LET'S CLOSE THE INDUSTRY

Welcome to the second article in our new series, If-this-then-that. This time, it’s about how organizations that are supposed to support our industry talk the industry down—way down. The German BVDM is one example, and in this article, I will write WHY they are wrong and why the consequences of ill-speaking don’t do anybody good!

The former head of the German Bundes Verband Druck und Medien, Dr. Paul Albert Deimel, is a very nice and pleasant person, and this article is not against him as a person or his right to express himself or in his former role with BVDM - but a clear example of why words matter.

I was asked to give a presentation at a NOPA event in Berlin on November 8th, 2023 - and before me, Dr. Paul Albert Deimel gave a presentation about the state of the industry. Fewer presses, fewer companies, decreasing equipment sales, decreasing paper volumes, and fewer employees. It was like a recipe for depression, and most of the about 100 attendees were sitting quietly, digesting the facts. All facts are true, and if the numbers were representative of the industry - maybe we should shut down the industry and say that print did die after all!

But let’s look at the facts and discuss why these numbers aren’t bad. It starts with a simple question: Do you believe in capitalism? Capitalism is about supply and demand, and overcapacity has been one of the printing industry's issues for years. When a market has an overcapacity, selling prices will be low. Supply is way higher than demand, and let’s be honest - the growth many printing companies saw during the ‘80s made many invest in more capacity, and suddenly, the market changed - and overcapacity became a fact. When the Lehmann brothers collapsed in 2008-2009, the world saw a financial crisis, and demand took an even deeper dive. The maybe biggest problem is that we never really realized that the dip wasn’t solely because of the financial crisis - but in 2008-2009 the global internet population reached critical mass. Demand changed!

So, when Dr. Deimel speaks about fewer printing companies and presses in the market, this is good - not bad! Lower capacity will eventually balance supply and demand, allowing higher prices and, more importantly, higher margins. Of course, not good for the influenced companies' owners and employees, but from an industry perspective, this is good.

When a market is changing, it happens because of a changing demand. The Internet became an easy and cheaper way to mass communicate, and the companies that saw the consequences of this change were the large printing companies—the rotogravure, the web-offset printing companies, and the companies that scaled for volume. When these companies closed, merged, or adapted to a new reality - they took out capacity, meaning less paper - but paper with a lower value per unit.

When paper companies adjust supply and demand, prices reflect a new competitive situation in the market - and, as we can see, a way lower volume - but that is also good! Of course, rapid changes are not good because it’s difficult or almost impossible to adjust to new prices rapidly - often because of contracts, obligations, etc.

But a paper industry that is more aligned with supply and demand is by all means GOOD for the industry!

Will a changing market invest in more capacity? Or are printers and converters more likely to invest in technology addressing future demand? I am not surprised that Heidelberg has issues - they don’t deliver products aligned with the market. When they talk about low OEE and with some customers even adding low utilization to the equation, they offer a 21K version of their XL106. The customers that need a 21K will, of course, like the machine. However, suppose you are a printing company seeing shorter print runs, demand for variable data, faster change-overs, etc. In that case, they will look at Heidelberg and the new 21K and say - fantastic technology. Still, it doesn’t fit the bill for my company.

So, some OEMs will not survive a changing market if they don’t listen to the market, understand the underlying trends, and develop technology in this window of opportunity!

Heidelberg is one example, but many companies don’t adapt - and friends, they will live fine in a smaller market for some time, but when the 'Dr. Deimlers' of the future talk about the market - the measures might be 100% wrong.

The volume of paper and print is not important - the value of what’s sold is important. You might have a super business if you can sell a tenth at the same price. Neither the number of printing companies, the number of printing presses, the number of new Heidelbergs, or the volume of paper reflects the value at all - so what happens when an organization like BVDM and other federations present and misinterpret numbers that talk our industry down?

I would be reluctant to invest in a new and unproven technology for once. I will also lower my prices because I fear what might happen if sales drop - or even worse, stop developing my business, and for some, even consider the future of print.

The printing industry is NOT dying; it’s changing like any other business. It has always changed, and if you think back to the last drupa - I am pretty sure you looked at your future investments totally different from what you do now. I am also convinced that if you have taken over your company from your father or mother, the company has developed from maybe having one press, maybe also some digital equipment, even selling via Amazon online - which is good.

I also hear from the consultants industry that the industry is a replacement industry - as if this is bad. It’s not. The dynamic moving from one technology to another is not just about producing what we have always done, but a matter of having technology enabling productions that wouldn’t be possible before. In an interview I did with the former General Manager for HP Indigo, Alon Bar-Shany, he said, we never developed the Indigo’s to produce balloons - and yet today this is a fact. Technology drives innovation and opportunities - and for the companies that listen carefully to the market but also dare to drive innovation, all industries have fantastic opportunities - this article aims to focus on how we can grow rather than using old-school measures to evaluate our industry and our future!

We have a lively industry. The companies that read the markets right are prosperous and enable healthy competition, giving a balanced supply and demand. I love it!

Apr 08, 2024

Author: Morten B. Reitoft