Drupa has released a report on ‘Drupa Global Trends’ and will publish another report series on ‘Drupa Global Insights’. Both reports study for the first time the trends and major changes in the international print and media sector at both global and regional levels.
The report was compiled by two independent consulting and market research companies appointed by Messe Düsseldorf: Printfuture (UK) and Wissler and Partner.
According to the report, the last three months of 2013 Drupa asked printing and print-related companies worldwide about their current activities and feelings about the future. A total of 2425 senior decision makers in print and related industries took part and answered the extensive questionnaire, specifically 1419 printers, 498 suppliers and 508 print purchasers.
There was a good global coverage with all regions well represented. The majority (58%) came from print services providers, followed by suppliers (21%) and print purchasers (21%). In the economic part of the survey we tracked a cross section of printers, suppliers and print purchasers to see how their businesses were standing up to the current economic turbulence and uncertainty. Then in the markets part of the survey Drupa asked the printer participants to comment on how the radical changes in these markets were impacting on them.
Revenues are up, profits are down and cost increases are hurting:
During 2013, 45% of the insight respondents grew their revenues, but 21% experienced revenue declines. Across the printer, supplier and purchaser communities achieving any price increases for their products remains a major challenge. Only 19% of respondents managed to increase their prices, while 35% saw a decline in pricing. In the developed regions companies are largely absorbing raw material price increases and rising overhead costs.
This combination of negative factors along with a stagnant economy has damaged growth prospects and bottom line results of the majority of companies. Hence although 45% of companies had grown their revenue, 42% had seen a decline in margins and only 19% had managed to grow profitability.
Financial impacts are a mixed bag:
The global trends survey measured the impact of a range of financial measures on the global print community. For 60% of companies in the print supply chain, availability of credit remained unchanged in the last 12 months, but 17% feel that access to credit has tightened.
The level of bank lending remained unchanged for 61% of the print industry. Suppliers have been worst hit by the squeeze on lending, a reflection of the tough trading conditions and economic challenges facing the printers. So 27% of suppliers themselves have seen the cost of lending increase against an industry average of 20%.
Cash flow is a major issue for all companies, so keeping debtor days to an absolute minimum is a critical task. For 58% of the market, debtor days remained unchanged and 11% thought payments had improved against 26% who thought that debt recovery had got worse. Once again the suppliers were hit the hardest with 32% declaring that debtor days had increased.
Yet print in the trenches is coping:
Given the demanding economic conditions and rapidly changing market dynamics facing global print in 2013, the overall picture of operational issues is surprisingly upbeat. Most companies have experienced growth of conventional print volumes in the last year (eg 29% reported more sheetfed offset volume whilst only 16% reported a decline), as well as a strengthening of demand for digital print production (eg 33% reported more digital cutsheet volume whilst only 3% reported a decline).
Printers in every global region are experiencing radical changes in the mix of digital and conventional print as the combination of economic conditions and changing patterns of demand take effect. 45% reported reducing run lengths and shorter lead times, whilst just 16% stated that run lengths were increasing and only 10% that lead times were increasing. At the same time the number of print jobs is climbing (52% reported an increase and just 17% a decline). However the results vary significantly region by region.
Somewhat surprisingly, there were very few respondents in any region reporting major declines in print volume. What appears to be happening is that as print volumes decrease, prices drop, followed by the consolidation of printing companies by merger. The remaining printers have to work even harder to print more and more in an attempt to keep revenues in line with overheads.
The print technology mix is changing:
The survey shows the growing importance of digital print; 65% of all printer respondents globally have digital print production and 5% are digital only printers. 85% of all commercial printers worldwide have digital print and 31% of those state that 25% or more of their turnover is digital print.
In comparison 38% of publishing printers (i. e. printers who work for publishers) and 57% of packaging printers have no digital print capability; a reflection of more conventional business models that demand more traditional print formats and longer print runs.
Digital print has yet to have a significant impact on primary packaging, with the exception of label production where its use is much more widespread.Despite the decisive impact of digital print in the commercial market, it may be reassuring for most printers to know that much of that growth is not at the cost of conventional print production, as 57% of commercial printers worldwide reported that digital production had taken away either nothing or less than 10% of their conventional print turnover.
