C. Clint Bolte & Associates

In years past a big equipment trade show would be worth a lengthy article highlighting new product announcements. Perhaps because the exuberance of attendees and exhibitors was the highest in half a decade or perhaps because of industry news and announcements made during the show, I find it necessary to break out my reflections on the importance and impact of Graph Expo 2006 in a series of topical articles. A number of panel discussions and presentations by leading prognosticators offered insights and even contradictions that I thought readers might find interesting for their own planning purposes.

Official Numbers For Naught

Economists covering the printing industry suggest that 2006 will be off somewhat from the higher results of the previous two years and universally forecast even lower GDP and print figures for the next couple of years. Richard Romano, analyst and researcher for The Industry Measure, reported in their industry briefing that Merrill Lynch has revised downward their expectations for advertising expenditure growth from 5.1% to 4.7% for 2006 and from 3.5% to 2.8% in 2007.

In his annual "Renewing the Printing Industry" presentation Dr Joe Webb does not expect print revenues for 2006 to be anywhere near 2003 or 2004. He expects the commercial printing segment to be $91-92 billion in 2006 and then falling off to $87-88 billion next year. While total print numbers are actually higher, there is a continued shift to office superstores and desktops, which, of course, don't report aggregate print values. While these figures are falling off, the average annual revenue per employee continues to climb to $205 thousand per production employee and $144.5 thousand per each employee. This is due to continued efficiency gains and the disproportionate increases in non-print revenues from so called value-add services. Webb was quick to add, "Value-add is a myth. Buyers deal with the whole company."

The annual PIA/GATF Financial Ratio Studies have shown the industry profit leaders, defined as the highest quartile or 25% of participants, and the all industry averages. What is not shown is "all others" or the lowest 75% of the participating printers. This is easy to arrive at by simply subtracting the results of the top quartile from the "all others" numbers. The results in virtually every year for nearly a decade has been that the rest of the industry is at or below breakeven. Or stated another way, about 30% of all printers are generating 100% of the industry's profits. Andrew Paparozzi, NAPL's Chief Economist, writes and reflects often on the industry's growth leaders. If all economists report that the printing industry is struggling to keep up with the Gross Domestic Product and Paparozzi continually reports the industry growth leaders are experiencing double digit percentage growth year over year, the conclusion is clear. The leading printers are also generating all of the growth and progress in the industry.

Webb opined, "Strategy starts with a situation analysis. All of the (general) data are suspect!" Webb had some interesting observations on print strategies. He feels that printers have a choice of seven different strategies, which are often client driven and may differ slightly among major clients; four communications and three production strategies. The communication strategies are (1) sender - design, creation based, (2) message conduit - connects sender and receiver, (3) receiver - data base creation/management, publishing services, and (4) feedback - fulfillment warehousing services. The production alternatives are (1) communication logistics - managing the details of marketing services, (2) corporate outsourcing - removing the logistics burdens from the shoulders of clients, and (3) commodity printing, i.e., low cost producer.

As printing prices have cascaded, many printers, voluntarily or involuntarily, have tried to follow the "commodity pricing" forte. If done well, this does not mean "no or even low profits." Those successful share these characteristics; expanded geographic sales area, lean overhead, high productivity, high utilization, less equipment, more shifts, super backroom operations, i.e., management information system expertise, and complimentary product mix. The downfall of many printers in the commodity printing genre is their inability to recognize their situation and build an appropriate model for success.

The industry seems to be abuzz with the success of Vistaprint and their Internet ordering and computer integrated manufacturing business model. Webb offered that Vistaprint is taking advantage two situations; (1) every +0.1% in e-com retail results in a loss of $1.8 billion in commercial print and (2) the 2006 United States economy is generating 78,000 net new businesses every month. All of these are potential Vistaprint clients.

Webb advises print sales and marketing professionals to attend media selector meetings and educate yourself on the weaknesses of the new media. Are you aware that a third of all e-mails don't get through, e-mail addresses go out of date faster than physical addresses, subscribe to the best on-line newsletters. "Lead generation and brand building are the major advantages of print."

He concluded, "Credibility of any strategy is decisive implementation."

The Vistaprint rage has taken front page in the recent couple of years. However, another heavily automated printing plant facility in the planning stages for four years was officially announced at Graph Expo by two of its major equipment suppliers, Muller Martini and Goss. Cox Target Media will be opening a 470,000 square foot plant (one acre under roof) in Largo, Florida near St. Petersburg to produce the familiar and proprietary Valpak coupon product. Culminating a $200 million capital investment this plant will have the capacity to more than double the current 20 billion coupon output to 54 billion in half the current manufacturing time in a near "lights out manufacturing environment." There will be minimal work-in-process as rolls of paper will be converted into coupon-filled envelopes with no human hands ever touching the product.