drupa Global Trends report

Printers and suppliers from the majority of market sectors reported growing confidence in their companies’ economic performance. The opportunity was taken this year to track patterns of performance over the years. Packaging remains the most buoyant market and there has been a steady improvement in confidence over the five years amongst Commercial printers. Functional printers were following a similar positive story but there was a puzzling increase in uncertainty this year for both printers and suppliers to this market. Publishing printers probably face the most challenging strategic changes and there is a decline in assurance this year, despite the reducing threat from E-books.

Sabine Geldermann, Director drupa, Messe Duesseldorf, commented, “The report indicates that print can be optimistic about the future. After the double blow of the 2008 global recession and the consumer shift to digital communications, printers and suppliers are taking full advantage of the slow but clear global economic revival and finding new ways to exploit emerging technologies so as to place print as a central tool for consumers.”

Recruited from senior managers who visited drupa in 2016, over 700 printers and almost 250 suppliers participated in the survey run by Printfuture (UK) and Wissler & Partner (CH). Richard Gray, Operations Director at Printfuture, states, “Both printers and suppliers clearly understand the strategic challenges that print faces. However there is increasing confidence in a strong future for printers in most markets and regions, as long as they analyse their target markets carefully and make suitable innovations to meet the future needs of their clients’ customers.”

Challenges for some regions but strong growth in suppliers’ core sales

In regional terms again the picture is positive in general but with clear exceptions. North America has been consistently the strongest region over time, although Europe has shown steadily increasing confidence. Sadly Africa and the Middle East see clear decline in confidence over time.

Globally this is the fourth year of increasing confidence reported by suppliers. What is striking this year is the surge in sales of core equipment/software/materials (+29% net balance). Indeed all supplier revenue streams showed their best ever net positive balance.

Printers globally report that the squeeze on prices and margins continues and is coped with best by ever increasing utilization and hence revenues, whilst holding costs as steady as possible. There is evidence that over time the squeeze on prices and margins is somewhat lessening globally. However the regional picture is far more patchy. For example whilst North America reported some increase in prices, Australia/Oceania reported a clear drop in pricing. Equally Packaging prices are holding up globally whilst Publishing and to a lesser degree Commercial prices continue to decline.

Digital print grows but conventional print still dominates

The transition to digital print continues but slowly, with Functional printers now largely dependent on digital print but few packaging printers reporting significant digital sales as yet. (60% of Functional printers report more that 50% of turnover is digital, whilst just 12% of packaging printers report more than 25% of turnover is digital.) It is striking to report that only 27% of all printer participants operate a Web to Print /Storefront installation, up just 2% from 2014.

Globally printers were more willing to invest: 42 percent reported an increase in capital expenditure compared to the previous year while 9 percent reported a decline – a positive net balance of 33 percent. North America performed best with a net balance increase of 51 percent while Australia/Oceania lagged farthest behind with a net increase of only 18 percent. Not surprisingly Packaging printers reported the biggest positive net balance at +45%, Functional at +42%, Commercial at +30% and Publishing at +20%. Finishing is the most popular focus for investment for the second year running, followed by print technology and then prepress/workflow/MIS.

Plans for print investment in 2018 depend on the market sector, with Flexo the most popular choice in Packaging, followed by Sheetfed offset. In Commercial it is Digital toner cutsheet colour that leads followed closely by Sheetfed offset and Digital inkjet wide-format. In Publishing it is Sheetfed offset that leads and Digital toner cutsheet colour in second. While in Functional, it is Digital toner cutsheet colour that leads and Digital inkjet wide-format in second.

Following the successful drupa in Spring 2016, this 4th annual Global Trends report gives the detailed evidence to support the thesis that globally Print is recovering well from the double challenge of the 2007/8 economic crisis and the strategic shift towards digital communications.

Sabine Geldermann, Director drupa, Messe Duesseldorf, said, “Last year’s drupa showcased a global print industry that has regained its confidence in the future, with lots of fresh technology and applications demonstrated to enthuse both printers and their customers alike. This report shows that whilst levels of confidence vary between regions and markets, overall the print industry is on the up and will invest strongly to secure a prosperous future.”

