Article prepared by C. Clint Bolte, C. Clint Bolte & Associates, Chambersburg, Pennsylvania. For additional information please call 717-263-5768, fax 717-263-8945, or e-mail to clint@clintbolte.com.

DRUPA 2008

American Opportunities + New Technologies

Printing trade press the world over will naturally be touting the exciting new technologies heralded at the DRUPA 2008 trade fair recently concluded in Düsseldorf, Germany. This article likewise will naturally describe my take on many of these new tools and their potential process and product development impact.

However, this being my sixth DRUPA, I have long since observed that there is so much more that can be gleaned from a gathering that draws the corporate CEOs of virtually every major manufacturer serving the printing industry worldwide. Attending supplier press conferences and hearing impromptu answers to your own questions from these strategic leaders adds so much more perspective than simply reading prepared press releases. Talking with European printers, walking the streets of several of these cosmopolitan cities, observing the reality of their economy, and hearing the political issues described by new foreign friends can all contribute to an assessment of the future impact on the United States, the printing and publishing industries, and your business. This first hand perspective will be woven throughout the article.

The Relative World Economy

No country’s economy should be viewed solely within the context of its own dynamics and demographics. In the United States we often have a tendency to consider only what we can see and feel first hand in the markets we serve each day. Our “broadened outlook” is often limited to what other regional areas of the USA are experiencing. The current stagnating US economy and record weakness of the dollar relative to the Euro resulted in many US-based suppliers not wanting to budget for an expensive two-week trade show in Europe. This was extraordinarily short sighted for several reasons!

The United States is now viewed by European manufacturers as being one of the lower cost labor markets in the developed world. Several Germany, Swiss, and French companies acknowledged that they will be evaluating the addition of a USA manufacturing plant to their historic home country only plants. While the US$ has been cascading for several decades versus the Euro and other currencies, many European economists and publications still do not anticipate the US$ getting stronger anytime soon. This simply makes European made capital goods increasingly expensive in the states. If this same equipment were manufactured in the states, this currency differential could be nullified. Many of these first hand contacts could have been made if US manufacturers had been at DRUPA.

The few US firms at Drupa reported brisk sales. For example, Xante, a Mobile, Alabama-based manufacturer of desktop CTP units announced the introduction of a new desktop digital printer producing short run lenticular sheets. This could potentially be a proofing device for Lenticular jobs to be run on sheetfed presses which currently does not exist. The entire package includes the necessary proprietary Lenticular software that merges multiple images and a laminator to adhere white stock to the back of the Lenticular lens material, which provides the necessary visual backdrop for optimum visual reflectance. This entire system is priced at 25,000 euros. Xante’s National Sales Manager reported that half the expected production volume planned for 2008 was sold out during the first week of the trade show alone.

The European paper market is undergoing unusual pressures. M-Real, the continent’s second largest paper manufacturer announced major turn around moves; (1) a 6 - 8% price hike with consideration for another before the year is out, (2) a shuttering of mills and machines to rationalize their own over capacity, and (3) a narrowing of their product line to only five premium publication and coated fine paper grades. While paper demand on the continent has remained strong, supply continues to climb. Some of this excess capacity is the result of North American paper being exported to Europe to take advantage of higher prices, i.e., strong Euro, and stronger demand relative to the USA home turf.

While the United States has been reporting a net trade deficit (imports exceeding exports) for decades because of their own strong economy, the opportunity has never been brighter for American printers to help their small to medium sized corporate clients to ramp up their export marketing plans. This could include a myriad of ancillary services from commercial design and web site services to fulfillment as well as complete print services. Balancing volume capacity in a global free enterprise market place are commonplace practices for large, multi-national firms. However, with the Internet, expertise and assistance of national print trade associations as well as US Federal trade services, smaller firms can now get their piece of the pie easier, quicker, and with less risk than ever before. More and more printers are joining the Association for Printing, Publishing, and Converting Suppliers (NPES - npes.org), who are experts at helping their members develop their export capabilities and relationships.

R & D Directed at Newspapers and Emerging Nations

Suppliers and manufacturers reported during Drupa to be investing an impressive 4-12% of revenues into research and development as they enhance select equipment, add value-added features to mainline products, and provide speed, efficiency, and productivity to entire existing lines. As I have been reporting for over a decade, with but few exceptions the print equipment suppliers are so far ahead of the industry that the concern for beta testing of new technologies by the majority of printers has been all but eliminated. The “concept” products shown at DRUPA may suggest otherwise, but the reality is that most any printer can recapitalize virtually any production process with name brand products without incurring risk of installing unproven and untested technology. The sad truth remains that while new equipment can be cost justified, the printing industry overall is choosing to run aging equipment.

As a result of this imbalance of proven technology versus market adoption of state of the art tools, it was not surprising to me at how little ground breaking announcements were actually made directed toward the mature small-to-medium sized general commercial print market. Instead the announcements concentrated on niche products and markets. Here are the key three areas from my observation.

