CONTRARY TO “economic consensus” forecasts1 that are merely opinion averages, the United States will outpace 2007 with annual growth exceeding 6.5 percent nominal (3.4 percent real) Gross Domestic Product (GDP) through the next two years. Foreign investment, immigration and productivity gains will more than offset exaggerated “crises” like sub-prime mortgages and rises in oil prices.2
Former GE Chairman Jack Welch advises the obvious: “Move up the food chain and stop complaining about the present. If residential ownership weakens, move to residential rentals.” The same applies to printing sales. Migrate to where the markets are hot and to the places and sectors underserved by our medium, its precursors and its successors.
Publishing/non-newspaper ($108B, -3 percent; with $14.3B to print, -2 percent) will remain the Number 1 print demander, although sales will be flat or declining in every segment except juvenile/adult trades, CDI and religious publishing ($3.1B to print, +3 percent). Offshore book production may decrease with the exchange rate helping domestic manufacturers.
Professional/educational books ($3.6B to print, -16 percent) will be victim of both price excesses, as students get poorer, and instructors migrate to custom digital content, which is not easily controlled or protected. Periodicals ($5.8B to print, -9 percent) are cutting back frequencies, page counts and circulations—a slow death for many full-web heatset printing plants. Other/non-traditional publishing ($1.4B to print, -11 percent) will level off as foreign-language/content publications and newspaper FSIs consolidate.
Greeting cards ($0.8B to print, -20 percent) will slide with reduced consumer discretionary spending and the challenge of e-cards. American Greetings’ foray into online photo sharing (Webshots.com) is indicative of where social expression is headed.
Number 2 banking/insurance ($3.24T, +7 percent; with $13.4B to print, -15 percent) will make a major withdrawal from our medium despite a 10 to 12 percent increase in commercial loan activity. Completed mergers in commercial banking ($9.9B to print, -14 percent) and the collapse of sub-prime lending portfolios signal substantially less signage, stationery and direct mail.
Both property/casualty insurers ($1.6B to print, -15 percent) and life insurance ($1.9B to print, -9 percent) are turning to the Internet on-the-cheap and will see almost zero growth in premium income.
Related at Number 12 is investment/brokerage ($948B, +7 percent; with $7.9B to print, -7 percent). Only robust digital printing is gaining in securities/brokerage and mutual funds ($4.7B to print, -6 percent), while direct mail, coldweb and other commercial print crash.
Investment banks/syndication ($3.2B to print, -8 percent) will suffer as more IPOs go offshore, thanks to Congress’ continuance of Sarbanes-Oxley resulting in lower legal and administrative costs in London, Toronto and other financial centers.
Number 3 medical products/pharmaceuticals ($384B, +3 percent; with $12.1B to print, -6 percent) will be sub-normal, as pharmaceuticals and wellness ($8.9B to print, 0 percent) stall with the expiration of patents and government encroachment.
Just the opposite is true for biotechnology ($0.9B to print, +14 percent), which is emerging with new breakthroughs that require introduction and marketing print. Magazine and newspaper ROP, bind-ins and FSIs, as well as outdoor advertising, will sell well. In saturation with equipment placements will be medical products ($2.3B to print, -22 percent). De-packaging and packaged imports will hurt suppliers to medical consumables providers.
In the demand chain are Number 11 health providers ($2.27T, +8 percent; with $8.0B to print, -3 percent). Third-party administration/health insurance ($5.5B to print, +10 percent) will far out-buy hospitals, nursing homes and home care ($2.3B to print, -18 percent). The grossly underserved segment is medical practices ($0.2B to print, -19 percent), which should be buying promotional and patient- relationship programs.
Packaged foods ($772B, +11 percent; with $11.3B to print, +15 percent) moves up the food chain to Number 4. U.S. bulk and packaged food exports will increase dramatically, and more previously imported foods will be produced domestically. Flexi-film packaging, pressure-sensitive labels, lids, tubs, folding cartons and extruded plastics will wrap up double-digit growth in the next two years.
The biggest growers are fresh-packaged foods and pet foods ($4.5B to print, +19 percent), while the slowest is bottled, canned and confections/baked goods ($3.1B to print, +2 percent). Sheetfed litho label plants will starve.
Get With the Program
At Number 5 is computer software ($434B, +23 percent; with $11.1B to print, +13 percent). Networking and mainframe computing ($3.0B to print, +35 percent) companies are designing complex support software and maintenance for the rapidly increasing numbers and varieties of mobile devices and connectivity methods beyond cellular. Online help, graphics cards for games, streaming video, mobile banking, sales transactions, etc., are driving these categories.
