Outlook: Printers Hope for Growth After Year of ConsolidationPlayers in the print production business coming up for air after a year of mergers, acquisitions, plant closings and job losses have reason for measured optimism.
Industry estimates indicate that print markets may grow 3 percent over last year. Attribute this to an upsurge in mail-led marketing as well as the Summer Olympics and U.S. elections.
"We're already seeing increased quantities with our current customers, and we've been receiving more bid requests from prospective customers," said Holly Harle, account executive at lettershop and data processing firm Mid-America Mailers Inc., Hammond, IN. "The activity is picking up with our retail clients. We're also seeing growth in the work we're doing with advertising clients. It seems that their clients are allowing them to design more creative and unusual formats, which are more expensive to produce."
Tom Quadracci, president/CEO of Quad/Graphics, Sussex, WI, is equally optimistic.
"As the economy continues to strengthen, ad pages and catalog runs should increase," he said. "And with the presidential election ... we should see further spikes in print orders."
Many small to midsize printers, brokers, ad agencies and even mailers may beg to differ. They lament the rising technology and transportation costs. Some worry about higher paper prices and even claim declining demand for services. They are caught in the crosshairs of several trends converging rapidly to transform perhaps the most conservative end of the direct marketing industry.
"By far, the printing industry's greatest challenge -- and opportunity -- lies in making print more competitive against other forms of media," Quadracci said.
He sees that happening in several ways. First, industry players must tap into this thirst from catalogers and mailers for more one-on-one communications with consumers but on a cost-effective, mass production scale.
Second, new equipment will have to cater to the trend of shorter print runs. Third, everyone will need to prepare for tightened turnaround times as clients vie to stay competitive.
"Catalogers, for instance, need more time to determine product mix and price points," Quadracci said. "Quad/Graphics has been condensing cycle times by automating and integrating all aspects of our manufacturing platform, from plant to plant, with our clients."
Then there are technological advancements that improve the quality, immediacy and cost of ink on paper as well as the growing emphasis on environmentally sound business practices. Finally, the need for postal reform is pressing.
"Next to paper, postage is our clients' largest expense," Quadracci said, "which is why we're eager to see meaningful reform in the operations of the postal service. To keep print competitive, we must lobby for ways to keep mailing and distribution costs manageable on behalf of our clients."
The mailing business got a boost last year from the Federal Trade Commission's no-call list limiting telemarketing. Several marketers surveyed have said they are shifting dollars to direct mail.
The popularity of e-commerce and direct response television also has led to a discernible increase for hand fulfillment products. Regardless of the medium used to deliver an offer, remote orders for products or informational packages will need physical involvement in fulfillment at some point. This is a potential growth area.
Technology Reshapes Print Business
Aside from consolidation -- Chicago-based R.R. Donnelley's recent merger announcement with Moore Wallace Inc. would put it in competition with Montreal-based Quebecor for the title of world's largest printer -- nothing will shape printing more in the coming years than technology.
Developments in machinery and processes are resulting in shorter work cycles for pre-press. Direct-to-plate technology is displacing pre-press film. And digital retouching and high-end imaging have transformed pre-production.
Xerox Corp., for instance, debuted technology last year that will allow the printing of two entirely separate, detailed images on one sheet of paper. Readers can see one image under a particular color of light. The other image is seen under a different color. The creator describes this advance as "a more sophisticated version of the children's trick of using colored cellophane to reveal a secret message."
Internet proofing, too, is growing more common. Printers can offer clients so-called soft proofs of the printed piece. Many people simultaneously can view the document online and append comments to the proof. The obvious benefit of using the Internet is that it shortens the proofing cycle. But there also is a downside.
"A shortcoming is that critical color cannot be properly viewed on computer monitors without expensive calibration tools and processes," said Joe Kulis, a senior executive at Ed. Garvey & Co., Niles, IL.
As for digital printing, it is normally preferred for smaller print runs. Current thinking is that it will not displace traditional ink-and-water printing, at least not at current prices.
Still, regardless of the challenges, expect rapid adoption of new technology to reduce operational costs, eliminate redundancies and improve efficiency. Moreover, mailers, be they catalogers or publishers, increasingly demand full service.
Print production companies lacking size and scale will face much discomfort if they have not kept up. As seen from activity last year, many pre-press firms are buying printers or brokers.
David and Goliath
Then there are printers whose appetite for smaller rivals is creating behemoths unrivaled in size, funds and technology access. Their encroachment into areas like film separating is erasing layers of middlemen from the business.
"I see more of that work swinging into the printer's hands," said Bill Duhownik, vice president and director of production at ad agency MAB Advertising Inc., Chicago. "Traditionally, there used to be film separators, who did color retouching, film separation and high-end imaging. I think that today's technology has made it easier for printing companies to handle the production themselves. I can compare us to other industries. We're an industry where full service has become more important. The companies that are surviving and prospering are companies that can handle more and more under one roof."
Tight budgets undoubtedly will fuel greater demand for one-stop shopping. Print buyers prefer as many services under one roof to minimize freight costs and additional processing time.
"It's going to be critical in the upcoming years for printers, mailers and envelope houses to develop closer strategic relationships," Harle of Mid-America Mailers said.
Another effect of stringent budgets is the growing use of self-mailers over No. 10 envelopes. Many jobs undertaken by Duhownik, for example, are 6-by-9-inch postcards. So a 5 million-piece postcard mailing typically costs 23 cents for him: 17 cents for postage and the rest for the actual production of the postcard.
"So where's the bulk of the money go? It goes to the post office," Duhownik said.
A corollary of technology is the way marketers now are segmenting their lists. The increasing sophistication of database marketing means more use of variable data and customized offers.
Not surprisingly, better segmentation leads to higher revenue on the computer programming side for those in print production. But it also results in smaller mail quantities.
"Optimistically speaking, we would hope that in the long run, more targeted offers will yield higher sales for marketers so that they can continue to expand their client base and mail more in the future," Harle said.
Another trend is the continuing shift from informational printing to marketing efforts. There are shorter run lengths, but more versions as marketers target more specific groups. In response, printers are expanding their services beyond printing to include personalization, lettershop and mailing. They also are adding creative services.
Where does this leave those thousands of small players threatened by consolidators filling the cracks of a fragmented print production business? In a sense, the print production industry is facing its Wal-Mart moment.
Kulis regrets the thousands of jobs shed by the printing industry over the past two to three years as companies have cut workers or closed.
"The industry is working on properly matching production capacity with print demand," he said. "A combination of technology providing improved worker productivity along with reduced print demand has led to print companies needing fewer workers. Companies that do not adapt to this reality fast enough face a difficult financial future."