December 18, 2003 -- Speakers at the December 4-5 PRINT OUTLOOK 2004 conference in Washington, DC, sponsored by NPES The Association for Suppliers of Printing, Publishing and Converting Technologies, predicted improving revenues and profits for the printing, publishing and converting industry in 2004 after a long and difficult recession, but also warned that the industry still faces challenges.   Rosensweig: Emerging markets due for fast growth Many of the economically advanced parts of the world will see slow economic growth in the near future, but several big emerging markets, including China and India, will grow much more quickly, said Jeffrey A. Rosensweig, Ph.D., Associate Dean for Corporate Relations, Goizueta Business School, Emory University.   Rosensweig, the conference keynote speaker, predicted that “China is going to be the next big market,” and noted that China’s economic power is particularly clear when the domestic buying power of its currency is taken into account.   He also warned that the world today displays “a major north-south divide in economic power and wealth.” Populations are growing much more quickly in the emerging markets, he noted.   Romano: Digital printing the engine of growth   Digital printing will be a key engine of growth between now and 2010, with particularly healthy expansion likely in advertising, promotional and other direct mail materials, said Frank J. Romano, Roger K. Fawcett Distinguished Professor at the School of Print Media, Rochester Institute of Technology.   Likely changes in the print environment may include more last-minute jobs, more capabilities to make changes right up to and during a press run, and a greater ability to have confidence in job quality with less demand for repeated proofs.   Commercial printers have lost roughly five percent of their print volume annually for the last four years, Romano said, but these losses weren’t easy to identify because so many printers were building revenues in ancillary service areas such as mailing and fulfillment. The generally poor economy also served to mask fundamental declines in print volume, Romano continued.   Pesko: Print-on-demand will shape future markets   Sixty percent of printers surveyed recently agreed that “within two years more than half my jobs will require 24 hour turnaround or faster.” And two-thirds reported they are “making more frequent updates or last-minute revisions.” CAP managing director Charles A. Pesko, Jr reported these findings of a recent survey to PRINT OUTLOOK 2004. This survey revealed an overall rise in demand for print, Pesko said, as well as the fact that document owners and print buyers rely on print service providers to deliver expertise and communications solutions.   Still, Pesko noted, print sales will no longer rise in tandem with GDP as they did for so long.   Between 2002 and 2007, Pesko said, revenue from digital printing and value added services should grow much more quickly than from printing and related services, Pesko said.   Evans: 2004 strong, 2005 weaker   The national economy is “doing better than anyone expected,” and should grow by four to 4.5 percent in 2003, predicted NPES Consulting Economist Michael Evans of The Evans Group. Next year “will be a very strong year, but we will see a wind-down of growth to below-average rates in 2005 and 2006.”   In particular, Evans forecast that sales of printing equipment will register a gain of about five percent in 2004, after several very difficult years.   Evans provided specific forecasts for 2004 and 2005 performance in a variety of categories of printing equipment and supplies. Sheetfed presses should do slightly better in this period, but the decline in sales of offset duplicators will continue, as will sales of graphic arts film. Direct-to metal plates will register sales growth of about 20 percent in 2004 and 15 percent in 2005, Evans said.   DeWese: Mergers again on the rise in industry   Harris DeWese, Chairman and Principal of Compass Capital Partners, told PRINT OUTLOOK attendees that merger and acquisition activity in the printing industry, severely depressed in 2000 and 2001, is rising again and should continue to rise in the near future.   “When M&A activity subsides, margins are very low in the printing industry and bankruptcies tend to increase,” DeWese said, noting that in 2001 there were fewer than 50 acquisition deals and more than 500 bankruptcies. The number of deals has increased in 2002 and 2003 and will likely increase in 2004, he added.   “There will be no more valuation craziness,” DeWese predicted. “Motivated sellers are plentiful, even at lower valuations.”   Paparozzi: Growth, but not enough for everyone   “In 2004, for the first time in four years our industry will grow, but there will not be enough for everyone,” said Andrew Paparozzi, Vice President and Chief Economist at the National Association for Printing Leadership.   Paparozzi reported “real print sales are up 1.2 percent so far this year.”   Next year, NAPL predicts print sales will grow by between 3.2 and 4.1 percent, reaching a level of $81.4 to $84.2 billion.  