Digital Package Printing – The Value Proposition for the Brand Owner
With all the news chatter around digital printing for packaging coming out of PRINT 13 and Labelexpo this fall, I thought it appropriate to bring the Digital4Packaging readership some insights we have on the topic. This and subsequent articles will be comprised of excerpts from a 155 page report we have published titled, Is Digital Printing Part of Your Brand or Operational Strategy? The report is tailored for Brand Owners and their Supply Chain Partners who are seeking information on the use of digital printing for packaging. The report was written in conjunction with Mike Ferrari of Ferrari Innovation Solutions and I feel is ideally suited to this venue.
Edited excerpt from Is Digital Printing Part of Your Brand or Operational Strategy? Karstedt Partners LLC, 2013
Many analysts forecast a bright future for Digital Printing in the Packaging Market, and while we concur the future does look promising, we see the future evolving in a slightly different manner than most. Most market analysts see the immediate benefits of Digital Printing aligning with, and in support of marketing campaigns. The previous section of the report on the Megatrends affecting packaging we discuss several trends capable of creating new opportunities for Digital Printing. While we agree that marketing campaigns are worth pursuing, we see a parallel market occurring. Reflecting back on the “Chasm Concept” presented in the introduction, Dr. Moore discusses the difference in buyer behavior relative to risk tolerance. (Fig. 1)
Early Adopters have a high acceptance of risk. The Early Majority, or the mainstream market, has a much lower acceptance of risk. Pursuing new markets with new technology is an expensive proposition. This pursuit also involves a much longer timeline for generating positive cash flow versus other product or market investments. Will Print Service Providers (PSPs) and Converters who are typically adverse to risk factors be willing to make that investment? Some will, many will not. The vast majority of potential buyers justify investments based on hard cost savings, or guaranteed opportunities. Some print suppliers may “hedge their bets” by justifying their investment with a positive impact to existing operations, primarily by improving asset utilization on high volume analog equipment. Emerging market opportunities will be pursued, often in parallel, but for many potential investors, risking everything on one endeavor is not comfortable. Most Digital markets evolved in this manner: Early Adopters establish high-value-added niche markets concentrating on unique market or service offerings. Mainstream investors make digital solution investments based on the expectation of internal cost reductions. Suppliers ultimately expand their offerings into both areas.