My name is Matt Bennett, and I am the Global Vice President for Business Strategy, Digital Packaging for Fujifilm. I've spent the bulk of my career on the supplier side of the business in executive leadership roles with leading offset and digital press companies such as Heidelberg and HP with a strong focus on the digital packaging side for the past 12- 13 years.
Morten B. Reitoft: Being responsible globally for packaging must be challenging - are there any low-hanging potentials everywhere to pick up on, or is that very different from market to market?
Matt Bennett: It certainly can present its challenges logistically, and launching any new, complex product lines during a worldwide pandemic doesn't make it any easier, however, because we have already such a substantial business footprint in the graphics business around the world, and we do business already in the different packaging segments with our analog products, we've got good, established relations and excellent brand recognition because of the quality of our products and services. And yes, the markets around the world and the individual segments can be very different and are transforming from analog to digital at a different pace. For example, the packaging markets in North America and EMEA generally are far more advanced digitally, with similar trends occurring than most of Asia and Latin America. However, that doesn't mean that digital transformation is not happening in the developing part of the world. This actually presents tremendous excitement and opportunity for us overall at Fujifilm on the one hand, but how we address these markets across the globe will most likely cause us to have a different playbook.Morten B. Reitoft: Packaging is, for the majority, still printed in analog (offset, flexo, gravure). Still, digital is considered one of the fastest-growing segments, but do you think that digital will replace the majority of production any soon, or is it more about creating entirely new markets?
Matt Bennett: We are happy to be participating in two market segments that are both forecasted for growth into the future, for both analog and digital. In the near and midterm in the label segment, you will most likely have to service your customer base with both technologies in order to remain competitive and relevant. For example, in the label converting market in North America, digital label presses have been available in the market for about 20 years. After a fairly slow start, digital today accounts for about 18-20 percent of all pressure-sensitive label production. In the past five years, there has been a tremendous gain in productivity, particularly in digital inkjet, and this is only going to continue to improve. This has accelerated the move to digital as now production speeds and print costs are rivaling flexo and gravure in a large portion of the market. If you look at any of the reporting of the industry experts, most are projecting anywhere from 12-15% digital growth into the future. This growth will come at the expense of analog. The ultra-long run work, which still makes up a large portion of the market, will continue to be run on flexo and gravure machines.
In flexible packaging, the other packaging market segment we are entering with our new digital inkjet press, the trends are the same. However, they are at a different starting place than labels. The early digital presses for flexible packaging provided good print quality. However, they never were able to scale because production speeds were so slow and average run lengths too high in order to make a business case for converters. In a very competitive and tight-margin business, digital just couldn't compete with analog for the most part. Today, two things are happening simultaneously that will accelerate the growth in digital flexible packaging in our view, and it's not about new markets but about changing markets, mainly being driven by the consumer and new digital inkjet technology. Consumer buying habits are changing rapidly. Never before have we seen anything like it, and they’ve quite probably been influenced by the worldwide pandemic. Today's consumer wants way more variety to choose from, meaning more SKU choices; they want things fast like they get when they order from Amazon or online. They want more local, regional, and organic brands that are cool and committed to the environment. Lastly, they want an interactive packaging experience where they can use their mobile devices to find out more information about the company, products, and ingredients; this can best be accomplished with a digital solution. For brands to be relevant and compete for consumers' business, they must be able to deliver to the consumer what, when and how they want it. Product security and anti-counterfeiting technology are also important and can best be provided digitally.Morten B. Reitoft: When you look at media and research companies - do you think the importance of particularly inkjet is hyped more than sales justifies?
Matt Bennett: I really don't think so. If you look out at the history of digital print in the graphics industry, as the technology was developing, different digital methods were used to get ink onto a substrate using digital imaging. There was dry-toner based technology that had been around for many years, mainly in copiers but brought to production print by Xerox in the late '80s and Xeikon in the '90s. There was electrophotography, a liquid-based toner technology first introduced by Indigo in the early '90s, and then there was inkjet. Inkjet technology has been around for the longest period but mainly used in copier and desktop printing devices. Over the years, many companies had identified inkjet as the easiest and fastest print process, so much development was put in place to refine and improve the inkjet heads themselves as well as the inks. Today, many different businesses utilize inkjet technology, not just the graphics business. In business, the most complex technology solutions are typically the most expensive to develop and commercially bring to market. With inkjet, because it’s been such a good and versatile technology, companies are continuing to invest in improvements as opposed to brand new product development from the ground up. How long this will last is anyone's guess, but there doesn't appear to be anything else on the horizon that will overtake inkjet for the foreseeable future. Will it overtake the other digital processes entirely? Probably not, but even if it did, it would take a very long time.
Morten B. Reitoft: If digital is so obvious, why is it still a challenge for some PSPs to see the "obvious?"
Matt Bennett: The short answer is change. People just don't like to change. However, every year that goes by, we see more and more PSP's go by the wayside because they did not change. The hardest part of being an owner of a printing company today is that you need to constantly look out for what's next. When I first got into the business 30 years ago, a printer could buy a press and know that his investment would allow him to look ten years into the future comfortably with his purchase and not have to worry about its obsolescence. Today, I would say that it is now down to three to five years. So every three years, a printer must be prepared to invest in a new press to support his changing business, but he has to make sure that he has an effective business strategy to pay it back and make money over a shorter time. This is not an easy situation, the leaders somehow figure it out, and others just can't get there.Morten B. Reitoft: With new technology comes new business opportunities, and not to forget business models - what is the harder of the two for PSPs?
