Are Commercial Printers Invading Package Printing?

Given the general consolidation of the print industry as a whole and the blurring of lines between the various segments, it would make sense to see an increase in commercial printers seeking to make an entry into package printing. And while there are several success stories of commercial shops adding packaging applications to their repertoires, package printers can still rely on their competitive advantages to stay a step ahead.

“Unlike commercial print where print is the final product, in packaging print the majority of the value is in the substrate and its conversion, and typically less than 25% of the value is in print,” Marco Boer, VP of I.T. Strategies, a consulting firm serving digital print vendors, says. “Most commercial printers do not have the conversion equipment and expertise, so the default entry point for most commercial printers into packaging is either entry-level labels or folding cartons. It is a big culture change to move into packaging print for a commercial printer.”

The reality is that commercial printing and packaging remain two very different worlds. For commercial printers, the end product is the print itself, Boer says, in whatever size, shape or form it might take. Packaging, on the other hand, derives much of its value from conversion, which typically requires equipment and skills beyond printing.

For example, the corrugated packaging segment often requires a highly specialized process and a variety of capabilities to both print and convert a finished package, says Rachel Kenyon, VP of the Fibre Box Association.

“Printing on corrugated is a specialized capability that is typically — and most efficiently — done in-line at the corrugated plant,” Kenyon says. “Printing advances in the corrugated industry are really going in the opposite direction — as corrugated manufacturers gain greater capabilities for digital printing and other new improvements, we’re able to produce cleaner, sharper, more eye-catching graphics with direct printing in our own facilities. Technological innovations in laminating, diecutting, creasing, folding and gluing are also making elaborate designs more economical for us to produce at high volumes and high speeds. The printer and box manufacturer are one and the same.”

Kevin Karstedt, CEO of consulting and market research firm Karstedt Partners, says the large commercial printing companies are unlikely to get into packaging any time soon, but small to medium-sized operations in the $10 million to $30 million revenue range are increasingly looking into adding packaging applications, including folding cartons and pressure sensitive labels.

“Their clients aren’t the big guys, the Fortune 100 brands,” Karstedt says. “They are the Fortune 5000 brands — they are small, niche and local products without the traditional volume requirements for folding cartons or labels.”

Will Technology Change Things?

The last decade in the print industry has been one of extreme innovation, with digital technologies pushing the boundaries of what anyone thought could be done with a standard printed piece. Those innovations have spread to every aspect of print, transforming the industry’s — and consumers’ — expectations of what to expect when they interact with any piece of printed material. Packaging is no exception, but should package printers worry about those very same innovations making it easier, and profitable, for someone else to come in and steal their clients?

Boer says digital will open some packaging doors for commercial printers, but it’s not likely to be in significant quantities.

“It is likely to be a gradual process, where commercial printers inadvertently stumble into a packaging application by trial and error,” he says. “For example, using light production toner printers to print on folding carton stock to make small boxes for confectionery manufacturers.”

For corrugated manufacturers, Kenyon states that the rise of digital adds versatility, allowing established companies, rather than newcomers to the space, to seize new opportunities.

“Advances in digital printing and finishing facilitate print precision and consistency, so corrugated suppliers can deliver high-resolution, G7-certified printing in flexo, litho and digital,” she says. “Corrugated now has the ability to meet print specifications throughout an entire retail campaign, irrespective of the print execution format. Digital printing, in particular, has opened opportunities to corrugated users with its capabilities to cost-efficiently support short runs.”

Boer says that due to the complexities of packaging substrates and the converting process, it will be unlikely to see many commercial printers producing packaging output at a similar rate to their commercial applications. He explains that most commercial printers entering packaging will do so by either making it a small part of their product offering, or by making a complete transition.

“The package printing world is a complicated one in terms of substrates and conversion, so one either has to dabble on the side in packaging using existing equipment, or make a wholesale change in the focus of the business from a commercial printer to a packaging converter. Note the term difference — printer versus converter,” Boer says.

