December Printer Confidence Index
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Welcome to our first Printer Confidence Index with CAP Ventures. Each month, we will publish essential intelligence about trends in the print and graphic arts industry. Members of our free services will receive overall findings, while Premium Access Members will receive full details with analysis, charts and cross tabulation. Survey participates also see the full results.
Highlights of the Printer Confidence Index:
- Over half of printers see a decline in demand.
- December demand for print will be the same or down from November.
- Printers expect a (-0.6%) decline for their local market in the next 6 months.
- For their own business, printers see an (3.3%) increase in demand.
- The Mountain region of the US showed the strongest confidence.
- In December, the most cited planned purchase is digital black & white printers.
- Over the next 6 months, frontend and backend equipment will mostly be acquired.
Respondents to the December Print Industry Index represented a wide range of companies by various business and demographic factors. Roughly half of the 168 respondents characterized themselves as general commercial printers primarily offering offset printing services. The other half included a mix of digital print specialists (mostly digital), quick printers, prepress services and other graphic service providers.
The actual respondents were mostly owners, presidents, general managers, VP of Manufacturing, and production managers. Clearly this group of respondents have a detailed knowledge of their local market conditions, company activities and plans.
Local Market Conditions for Print
There is clearly a negative sentiment among print providers about the conditions in their market for print. Over 50% of printers indicated that demand for print in their local market is either starting to slip or continues to decline. Only 12% indicated that their local market is growing.
CAP Ventures gave print providers several scenarios to describe their current local market conditions and their operating plans:
- Demand continues to increase, we can routinely charge a premium; we are adding capacity
- Demand is starting to increase, some ability to charge a premium; we are considering adding capacity
- Balance between supply and demand, normal pricing; we have no plans to increase or decrease capacity
- Demand is starting to slip, very competitive pricing; we are considering reducing costs or capacity
- Demand continues to track down, extremely competitive pricing; we are reducing costs or capacity
By assigning a value to each of these scenarios ranging from +2 (demand continues to increase) to –2 (demand continues to decline), we are able to generate a print industry growth index for the current month. For the month of December the index was –0.7, a relatively strong negative sentiment.
In general, CAP Ventures believes the current market conditions in most regions and size of companies is highly competitive, with significant pricing pressure and many companies seeking to reduce capacity by lowering hours and/or reducing staff.
One interesting note is that large printers ($20 million+) generally had a more negative perception of current market conditions compared with small and mid-size printers. CAP Ventures believes many large printers are being especially hard hit by the widespread downsizing and cost reduction efforts of Corporate America.
Smaller print providers appear to be more insulated from the impact of a rapid reduction in print spending. Many smaller print providers have a relatively large customer base that includes small businesses, home offices and consumers (e.g. invitations). CAP Ventures believes as print spending rebounds, the smaller print providers are also less likely to experience as sharp an increase as large print providers may.
Print Volume Growth Expectation
As might be expected given the negative sentiment for local market conditions, the majority of printers indicated their December print volume will either be the same or decline compared with November. 75% of printers indicated that, given their current backlog of work and expected sales, they expect their total December print volume to stay the same (41.1% of printers) or decrease (33.9%) compared with November.
CAP Ventures has derived an average expected change estimate using the following formula:
Percent of printers expecting an increase (25.0%) * average expected increase (12.4%)
Percent of printers expecting a decrease (33.9%) * average expected decrease (-12.3%)
Average expected change in print volume (-1.1%)
The result for December is a decrease of 1.1% in print volume compared with November.
The research suggests continued soft demand for paper, ink, toner and other consumables.
6 Month Outlook
CAP Ventures asked printers to indicate by what percent they expect demand to change in their local market and for their business. Overall, printers’ outlook for their local market over the next 6 months is flat to slightly declining (-0.6%). However, printers’ also have an optimistic view for their own business indicating an expected increase of 3.3% over the next 6 months.
CAP Ventures believes part of this anticipated increase in their own business could be printers having positive thinking about their prospects. It could also reflect a notion that there may be some industry consolidation through mergers, bankruptcies and other activities that reduce local capacity.
By geographic region, once again, printers are more optimistic about their own business than their overall local market. Over the next 6 months, expected local print demand for the Northeast, Pacific, South and Midwest was negative. The Mountain region showed the strongest confidence followed by the Midwest.
The research suggests that the market may be bottoming out and not continuing the significant declines in demand for print that have characterized 2001. The data also suggests that demand for capital equipment will be modest as printers defer decisions until signs emerge for sustained demand of print services.
Capital Equipment Purchases
The near term and mid-term outlook for capital equipment purchases is modest. For the month of December, the most commonly cited equipment that printers plan to acquire is high-speed black & white digital printers (6.5%) followed closely by prepress equipment (6.3%) which includes workstations, scanners, imagesetters, proofers and other devices.
Given the generally negative sentiment for print volume, CAP Ventures believes a growing percentage of capital equipment purchases, especially for digital printing equipment, will be to replace devices that have expired leases vs. for additional capacity.
For each of the production equipment categories, roughly 10% to 15% of printers indicated that over the next six months they plan to purchase something. Most printers indicated they will be investing in the front-end (prepress 33.8% of respondents) and backend (bindery and finishing equipment 23.7% of respondents) of the printing process.
Another interesting note is that, in general, large print providers ($20 million or more in annual sales) were the least likely to be making any capital purchases in December or over the next 6 months. CAP Ventures believes this lower investment sentiment is a function of many of the larger printers having been hit hardest by the recession.
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