted. “For other manufacturers, such as printing press OEMs, printer consolidation can result in fewer purchases, as consolidators take out any overcapacity and maximize their best equipment, potentially resulting in fewer presses as a result. As printers have consolidated, the ink manufacturing segment has become more challenging.”
Mike Dodd, president, US Ink (A Division of Sun Chemical), said that consolidation among printers has increased the competitive activity in the market.
“This has a direct effect on prices, which has therefore compressed margins at the converting and the ink level,” Dodd added.
“This increase in competition puts more emphasis on technology and product differentiation. Product differentiation is becoming increasingly difficult as the supply chain also consolidates since the selection of options in raw materials decreases. Sun Chemical’s commitment to the publication sector is strong as reflected by its recent acquisition of Flint Group’s European publication gravure ink business.”
The Publication Ink Market
The various segments of the publication printing market - magazines, catalogs, annual reports and most dramatically, newspapers – have been hard hit by economic conditions and changing consumer tastes. In turn, this has impacted the publication ink field.
“Over the last years, the demand for publication and commercial printing inks has been further slowing down due to a decreasing global print media market, which has shrunk to less and less suppliers,” Bartelheimer observed. “You could observe a consolidation trend along the whole supply chain. As only few ink suppliers are still serving the publication printing field, the competition stays intense among the remaining players at the market.”
“While newsprint tonnage has settled into high single-digit decline, newspapers continue to consolidate,” Dodd said. “This year has seen major acquisitions of medium, small and large publications. Consolidation results in planned regional print centers. This ends up being a double win situation for both the acquired and the acquirer. Also, due to economies, we see situations that a decade ago were unimaginable. Competitors are utilizing both distribution networks and production facilities in the same market.”
Chris Parrilli, VP, publication heatset for Sun Chemical, added that dynamics in the heatset market are similar to last year.
“A combination of excess capacity and sustained lower crude oil prices continues to put pressure on pricing,” Parrilli observed.
“The regionally focused printer had growth opportunities this year and many of our customers enjoyed successful years in terms of sales growth. Continued consolidation and shutdowns are a norm that continues, and we don’t expect to see that end anytime soon.”
Flint Group’s Podd said that major trends in the publication sector have been consistent for some time.
“Consolidation of our customer base and shrinking demand has driven consolidation of suppliers,” Podd reported. “In the heatset segment, we continued to see steady yet manageable shrink overall. We’ve also seen more regionalization of publications, as publications aim to increase their appeal to consumers.”
The newspaper industry has been suffering in recent years, and 2015 was particularly difficult, according to the Pew Research Center.
“For newspapers, 2015 might as well have been a recession year,” the Pew Research Center reported in its State of the News Media 2016. “Weekday circulation fell 7% and Sunday circulation fell 4%, both showing their greatest declines since 2010. At the same time, advertising revenue experienced its greatest drop since 2009, falling nearly 8% from 2014 to 2015.”
Norm Harbin, Flint Group’s business director, News Ink, reported that the newspaper segment in North America is under significant pressure due to the Internet undermining traditional print advertising revenue.
“Among newspaper printers, efforts are underway to develop digital alternatives to the printed newspaper product, but revenue generation from these alternatives are so far coming up short,” Harbin said. “Globally, newspaper conditions in mature countries are experiencing similar trends as in North America. Developing regions, such as India, still have opportunities and moderate industry growth, but even that growth is limited due to strained economies, which limit investment and advertising spending.”
Sun Chemical’s Dodd reported that the effect of consolidation in the market has forced ink manufacturers to also streamline.
“Pounds are down, but there are also less print sites,” Dodd said. “The major ink suppliers have had to consolidate facilities to stay price competitive. The high single-digit newsprint decline being down from the mid-20% decline of 2009 is somewhat of a good sign. Newspapers are aggressively pursuing new marketing ideas regionally and nationally to keep both readers and advertisers. Consolidation creates less individual customers, which makes the marketplace more competitive for ink suppliers.”
Magazine and periodical publishing is steady, with low single-digit declines forecasted. In its report, “Magazine & Periodical Publishing in the US: Market Research Report,” IBISWorld noted an average decline in revenue of 2.1% from 2011-16 to $30 billion in the US.
“We see a steady, slow decline in the mag/cat segment, with some greater declines in Asian countries due to economic concerns and currency fluctuations,” Podd said. “But Asia is not alone. Inflation and instability in Latin America, for example, have decreased advertisers’ appetite for marketing spend and consumers’ appetite to spend discretionary money on magazines.”
Parrilli reported that 2016 was a good year for magazine and catalog printers in North America.
“Specific to North America, we saw 2016 as a bounce-back year, with many of our customers busier than previous years,” Parrilli said. “The Olympics and an election year had something to do with it, but even without those dynamics, business was better. Most of our customers understand the need to be more than just a print partner and have adjusted accordingly.”
For Siegwerk, the publication gravure ink segment is its sole focus on the publication side.
“As the print media market is decreasing, the whole demand for publication inks is correspondingly slowing down,” Bartelheimer said. “This also results in a decline in the publication gravure segment, but on a slightly slower pace than in previous years. You could see big publication gravure printers recently exiting the market, but what impact this will have on the overall market is still unpredictable to a certain extent.”
Outlook for Publication Ink
Overall, ink manufacturers are expecting further declines in the publication printing.
“We forecast a continued decline in both heatset and coldset printing,” Dodd said. “The numbers can be debated, but we believe the magazine/catalog sector will decline in the 3% to 6% range, depending on numerous variables that typically impact the business. Consolidation will continue, as will the shutdown of printers who aren’t positioned properly in today’s market.”
“We don’t expect the news, magazine and related print segments to grow in North America or Europe, though we might see some leveling off of declines in mature regions,” said Bill Miller, president, Flint Group Print Media. “There is some possibility that we’ll see areas of growth internationally if geopolitical situations become more stable. To some extent, online communications leap-frogged print in developing regions, so such nations are not likely to print to the extent that North America and Europe did before declines began.”
For more information on the publication ink market, see the online version at www.inkworldmagazine.com.