Globally there are three added value services that have seen widespread adoption by commercial printers: variable data print, creative design and stock, storage and fulfilment. Wide format print is also commonplace and nearly one third have installed web to print services.
However, regional variations are striking, as evidenced by the wide adoption of a variety of different services by North American commercial printers compared with the much more patchy adoption in the majority of other regions.
Operational Trends: February 2014
Given poor economic conditions and major market changes driven by digital communications, remarkably strong operational performance was reported by printers for the last year, though prices and margins remain under severe attack (see image 1 and 2).
Business growth is a major challenge:
Achieving business growth in a declining and rapidly changing market is a significant challenge, especially against a background of strong competition and economic constraints. Couple this with the printer’s traditional blind spot for sales and marketing and there are major challenges establishing a platform for growth.
When printers were asked about the top two constraints to growing their business in 2013, the overall results indicated very clearly that strong competition at 57% and lack of sales at 39% were the major problems. Even though we have seen a significant decline in the number of print companies over the last five years, it appears that there is still strong downward price pressure and either overcapacity or the wrong capacity in the industry to meet current demand.
Perhaps surprisingly print company employment continues to climb; 34% reporting an increase versus just 24% a decline whilst 21% of printers reported that an inability to recruit the new skills they require as a key constraint on growing their business.
With most print companies containing an ageing staff profile and the industry widely being perceived as a traditional sunset industry (in decline faced with online and other digital media), recruiting a new breed of digital natives that can bring new energy in general and IT skills in particular, is likely to remain a significant challenge.
Finding new customers is the number one sales problem:
60% of all the respondents across almost all regions thought that finding new customers was the biggest challenge. For 38% the second biggest constraint to growing sales is finding good sales staff.
In developed markets like North America and Australasia where the transition to digital print and media services is far more advanced, finding a new breed of sales person who can sell these services effectively is a major challenge.
Investment drivers are about efficiency and new services:
When we asked the principal reasons for capital investment across commercial print, packaging and publishing companies, raising efficiency comes out top in every category, particularly in developed regions.
In general terms, print companies appear to be choosing between consolidation and growth of offset capacity dependent on their regional market conditions; whilst there is widespread expansion of digital print capability supported by more automated workflows. However there are some striking differences between the three primary print market sectors.
The next most important reason to invest for commercial and publishing printers is to offer a range of new services to their clients. This is given a much higher priority in the developing regions. In the packaging sector, which still enjoys consistent global growth, the opportunity is to invest in additional production capacity and less about adding additional services.
In what are printers investing?
The print industry has always had primary concern with products and equipment over customer focus and commercial outcomes. So it is not surprising that across all print companies in every region and market sector the number one investment priority is print technology at 52%, followed by finishing equipment at 49% and prepress/workflow/MIS at 41%.
Respondents were asked which print technologies did they plan to invest in over the next twelve months? For the commercial printers across every region, digital cutsheet colour was the number one choice with an average response of 38%. For publishing printers digital cutsheet colour was at 32% globally. Packaging was different and flexo was the first choice at 34%.
A clear second choice for investment across all three primary print markets was sheetfed offset with an average of 29%, although there were some regional variations. The third most popular choice of print investment for commercial and publishing print was digital rollfed inkjet and gravure for packaging.
A focus on workflow and MIS is an indication of the high priority given to cost reduction and efficiency improvement in all sectors. Web to print software is a consistent area for investment across all regions, demonstrating the importance of e-commerce capability and the necessity to attract new customers online. IT infrastructure is also attracting
considerable investment as print businesses around the globe become driven by IT.
Indications are that overall global investment in the print industry during 2014 will be strong as economic conditions are picking up and confidence is slowly returning. North America is leading the way, gearing up for major transformation with high levels of investment in printing technology, IT and new services.
It is clear that other regions like Australia/Oceania are ready for structural change and print companies are looking to differentiate themselves and reinvent their business models. In the developing economies there is still opportunity to increase capacity, but also a growing realisation that printers must invest for the future, add new services and avoid the commoditisation trap.
Investment Trends:February 2014
Indications are that overall global investment in the print industry in the next 12 months will be strong. Economic conditions are picking up, confidence is slowly returning (see image 3 and 4).