Think Ink

Package printing is not for the faint of heart. One needs to look no further than packaging ink systems to get an understanding of the complex nature of printed products for the packaging market.

Inks can be water-based, solvent-based, or radiation-cured systems; they can be developed for specific processes such as offset, flexo, gravure, or screen; and can be compatible (or not compatible) with different coating, lamination, or adhesive systems. Some are designed for use with specific substrates, while others are applicable for a wide range of substrates. These are just the basic, top-level considerations. Beyond these, there are a multitude of functional, color, or market-specific concerns.

To get a picture of current trends and market drivers for packaging inks, packagePRINTING talked to executives from several ink manufacturing companies.

pP: What growth do you see for the different ink categories (water-based,solvent-based, energy-cured) over the next several years?

Michael Impastato, VP, business development, Flint Group—A number of years ago, we saw movement between water, solvent, and radiation-cured inks, allowing some of these ink chemistries to grow at significantly higher rates than the underlying market. In most cases, this has moved back to an equilibrium, with the underlying markets driving the growth of each ink chemistry. Although most market segments in packaging can be serviced by water, solvent, or radiation-cured inks and coatings, it is typical that one type of ink chemistry is primary in most markets.

For instance, shopping bags are mostly water-based while high-performance film laminations are mostly solvent-based. The exception to this equilibrium is the continued higher growth in radiation-cured products. UV and EB inks will continue to grow faster than their underlying markets due to conversions from either water or solvent inks. The rate of conversion to UV and EB has slowed over the last several years, but we will continue to see additional conversions to radiation-cured products as their unique characteristics are identified and the cost performance relationship is better understood.

Dr. Lothar Schaffeler, director of technology – flexibles NAFTA, for Siegwerk—Siegwerk continues to see solvent-based ink leading the market share for the packaging industry; however, this is somewhat dependent upon the volatility of solvent prices. If solvent prices continue to rise, Siegwerk sees some market share transferring to water-based technologies as a cost advantage to the customer. The bulk of the market will remain solvent-based though. Energy-cured technologies showed growth within the overprint varnish sector, while no growth is foreseen for the colorant side of the food packaging market.

Richard Pettifor, president, Sun Chemical North American Packaging Inks—While both flexo and gravure processes are commonly used in the packaging market, flexo has a significant share in North America. However, competition between the two processes, on a global basis, is driving ink manufacturers, press manufacturers, and other suppliers to hone the strengths of each process, which is a major benefit to converters.

Both flexo and gravure have seen major improvements in recent years, but the flexo print process, aided in part by the technology advancements in ink systems and the installation of high-speed flexographic presses, have seen a significant improvement in delivering the high-quality print demanded by the market. The technology provided by the ink maker is vital to the converter to ensure he can be competitive against overseas competition.

It appears that water- and solvent-based ink usage continues at levels similar to recent years, with neither gaining significant share. We believe there is significant opportunity for energy-cured packaging printing, especially for the WetFlex™ process and UniQure™ inks that Sun Chemical has developed. WetFlex is a patented flexo printing process designed to significantly improve print quality and efficiency for flexible packaging and using UniQure™ inks that can be wet-trapped on a common impression (CI) cylinder press and cured instantly by an in-line electron beam at the end of the press.

Bob Waddington, general manager for UVitec Printing Ink—Energy-cured should have low double-digit growth for the foreseeable future. Water-based will also continue to remain strong as certain jobs are more cost-effective to run with that ink system. Solvent-based will remain static or condense as environmental issues increase and [there are gains in] certain segments by energy-curable inks.

pP: What impact on the overall package-printing ink market do you see from digital printing (toner-based systems, inkjet inks, etc.)?

Impastato—In packaging, I don’t see much impact for toner-based systems over the next five years. However, I do see continuing opportunities for inkjet to be used in the narrow-web portion of the industry. This will be limited due to economics, but I would expect that inkjet will eventually carve out a unique niche in the packaging market.

Bryce Kristo, Sr. VP, CFO, INX International—We see digital ink making inroads into the packaging conversion process to provide more dynamic advertising to the final product. As early adaptors become successful in this integration effort, others will be forced to follow.

Daniel F. McDowell, president – NAFTA Region, for Siegwerk—Siegwerk has not experienced any erosion of market share due to digital printing.

Pettifor—Digital printing is getting a lot of attention because everyone realizes that it has great potential and as a market leader, Sun Chemical has invested in a revolutionary FastJet™ process for printing corrugated packaging. However, with less than three percent of the market, it accounts for only a very small part of the packaging market today. Speed and cost are still limiting factors. For at least the mid-term, it’s likely that digital’s primary use will be in customized or short-run applications where it can be more competitive with the processes that can produce lower-cost packages en masse. Inkjet presses using UV-cured inks have potential because they can withstand many liquid or greasy products. If they can speed up inkjet printing, perhaps through the use of fixed-array print heads, it is likely to grow more quickly, as shown in the FastJet process.

