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By Editor Morten B. Reitoft 

In 2008/2009, printing companies realized a decreased order intake. Many blamed this on the financial crisis. Fewer realized that it was maybe because of a paradigm shift. 

The Internet was born on August 6th, 1991 - but it was with broadband that became widely available in 2007 that the Internet started to show its commercial and communications potential. Though Google was invented already in 1998, the real breakthrough came around 2005-2007. As you can see, the financial crisis may be one reason for the lower demand for print, but it falls together with the technical development of services that we today take for granted. 

It could be a paradigm shift strengthened by the financial crisis!

Years after the financial crisis, leaders continue using the financial crisis as an excuse for not adapting to the new "normal."

Societies and businesses change, and industries that don't adapt will eventually die. Typographers were replaced by desktop publishing, and for sectors not replaced with technology, outsourcing to countries with lower salaries is used - maybe as a last option. 

During the pandemic, some segments in the printing industry developed very well. Companies producing face-masks, face-shields, packaging, label, signage, direct mail, etc., were less influenced since demand increased during the pandemic. 

It may also make sense that web-to-print and workflow/automation see growth, but the question is, what about the companies that have experienced a recession during the pandemic?

The five major offset vendors, Heidelberger Druckmaschinen, Koenig & Bauer, Komori, RGMT, and Manroland, have experienced lower order intake - and though they blame it on the COVID, is this really the only reason?

Heidelberg is the company that has 'lost' the most for now. As far as I remember, the order intake decreased by almost 40% in Q2. The number is not essential for the story, but more as an example that the industry is changing. Regardless of whether it's 10%, 15%, 20%, or 40%, the fact is that orders have declined during 2020. 

If order-level returns to 'normal' after the pandemic, the decrease will be temporary and manageable. However, if the current level is the new 'normal,' it will be a tremendous challenge for all the vendors!
The first, and maybe most important challenge, is what strategies these vendors pursue to continue being profitable - and second, what if the pandemic fast-forward trends towards digital in a similar pattern as the financial crisis fast-forwarded the use of the Internet?

Let's start with the last question first. 

Nobody could anticipate the pandemic, of course. However, digital transformation is a fact and has already influenced the offset vendors a long time before the COVID-19 pandemic.
The changes in the market, from a customers perspective, have partly been driven by:

increased need for mass-customization

  • - shorter print-runs
  • - potentially linear costing
  • - faster turn-around time
  • - high-quality
  • - and more

If we look back a couple of years, the dominating technologies in digital print were toner. Inkjet was mainly for transactional/transpromo. 

With the latest iterations of inkjet printers, this has changed.

  • - quality is not an issue
  • - speed is not an issue
  • - potentially a lower entry cost to digital
  • - and for sure lower operational cost than toner
  • - diversity with substrates is less of a problem
  • - variety in applications is less of a problem
  • - and more

So the technologies work toward digital, and as usual; Everything that can be digital will be digital. When vendors like Heidelberg, for example, focus on OEE, this doesn't change the fact that many offset printing companies utilize their equipment little. Though both toner- and inkjet machines may still be slower in actual speed than an offset machine, utilization, setup time, and diversity in applications justify the difference - and maybe a lower demand during the pandemic pushes printing companies to think different?

At the same time, the number of printing companies continues to decrease. Simultaneously, all offset machines have gotten faster, and capacity has grown, and demand has fallen regardless of fewer PSP's. 

The result is a staggering over-capacity pushing prices and profit.

So what about the strategies? 

You can downsize, acquire companies to grow your market and reach, or you can develop new products and technologies supporting your future. Of course, you can also choose to partner with companies you see fit, and you can probably do quite a few other things, as well, to avoid an unpleasant future. You can eventually end up in a 'Kodak' moment where you miss the future opportunity - because, regardless of most things believed and said - print is thriving.

Print is, however, changing as it has always done. Letter-press machines turned into litho-offset, and, of course, litho-offset will transform into something else. With "New Print," printing companies have more opportunities than ever. Printed electronics, 3D, wide-format, signage, and textile - pretty much everything that can be printed today. This is an opportunity for printers and vendors. 

With these opportunities, and increased demand for also mass-customized products, the value of print increases. You will simply profit more from delivering products with a higher value proposition. This will challenge you since you will need to sell entirely different from today - I believe. Many commercial printers are struggling - maybe mostly because it's so difficult for our industry to price our products based on what value the customers gain? 

If this is a paradigm shift, the order-level of 2020 maybe is the new normal? Perhaps the change to digital is so fast now that the need for offset machines changes?

I am sure there is an excellent need for offset machines in the future, but maybe there isn't a market for 4-5 large offset-vendors? Perhaps we will see closures or mergers that can pick up on both R&D, production, and service. 

Who will be the winners and losers? I believe that the winner will be the vendors who understand the market, adapt to the market's needs, and complement their offset business through partners, acquisitions, and development into the products that serve the best in the future.

Can the five majors survive this paradigm shift? Well, if they can adapt fast enough to the changes in the market, yes. However, the production of offset machines is labor-intensive industrial production. If these companies rapidly have to adapt to the order-sizes of 2020 (if this is a measure), they all must move fast! 

I don't believe that all of them can survive. I think the winners will be the companies with managements who know the printing industry better. The partnerships between offset- and digital vendors today look like digital being the smaller partner. This may change since the offset vendors in the future can be the smaller entities with the role of being sub-contractors. Mergers between digital and offset vendors are also likely, I believe. 

Maybe stubbornness will stand between this to happen any soon, and perhaps some of the offset vendors will need to have an even lower demand before taking the right steps. The digital vendors like Canon, HP, Ricoh seems to position themselves as players in the market with growth. 

The pandemic has already influenced many businesses, and I am confident that the pandemic's after-effects are still to be seen!

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