Recruited from senior managers who visited drupa last year, almost 850 printers and over 300 suppliers representing all regions and markets participated in the survey run by Printfuture, the specialist print consultancy and market research company. “All printers, whatever market or region they are based in, know that if they are to succeed in the long term, they must continue to adapt to the ever changing market and economic conditions. This needs a ruthless approach to efficiency and automation while at the same time learning new skills and adding new added value services. Nevertheless it is pleasing to report that overall, print has got its ‘mojo’ back.”

General confidence amongst printers and suppliers for 2017

Globally 42% of printers described their business as in a ‘good’ economic condition in 2016, with just 11% reporting it as ‘poor’, a net balance of +31%, the highest recorded global result of the report series. Prospects for 2017 are better with a net balance of +46%.

However market variances and regional variances are growing. Packaging at +39% net balance and Functional (Industrial/Decorative) at +34% are strongest while Commercial at +26% and Publishing at 23% follow behind. North America once again is the strongest region with a net balance of +49%, followed by Europe and Australia/Oceania at +33%, Central/South America at +29%, Asia at +20%, the Middle East at 19% and Africa at -3%, the first negative net balance of the report series. Indeed on many measures, the Middle East reported a very poor condition, while Africa and Central/South America reported fragile conditions.

Looking at the underlying financial performance figures, printers reported a well-established pattern of falling prices and squeezed margins, compensated for by increasing revenues assisted by higher utilisation. In terms of conventional print, the well-established trends continued of falling run lengths and lead times and an increasing number of jobs to be handled.

Notable pause reported in the growth of digital print and a clear fall in the number of Web to print installations

What was different this year was a possible pause in the historic rise in the proportion of turnover that is digital print (28% of printers in 2015 reported that more than 25% of their turnover was digital while the figure for 2016 was 27%). Nevertheless digital print has an ever-increasing hold on Functional print with inkjet the dominant technology for most applications, up from 61% in 2014 to 74% in 2016. Similarly digital continues to grow rapidly in Commercial print e.g. wide format print installations up from 37% in 2013 to 50% in 2016. The much talked of growth of digitally printed packaging is starting, with 34% of packaging printers offering digital print, up from 24% in 2014, although demand is patchy as yet.

Even more striking was the clear fall in the number of Web to print installations globally down from 26% in 2015 to 23% in 2016. This decline was not universal eg in Asia it rose, but in some regions eg North America and Australia/Oceania, the fall was decisive.

Turning to capital investment plans, 42% spent more over the last 12 months and just 11% spent less, a net balance of +31%, and there was a net balance of +41% in respect of plans for 2017. This positive story was true for most regions, the exception being the Middle East where there was a new low for the report series of just +5% in 2016. For the first time the No. 1 priority globally was Finishing, followed closely by new Presses. That in turn was closely followed by PrePress/Workflow/MIS; a sign that automation is being taken seriously.

As for press investment plans, Sheetfed litho led the global race followed by Digital toner cutsheet colour. But what was another first for the report series, each of the four markets had a different No. 1 press investment priority – Commercial, Digital toner cutsheet colour; Publishing, Sheetfed offset; Packaging, Flexo and Functional, Digital inkjet rollfed colour.

With just weeks to go before drupa 2016 opens, the results of the 3rd drupa Global Trends report have been published. The report finds that although recovery from the financial crisis in 2008 is incomplete and uneven, printers everywhere are increasingly optimistic about their prospects throughout 2016, despite tightening margins and falling prices. This is influencing their plans for investment in production equipment.

The three reports have drawn on a global panel of about 750 printers to survey the state of the printing industry and expectations about its future over the three years leading up to drupa 2016.
Sabine Geldermann, Director drupa, Messe Düsseldorf, said: “This year’s drupa is a showcase for the latest developments in the global printing industry. By commissioning the series of drupa Global Trends reports, we are able to put these new developments into the context of the state of the industry as a whole. Anyone visiting drupa this year will find the reports make an invaluable backgrounder.”

