However, these messages of hope and optimisim were also underscored by the grim reality that the industry still faces challenges.
Rosensweig: Emerging markets due for fast growth
Many of the economically advanced parts of the world will see slow economic growth in the near future, but several big emerging markets, including China and India, will grow much more quickly, says Jeffrey Rosensweig, Ph.D., associate dean for corporate relations, Goizueta Business School, Emory University.
Rosensweig, the conference keynote speaker, predicts that “China is going to be the next big market,” and noted that China’s economic power is particularly clear when the domestic buying power of its currency is taken into account.
He also warned that the world today displays “a major north-south divide in economic power and wealth”. Populations are growing much more quickly in the emerging markets, he says.
Romano: Digital printing the engine of growth
Digital printing will be a key engine of growth between now and 2010, with particularly healthy expansion likely in advertising, promotional and other direct mail materials, says Frank Romano, Fawcett professor at the School of Print Media, Rochester Institute of Technology.
Likely changes in the print environment may include more last-minute jobs, more capabilities to make changes right up to and during a press run, and a greater ability to have confidence in job quality with less demand for repeated proofs.
Commercial printers have lost roughly five percent of their print volume annually for the last four years, Romano says, but these losses weren’t easy to identify because so many printers were building revenues in ancillary service areas such as mailing and fulfilment. The generally poor economy also served to mask fundamental declines in print volume.
Pesko: Print-on-demand will shape future markets
Sixty per cent of printers surveyed recently agreed that “within two years more than half my jobs will require 24 hour turnaround or faster”. And two-thirds reported they are “making more frequent updates or last-minute revisions”. Charles Pesko, Jr, CAP managing director, reported these findings of a recent survey to Print Outlook 2004.
This survey revealed an overall rise in demand for print, Pesko says, as well as the fact that document owners and print buyers rely on print service providers to deliver expertise and communications solutions.
Still, according to Pesko, print sales will no longer rise in tandem with GDP as they did for so long.
Between 2002 and 2007, Pesko says, revenue from digital printing and value added services should grow much more quickly than from printing and related services.
Evans: 2004 strong, 2005 weaker
The US economy is “doing better than anyone expected”, and should grow by four to 4.5 percent in 2003, predicted NPES consulting economist Michael Evans of The Evans Group. Next year “will be a very strong year, but we will see a wind-down of growth to below-average rates in 2005 and 2006”.
In particular, Evans forecasts that sales of printing equipment will register a gain of about five per cent in 2004, after several very difficult years.
Evans provided specific forecasts for 2004 and 2005 performance in a variety of categories of printing equipment and supplies. Sheetfed presses should do slightly better in this period, but the decline in sales of offset duplicators will continue, as will sales of graphic arts film. Direct-to metal plates will register sales growth of about 20 per cent in 2004 and 15 per cent in 2005, Evans says.
DeWese: Mergers again on the rise in industry
Harris DeWese, Compass Capital Partners chairman and principal, told Print Outlook attendees that merger and acquisition activity in the printing industry, severely depressed in 2000 and 2001, is rising again and should continue to rise in the near future.
“When M&A activity subsides, margins are very low in the printing industry and bankruptcies tend to increase,” DeWese says, noting that in 2001 there were fewer than 50 acquisition deals and more than 500 bankruptcies in the US. The number of deals has increased in 2002 and 2003 and will likely increase in 2004, he says.
“There will be no more valuation craziness,” DeWese predicts. “Motivated sellers are plentiful, even at lower valuations.”
Paparozzi: Growth, but not enough for everyone
Andrew Paparozzi, the National Association for Printing Leadership (NAPL) vice president and chief economist, says, “In 2004, for the first time in four years our industry will grow, but there will not be enough for everyone”.
“Real print sales are up 1.2 per cent so far this year.”
Next year, NAPL predicts print sales in the US will grow by between 3.2 and 4.1 per cent, reaching a level of US$81.4bn to US$84.2bn.