The biggest print buyer, though, is packaged/download software ($4.0B to print, +7 percent). Microsoft’s new Office Communicator will let e-mailers talk and conference call, and Apple’s Mac OS X “Leopard” upgrade allows users to upload Windows programs along with hundreds of other features. Memory/storage and hosting ($3.1B to print, -11 percent) continue downward, although category sales are rising more than 7 percent outside the United States.
Real estate ($2.0T, +1 percent; with $11.0B to print, +4 percent) is Number 6. Commercial non-infrastructure, manufactured homes and mortgage fees ($2.5B to print, -14 percent) will be very sub-prime for our medium as office and retail construction remain slow and storefront mortgage firms collapse. The battered residential new/resale/condo and rentals ($8.5B to print, -9 percent) categories will reduce print spends for literature, signage, direct mail and free publications. The only opportunities will be among brand consolidators because three-quarters of realtors are independent.
Realogy Corp. is re-launching its fourth brokerage chain (Better Homes & Gardens) and ramping up its Sotheby’s brand. Print sales reps should pursue foreign-language publications and offshore distribution for high-end real estate properties and agents. Recovery in this sector will be from non-U.S. buyers. The best geographies will be the Las Vegas metro, Manhattan, Seattle, Hawaii, the West Coast, Southwest and Southeast regions.
Beverages ($366B, +4 percent; with $8.8B to print, 0 percent) at Number 7, along with food service ($681B, +3 percent; with $4.7B to print, +2 percent) at Number 21, are going through a period of re-invention. Makers of soft drinks and waters/juices/energy drinks ($2.9B to print, +14 percent) continue to launch products with negative calories, herbal infusions and vitamin fortifications. All compete for shelf space with POP/POS, floor, window and outdoor print, produced via screen, large-format litho and digital processes.
Beers, wines and spirits (more than $4.0B to print, +4 percent) are proliferating with thousands of small brand entrants thirsting for packaging and promotional print. In the restaurant trade, fast foods/take-away ($2.0B to print, +9 percent) firms are upgrading facilities to become “fast casual,” offering cooked-to-order foods and, yes, menus! Flat or declining for a second year are coffees and dairy ($1.9B to print, +4 percent), institutional food service ($0.3B to print, -35 percent) and full-service restaurants ($2.2B to print, -2 percent) as consumers go on a diet.
The Road Less Traveled
Stalled at Number 8 is automotive ($1.6T, +2 percent; with $8.8B to print, -2 percent). Off-road vehicles ($0.9B to print, +17 percent) lead the race as domestic infrastructure and foreign, dollar-driven demand revs up sales of road building, construction, farm and recreational vehicles.
Rentals and leases ($1.3B to print, +8 percent) and new vehicles ($4.1B to print, +3 percent) will slowly accelerate their print spends heading into 2009, when radically new brands and models powered by pollution-free fuel cells will be introduced. Volkswagen will become a domestic producer, and Chinese cars will be manufactured in Mexico; both demanding print for introductions and dealer build-outs. Driven will be POP, outdoor, high-end sheetfed, pressure-sensitive/decal OEM and direct mail. Finance/insurance ($2.0B to print, 0 percent) and used vehicles ($0.5B to print, 0 percent) will decelerate.
Fashion ($567B, +12 percent; with $8.7B to print, +1 percent) ranks Number 9 with a very mixed closet. The big print buyers are the sales-challenged department stores fighting discounters that are now selling brand-name jewelry and intimate accessories ($3.0B to print, +11 percent), and clothing and footwear ($5.7B to print, 0 percent). Women’s apparel, a weakness in ’07, will wear better in ’08 and ’09. Screen and digital large-format printing will be in vogue. At retail, gift cards continue to be the biggest print spend (+14 percent), as more transactions involve them.
With exciting new 3G wireless products being introduced, telecommunications ($1.026T, +9 percent; with $8.7B to print, +4 percent) rings in the New Year at Number 10. The Google-Phone and Amazon’s Kindle, which downloads books and other media without a computer, are among the most promising enablers of new applications, including mobile banking.
The wireless/equipment category will dominate the sector ($3.0B to print +50 percent). Our opportunity, however, extends beyond wi-max to providing content for wireless distribution. Electronic ads, dot-mobi domains, PR, coupons, POP, loyalty programs and even outdoor billboards could connect with customers.
