State of the Industry (SOI): Analyze This
The year may be young, but the media has been busy keeping print suppliers and distributors abreast of major developing issues.
The United States Postal Service (USPS) ended the first three months of its 2012 fiscal year (Oct. 1 - Dec. 31, 2011) with a crippling net loss of $3.3 billion. In an effort to stay solvent, the USPS has proposed to consolidate 200-plus processing facilities. The proposed move would reduce operating costs by $2.6 billion annually and result in a net savings of $2.1 billion, while jeopardizing 35,000 Postal Service jobs.
Eastman Kodak and its U.S. subsidiaries filed voluntary petitions for Chapter 11 business reorganization in the U.S. Bankruptcy Court for the Southern District of New York. The company is phasing out its dedicated capture devices business (e.g., digital cameras, pocket video cameras and digital picture frames), shifting its focus to digital printing.
And by now everyone has heard the surprising reports of Cenveo agreeing to sell its Forms and Business Documents Group—including the Printegra and PrintXcel brands—to Midlothian, Texas-based Ennis. The divestiture of the group, which closed on February 10, will allow Cenveo to focus on its core operations, according to Chairman and CEO Robert G. Burton, Sr. Meanwhile, Ennis is pleased to be able to expand its growing number of capabilities, remaining poised for continued success.
What does it mean for the "little guys" when a major acquisition occurs between two printing powerhouses? Increased market share or are they on borrowed time awaiting their own liquidation auction? Time will tell.
The Printing Industries of America (PIA) recently released a special report, "A Planning Guide for 2012-2013," to better prepare print suppliers and distributors for the future. Current research shows the economy is projected to continue its slow recovery from the recession.
"While a return to recession is always possible, especially since the recovery has been slow, the most likely scenario is for economic growth of more than 3 percent over the next two years," said Dr. Ronnie H. Davis, PIA senior vice president and chief economist. "The largest unknown, of course, is the outcome of the national elections of 2012 and their impact on federal tax and spending policies both over the short and long term."
If economic recovery stays on course, Davis believes print markets should continue to grow as well.
According to Davis, "All in all, our projection is for 3 percent growth in 2012 and 3.3 percent growth in 2013 on a nominal or non-inflation adjusted basis. In terms of print function, the national elections should give a particular boost to marketing/promotional print, which means that this function would grow at above-average rates. In contrast, print intended to inform or communicate will likely grow at a less-than-average pace. Print logistics will likely be in between these two."
In the report, Davis urged companies to make a strategy check a planning priority for 2012-2013. "If you have not yet developed a plan to increase both your specialization and diversification, now is the time, because specialization decreases cost and diversification increases price with a resulting boost to profits," he instructed. "As you focus on diversification, keep in mind that the path to the printing firm of the future is to move from producing printed products to ancillary services to communications solutions to print management services. Wherever your firm is in this spectrum at the present time, you should be thinking ahead to the next step."
Overall, there is a core lesson to be learned from Davis's research: If printers are perceptive of the emerging industry environment and key business tactics, they can look toward a bright future.
Print Professional wanted to know how members of the print industry felt about the current state of the industry—the good, the bad and the ugly. We turned to some of the experts and here is what they had to say:
"The print industry has been evolving over the last several years. Technology, the economy and the contraction of capacity have all affected the state of our industry. Digital production and commercial printing are areas of growth, while traditional documents continue to be a challenge.
There will be continuing changes in our marketplace over the next several years. While traditional documents may see a downturn, the capacity for these products will continue to shrink as plants close or are acquired. This may slow the effects on individual manufacturers somewhat. The role of digital products in our industry will likely continue to grow as the effective pricing quantities edge higher due to improved processes and lower equipment costs."
– David Batson, executive director, Strategic Print Alliance
"The printing industry continues to experience a monumental shift in the way our products are sold, purchased, used and the overall demand. For those companies—manufacturers and distributors—that are committed to the industry, there are still many valuable opportunities. Many of these opportunities are uncovered through non-traditional channels and methods. These non-traditional channels and methods are the new normal.
The trends we've seen over the last three to five years will continue. Long run traditional forms will continue to decline through product type changes as well as customer demand. We anticipate that labels, digital printing, high-color docs, integrated and other value-add products [will] continue to see growth."
– Steven Osterloh, vice president of marketing, Ennis
"For us, 2011 was a banner year. We achieved a combined (NJBF and InfoSeal) sales record for full year 2011. We attribute this to working with valued resellers that focus on relationships with their end-user customers. We also attribute this to capital investments we made in 2010, which lined up with our sales success in 2011. We also attribute this to opportunities created when manufacturing competitors shut their doors or are acquired.
Several conglomerates continue to gobble up significant market share in our industry. InfoSeal and NJBF don't view this as a good thing for independent resellers. We hope that resellers recognize the importance of independent manufacturers and continue to support them. There is a competitively priced, independently owned manufacturer offering virtually any print product.
We continue to see resellers doing business with manufacturers that also sell direct. Our challenge continues to be to show the reseller how they can work with a true trade-only manufacturer and receive the same or better pricing and quality."
– Andrew Harnett, vice president and partner, NJBF and InfoSeal
"The demand for print is in a continual decline and [we] do not see it ever coming back. [However,] print is still an integral part of the media mix—the challenge is to find ways to integrate the other channels with print.
Direct mail is one product area that is growing for us. E-mail campaign response rates are failing miserably. Clients [are] turning to direct mail to drive response rates up and it's working.
... Print is still a great way to communicate your messaging, you just have to get creative on how it can be used in conjunction with other forms of media. To accomplish this, we need to provide constant education and to be involved in the media planning process early. Print as an afterthought is tough to justify."
– Paul Doerfler, chief sales officer, Foster Printing Service