By editor Morten B. Reitoft
The data is based on the limited availability of public data. Intergraf claim to represent approx 110.000 printing companies across Europe. India has, based on multiple independent sources, about 250.000 printing companies. All other data are based on numerous searches on Google. All types of printing companies are included from small family-owned companies to corporates, to commercial, packaging, etc. The total accounts for close to one million printing companies.
However, this doesn't say much about the market neither before nor after COVID-19. The general assumption is that the number of printing companies is decreasing, but this may be an assessment based on the development in the developed markets. If you look at India where it's estimated to be 250.000 printing companies (mostly small family-owned) and with growth in all segments - why should companies here close, merge, or by any measures be similar, i.e., to European printing companies? However, the data available for North America show a decrease in revenue from around 100 billion USD to approximately 85 billion USD in the period from 2008-2018. One important thing is, however, that the statistics don't account for the price developments (down curve), and inflation.
While researching this article, I found it very difficult to find data that support all the statements. From an editor's perspective, you can decide whether you want to be speculative or not, and I have decided to do so. This hopefully can lead to some interesting debates and comments.
Predictions, therefore, have to take these considerations into account. For most printing companies, the market in the short-term most likely will be as it was before. Demand will go back to normal shortly after the lockdowns will stop. The products will be the same, and the changes will be minor, and if any changes, these will take a long time before influencing much. We believe this is the case for most of the very small companies in most countries.
A denominator for these printing companies is their size, the market they serve, the technology level (generation), and the company structure. These companies probably account for the highest number of companies in the global printing industry, but most likely only account for a fraction of the revenue. So are these companies interesting to consider in an assessment of the post-COVID-19 situation?
That, of course, depends on what you sell. If you are into consumables, the market and opportunities are maybe endless. If you are into the newest and latest in workflow/automation, maybe less obvious. However, with young people taking over these types of companies (i.e., in India where it is still very normal that companies continue in generations to follow), they, too, have a technology interest and an interest in developing their companies to be more competitive and productive!
The situation is different for printing companies in developed countries, representing a smaller percentage of printing companies, but a higher percentage of global revenue. The demand for all printing companies changed rapidly due to COVID-19, and many printing companies are speculating about the future. Will demand come back? Will the demand change to something new? And maybe most important how long time will it take.
The companies will suffocate from limited cash flow. The printing industry obviously depends on supply and demand, like any other industry. That, however, also puts things in a clear perspective since almost every industry is influenced by the pandemic. The Jakarta post estimates a drop in the textile market for up to 70% of Indonesia's textile industry. Washington Post estimates 100.000 business's to close, and, of course, all these companies use print. With fewer businesses, the lower demand is only natural, and it will lead to the closure of maybe up to 20% of the printing companies. The number of companies that will close is, obviously, a guess and depends on how long time it will take before the situation becomes more 'as usual.'
Some companies will also seek alternatives to closing, like, i.e., mergers.
In a conversation I had with former Elanders CEO Peter Sommer, he said that now is a good time for acquisitions, since the prices may be lower than ever. He probably pin-points a significant subject, since one of the things you can be almost certain about is consolidations.
Many of these companies would have died anyway, but COVID-19 has pushed this development further.
However sad this is for the people involved, this will balance the supply and demand for the greater good. For vendors, this will, most likely, influence less, since the companies out of business wouldn't acquire new equipment anyway! However, vendors who have buy-back guarantees or unsettled debt will, of course, be influenced.
These changes will most likely hurt the smaller businesses the most, and therefore vendors and customers should get used to deal with larger entities. For some vendors, that might lead to more competition and lower margins. For customers, it may lead to fewer products and services.
We believe the changes in the market will happen relatively fast. Unfortunately, the COVID-19 pandemic is most likely stimulating the expected recession - despite governments pushing liquidity into the markets. The purpose is to keep the population at work to avoid significant unemployment. Governments are also already looking into how to stimulate demand with tax-intensives, pay-out of money, and other things to stimulate demand.
GDP is regardless of these initiatives expected to fall quite much, and with high unemployment, already a fact, all the parameters of a recession is for sure there.
As François Martin from Bobst said, Bobst sales pretty much follow the development of GDP, so though packaging has grown during the pandemic, a decrease must be expected here as well.
Whether the stimulation to consumers will influence the printing industry is too soon to judge. However, we believe that all the aid-packages will only have a limited effect since the demand for print is stimulated by demand of other goods, and therefore takes time before getting back to normal - if ever.
Time is the critical and crucial element in this equation!
The COVID-19 will almost certainly lead to fewer printing companies, and we believe these changes will take place relatively fast.
How COVID-19 will affect the industry in the longer-term depends on how long and how deep the recession will be. The nature of a recession is that demand will surge, and companies should plan for lower demand, lower order intake, and by all means, lower revenue. The financial crisis from 2008/2009 clearly showed the effect of a recession. More companies will go out of business, more companies will merge or be acquired. The positive effect of a recession is, however, that this leads to innovation of both technology and new products and services. The innovations will stimulate demand, and lead to increased financial activities and lead the way out of the recession. This is the time for the Ubers, the online printers, the Airbnb's, inkjet, and new innovations to set the agenda. This is not new, and the question is always more: who will be able to set the agenda and how long time will it take before the effect becomes evident.
We believe it will fast forward trends you already see, like mass-customized products, short-runs, faster turn-around, proximity to the user, CSR, environment, and other mega-trends that are not only about print but all products.
New business models will be in demand, and we are certain that the buyer/seller relationship will develop into something much closer than today. The new business models will maybe also open up for new types of ownership. IoT and industry 4.0 will lead to a clearly defined A and B team. The A-team will have the latest technology, and be extremely efficient, but also maybe more distanced to customers, since the size is critical.
For print buyers, we are not sure that the printing companies will be a very influential part of the actual value creation. We don't think that it's a new era for the large design/advertising bureaus. For most of the smaller print buyers and business owners, the content will be created by themselves, since tools to write, design, create, etc. will be even more accessible for most. The trend of working with free-lancers will, for sure continue, since the more cost that can be variable will be variable.
Some printers will specialize in segments, products, or services where they will either focus on technology with limited availability and offer premium products/services. Some printers will see the value of providing premium products/services with a customer service level different from the commodity printers focusing on price.
We also believe that all the above trends will push digital technology forward. The quality, the operational cost, and the speed are just a few of the reasons for this. We believe that customers will be willing to pay more for premium products/services and less for commodity products. Web-to-Print will enable customers to compare prices easier, and the loyalty on commodity products we believe is close to zero. Some of the online printers may develop services to build loyalty programs and communities. Since everybody will work on similar programs, we still wait to see the real differentiator.
The big question is, of course, how printers and vendors will address these market changes. Many will most likely say that the market, as we know it, will not change radically. However, one of the things that have caused the printing industry the most consideration is how fast things changed from print to the Internet. Though most people are conservative, convenience often wins, and in times regardless of the COVID-19 and a potential recession, we could maybe sit down and at least consider.