For particular types of business, Paparozzi forecast that by 2007:
*Lithographic printing and associated prep and finishing services will decline from 81.9 per cent of revenue to 68.3 per cent.
*Digital printing (variable content) will rise from 6.5 per cent to 13.2 per cent of revenue.
*Value added services (fulfilment, database management, etc) will rise from 7.8 per cent to 14.5 per cent.
Davis: “Turnaround has finally begun”
Ronnie Davis, Printing Industries of America chief economist, says, ” Print sales should be 2.5 per cent higher in 2003 than in 2002, indicating “the turnaround has finally begun”.
For 2004, Davis foresees further growth of three to four per cent. PIA predicts the strongest growth in direct marketing and general commercial and quick printing.
To get the most from this long-awaited turnaround, Davis has identified six “secrets of success,” including:
*Manufacturing efficiency – the most profitable companies typically have manufacturing costs two to three percent lower than the average firm.
*Support and administrative efficiency – once again two to three per cent below industry-wide norms.
*Being a learning organisation – Davis notes that “profit leaders spend twice as much on training and education compared to profit challengers,” ie, companies lagging behind in profitability.
Panel highlights routes to success
Three printing company executives, with quite different specialties, outlined their strategies for continued growth and technology implementation at Print Outlook 2004.
For Automated Graphic Systems of White Plains, Maryland, digital tools and ancillary services have been critical. John Green, company president, says, “Most of our equipment purchases in the past year have been in the digital world”. The company is currently installing a new Xerox iGen3 variable data digital press.
“Even though most of our work is ink on paper, we get that work because we do all the other work as well,” says Green, citing data storage, fulfillment, and CD-ROM production as examples.
Newth Morris, Owner of Dixie Printing and Packaging Corporation in Glen Burnie, Maryland, says his firm also “moved early on Computer-to-Plate” to streamline production. Dixie also controls quality and workflows by performing all tooling and making all dies in-house, Morris says.
These advantages have been critical in an atmosphere of shrinking business and intense competition.
Paul Reilly, Chairman, President and CEO of Mail-Well, based in Englewood, Colorado, cites many of the same business pressures. “Today the problem with our industry is that printers all look a lot alike, and our suppliers look a lot. Technology is great, but technology also equalises. This makes it hard for printers to make themselves very different from one another.”
Pellow: Who’s creating demand for digital print
Understanding of personalised digital printing still lags in many advertising agencies, according to a recently completed study at the Sloan Printing Industry Center at Rochester Institute of Technology, reported at Print Outlook by Barbara Pellow RIT Gannett Distinguished Professor.
“The concept of personalised printing, from an agency perspective, has not taken hold. Agencies are starting to see value in personalised print applications, but there is still a major void,” says Pellow.
Many print specifiers still mistake ordinary mail merges for personalization, she added. On the client side, “marketing executives are becoming much more technology-savvy”.
The main cost barrier is the job of building the client‚s data infrastructure to support personalisation. “Investment in software can be two to three times greater than the investment in equipment,” Pellow says.
Postal Service reform a critical issue, panelists say
Benjamin Cooper, Printing Industries of America executive vice president for Public Affairs, says reform of the United States Postal Service is “the single most important issue the printing industry has faced”.
Cooper was part of a panel exploring current Postal reform proposals. The other panelists were Jack Callender, counsel to the House Committee on Government Reform, John Kilvington, legislative assistant to Sen. Tom Carper (D-DE), and Roger Kodat, Deputy Assistant Secretary of the Treasury for Government Fiscal Policy.
Kodat summarised the findings of a presidential commission that has offered 35 proposals to streamline the Postal Service and solve its pressing financial problems.
With White House support, “next year is the year” for reform, according to Callender. He says he expects reform bills to be introduced in both houses in January or February and to reach the Senate and House floors by summer.
“It would be a massive failure if some kind of reform did not get passed by spring,” says Kilvington.
Cooper says that “the USPS is the national print distribution system, and printers have realised that this is their issue”.
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