Behind the Growth Numbers

Data show a rebounding industry, but the real picture is more complex—and encouraging.

WHETHER AN INDUSTRY'S basic economic numbers look good or bad on the surface, it's usually necessary to look more deeply in order to understand what is really happening—and what those numbers mean for the industry's future.

That is the case today with the printing, publishing, and package-printing industry.

As several sources have pointed out, the industry in general has been rebounding from several very difficult years. Revenues are increasing across the board. Indeed, at the PRINT OUTLOOK® 05 conference in December, Printing Industries of America (PIA) Chief Economist Ronnie Davis said, "The current conditions represent the best print market I've seen in about five years."

Davis reported on growth of about 4.1 percent in total industry shipments during the first nine months of 2004. Bear in mind, inflation is almost totally absent from the printing industry; price pressure is one of the defining conditions of our business.

For the coming year, PIA predicted growth of 2 to 3 percent in overall shipments, along with a gain of roughly 2 percent in the category of labels, packaging, wrappers, and catalogs.

However, we must also note that so-called "ancillary services" make up a significant portion of printers' revenues today, and are growing quickly. Thus, even though a company's total revenues may be increasing, more of those revenues are coming from non-print sources like mailing and fulfillment, digital asset management, wide format imaging, and design services.

This interest in expanded services can be seen by the increased attention and resources being given to such areas as mailing and fulfillment services, wide format inkjet printing, and package printing and converting at the upcoming PRINT® 05 & CONVERTING 05 trade show. Wide format inkjet output options, for example, will have nearly 20,000 sq. ft. of space in 2005, as opposed to the 1,500 sq. ft. allocated in 2002.

Packaging opportunities

Flexible packaging, in particular, is on the upswing, with industry groups forecasting annual growth in the 5 to 6 percent range for the next several years. Any market combining such high levels of creativity and growth potential is bound to attract the best efforts of leading vendors and the companies they support.

Professor Frank Romano of the Rochester Institute of Technology (RIT) recently predicted that "over time, commercial printers are really going to be printing packaging on a regular basis. A lot of people think this work is only being done by specialists, but that is not so."

Some forms of packaging, including metal cans and sanitary packaging, will continue to call for specialist attention. But in two of the most widely used packaging forms, folding cartons and labels, commercial printers already enjoy large market shares and are likely to increase their business in the next 5 to 10 years, Romano says. "Folding cartons and labels are really going to open up for commercial printers."

GASC has increased the focus on package printing and converting at its events with two main goals. First, to provide commercial printers with a convenient way to judge how successfully they could migrate their printing businesses toward a packaging focus, bearing in mind the continued dynamism of the packaging market.

Our second goal is to offer folding carton, label, and other package production specialists a clear roadmap to better printing and better integration of their functions with all of the other communications needs of their clients.

Here, really, is the crux of the challenge presented by today's market.

Clients today, whatever their field, want to view their marketing as a coherent, integrated whole. They have turned away from employing a multiplicity of specialized suppliers handing their jobs off to one another, with all of the delays and opportunities for errors that come along with these transitions. They want fewer suppliers to meet more of their needs, and to do so more quickly than ever before.

Package printers see first-hand how test marketing, versioning, and other strategies create new pressure to cut down the time it takes products to reach the market. They know how intense the battle for shelf space and consumer attention has become. However, they also keep up-to-date with the extraordinary range of innovative new products they can adopt to help them meet this demand.

Consider radio frequency identification (RFID) technologies. By all accounts, we are only at the beginning of the evolution of this exciting new specialty. Major government and commercial customers will be requiring RFID tagging on the pallet level for all the products they buy, aiming to reach this goal within the next two or three years. After that, attention will likely shift to tagging for the individual packaging unit.

Creating an RFID label is a complex business. However, RIT's Professor Michael Kleper notes that "RFID antennas are simply patterns. Most modern printing presses should be usable for this purpose. Commercial printers who have technical expertise, skilled workers, and up-to-date equipment are well-positioned to consider this as a new market."

High-quality offset lithographic printing is well suited to the production of RFID antennas and batteries, but in order to produce RFIDs successfully, printers will have to achieve the highest possible print quality, coupled with the highest possible consistency piece to piece.

Folding carton converters and other packaging specialists must also come to grips with these complexities, because their clients will face increasing pressure to integrate RFID in packaging. How will they respond? The answer will take shape over the next several years, and it will identify a whole new group of profit and innovation leaders in our industries.

A decade ago, one might have been very concerned about the future of an industry facing so many complexities and challenges. Today, however, we believe the dominant feature of the new printing landscape is the speed with which printers are reshaping their businesses and expanding their capabilities to seize new profit opportunities.

From the NPES standpoint, one measure of this success is a return to growth in equipment shipments. We foresee at least two years of modest but welcome growth in shipments of printing and related equipment. After several of our industry's worst years to date, coming one after another, this is a welcome development.

Versatile and customer-focused

The absolute number of print companies in the United States may be shrinking, but those that remain are more versatile, better managed, and more customer-focused than ever. They are moving aggressively toward comprehensive workflow automation and evolving into true communications companies, able and eager to meet all of their customers' needs.

In commercial printing, package printing, and a range of other specialties, growth prospects are bright and the future is filled with promise.

By Regis J. Delmontagne

President, NPES