Investing in a Brighter Future

Package printers are following a trend of increased capital spending on new printing technology.

By Tom Polischuk

Editor-In-Chief

THERE ARE HIGH expectations (if not just high hopes) that 2004 will be a breakout year for the U.S. economy in general, and the packaging segment in particular. It has been a long arduous wait, especially since signs of a turnaround have been apparent for some time now. It just seems like everyone is lined up at the starting line for the race to begin, but the starter's pistol just keeps on misfiring.

A good indicator of both current business expectations and future economic performance is the capital expenditures that businesses are making, or are planning to make, in light of the present economic conditions. Some businesses wait for an upturn to be well on its way before spending money on new equipment, while others will invest in new assets so they can be ready when business picks up. Either way, current spending on capital equipment provides a good gauge on business activity in the months ahead.

Two recently completed surveys of equipment purchasing plans show that 2004 will be a year of healthy capital investment in the packaging industry. In its seventh annual Purchasing Plans Study, the Packaging Machinery Manufacturers Institute (PMMI) reports that 66 percent of the companies surveyed plan to spend as much as or more capital in 2004 vs. last year. Similarly, packagePRINTING's 14th annual Equipment Purchasing Survey had almost 90 percent of respondents indicating the same or greater level of spending in 2004.

PMMI's 2004 Purchasing Plans Study is a broad study, looking at the plans of both consumer and industrial goods companies over the full spectrum of the packaging segment. Results show that packaging machinery expenditures will increase to $5.479 billion, 4 percent more than last year.

The study also indicated that six of eight market segments will grow during 2004. These six segments—beverages, chemicals, durables, foods, personal care, and converters—account for about 81 percent of the U.S. and Canadian packaging machinery market, according to PMMI.

For overall spending plans, 33 percent of the companies reported plans to increase spending in 2004, while 28.7 percent plan to reduce spending and 32.5 percent will spend at the same level as last year. "This is the first year since the inception of the Purchasing Plans Study that the 'no change in spending' group did not represent the clear majority of respondents," said Chuck Yuska, PMMI president. "This is good news, in that there may be a shift away from the overall mood of extreme caution we've seen in the market for many years."

The packagePRINTING Annual Equipment Purchasing Survey has a more targeted focus, covering the spending plans of printers of packaging materials (primarily, tags and labels, flexible packaging, and folding cartons). Data from this survey reinforces the findings of PMMI.

This year's respondents include 38.7 percent that are planning to spend the same level of capital as last year and 48.4 percent that will increase spending. The combined total of 87.1 percent compares favorably with last year's total of 70 percent.

The reasons given by package printers for their new equipment purchases showed a healthy 46.7 percent indicating a need to add capacity. This was followed closely by "enhance services/processes" at 43.3 percent, while 30 percent indicated a need to simply replace old equipment. (Note: Respondents could select more than one category.)

The investment categories that package printers are looking at show a real bias for improvements in the prepress area. More than 75 percent of respondents said they will be investing in prepress capabilities. Of these, more than half listed a prepress software/hardware combination as an area for new purchases. This may well reflect a recognition that the many new product enhancements coming from prepress suppliers are allowing package printers to cost-effectively improve quality, reliability, and productivity.

There is also serious interest in new presses. About 30 percent indicated that they were investigating new press purchases. Flexo and combination presses were listed most often as what they were looking into.

Other equipment categories getting the attention of package printers include slitter/rewinders (27 percent) and inspection equipment (23 percent).

Only time will tell whether these plans become reality. Everyone in the package-printing community is hoping that capital spending does pick up—suppliers because they'll be on the receiving end of the check, and package printers because they will be on the receiving end of the benefits.