Agfa Graphics announced last week that it signed an agreement to purchase the assets of Pitman, one of the few remaining independent dealers of equipment including prepress, inkjet, pressroom and packaging printing products. This was not a total surprise as speculation of a Pitman sale grew a few weeks ago after Kodak announced it would cut distribution ties with the company, which had been its largest U.S. reseller of prepress products since 2007.
The relationship between Agfa and Pitman is well established. Pitman was founded over a hundred years ago and has worked with Agfa for almost half that time. Both companies are based in north NJ and Pitman has 502 employees in 16 locations throughout the U.S. Agfa will retain the Pitman name for the business.
Agfa’s market will increase substantially, thanks to the addition of numerous product lines to its offering, including flexographic printing plate solutions for the packaging industry, pressroom products and value-added services. Agfa Graphics reports it will be able to complement its own developed industrial inkjet offering with the addition of a range of media, new inks and wide-format printing systems.
"One glance at Pitman's extensive catalog is enough to understand that we will considerably expand our scope," says Stefaan Vanhooren, president of Agfa Graphics. "One of the main drivers behind this decision was the fact that we gain a unique opportunity to significantly grow our inkjet business. Pitman's strong distribution network and broad portfolio of products and systems, combined with our leading technology, will provide us with promising growth opportunities in this strategically important region," said Stefaan Vanhooren, president of Agfa Graphics.
Agfa forecast its U.S. sales would more than double to over $500 million from about $200 million after the acquisition of Pitman.
Is this good news or bad news for you?
Howard Fenton is a Senior Consultant at NAPL. Howie advises commercial printers, in-plants, and manufacturers on workflow management, operations, digital services, and customer research.
Discussion
By Clint Bolte on Jul 20, 2010
Independent dealers and distributors typically carry competing lines of supplies and equipment in order to be able to present a "complete offering" to the market place.
During difficult and uncertain economic times contracts with distribution networks are often more financially attractive to manufacturers as these arrangements convert fixed overhead costs to variable costs based upon volume moved through this partner channel.
It will be interesting to see how much of the Pitman sales volume generated from products competing with Agfa will gravitate to other "independent" distribution channels.
Vertical integration into the distribution channel is certainly a long term strategic move. Its motivational eye is on future growth and improved potential control of one or more market niches. It has been tried before and will be interesting to observe the market place's response.
By Howie Fenton on Jul 20, 2010
Clint,
Great points. As we have seen in the industry especially in the digital copier and printer space the distribution channel has become a critical target for acquisition. The thinking is - it's not enough to make a great product, you also need a world class distribution channel. Pitman has proven to be a world class distribution channel. It will be interesting to see how this plays out.
Howie
By Vlad Gorelkin on Jul 20, 2010
I expect: customers will pay same AGFA price for AGFA spare-parts after the acquisition without any discount that Pitman gave them for years.
By James Gordon on Jul 20, 2010
This new alignment of the big three pre-press consumables manufacturers with exclusive distribution channels should give each one more pricing power since there will be no competition if you prefer one of the three. Will the manufacturers continue to sell directly to end customers or force everyone to purchase through their newly formed distribution channel? As Howie Fenton stated earlier, "it will be interesting to see how this plays out."
By Ian Mackenzie on Jul 20, 2010
@ James....There will indeed still be competition and the plate manufacturers want it that way. For example, I live in Chicago. Since Kodak plates can no longer be purchased from Pitman, then all I need to do is pick up the phone and call: 1) xpedx 2) Oldham (also sells Agfa)and 3)Lacrosse Litho.
Fuji has a very clean channel as they rolled up most of the independent dealers under the Prime Source then Enovation company.
Agfa has Pitman now but they also have xpedx and some independents. THAT will be interesting to see. Rumors are swirling that Kodak may accelerate their channel realignment with xpedx. Who knows?
The player(s) most affected by this (I believe) are the ones that did business with Pitman in the wide format hardware sector. Not only will Pitman put an immediate focus on Agfa's offerings, but they will also target their old partner's install bases with their 3rd party UV and solvent inks, previously off limits to them. Ink margins are a little more robust than plate margins.
That's where the bloody water may boil.
Discussion
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