Hang up on the balance of telecom unless you print directories ($2.8B to print, -7 percent). Long distance and local wire ($1.1B to print, -32 percent) are post-consolidation and in low growth mode. Also post-growth are cable and satellite ($1.9B to print; +5 percent). Now approaching 70 percent of U.S. households, they will turn to print after the FCC mandates “a la carte” channel selection and pricing, and lower rates on leased channels to increase variety. More content will mean more print in front of programming and more heatset half-web direct mail to turn subscribers on to new offerings.
Akin is Number 23-ranked electronic products ($680B, -9 percent; with $4.1B to print, -15 percent). Toys and games ($0.8B to print, +6 percent) and computers/peripherals ($1.5B to print, 0 percent) will win with in-store, outdoor, catalog, direct mail and tie-in printing. Third-party deals for new games that are independent of console producers will open up the category. Most home entertainment receivers and players ($1.8B to print, -25 percent) are produced in Asia along with attendant packaging and manuals. Only promotional print catalogs, transit POS/POP and ROP are available to U.S. printers.
At Number 13, travel/hospitality ($758B, 0 percent; with $7.2B to print, 0 percent) will be slowed as a result of high fuel costs and declines in business travel. Overbuilt and under-occupied hotels and resorts ($3.5B to print, +3 percent) will check-in with more promotional print. Close-to-home tourism utilizing carry-forward bed taxes and regional agencies will increase. Less overseas travel will force tour operators to up their ad spends. After a take-off in print buys in ’07, airlines ($1.8B to print, -7 percent) will crash land.
Standby for Print Sales
The exceptions will be new boutique carriers with new logos, colors, literature, posters and signage. Another opportunity will be the spinoffs of frequent flyer programs which, under new ownership, would be radically expanded by direct mail and other print.3 Cruise lines ($1.4B to print, 0 percent) are in calm waters with collateral and outdoor print as the seas get crowded.
At Number 14 is personal care ($361B, +4 percent; with $6.8B to print, +5 percent). Fragrances ($0.8B to print, +18 percent) will continue as the fastest-growing demander with packaging, counter-top displays and ROP advertising and insert samples. Both hair, skin, suncare ($1.6B, +7 percent) and sanitary/hygiene products ($1.3B to print, +8 percent) segments will increase package and POP print as established brands extend to new products. Indicative are Clorox’s Green Works natural cleaners, its first new product launch in 20 years, and its acquisition of Burt’s Bees, a lip balm and lotion maker.4
Home improvements ($973B, +4 percent; with $6.8B to print, -5 percent) is Number 15. Double-digit earnings declines and losses across the sector signal print cutbacks. Lowe’s doesn’t see a rebound in home prices, home sales and credit until late ’08 at the earliest.5 Only tools and materials ($1.7B to print, +12 percent) will build with aggressive marketing and price increases at twice the growth rate.
Home appliances and furniture and fixtures ($1.6B to domestic print, -24 percent) will continue in decline as more production goes offshore. Coldset web FSIs, coupons, swatchbooks, POP, packaging and labels will be the principal buys. Floors, walls, windows ($2.0B to print, +3 percent), lawn and garden ($0.4B to print, +19 percent) and remodeling services ($1.0B to print, -8 percent) will source to mostly local sheetfed, label, folding carton and copy shops.
Related at Number 17 is discount retail ($1.05T, +3 percent; with $5.1B to print, -3 percent). Wal-Mart, Costco and Lowe’s are registering less than 2 percent growth and are maxed out in locations. To improve “shopping experiences” and look more like top-drawer retailers, the hypermarkets and clubs ($3.5B to print, -10 percent) will begin to reposition with private designer labels and in-store amenities. By ’09, print demand should turn positive.
Meanwhile, off-price stores and outlets ($1.6B to print, +5 percent) are “on” to offset. Ross Stores (+13 percent), Big Lots (+9 percent), Dollar Tree (+8 percent) and others are up to doubling their web offset spends. The increased U.S. minimum wage will swell this category.
Security/protection ($512B, -3 percent; with $7.1B to print, -1 percent) is falling to Number 16, but could turn around if a terrorist act is carried out. Data/document integrity security ($1.8B to print, +13 percent) will benefit from the Real ID Act, which is overloading government agencies.
Printers should learn to use chemical-reactants and other security features to go after public and private records contracts and a myriad of other authentication and counterfeiting/alteration-resistant documents and smart labels/packaging. Locks, safes and equipment ($1.1B to print, -42 percent) continue to be jammed by foreign producers and the downturns in residential and automobile production.