The research and writing of the reports were handled by Richard Gray and Neil Falconer of the specialist consultancy and market research company Print Future. “The previous report in 2015 was upbeat in general, globally,” says Richard Gray. “In 2016 the picture is patchier, with some regions thriving, such as North America, others are struggling, including some of the developing regions. Similarly whilst packaging and functional markets are in general doing well, those in the commercial market are more chal-lenged and those in the publishing market particularly so."

In each report the responses of printers have been gathered and averaged to produce a barometer of economic confidence. Some 37% of the global panel of printers described their current condition in 2015 as good, although a significant 12% said their condition was poor, giving a positive net balance of 25%. Looking ahead, printers were in general more positive with 50% expecting their economic condition to improve in 2016 compared with just 6% expecting it to deteriorate – a positive balance of 44%.

Taken by region, everywhere is more optimistic for 2016 than 2015, but the biggest increases in positive feelings are in Africa, Australia/Oceania, Middle East and Asia. Taken by sector, all the 2016 forecasts are more optimistic on balance, with commercial and functional (sometimes called industrial) printing showing the greatest increase compared to 2015.

Digital prospects
Looking at some 14 common print processes, the report found that, as might be expected, digital technologies are growing fastest (on average by 28% per annum), but that sheet fed offset lithography is also seeing sig-nificant growth, particularly in publishing (net positive growth of 7%) and packaging (+12%). Flexography is also doing very well in packaging (+18%), and gravure is also seeing a modest but definite growth (+3%) in this sector. Functional printing is a growth area for screen printing (+11%), though digital is very important here too.

While the bulk of turnover still comes from conventional print, there is a steady increase in the volume and value of digital print, with the exception of packaging where only 13% reported that it represents more than 25% of turnover, compared to 35% for commercial, 24% for publishing and 59% for functional. The ability of digital to print variable content is important, with 59% of functional printers and 35% of commercial printers reporting that more than 25% of their digital turnover was variable.

Web to print seems to have stalled, with only a percentage point of growth from 2014 (25% of printers had it) to 2015 (26%). Only North America as a region and Ffunctional print as a sector saw significant increases in volumes going through web to print.

Limits to growth
Both printers and suppliers cited strong competition as the biggest con-straint to growth, with lack of sales being almost as large a factor. When asked the reason, the largest factor (58%) was finding new customers, with finding good sales staff second at 35%. About 32% blamed lack of demand for conventional print, but only 10% said the same for digital.

Initial results from the second "drupa Global Trends" report are showing sustained recovery from the recession with some surprising insights and positive feedback. The full report designed to highlight economic and operational trends in the worldwide print sector is available at the end of March. The results are all the more interesting as the survey itself, conducted in October 2014, was largely identical to the first "drupa Global Trends" report from February 2014. In addition this year a full survey was conducted amongst industry suppliers for the first time, ensuring a balanced picture of the global print market. Developments and important key data from the worldwide print sector – such as financial conditions, business climate, investment plans and technologies used are given in detail and trends revealed.

Werner Matthias Dornscheidt, Chairman of the Messe Düsseldorf Management Board summarises the key results of the study. "The generally upbeat picture reported by the expert panel surprised us,” says Dornscheidt. “Both the print service providers and the international supplier industry gave a positive evaluation of the economic situation of their own companies as at October 2014. Even more surprising, however, was that the print and supplier industry is heading into 2015 with a very positive outlook.”

The question ‘How do you see the outlook for the coming twelve months?’ was answered by 48 percent of service providers surveyed with expectations of an improvement in their companies’ economic situation, and only seven percent with a decline. The results from the worldwide supplier industry were similarly positive: 51 percent forecast an improvement, and only eight percent a decline.