Waddington—Digital still has a long way to go but it can’t be ignored. Finishing systems for the press were a big setback as hot stamping, diecutting, and so forth could not be done on the older equipment. New digital presses are available that can do all the finishing work of the larger ‘conventional’ narrow-web printing presses. The continual prohibitive factor for digital printing is that it does not make sense on long runs (speed and cost of consumables = quickly diminishing returns on longer runs). The digital press cannot lay down a thick ink film, which creates opacity issues for clear stocks and it is a big issue where a coating is being applied for slip and/or product resistance factors. I think that until these issue can be met, digital’s impact on narrow-web printing will be static for the foreseeable future.

pP: What ink markets/segments does your company focus on? What makes your company distinctive?

Impastato—Since Flint Group is a large global supplier of inks for packaging, we have the geographical coverage and critical mass to participate in all the major packaging sub-markets. Certainly folding-carton and flexible-packaging are key markets where we have a comprehensive portfolio of products.

Flint Group has been built through a number of acquisitions over the last 20 years. Each of the acquired companies had a unique set of experiences and products. Some had very tight focuses on specific segments of the market, while others had a wider focus. Having all this diverse experience has provided us with unique insights into a variety of packaging markets. In addition, as a global company, we source materials from all around the world. We have people who are continually looking for new raw materials and technologies that will advance our inks and coatings.

Kristo—We are best known as a metal deco ink supplier; however, we have a full scope and breadth of products for the packaging markets. Close to 80 percent of our domestic sales are to packaging companies. In addition to metal cans, we are a leader in single-serve containers. We cover all substrates including rigid, paper, and film including UV and certain coating applications. What makes INX distinctive is our integrated technological approach between local R&D efforts and our main group in Japan, along with an emphasis on local technical service.

McDowell—Siegwerk provides products that are solvent-based, water-based, and energy-curable, as well as specialty inks and coatings for flexographic, rotogravure, and offset printing applications. Siegwerk is 100 percent dedicated to the development and manufacturing of inks for the packaging market.

Pettifor—Sun Chemical supplies a number of segments in the packaging market, but we have gained leading shares in the flexible packaging and paper packaging segments. Within these segments, we provide a broad array of products to cover any print process and most applications. No other ink company offers the breadth of products worldwide that Sun Chemical does. Sun Chemical also is the leader in innovation and color technology, because we invest a significant amount of annual turnover in research and development.

Waddington—UVitec focuses on energy-curable inks and coatings. We are heavily involved in the pharmaceutical and prime label markets. We have a complete line of inks and coatings that are ‘Pharmaceutical Safe’. We offer UV inks that adhere well and are extremely flexible; this is important for the many different types of synthetic substrates on the market. We are one of the few remaining independently owned, specialty ink manufacturers.

pP: Inks experienced some fairly significant price increases in 2006. Did this have any adverse affects on your business? How did your customers deal with these increased costs?

Impastato—The last few years have been difficult. Nearly all raw materials have been affected and have increased in price. The magnitude of the increases was such that we could no longer hold back ink prices. Prices had to increase, all other attempts at cost savings had been exhausted earlier in the cycle. Price increases always create a strain on relationships. Whether the relationship is relatively new, or if it had been in place for years, a price increase often triggers a reaction to bring in other suppliers and examine competitive offers. Unfortunately, this often reduces the conversation to price and minimizes attention to added-value services.

It appears the result of the price increases over the last few years has moved many printers to this unilateral (price) focus. This is unfortunate because inks impact so many parts of a printing operation and can have cost implications far beyond the actual cost of the inks. I believe by working together on these issues, an ink supplier can often assist a printer in reducing costs in other areas that can compensate for higher ink costs. Hopefully, we can start moving to a more comprehensive examination of value in the future.

Kristo—The ink price increases were necessary for the industry as a whole to remain profitable. The industry had been continuously lowering prices for years as improvements were made, however, the trend of eroding prices combined with increased raw material costs made it essential that the industry move to raise its price. The affect on our business was to offset the adverse impact of the previous year’s rising material costs.

McDowell—For the most part, customers were accepting of those changes that ink manufacturers have been facing due to the continual rising of raw material costs. Price increases are difficult on all customers, which is why Siegwerk continues to strive to provide value through process cost savings, not only at the customer level but also within its own processes and formulations.

Pettifor—Raw material prices and manufacturing costs have been rising steadily due to a myriad of factors. Ink manufacturers have not been able to raise prices at the same rate, so margins are being squeezed because we have not been able to keep pace. Some raw material suppliers are moving to other markets that are more profitable for them. Where we can, we have identified alternative sources and substituted materials, while maintaining quality and performance levels. We also continue to do all we can to streamline our processes using Lean and Six Sigma initiatives, although these productivity improvements have been underway for a number of years.