With circulation cascading and the Internet cannibalizing traditional news and advertising, newspapers do not feel they can replace their aging presses with the latest and greatest without also targeting additional revenue streams. These new products to be run during the 80+% of available press time are from the general commercial web printing market. They are needed in order to help pay back this huge press+finishing investment. There were three noteworthy product announcements directed at the recapitalizing newspaper market; Ferag’s customized finishing lines, high-speed inkjet presses, and the Goss M600 Folia press.

Ferag has long enjoyed a dominant market position in providing custom-made, conveyor-linked systems for placing inserts of varying physical specifications into the just printed newspapers. Utilizing their innovative and proven material handling expertise with regard to inserts, Ferag demonstrated an inline saddle stitching, three-side trimming, tab on “MemoStick”- identical to the USPS Repositionable Note (RPN), and MemoFlag. The later two items are advertising format gimmicks.

Xeikon, HP, and Oce were each running sections of various international daily newspapers on their new high-speed inkjet presses. They were obviously given PDFs of the current editions by the publishers to demonstrate print quality and capability. The print quality was exceptional and certainly acceptable versus the finest offset newsprint production. The need to fly copies of USA Today, Wall Street Journal, Financial Times, New York Times, etc. into the Caribbean or other offshore location is now an easy make versus buy decision for local production. While the full list price for the Oce unit was about $5.5 million (three were reported sold during Drupa’s first week), multiple printing contracts to print dailies for leading publishers would seem to offer an interesting business plan concept. It is clearly a niche application, but an interesting one at that. Pagination to optimize the print image area and the finishing steps need to be engineered, but that should be done quickly.

Goss converted their proven M600 publication press into a concept press to compete with the long sheetfed perfectors. Using sheetfed inks, spray powder drying on both sides of the sheet (no heatset dryer needed), the M600 Folia delivers a wide variety of stocks at 30,000 sheets an hour into a VITS sheeter. Since this is twice the productivity of long perfectors, the capital investment is expected to approximate this same level of competitive efficiency according to Goss. While commercial printers running Sunday web presses might be an assumed target market, the more logic prospect might again be newspapers that need separate covers for their new “semi-commercial” magazine products.

manroland – new logo and all – introduced a new Roland 50 while Heidelberg added XL features to their entry level 52 press. The product logic for both firms is that they need a small format, inexpensive press to entice small printers who will hopefully in time trade up to the larger press lines. Since this buyer behavior has rarely proven to be the case in North America either in the general commercial market or in-plant market, it can be assumed that it is being directed to the emerging and developing countries of the world. And in fact the strategy might work there.

Traditional Drupa Red Should Have Been Green This Year

The Drupa logo and all its presentations are in the color red. However, the universal emphasis by so many suppliers on environmental sensitivity could well have warranted switching the color to green for this year. It is interesting that in my first Drupa 1990 article I stated how much more environmentally sensitive the Europeans were than their North American – US & Canada - counterparts. The countries had laws on the books regulating such even back then. And yet it was not marketed. It was just cultural reality.

While there was little new shown or reported on the environmental front, it is clear that manufacturers are publishing more “how to” manuals to aid their printer clients in documenting their own “greenness” from a marketing perspective. Many of these guides are also designed to help the print buyer community to document for their own publishing and business purposes where they stack up on the carbon footprint scale. If ever there was a consensus issue in publishing and print production, the environment would be it.

New DRUPA Features Reflect Market Reality – Extensive Print Buyer Sessions & Used Equipment Expansion

For the first time ever Drupa organized DrupaCube: daily seminars, sessions, and trade show floor tours for the full range of print buyers, print and media specifiers, designers, etc. Beginning with different topical sessions every morning, the attendees were later broken into smaller groups and personally guided through the various halls to see demonstrations of the software and equipment illustrating the concepts described that morning. Each afternoon concluded with a social encounter in a beer garden atmosphere. Most of the sessions – all conducted in German - were reported to have been sold out.

There were 73 used machinery dealers with booths not counting the new equipment manufacturers offering refurbished, previously owned items as well. This was an all time high figure and warranted their own area in a Hall. These vendors were overwhelmingly headquartered in Europe. Considering how much less expensive USA used equipment might have been, again because of the currency differential, it would seem to be a missed opportunity that there were no North American headquartered dealers with booths at Drupa.

Interviews with these European firms confirmed that they often “have access” to used equipment from other parts of the world. Perhaps this is through trade-ins. However, they don’t seem to be interested in multi-national representation or collaboration.

Trumpets Herald the Presses but Software and Finishing Lead the Parade

Conventional press manufacturers had full booths while running long perfectors and often demonstrating new and enhanced capabilities. With much less fanfare but no less acknowledgement pre and post press vendors verified that they could keep up with the product flow and efficiency demands of any press.

The CTP vendors are all touting their next generation process less units since this market is now fully cost justified in replacing the initial CTP technology installed. Agfa announced a new Avalon CTP and five year contract for plates valued at 12 million euros. This simply highlighted the fact that these vendors are selling both the razor and the razorblades. And the best total deal is probably available as a package.

Muller Martini was closed lipped about what they expected to show at Drupa. There was no disappointment as they entire product line had been upgraded and enhanced. From basic entry level to full automation every line was ergonomically designed showing operator friendly functions to increase utilization and net speeds.