On the other hand, the results from individual performance measures surveyed show a much more mixed picture:
1. Sales for print service providers continue to rise – but are less pronounced. 39 percent of print service providers report an increase, whereas 22 percent show a drop in sales. This positive balance of 17 percent is well below the positive net balance of 27 percent from the first survey.
2. The margins for print service providers continue to fall. Almost half (43 percent) of the print service providers surveyed report falling margins, while just 16 percent succeeded in increasing margins. Positive exceptions here are the markets of North America and the Middle East, where 29 and 28 percent reported increased margins.
3. Digital print is growing fast but is still a small percentage of turnover for most printers. As quickly as the share of digital printing in the overall print technology mix continues to rise, most turnover continues to be generated from traditional print. Only ten percent of the print service providers surveyed achieved more than 25 percent of their 2014 sales in digital printing (2013: 8 percent).
4. Print service providers are not turning to services outside the print sector. Often recommended as a new business area – but not yet realised in practice: Just 27 percent of the print providers surveyed achieved more than ten percent of their sales with services outside the print sector (e.g. asset management for customers, updating databases, etc.).

Drawing an initial conclusion from the second "drupa Global Trends" report, those surveyed feel pretty positive – even if some measures are still showing negative trends. This general optimism is supported by the investment plans cited both by print service providers and supplier firms. After all, only a forward-looking development strategy ensures a competitive edge and thus the future of the company.
More than 1100 international decision-makers from the print industry and their suppliers responded to the comprehensive survey in October 2014. The independent market research company Wissler & Partner (Switzerland) and Printfuture (UK) have – as with the first "drupa Global Trends" report and the first "drupa Global Insights" report – expertly evaluated and prepared the results.

drupa will publish two report series entitled “drupa Global Trends” and “drupa Global Insights,” that will study for the first time the trends and major changes in the international print and media sector at both global and regional levels. The results will be based on answers provided by a representative panel consisting of leading executives from printers, suppliers and print purchasers from around the world, recruited primarily from the drupa 2012 visitor and exhibitor database. Messe Düsseldorf, in its role as drupa organiser, has appointed two independent consulting and market research companies Printfuture (UK) and Wissler & Partner (Switzerland) to conduct these two report series. The first “drupa Global Trends” report is now published.

Despite reporting significant regional variations, the “drupa Global Trends” report does reveal a number of critical – and sometimes surprising – trends that are shared by all economic regions and across print segments (Publishing Packaging and Commercial). As was to be expected, the report confirmed that the global printing industry’s structural transformation is still ongoing, with increasing costs coupled with declining prices and shrinking margins. However, three other major findings of the study are more pivotal:

1. There are clear signs that economic conditions are improving. As a consequence the printing industry globally is planning increased investment over the next twelve months. Efficiency gains and the development of new services are driving investment in the industrialised countries. North America is leading the way by gearing up for major transformation with high levels of investment in printing technology, IT and new services. In the emerging countries growing demand is the main driver.
   
2. The printing industry is in the midst of a transition from a product-driven industry to a service-driven one. The demand for new solutions and business models that better reflect the customer needs is clear.
   
3. As expected, digital printing plays an increasing role in the technology mix deployed. Among print services providers, 65% produce using both conventional and digital methods and one-third of commercial printers already gain a quarter or more of their turnover from digital printing. But conventional printing (especially sheet-fed offset) continues to be an important pillar for the print sector. Planned investment reflects this point as 29% of all printers say they intend to invest in sheet-fed offset printing.

“Thanks to these two report series, drupa is able to offer first-rate, representative market data and information that will enable the market players – be they providers of print services, suppliers or print purchasers – to make better strategic decisions. In addition the reports will allow variations between the world’s major economic regions to be analysed. Finally the insights gained will serve to further improve drupa’s positioning,” says Werner M. Dornscheidt, the President and CEO of Messe Düsseldorf.

This first drupa “Global Trends” report provides an initial assessment of the state of the global print industry In order to monitor the trends going forward, the survey will be repeated in the fourth quarter each year. In parallel drupa will publish a series of “Global Insight” reports that will offer detailed analysis into specific industry-relevant topics. An “Insights” report on “The Impact of the Internet on Print” will kick off the series in June of 2014. The objective will be to show the effects of the Internet on e-commerce, digital marketing, mass customisation and IT on the world of print and illustrate how future strategies and business models need to adapt.