For particular types of business, Paparozzi forecast that by 2007: - Lithographic printing and associated prep and finishing services will decline from 81.9 percent of revenue to 68.3 percent. - Digital printing (variable content) will rise from 6.5 percent to 13.2 percent of revenue. - Value added services (fulfillment, database management, etc) will rise from 7.8 percent to 14.5 percent. Davis: “Turnaround has finally begun”   Print sales should be 2.5 percent higher in 2003 than in 2002, indicating “the turnaround has finally begun,” said Printing Industries of America Chief Economist Ronnie H. Davis.   For 2004, Davis foresaw further growth of three to four percent. PIA predicts the strongest growth in direct marketing and general commercial and quick printing.   To get the most from this long-awaited turnaround, Davis identified six “secrets of success,” including: - Manufacturing efficiency. The most profitable companies typically have manufacturing costs two to three percent lower than the average firm. - Support and administrative efficiency, once again two to three percent below industry-wide norms. - Being “a learning organization.” Davis noted that “profit leaders spend twice as much on training and education compared to profit challengers,” i.e., companies lagging behind in profitability. Panel highlights routes to success   Three printing company executives, with quite different specialties, outlined their strategies for continued growth and technology implementation at PRINT OUTLOOK 2004.   For Automated Graphic Systems of White Plains, Maryland, digital tools and ancillary services have been critical. “Most of our equipment purchases in the past year have been in the digital world,” said President John Green. The company is currently installing a new Xerox iGen3 variable data digital press.   “Even though most of our work is ink on paper, we get that work because we do all the other work as well,” Green said, citing data storage, fulfillment, and CD-ROM production as examples.   Newth Morris, Owner of Dixie Printing and Packaging Corporation in Glen Burnie, Maryland, said his firm also “moved early on Computer-to-Plate” to streamline production. Dixie also controls quality and workflows by performing all tooling and making all dies in-house, Morris said.   These advantages have been critical in an atmosphere of shrinking business and intense competition.    Paul V. Reilly, Chairman, President and CEO of Mail-Well, Inc., based in Englewood, Colorado, cited many of the same business pressures. “Today the problem with our industry is that printers all look a lot alike, and our suppliers look a lot alike,” he said. “Technology is great, but technology also equalizes. This makes it hard for printers to make themselves very different from one another.” Pellow: Who’s creating demand for digital print   Understanding of personalized digital printing still lags in many advertising agencies, according to a recently completed study at the Sloan Printing Industry Center at Rochester Institute of Technology, reported at PRINT OUTLOOK by RIT’s Gannett Distinguished Professor Barbara Pellow.   “The concept of personalized printing, from an agency perspective, has not taken hold,” she said. “Agencies are starting to see value in personalized print applications, but there is still a major void.”   Many print specifiers still mistake ordinary mail merges for personalization, she added. On the client side, “marketing executives are becoming much more technology-savvy.”   The main cost barrier is the job of building the client’s data infrastructure to support personalization. “Investment in software can be two to three times greater than the investment in equipment,” Pellow noted.   Postal Service reform a critical issue, panelists say   Reform of the United States Postal Service is “the single most important issue the printing industry has faced,” said Benjamin Cooper, Executive Vice President for Public Affairs at the Printing Industries of America.   Cooper was part of a panel exploring current Postal reform proposals. The other panelists were Jack Callender, counsel to the House Committee on Government Reform, John Kilvington, legislative assistant to Sen. Tom Carper (D-DE), and Roger Kodat, Deputy Assistant Secretary of the Treasury for Government Fiscal Policy.   Kodat summarized the findings of a presidential commission that has offered 35 proposals to streamline the Postal Service and solve its pressing financial problems.   With White House support, “next year is the year” for reform, according to Callender. He said he expects reform bills to be introduced in both houses in January or February and to reach the Senate and House floors by summer.   “It would be a massive failure if some kind of reform did not get passed by spring,” said Kilvington.   Cooper noted that “the USPS is the national print distribution system, and printers have realized that this is their issue.”   PRINT OUTLOOK proceedings are available electronically for $150 from the NPES Member Services Department at 703/264-7200 or e-mail [email protected].