State of the Industry-Industry Wide

LAST OCTOBER, DURING a panel discussion at GRAPH EXPO® and CONVERTING EXPO® 2002, one long-time industry observer noted that the printing industry isn't really one industry at all, but rather a collection of different niches and specialties in which conditions, pressures, and opportunities can vary widely.

Bearing this diversity in mind is the key to understanding where our industry may be headed in 2003. Clearly, the starting point for any such discussion is a distinctly lackluster 2002. A number of factors have come together during the last two years to create one of the most challenging periods our industry has ever faced.

National economic conditions have been sluggish at best. Closer to home, print sales overall declined in both 2001 and 2002, according to the National Association for Printing Leadership, which projects, however, a return to growth in 2003.

Orders and shipments of printing equipment closely follow these trends. From a historic high of $2.7 billion in 2000, equipment shipments declined to $2.5 billion in 2001 and are projected to total $2.3 billion in 2002. Supplies shipments have also contracted, from a high of $1.961 billion in 1998 to about $1.441.7 billion in 2001, and another decline of $100 million or more estimated for 2002.

NPES expects that growth may soon return to several product categories. Shipments of sheetfed offset presses, for instance, have been flat in 2001 -2002 but are expected to post about a 6 percent gain in 2003. A number of other categories are also poised for growth.

An ongoing survey conducted through the NPES Web site has found that nearly 60 percent of respondents expect business to be up in 2003, and another 35 percent expect roughly the same performance as in 2002.

Certainly optimism about 2003 was increased by the success of GRAPH EXPO and CONVERTING EXPO last October. Exhibitors across virtually all product categories reported strong sales and buyer interest. In some categories marked by rapid technology development such as computer-to-plate and digital printing, it seems reasonable to think a long period of "wait and see" is ending, and printers are beginning to execute concrete investment strategies.

Still, the strongest message we derive from both expert forecasts and the data is this: Even when recovery comes to our industry it will not be uniform, but will vary widely from segment to segment and from shop to shop.

Part of this variation will reflect business conditions in different market niches. But another factor, possibly even more important, is how well individual company managers position their firms, control their costs, expand their service offerings, and implement new technology.

Package printing has been one of the industry's bright spots for many years now. Such developments as all-digital workflows, improved color management, more productive presses, and steady progress in flexographic printing have helped print respond to marketers' demands for faster turnaround and lower costs.

These values, in turn, support more geographic and demographic variation in packaging designs, more test marketing, and closer integration of packaging design and printing with a marketer's overall strategy.

But the package printing environment is not without its concerns. Like other segments of the print industry, packaging faces stiffer competition from non-print options. Items sold through a Web site don't require the attention-getting package designs so essential to winning shelf space in stores. Indeed, these items are often shipped in polyester bags or plain white cartons, requiring little or no printing. In this way, the growth of e-commerce may undermine the prospects for package printing in the next several years.

Will other segments pick up the slack and keep package printing growing? Some niches like covers for CDs and DVDs are doing quite well, as is label printing for beverage containers. Consumer packaging in general continues to be strong. As industry commentators have noted, Wheaties aren't delivered through the Internet. By making it easy to create an extraordinary wealth of creative and exciting packaging, print is actually stimulating marketers to do exactly that.

Yet even specialists in healthy and growing fields may be dangerously unaware of the challenges the future may bring. A speaker at the recent PRINT OUTLOOK® 2003 conference in Washington reported on a survey that asked printers to rank their top business concerns. Leading the list were general economic conditions and direct competition from other printers. Losing business to non-print communications didn't even make the survey's top 10.

Yet at the previous year's PRINT OUTLOOK program, it was estimated that print had lost some $36 billion in sales to non-print media over the previous three years without even realizing it. These are not jobs printers lose to other printers, but work that is never printed at all.

Here, really, is the crux of the challenge—and opportunity—our industry will encounter over the next several years. Package printing, along with the brochures and direct mail that have always been the bread and butter of commercial printing, is part of a communications continuum today.

This continuum embraces Web communications, video, point-of-sale graphics, trade-show displays, signage, and other tools along with printing. Marketers want to treat these vehicles as part of a comprehensive package. They want their designs and original artwork to be instantly adaptable across product types and technologies without loss of quality. They want to deal with fewer suppliers, each of whom can deliver more kinds of service.

Thus, the key for printers is to evolve beyond a limited focus on putting ink on paper. Many printers are exploring partnering opportunities with non-print companies, while many others are actively adding capabilities to their own shops.

Fully digital workflows, leading to true computer integrated manufacturing (CIM), will be keys to this process because they will enable print production to be managed like other manufacturing processes; to be measured, controlled, and integrated with other aspects of the customer's business.

This evolution will also bring print managers face to face with another big task: They need to expand their own thinking about sales, customers, and market opportunities. They need to learn how to sell such new services as wide-format digital inkjet printing, fulfillment, and digital asset management—services that require a different sales approach from traditional printing.

At the end of this process of change lies a big reward. The diversified, broadly competent "printer-plus" can become an indispensable part of the customer's team, a supplier whose services are so completely interwoven in the customer's business that their fates are truly linked.

However our overall economic picture may develop over the coming year, that kind of problem-solving creativity is always going to succeed. Though it may look very different from the familiar old print business, our industry is indeed primed for continued prosperity in the years ahead.

-by Regis J. Delmontagne

President, NPES