Two other interesting observations to be offered about Muller. At Drupa 2004 Muller demonstrated their highly sophisticated Sigma stitcher and perfect binder configuration in line with a digital press. Accommodating run lengths of one with fast switchovers either between units or to different size books. Only two sales have been reported for this million dollar finishing line since. And yet at Drupa 2008 four different Sigma perfect binders were running attached to an equal number of different digital presses in the press booths. Clearly these top end digital press vendors see the in-line benefit but the market has not yet responded.

Both Muller and Ferag are Swiss based firms and compete head to head in the newspaper insert finishing markets worldwide. Both of these firms demonstrate the engineering prowess to develop equipment addressing the growing commingling and co-mailing process opportunity demands posed by the United States Postal Service for periodicals. The opportunity is for the mid market printers below the RR Donnelleys, QuadGraphics, etc. Currently Buhrs is the only proven supplier. They are a solid firm but free enterprise always tends to drive innovation and technology enhancements.

Because their expressed strategy is custom made, major systems for large printers, primarily newspapers, Ferag would not be expected to undertake this challenge. Muller could be a formidable vendor to this dynamic United States market if they could get a Swiss Product Champion moved to the USA for a few months. S/he could learn first hand about the USPS, attend a National Postal Forum, interview mid-market periodical printers, and garner appropriate market research to justify this product development initiative.

Digital Printing via Inkjet

Every trade press article that I’ve read about Drupa 2008 smokes elegant about this “Inkjet Drupa.” So this article would not be complete without hitting the highlights of these truly exciting demonstrations. But please note that the article concludes with this discussion. And it will not be weighted down by technical jargon (you get that from their websites), but hopefully my thoughts that might contribute to your future planning of how this technology could fit into your firm’s strategy.

As I’ve said before, in my entire career there has never been a technology aimed at the printing industry that has been more over promised and under delivered than digital printing. A number of “independent” consultants have been paid by the manufacturers to prepare surveys, white papers, and case studies touting the end all and be all of digital printing. Many of these well-paid advocates are prognosticating that digital print will be the dominant print process not in our lifetime but only in a few years.

My personal observation and opinion is that digital printing, i.e., utilizing no printing plates, will play an increasingly important role in the total services offered by full service printers. But it will be an ancillary and support role. There will be an increasing number of niche printers who specialize in digital printing who likewise will do well.

That said there were three very exciting digital print elements shown at Drupa. While inkjet products have been shown at the last three Drupas, the print quality and production features were outstanding at this show. Inkjet will be an overwhelming driver for digital print because it is simply more economic than all toner-based alternatives. Currently only available in expensive high speed platforms, inkjet equipment will surely come down market in the near future.

The second worthy announcement(s) were by Xeikon, Oce, and Konica Minolta. These are the only digital press manufacturers that have chosen a scalable manufacturing and marketing strategy. Simply stated the client buys into a platform based upon the capital expenditure level that the printer’s market volume and expertise warrants. As volume grows and sophistication demands increase, field upgrades can be made within the same family platform as required. Clients crawl before they walk and walk before they run. Not all platforms are upgradeable, but many are.

The other notable suppliers, most all of whom have excellent technology, seem to offer Model X and then negotiate a multi-year lease to fit their prospects hoped for cash flow. Within a year to eighteen months Model X2 comes out solving a few of the problems inherent in X and adding a few more bells and whistles. The printer is in the limelight of state of the art for only a few months of his multi-year contract.

Many of the digital press manufacturers acknowledged the advantage and need of their print image consistently matching Gracol standards. Or stated another way, to be color managed to match predictable lithographic output. They offer training and white papers to help their clients perform these monitoring and on going calibration tasks on their own digital press(es).

Specific product applications for inkjet digital are yet to be proven. The suppliers naturally are following the tried and true skimming strategy of targeting the premium priced markets, i.e., newspapers, which have lots of money, and this new TransPromo application.

It was comical that the European suppliers were touting the glowing future of TransPromo even as much as their American counterparts. And yet Europe has much fewer stand-alone inserts in their transactional documents than do Americans. This is partly because their first class postage rates go sharply higher with only slight increases in weight. In the US the second ounce of a first class envelope has actually come down in price, which encourages more inserts!

High-speed inkjet is certainly an exciting technology looking for a market. It might be “remote” newspapers. There will be increasing successful case studies of replacing traditional monthly bills. To what extent the fully integrated variable advertising is included in the same time sensitive invoice is yet to be determined. While suppliers claim that software is available and high-speed economic digital is now a reality, buyer behavior does not always change when confronted with logic and common sense rational.

The Drupa trade fair was again a huge success: purchase deals worth more than 10 billion Euros, 1,971 exhibitors from 52 countries and around 391,000 visitors from 138 countries. This was slightly fewer total visitors than attended Drupa 2004. The participation of North American visitors remained constant at 6% or about 13,000 of the foreign visitor total.

Article prepared by C. Clint Bolte, C. Clint Bolte & Associates, Chambersburg, Pennsylvania. For additional information please call 717-263-5768, fax 717-263-8945, or e-mail to clint@clintbolte.com.