Matt Bennett: There certainly has to be a delicate balance between evaluating and investing in new technology with different business models and opportunities and keeping your eyes focused on your core business. The same goes for suppliers as well. Funding new technology and a new business strategy with your present model, which in many cases is in decline, as I said, a delicate balance must be found. This is where leaders must make essential decisions on how to continue to grow and prosper in a very fast-changing industry. The most successful PSPs I've seen are those who've instilled a company culture of being ready and able to adapt to change quickly. The ones that will fare the most favorably are the companies that recognize that digital in all its forms is transforming all businesses and industries today and creating new opportunities and sometimes markets. An excellent example of this today, and I mentioned earlier, is the rapidly changing buying habits of consumers. The packaging companies that can best develop and execute new processes and strategy to support this significant shift will capitalize. In this case, there will be winners who are agile and can adapt and build new models with technology and thrive, and then there will be ones who don't move fast enough, don't adapt, and miss out on this megatrend.
Morten B. Reitoft: In offset, there are relatively few vendors. In digital, there are so many; how should a PSP choose, and what criteria do you find the most important?
Matt Bennett: Firstly, technology is clearly essential when determining a significant investment. But beyond that is the vendor's reputation and how they have historically worked with their customers. If you're looking at a supplier new to a market and several in the digital arena are, I would say that their technology must be a true differentiator in order to take on the risk of not having a track record. I would also want to ensure that whoever I am evaluating has a fundamental understanding and expertise of the overall market and a clear roadmap of where it is going.Morten B. Reitoft: Fujifilm is, of course, a well-known vendor in the printing industry. With the separation from Xerox, new opportunities lie ahead of you - how big a challenge/opportunity is that?
Matt Bennett: Although I am personally somewhat removed from that part of the business as it is mainly in Asia and does not impact packaging, I certainly have great faith in our executive leadership team's decision to acquire the portion of Fuji Xerox that they did not already own. I would say that one of the extraordinary competencies and foundations of Fujifilm Holdings has been its history of success in making large acquisitions and integrating them into the overall Fujifilm business. The opportunity to leverage and synergize on each other's strengths, not only from a technology standpoint but from that of a customer, sales, and distribution, is where the value will be extracted. I also believe that it shows an incredible commitment and bullishness to the imaging and graphics businesses overall – Fujifilm is telling their employees and the markets this business is important to our overall strategy.
Morten B. Reitoft: Fujifilm is known for technical excellence but is your marketing, service, and organization ready for growth - I mean, with the 720/750, the machines offer superior quality. However, your colleague Mark Stephenson from the UK once said to me (free from memory) that Fujifilm still sees inkjet as a supplement to litho and other technologies, rather than being dead-focused on taking down litho machines to be replaced by inkjet? What is your opinion about this - and your capability to handle eventual growth?
Matt Bennett: Digital print has been identified as a long-term growth business within Fujifilm Holdings. Our different businesses have a core strategy of being among the most relevant and important suppliers from a company strategy standpoint to whichever industry they support. To accomplish this kind of status in a business, you must have an obsessive and relentless enthusiasm to construct the business top to bottom as being world-class, from how we treat our customers, invest in our people, and develop new technology. We always take a long-term approach to our business planning and sometimes ease into markets more methodically than others. I am so impressed with how our company can look out over a five to ten-year period in a rapidly changing business with finite business objectives and goals in place. These future plans are in constant development and review by a team of business analysts and experts in each market.Morten B. Reitoft: Will the future have as many inkjet vendors today, or do you believe there will be more or fewer? And where do you see Fujifilm in that perspective?
Matt Bennett: It's really an interesting question, but with no easy answer, however, I will try to put it in some perspective and break it down into the different print markets, commercial, and packaging. Today, most inkjet technology placements have been made in the commercial print markets in both sheet-fed and web-fed. These placements, for the most part, have displaced offset press machines. The main segments of the commercial print markets are essentially general commercial print, books, magazines, publications, direct mail, and transaction print. Most all of these segments are going through dramatic change as well as decline, unfortunately. Essentially, the internet, computers, mobile devices, and tablets have changed how most people receive their information. So although the print markets overall are going to continue to decline every year, the digital print market portion will continue to grow and replace older analog technology because of efficiency and cost. However, there will come a time when all of the analog systems are replaced, and the market will still be in decline. This will ultimately cause challenges for inkjet suppliers as the law of supply and demand will eventually take over. There will be fewer opportunities in a shrinking market, so there won't be a need for as many suppliers, the market won't be big enough to support them all. Today, there are several good suppliers to the market and enough business for most to make a good living. What will that look like over time, and who will survive is anyone's guess today. With that said, it's still a long way off.
Conversely, the packaging markets today are in a completely different mode when it comes to digital. Digital print overall makes up a tiny part of the package print market. In some segments, like flexible packaging, it makes up less than 1% of overall print. Additionally, and this is good news, the packaging markets are all forecasted to grow worldwide annually into the future, and there doesn't appear to be anything today or on the horizon that will displace the printed package or label. So the packaging markets are fairly wide open to inkjet and digital suppliers today, which is a good thing. The challenging aspect is that these markets are much more complex than the commercial print markets and just because an inkjet supplier wants to move into these packaging segments is by no means a guarantee of success or scale. Typically in more complex markets, the suppliers who wish to participate have to be extraordinarily good at what they do to compete. This usually narrows the playing field from many to a few. The complexity, challenges, and investments just become too great for all to compete. So with all this said and like all free markets, there will be winners and losers; not all will make it. The history and culture of Fujifilm have been all about success, especially in complex markets. Our own core technologies and knowledge of inkjet heads, inks, primers, materials and workflow, we believe leaves us uniquely positioned to be one of the most relevant digital providers, especially in those more complex markets in the long run.