On the Up-and-Up
Buoyed by the surging national economy, package printers are expected to buy, diversify,and go digital to profit in 2000.
By Regis J. Delmontagne, President, NPES
A national economic expansion unprecedented in its duration and vigor continued in 1999and will continue in 2000to power the package printing industry to strong growth.
Economists speaking at December's PRINT OUTLOOK® 2000 program in Washington, DC, noted that 1999 was the fifth consecutive year in which the U.S. economy grew by 3.7 percent or more. Economic expansions throughout our history have averaged 32 months in length, while the current boom finished 1999 in its 105th month of growth.
As for the near future, CIT Group V.P. of Economic Research Michael Paslawskyj predicts a strong 2000 "is in the bag," adding that "inflation is truly dead," and "the near-term risk of recession has almost completely evaporated."
Michael K. Evans, consulting economist for NPES The Association for Suppliers of Printing, Publishing and Converting Technologies, projects further: "The economy can continue to grow at 4 percent or better indefinitely."
Of special interest to package printing specialists, consumer spending seems likely to remain very strong in 2000, due to a combination of rising wages, low inflation, steady interest rates, and plentiful credit. Americans are enthusiastically spending money on everything from automobiles to food products, from clothing to computer software.
Prosperity's impact
How will all this economic strength affect the printing, publishing, and converting industries?
Print performance has always been strongly tied to national economic conditions. However, after growing more quickly than the U.S. Gross Domestic Product throughout the 1980s, and keeping pace for most of the 1990s, print sales since mid-1997 have been trailing national economic growth. Real (inflation-adjusted) sales continue to grow, but they have not been keeping up with the surging national economy.
Package printing has also been growing steadily in recent years. About 1,740 plants in the United States specialize in package printing, producing chiefly flexible packaging, according to the Printing Industries of America Print Market Analysis. These plants reported sales totaling $19.1 billion in 1998, up about 4 percent over 1997. That year's sales, in turn, were about 5 percent higher than in 1996.
One factor accounting for this growth may be increasing complexity and use of color in packaging jobs, commented Ronnie Davis, PIA's chief economist. Specifically, he noted, intense marketplace competition is putting a premium on high quality packaging, which means package printers are pressed to deliver greater value in the jobs they execute.
Major investment spending forecast
Across specialties, printers' optimism is reflected in their plans to invest in new equipment. Nationwide, investment in new capital equipment should grow by about 13 percent in 2000, after posting double-digit gains each of the past four years. Favorable credit terms, coupled with dramatic technological improvements and the prospect of steadily rising consumer demand for all kinds of products, fuel this continued growth.
Looking specifically at print production equipment, NPES market data portray a 15 percent rise in shipments of printing equipment in 1999 and forecast a more modest 3 percent gain in 2000. Shipments of sheetfed presses, offset duplicators, and off-press color proofing products are all expected to advance in 2000.
Much of this economic forecasting, however, is complicated by the changes taking place in our industry. Today's printers are diversifying their businesses by adding new services in addition to traditional ink-on-paper products. And an increasing volume of routine business communication, including printing, is being done on systems that don't easily fit into the long-established Standard Industrial Classification (SIC) code 27 (printing and publishing).
Technological progress has made print a more effective competitor and a more compelling medium for communications of all kinds, including packaging. In fact, it can be argued that our industry is unique in its ability to integrate time-honored, highly effective manufacturing processes with state-of-the-art digital enablers and systems in an efficient manner. The result is an industry delivering the long-cherished values of printbeauty, permanence, conveniencein more flexible and customized ways than ever before.
New technology waves
New computer production integration standards and methods, developed by the 38-company consortium CIP3 (Cooperation for Integration of Prepress, Press, and Postpress), are expected to promote data linkage across every phase of print production.
Broad adoption of CIP3 will bring to print and packaging production the automation, information access, and efficiency already being realized in numerous other industries. Some of these advantages are particularly important to package printers. Consider the growing prominence of geographical, demographic, and even personally variable packaging. Marketers will enthusiastically welcome developments that enable them to get from concept to finished package faster, produce shorter runs economically, and coordinate their print production with highly detailed national distribution strategies.
Naturally, CIP3 presumes an all-digital workflow, a development that in and of itself is changing the dynamics of the print market. The National Association for Printing Leadership expects the percentage of printers offering digital printing to nearly double from 1999 to 2001, and notes that some 60 percent of printers responding to a recent survey reported that demand for digital, personalized, or variable printing is increasing.
As digital printing and digital on-press platemaking take hold, the opportunities to cut time-to-market and handle shorter press runs economically will expand, creating new advantages for the package printer.
Digital workflows also dovetail with e-commerce. Implemented between printers and their suppliers, e-commerce delivers just-in-time inventory, streamlined ordering of consumables, and other benefits. All of these tasks, of course, depend on the printer having immediate access to accurate information about his operationeverything from how much paper is being consumed to which inks will be needed for which presses the next day.
Many printers are also adopting e-commerce as a value-added in their customer relationships. Customers can often place orders for routine work directly through a printer's web site. In other cases, printers provide customers, through their web sites, with up-to-the-minute information on the status of their jobs. The customer, linking to a secure site, can find out how many copies have been printed, how many press hours remain, and other information.
E-commerce has taken an additional route into the bid/buy, or auction, strategy, which links print buyers with the least expensive suppliers for any given job. The auction approach will probably grow to command a certain modest market sharebut over the next few years, the more creative and relationship-driven implementations of e-commerce are expected to demonstrate their value even more convincingly.
Our industry still faces compelling challenges, chiefly in recruiting, training, and retaining a skilled workforce. But we're tackling these challenges in the context of a more dynamic industry, offering brighter and more exciting opportunities than ever before.
- Companies:
- Printing Industries of America, Inc.
- Places:
- United States
- WASHINGTON, DC