Insights from Vision 21: the printing industry redefined for the 21st century: this landmark report offers insights into key changes in the printing industry, and the impact they will have on papermakers and paper marketers.
In the 1960s, 1970s, 1980s, and early 1990s, total printing industry sales grew faster than gross domestic product (GDP) growth. In the last part of the 20th century and certainly in the 21st century, print growth will be below but not significantly below the growth of GDP. This simple fact will result in continuing price pressures as printers struggle to fill an ever-growing base of increasingly productive equipment to pay their bills. A significant number of printers that are mostly small to medium sized will simply cease business--up to 20% of those that exist today.
The Vision 21 report is the third in a series that pinpointed key changes in the industry. The previous two--Print 2000 and Bridging the Gap to the Digital World--were on-target with their forecasts. The first item to note about these two reports is that their predictions came to pass sooner than expected. The second is that neither report truly forecasted the tremendous impact the Internet is now having on business and retailing.
A single article such as can only sketch the depth of the macro and micro impacts on the future on printers. Those interested can learn more in the complete report available from the Printing industries of America.
An important segment of the report covers key printing product niches. Each product category includes coverage of growth trends, elements enhancing demand, factors undermining demand, major market uncertainties, and imperatives and implications for printers of these products.
The good news is as follows:
* Printer shipments of general commercial and quick printing will increase by 4.7% through the year 2003 and by 4.6% from 2004 to 2006
* Direct marketing printing will increase from 4.5% per year through 2003 to 3.7% from 2004 to 2006
* Catalogs and directories will grow at 2.8% per year through 2003 and 2.5% from 2004 to 2006
* Magazines and periodicals will grow at 5.6% per year through 2003 and 5% from 2004 to 2006.
Business forms will decline by 5.7% per year from 2000 to 2003 and by 3.5% per year from 2004 to 2006. Books should increase about 4.2% per year from 2000 to 2003 and 4.8% per year from 2004 to 2006.
The report predicts that the Internet will have a negative impact on paper-based catalogs and directories. Paper, mailing, and distribution costs provide the opportunity to reevaluate page counts and circulation levels and drive catalogs into higher-return variable printing.
Magazines and periodicals will grow primarily through specialization, customization, and demographic targeting as new titles focus on special interests identified over the Internet. Electronic substitutes will nevertheless accelerate the decline in the use of business forms.
Books will experience threats by e-books and the decline in classroom use of printed materials. College enrollment will remain strong, and print-on-demand will provide opportunities. Baby boomers will comprise the prime reading age class of 44-to-60 year aids. Finally, packaging with labels and wrappers--the print segment not under substantial pressure from digital alternatives--should continue to grow at a faster pace than all other print products.
Impact on paper: Papermakers and paper marketers who concentrate on providing substrates to the packaging industry including the printability of these substrates--corrugated boxes for example--will be pursuing print's most important growth market in the next decade. Concentrating on long-term contracts with the limited number of printers that niche themselves in packaging would seem an appropriate strategy.
SECOND VITAL MARKET
The next important print market product niche is general commercial and quick printing. An ever-increasing amount of work produced by quick and commercial printers will migrate to four- or more color printing from one- and two-color printing. This should increase demand for coated stock. The continuing decline in direct marketing printing and catalogs and directories will diminish the demand for uncoated stock. The significant decline in business forms also influences this trend.
Besides slower growth and the long-term substitution at print via Internet activities, Vision 21 lists several other major concerns that successful printers must address. These are as follows:
* A more stable paper market will produce continuing growth in paper prices.
* Labor markets will remain tight, and printers can expect to face strong demand from other technology sectors as they strive to attract and keep good employees.
* Energy will be the biggest near-term cost challenge for printers.
* The price of capital will probably increase more slowly than inflation over the coming decade.
* Printing industry bottom-line profitability will come under increased pressure over the next three to six years but should be similar to those of the last few years with average before-tax profit rates of sales at approximately 3%. This is a bad sign.
Impact on paper: The low profitability of the average printer is positive and negative for papermakers and paper marketers. With paper being the primary consumable cost to a printer, the paper industry will experience continuing pressure to reduce costs. Shopping to find the best price will become more common especially through the use of web browsers and Internet connections.
