Packaging print and functional print market sectors are better placed as the report unpacks the economic and environmental challenges facing the global print and packaging industry.
The Drupa team in May published its 7th Drupa Global Trends Report.
The results, from a survey conducted before the coronavirus outbreak and consequent postponement of Drupa to April 2021, showed a global industry that remained positive, but reflected more challenging global economic conditions. As expected, the packaging print and functional print market sectors are better placed than publishing and commercial print markets.
While North America remains dynamic, confidence was seen to decline in Europe and all other regions, including the Middle East and Africa. Developing regions, in particular, are suppressed by uncertainty
across economic and political lines. Developed countries are apprehensive, looking at an imminent economic downturn. There has been constant pressure on margins, while innovations in product, manufacturing and strategies are helping some companies who are smart in adopting these smart policies to thrive and grow.
These results come from Drupa’s seventh major annual survey conducted in November. The panel consisted of 2016 exhibitors and visitors with decision-making authority. The survey was conducted by Printfuture (UK) and Wissler & Partner (CH). Almost 600 printers and 200 suppliers participated.
While the survey focuses on the three main sectors of the printing industry – commercial, publishing and packaging print – we focus on the packaging sector.
The packaging market is the most successful, followed by functional, commercial and publishing printing in the order mentioned. In fact, a growing number of commercial and publishing printers are trying to diversify into the other two markets. The results showed confidence remained high, though cautious.
Developed economies were nervous about trade wars and emerging economies about corruption and political instability. Packaging remains a growth sector, although the environmental drive means problems for some and opportunities for others. For several years, printers have responded to the constant pressure on margins by increasing turnover and keeping costs to a minimum.
“Printers are recognising the need to innovate, launching products and services in their existing markets or by entering new markets,” said Sabine Geldermann, Director of Drupa and Global Head of Print Technologies at tradeshow organiser Messe Düsseldorf.
“More printers in all regions will even increase capital expenditure in the coming year instead of reducing it. This commitment to increasing investment applies to all markets, but is again most pronounced in packaging, followed by functional, commercial and publishing printing.”
How have your company’s revenues/prices/margins/ utilisation changed over the past 12 months?
If we look at the regions over time (Chart 1), then North America stands out as buoyant over the whole seven years, Europe improved steadily until 2018, and the remaining regions were in decline, with the encouraging exception of Africa which rose up in the past year. The suppliers share the same concern over the regions and mark down their forecasts for next year even more sharply than the printers, though Africa, Asia and the Middle East are modestly more optimistic than they were last year.
How do you rate the current economic situation of your company? (Actuals)
In most years, suppliers have been more realistic in their forecasts, though as can be seen from Chart 2 they did get overexcited in 2017. Nevertheless, it is remarkable how closely the global reports of actual economic confidence from so many printers and suppliers have been so similar year-on-year.
The pattern is clear. First came slow but steady recovery in confidence from the double hits of the 2007/8 global recession and the impact of digital media.
Then, since 2017, a lowering of expectations largely as a result of increasing concern over broader socio-economic issues such as political instability, global trade wars, etc. The coronavirus outbreak undoubtedly reinforces that slowdown, though hopefully there can be a relatively speedy recovery.
How do you rate the current economic situation of your company? (Actuals)
Clearly confidence levels vary by market sector, with packaging leading and commercial and publishing some way, behind as shown in Chart 3. Indeed, one of the features of open-ended replies, when asked what are the best opportunities in 2020, was the number of companies hoping to diversify into the Packaging or Functional sectors from Commercial or Publishing sectors. Nevertheless, all markets are impacted by broader socioeconomic factors, as evident from the trend shown over time.
How do you rate the current financial performance of your company? (Actuals)
If we drill down into the financial performance data over time for the three largest sectors (Chart 4), we can see that in all cases, printers manage to sustain performance despite unremitting pressure on margins by increasing utilisation and therefore revenues, consequently, over the period the pressure on prices has slowly reduced
How have your company‘s revenues/prices/margins/utilisation changed over the past 12 months?
The transition to digital print is slow but steady and while conventional (non-digital) print processes still provide the major cashflow for most printers, it is digital technologies that show more rapid growth in most sectors (Chart 5). The exception is packaging where flexo and sheetfed offset continue to thrive.
How has capital investment changed over the past 12 months? How will it change over the next 12 months?
For packaging, it was no surprise to be told that sheetfed offset was the most popular (29%), followed by flexo (26%). As for supplier capital expenditure plans, they vary greatly by region, with North America, Africa and Asia expected to do best. New sales channels are the most popular spend target, followed by raising efficiency and enhancing existing products. Given that Drupa 2020 was still on the calendar as of the time of this study, it was to be expected that new product launches would increase this year.
For the first time we asked specifically about the broader socio-economic pressures and there were two clear patterns reported across the globe. For the developed regions the focus was concern about the risk of or reality of economic recession in the country or region, followed by concern about global trade wars and the impact of global warming and other environmental pressures.
For the developing regions, it was corruption and political instability creating an economic recession that dominated concerns. Most regions reported that market pressures were more important than these socio-economic pressures, although in the case of several of the more badly affected developing regions, this was clearly more arguable. Perhaps not surprisingly, suppliers gave very similar replies to these socio-economic questions. The impact of the coronavirus outbreak will add to these concerns for all.
There has been a decline in the proportion of printers who report that publishing is their prime market. In 2013 it was 28% and has declined steadily since then to 19% in 2019.
As the proportion of commercial and packaging printers has remained broadly stable, this suggests that there is an active decline in the number of publishing printers. Digital book production is on the rise, while newspapers and magazines are in active decline. Many publishing printers are seeking to diversify, often into packaging.
Looking at our core sector, packaging printers themselves face challenges, particularly those using plastic substrates in the face of a global campaign against single-use plastics – an opportunity for those using fibre based substrates. Those using plastics are seeking more environmentally friendly options. The proportion of SKUs that specify digital print is growing steadily across the globe.
Conclusion
We must remind you again that the survey was conducted before the coronavirus outbreak. Add to that the global economy is past its peak in recovering from the previous recession and the global print industry, so closely aligned with advertising, is feeling the downturn. The developing regions have additional challenges of corruption and political instability – indeed, some might argue that the developed regions also suffer from these. However, looking at the longer term, and beyond the impact of the pandemic, the industry has adapted well to the challenge of digital communications. That is not to say that there is not never-ending pressure on prices and margins, but for those who invest wisely, bring their costs down steadily by increasing productivity, diversify or at least innovate with new products and services and who invest in their people to create an enthusiastic and committed team; they will prosper.
What better place is there to explore how best to turn those principles into practice than Drupa 2021 – now confirmed to take place in Düsseldorf on April 20-28?
See you there!