Karstedt meanwhile, points out that there are around 26,000 commercial printers in North America today, and about 10% of those are doing some level of packaging for non-complicated work. “Is it a huge amount of business? No,” he says. “The folding carton sector is probably in the $10 [billion] to $13 billion range in North America, and commercial printers have a slice of that — maybe 1 to 2%. It’s not large, but it’s a big amount to the small guys doing $10 million a year and $1 million of that is packaging. It’s not big in the scheme of things, but it is growing.”

Another stark difference between the commercial and packaging worlds, Boer says, is that while digital has made major inroads in commercial printing, the packaging segment is still predicated on long runs with little variation. Digital is certainly growing in packaging markets, but commercial printers will find less opportunity for specialty digital applications in packaging.

“There is very little digital printing in package printing, so in many regards commercial printers are ahead of the curve in short-run, high value digital print,” Boer says. “But there is little need for variable data in packaging (outside of web-to-print), since we don’t know who the final buyer or recipient will be. And the eco-system for packaging doesn’t like small runs — they are expensive and disrupt the flow and business model predicated on high and predictable volumes.”

According to Karstedt, digital printing technology can make for an easier entry point into packaging on a smaller, more niche scale for commercial printers, however. As digital presses become more versatile, he says the ability to produce packaging applications can even be a selling point for a press.

“Does digital help? Absolutely,” Karstedt says. “It can really help, especially if a printer buys a digital press for commercial work that can also be used for some packaging. That could be a selling point for a commercial printer — ‘If I buy this, I can also do packaging.’”

He sees the real threat in those small commercial shops adding digital presses to their equipment list that can print on 24-pt. stock — perfect for folding cartons. He also sees a market for short-run pressure-sensitive labels for those smaller local and craft businesses that are looking to expand from printing labels on the printer in the back room to a larger inventory, but can’t yet justify the larger volumes of a traditional packaging application.

Fending Off Further Incursions

So what should package printers be concerned about, then? One potential competitor is the brands themselves, as there is always a possibility of them bringing some of the specialty packaging work in house.

“At some point, packaging converters are going to have to eliminate their requirement for minimum quantities, five-plus day lead times, and upcharges for prepress,” Boer cautions. “We have a five to 10 year window before brands won’t put up with this anymore, but the time will come.”

He went on to note that, “Packaging converters — not printers — should be paying attention to the brands’ needs, needs outside of the brand’s procurement department whose demands are predictable and stave innovation. There are lots of interesting things digital printing can do today for packaging, especially if it involves a high-value good that can tolerate an expensive to produce, digitally printed box.”

Karstedt explains that the packaging segments that are the primary targets for commercial printers are the ones that do not require special equipment. Additionally, he states that by targeting smaller companies, commercial printers do not need to worry too much about the complexities of a packaging line.

“For the most part, a commercial printer today can do folding cartons or labels,” Karstedt says. “They can’t do flexible packaging or shrink sleeve work, they don’t have the specialized equipment for that. And in the past, even with folding cartons it was always that they don’t have the expertise to produce work that can function in a packaging line. And they’re correct — if you send a truckload of boxes that will have aspirin put in them, if that box doesn’t fold right, open right, pack right, if it slows down the packing line, that can’t happen. But small companies are using slower, older equipment or even packing by hand. They don’t have to have the sophistication of perfect boxes. Commercial printers are thinking small, going after the work in their own block, in companies where they already have relationships.”

On the corrugated side, Kenyon is confident about the future, and doesn’t foresee much infringement from commercial printers.

“Corrugated manufacturers are their own packaging printers — they are already building more advanced printing technologies and investing in state-of-the-art direct-printing equipment, and will continue to do so. Brands can now leverage their corrugated shipping containers with high-impact, full-color, beautiful graphics on all six outside surfaces and even on the inside of the box. Commercial printers can’t compete with corrugated manufacturers’ ability to print those multiple surfaces before the box even leaves the corrugated plant.”

At the end of the day, the key takeaway is that packaging is not a quick and easy market to enter, and not even new technological innovations are going to change that. Digital printing can do some amazing things but, Boer says, “the digital printing of packaging is a specialty, and deserves a premium as a result. And that is a market that is really just getting started now. The industry won’t convert to digital overnight — it will take decades. It’s going to be a great journey.”