MORE TOP TRENDS
Simultaneously, manufacturers and marketers who lock in long-term commitments with printers using predetermined pricing plus rebates for volume purchases could benefit front concerns expressed in the Vision 21 study. The Vision 21 report offers key messages and imperatives.
Ever-enhancing workflow management
Another term for workflow management is digital workflow. This means that each process connects to all processes through an electronic workflow management system. The print shop of tomorrow must have total integration with automated manufacturing processes rather than a mix of craft and manufacturing as occurs today. The need for continued reduction in cycle time and affordability will drive computer-to-plate and computer-to-press. As the printing industry develops standards for data definition for management integration of workflow processes, automation use will increase significantly. The emerging Job Description Format and other eXtensible markup language (XML) standards will increase the pace of automation in digital workflow management.
Impact on paper: Do not allow the initial rejection and criticism of e-business print specific models for conducting business with vendors, merchants, and customers on the Internet fool you. The Internet is a tremendous opportunity for building longer term relationships between papermakers, paper marketers, printers, and clients. A robust e-business connection can create workflow efficiency particularly in ordering materials and supplies. As the print world slowly but surely moves from traditional to digital printing with its emphasis on shorter runs and just in-time delivery, Internet ordering will be a necessity.
In addition, the elimination of traditional prepress will require printers to work with creative teams from their clients to generate image files. Customer service training will be critical to the success of the digitized printer.
Impact on paper: Papermakers and marketers must continue to build "brand images" for their new paper types and promote and train buyers and print sales representatives on the values and best use of these products. A print salesperson's key function is to recommend paper selections for a job.
The most dramatic result of adopting new digital technologies will be consolidation of the industry into two groups--small convenience printers and large printers. Printing industry consolidation will probably continue as large printers merge with or acquire medium and small sized companies that cannot afford new technology.
Impact on paper: with the strong dominance of large printers and the reduction in numbers, individual branded papers will likely continue to grow. Large printers can also best develop a strong workflow system from vendor to production to client. A robust Internet solution is again evident with this group.
In addition, small convenience printers will require instant availability, paper inventory evaluation, immediate pricing, and just-in-time services to deal with print clients demanding the same. This scenario also requires a robust Internet browser-based solution.
Finally, packaging for the small commercial and quick printer will require shipments of increasingly smaller quantities into the size range of the ever-increasing number of 12 in. x 18 in. digital printers. The cut sheet of the future may no longer be simply 8.5 in. x 11 in. but include 12 in. x 18 in. approximately.
Technologies first shown at the printing industry conference DRUPA '95 are now becoming commercially available. This is particularly true for the "direct-to" technologies of computer-to-plate, direct imaging and toner based production. Prices have fallen and medium sized and smaller printers must become more familiar with these technologies. Printers who continue to see their businesses as job-shop operations will become dinosaurs. The days when a printer could rely on only one process are ending.
Importantly, print economies are all about reducing job turn-around times, shortening press make-readies, and decreasing costly waste. Successful printers will discover innovative ways to bring new types of equipment into their shops and to apply them to the needs of their customers.
Lithography will he around for a long time, but it must continue to evolve. Printers must continue to supplement it with digitally based printing capabilities. Digital and offset markets are not a choice. Instead, a huge overlapping area relates to both. Printers need to understand the development of this overlap.
Impact on paper: Papermakers and paper marketers have been concentrating on developing new digital papers. This is an exciting growth market. Even the average commercial printer will have a digital operation, which will require coated and uncoated offsets and new digital papers. The print output from digital devices will drive the growth of coated papers and decrease the use of uncoated papers.
Internet trends, implications, and forecast
Use of the Internet by a printer is in the very early development stages. Use will rapidly evolve and have significant industry impacts over the next three to six years due to various market threes and technological developments. The key imperative is the need for printers to align their Internet capabilities with their specific workflow processes, customers, and job profiles. Business-to-business on-line commerce in particular should increase at spectacular rates. The on-line business for the printing industry will increase accordingly. Vision 21 predicts that approximately one-fourth to one-third of printer sales volume will be on-line by 2003 and approximately two-thirds to three-fourths by 2006.
