This morning I read an article about the number one problem for US President Biden that he won't be able to address - and it caught my attention because it addressed an issue most printers are already aware of. Prices on everything from raw material to equipment are increasing, and though the prices are different from place to place, there is a universal trend - and that is higher prices!
One thing is, of course, to feel the price increases on paper and other consumables that you use in your business. I took a look at the International Monetary Fund IMF'
s website to see whether consumer prices, in general, are influenced the same way as we experience in the graphics arts industry - and they are!
However, the consumer price index is very different from country to country, with the US as one of the countries with the highest price increases month over month. That gets me back to the article about Biden, which referred to prices on Turkeys. This week the American ThanksGiving holiday starts, and many, for the first time in years, get to meet families and celebrate the US holiday celebrating with food made of turkeys. More than 45 million turkeys are consumed, and many families have experienced price increases in the range of 30-40%.
Of course, American consumers are upset since the price increases are not only on food but on many things, from ordinary household things, housing, gasoline, and energy in general!
The growth in consumer prices was confirmed on the IMF website with an almost 5.39% increase in consumer prices on a month-over-month basis since 2020. Ladies and gentlemen, that's a lot!
This is a colossal increase compared to other Western Countries where the increase month-over-month is closer to 1-1,2% which is still quite a lot.
Of course, COVID can be blamed for some of these increases. Supply of everything from computer chips to paper to turkeys is lower than demand. And with growing demand, supply can't follow. But there might be more to it!
I have recently visited printing companies in Africa, Europe, and North America; owners believe that paper prices are agreed among the major suppliers. Nothing, however, indicates this since pulp prices and paper prices are on a very similar trajectory. I do, however, find it strange since how trees grow isn't influenced by a pandemic that by all means is just a second in time!
The supply of computer chips is also a problem, and though the supply sooner or later is expected to revert to "normal" levels - it's annoying. Some vendors have already pushed their anticipated delivery times on new equipment. The good news is that Samsung today announced the building of a new chip-manufacturing site in the US - but it takes years to build it, so don't put your hopes too high for now!
For printing companies, I, of course, understand the frustrations when paper prices increase. Paper represents between 40-60% of the total sales price depending on print technology, labor cost, and of course, print run and therefore influences the profit if the contracts you have with your customers have fixed prices.
However, price increases are an opportunity to both negotiate terms with your paper supplier as well as speculate about your pricing strategy!
We will, by the way, do a webinar about pricing in 2022. When we started planning this, it was dated October 7th, 2022. However, the current situation may move it forward!
Always see market conditions and particular changes as an opportunity and figure how to turn the changes into an opportunity!
It's, however, a given that increased prices on raw material will need some reaction!
I believe this will also lead to higher inflation, which will lead to increased interest, so now it's time to look into the entire financing of your operation!
All the best to all of you - I understand the difficulties supply restrain causes!