Sun Chemical has implemented moderate price increases in 2006, but they don’t match the rate of increase we’ve seen in our manufacturing costs. Most packaging printers have recognized that ink makers can’t continue to supply them without price increases. In a few cases, we did have to make a choice between selling inks at a loss or discontinuing the sales. We hope that customers recognize the total value that Sun Chemical supplies to them in terms of quality, dependability, and service.

Waddington—The price increases were industry-wide; most customers accepted them without any issue. I have noticed customers are more interested in blending their own inks from bases and other cost-cutting measures than they have been in the past.

pP: What competitive threats or market opportunities are ink suppliers facing by the growth in developing countries?

Impastato—There is a dual threat by the higher growth being seen in developing countries. First, the potential of printed product being brought in from overseas to supply the domestic market. Distance, time, and transportation cost can somewhat moderate this threat, but for some products the threat is real, and it is occurring now. A good example is the grocery sack market. A few years ago domestic printers were forced to go to court and get relief through an anti-dumping tariff because foreign printers were illegally undercutting domestic pricing.

The other threat is the loss of domestic manufacturing in general. As more products are manufactured in developing countries the packaging is also manufactured in those same developing countries. This may be an even larger long-term threat because regardless of what improvement a printer will make in its operational efficiency, this volume will never again be available.

Kristo—We see some developing-country companies attempting to penetrate the market based only on price, disregarding quality and service. The threat is when the market sees the price of a new entrant as including market prerequisites of quality and service when they do not. This brings instability to the market as companies switch suppliers and switch back or traditional suppliers respond to a new entrant’s price without regard to the cost of their value-added quality or services.

Gilles Faure, director of marketing – paper, plastics, and labels, Siegwerk—Despite correct global GDP progress in 2006, Siegwerk has experienced above-average growth coming from the developing markets such as India or Russia. Siegwerk has been able to broaden its scope within 37 countries worldwide.

Pettifor—The growth in offshore printing of packaging is a concern to all ink makers. Some of this growth has been fueled by cost advantages due to cheaper raw materials and labor. Now, however, ink components can be sourced from anywhere in the world. The biggest concern is that product manufacturing is moving overseas and, consequently, the package printing is, too. As a global ink manufacturer, Sun Chemical is seeing its sales rise in these developing markets also.

Waddington—We have lost and will continue to lose sections of our domestic customer bases as the printing industry further globalizes. Many domestic box printers and commercial printers are really feeling the crunch as these markets further contract. Pharma printing and consumer packaging needs to be based here (at least for now), and those markets continue to be fairly strong. There are more Pacific Rim raw material suppliers and European raw material suppliers who can heavily undercut domestic pricing, and subsequently hurt the American-based ink manufacturer. On the plus side, I have noticed more foreign inquires in the last few years and we have picked up considerable business in our foreign markets accordingly.

pP: In what areas is your company putting its R&D efforts?

Impastato—Flint Group has developed a customer-driven philosophy regarding R&D. Our customers directly drive our R&D efforts. Rather than trying to create a new technology and pushing it into the industry to create a market, we spend our resources on products that are directly related to our customers, and are driven by our customers and their current needs.

Schaffeler—There are numerous projects in which Siegwerk R&D has worked on in order to offer our customers more effective and efficient product offerings. Three areas in which Siegwerk has dedicated R&D resources include:

• Alternative technologies for energy-curable processes (i.e., two-component systems);

• RFID/conductive inks;

• Polyurethane chemistry for solvent-based applications.

Pettifor—Converters are demanding higher quality and productivity. Much of our research is going into producing inks that will perform on new, higher-speed presses and offer improved consistency and color strength. Due to rising costs and scarcity of some materials, we also have had to reformulate inks using alternative materials. Finding materials that result in quality inks which can match or exceed current offerings is a daunting task. One of our major efforts for core R&D is to manufacture products that offer our converter customers competitive advantage through better environmental credentials that meet today’s requirements for sustainable products.

Waddington—Areas of focus include security inks and coatings, lower viscosity flexo inks for high anilox rollers, and litho inks for plastic and credit card use. pP

Resources

Alden & Ott www.aldenottink.com

Environmental Inks & Coatings www.envinks.com

Flint Ink www.flintgrp.com

Fujifilm Sericol www.fujifilmsericol.com

INX International www.inxinternational.com

Rad-Cure www.radcure.com

Siegwerk www.siegwerk.com

Sun Chemical www.sunchemical.com

UVitec Printing Ink www.uvitec.com

Water Ink Technology www.waterinktech.com

Wikoff Color Corp. www.wikoff.com