Impact on paper: By the year 2005 or perhaps even 2004, a majority of paper ordering will be via the Internet. This will require a change in branding an individual sheet, better forecasting of inventory levels, inventory systems that have easy interrogation, standardized pricing for individual clients, stronger brand marketing of individual papers, a computer-literate sales force, and a strong customer relationship management (CRM) system. Companies that build and maintain a strong customer service relationship with their printer will more likely be successful.
Ancillary products and services
Printers are now moving from an era in which their equipment provided the value to a new competitive arena where their strategies, skills, digital experience, and print-support services will provide the value. Beyond 2006, many generalist printers will probably not exist. The "24/7, one-stop shopping" mentality is beginning in the printing industry. A trend exists for even the most basic printing to use color and complex finishing processes as users come to understand more widely the value of effective print advertising. By 2006, printers will need to operate in a more "user-friendly" if not "near-retail" environment. They will also need to provide a much richer array of print extension communication services.
Impact on paper: Even more than they do today, printers will rely on the advice and counsel of their paper sales representative and the papermaker regarding the qualities and appropriateness of an individual sheet for a specific digital process. The Vision 21 report predicts that clients of printers will be less likely to specify these papers as they continue to move to just-in-time.
Clearly, most printers will require a variety of reproduction capabilities including digital variable-data printing presses, direct image lithographic presses, or new high-speed ink-jet presses. Estimates indicate that by 2006 at least half of all printers will have both lithographic and digital printing capabilities. As much as 20% of all print volume may come from these digital devices.
Impact on paper: Digitalization is the primary agent of change and will in the medium term have the following effects:
* Reduce the length of print runs
* Give better quality reproduction
* Stimulate the need for higher quality papers
* Segment the market into commodity products such as cut size and specialty while niched sectors will serve the requirements for higher quality graphics
* Decrease tonnage of markets but give higher value
* Create a need for new and improved paper having different surface characteristics and structure with resistance to aging, light fastness and, improved end use flexibility.
By 2006, virtually all job elements will be digital. More importantly, a new series of standards and protocols will allow a continual dialogue among the designer, the creator, the printer, the finisher, and the print buyer. The printer's realm of responsibility will range from a pre-procurement and pre-creative stage all the way through to a fulfillment and customization stage. These digital interfaces will begin to allow the development of the "digital smart print factory" and an event-driven production environment.
Large franchise and chain companies have more flexibility in the type of operating models they can adopt compared with single-plant businesses. Printers who want to provide more service must become more capital intensive. This is a heavy burden for a single operation to carry. The chain stores have realized this and have begun to adopt a hub-and-spoke system for farming out various print jobs. Under this model, retail stores channel a steady stream of complex orders to a central hub for processing. This means the company can offer regular services without purchasing complex, expensive equipment for each retail store.
Impact on paper: Nationwide contracts with major national print groups--franchisers or consolidators--will be standard Papermakers must develop strategies to provide the proper inventory levels for an ever-increasing variety of stocks of which some will be branded for individual clients. Warehousing and distribution will simply become more important.
Increased prices will directly affect printers and manufacturers. They will need to find ways to increase productivity or attempt to pass price increases on to the products they provide to the independent organization. Where successful especially in the paper area, these efforts will continue to impact the competitiveness of print vs. alternate media.
All parties to this equation--the manufacturer, the printer, and the papermaker and marketer--must work together to find the best "solutions" showing why print is still a good value despite its increase in cost. This will be the emerging challenge.
IN THIS ARTICLE, YOU WILL LEARN:
* What trade associations predict for the future of the printing industry.
* How changes in printing will influence paper.
* Why the Internet will be an important factor in future printing.
* For a description of the Vision 21 Report, and an order form, go to www.gain.net/publications.
About the author: Terry A. Nagi is president of Digital Print Resource, a sales and marketing consultancy dealing with the realities of print today. Contact him by fax at +1 202 965-1722, by email at TANagi@aol.com. Additional information is available at www.tanagibigstep.com.
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|Author:||Nagi, Terry A.|
|Publication:||Solutions - for People, Processes and Paper|
|Date:||Oct 1, 2002|
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