Number 18 entertainment ($711B, +9 percent; with $5.0B to print, +1 percent) and Number 22 leisure activity ($187B, -4 percent; with $4.1B to print, -12 percent) will switch directions as consumers stay at home. Motion pictures ($1.3B to print, +8 percent) and amusements and live concerts ($0.8B to print, +6 percent) will struggle for attendance and increase advertising, couponing and outdoor print. Saturated broadcast/premium cable/satellite ($1.8B to print, 0 percent) and migration to download recordings ($0.4B to print, 0 percent) will turn down print volumes.
Gambling/wagering ($797B, +7 percent; with $4.8B to print, +22 percent), at Number 19, has the odds in its favor. Financially challenged consumers will scratch onto state/provincial lotteries ($2.8B to print, +12 percent) as the category increases outdoor/transit, in-store, game card and insert printing.
Casinos/wagering parlors and on-track/off-track betting ($2.1B to print, +9 percent) are racing. Sites in Pennsylvania doubled first-year estimates, prompting neighboring states to approve casinos. Florida and New York are also building facilities, and the traditional gambling locations are defending share. All are good bets for screen, direct mail and sheetfed printing sales.
Freight/logistics ($624B, +9 percent; with $4.8B to print, +65 percent) will load up to Number 20. Courier/small package delivery ($2.5B to print, +83 percent) will rapidly consolidate the smaller players and become a substitute for more expensive personal selling. Truck signage, store location graphics, and courier envelopes and boxes will nearly double. The remaining print spenders will be primarily national postal services ($1.5B to print, +2 percent) and all other freight ($0.8B to print, +10 percent). Sell moving billboards, security tapes, documents, forms and POP/POS to these segments.
Stay After Schools
At Number 24, and graduating, is higher education ($151B, +7 percent; with $3.2B to print, +7 percent). Alternative private education ($1.1B to print, +11 percent) gets an A+ in marketing as it outwits traditional, overbuilt private and public universities and colleges. Tuitions ($1.0B to print, 0 percent) will maintain direct mail, outdoor/transit advertising, free-distribution media containing inserts and viewbooks.
Cultural events ($0.5B, -17 percent) and athletics ($0.4B to print, -17 percent) will cut back as discretionary consumer spending de- clines. Development ($0.2B, 0 percent) will continue major campaigns to refill shrinking endowments.
At Number 25 is government/federal and state ($4.8T, +4 percent; with $3.0B to print, 0 percent). Congress will likely raise the public debt ceiling to more than $11T6 mostly to cover national security. Defense and homeland security ($0.4B to print, +8 percent) and state government ($1.4B, +7 percent) will be the only growth categories for ink. However, the biggest buyer will be health and human services ($1.4B to print, 0 percent).
These 25 hottest market sectors should account for more than 68 percent of U.S. GDP and 94 percent of all printing sales. Off the list in 2008, but still billion dollar buyer sectors, are Number 26 religion and charity ($2.4B to print, -17 percent), followed by energy ($1.7B to print, -26 percent), business/professional services ($1.6B to print, -20 percent), elections ($1.0B to print, +80 percent) and scientific/technical instrumentation ($1.0B, -10 percent). Rank the relative demand of each category to the geographies of your production and sales operations and sell proportionally.
This year may be the first since 1976 to see print sales fall year-from-year. The uninformed competition will likely misstep, but you—the reader—will take market share by targeting the hottest markets. Happy New Year! PI
About the Author
Vincent Mallardi, C.M.C., is a well-known printing forecaster and presenter at major industry meetings. He has been the author of “Hot Markets” for the past 28 years. The complete 196-page “Hot Markets for 2008-2009” report is available for purchase at www.pbba.org or by calling (866) 546-2005.
1 The National Association of Business Economists (NABE) median forecast is 2.6 percent (’08) and 2.5 percent (’09) net of inflation, which is forecast at 3.0 percent, compounded annually, for the “nominal” total growth rate.
2 Sub-prime mortgages in default represent less than 2.5 percent of all residential mortgages. Fuel costs, as a percent of personal disposable income, is lower than in 1995.
3 “Airlines Mull Spinning Off Mileage Plans,” Wall Street Journal, September 28, 2007.
4 “Clorox Charts a New Course,” Wall Street Journal, November 14, 2007.
5 Robert Niblock, chairman and CEO, Lowe’s Companies, Associated Press, November 19, 2007.
6 If this occurs, the total will be $5 trillion higher than the statutory debt limit before 2001. It was 57 percent of GDP before five increases to 65 percent of GDP by 2007.
- People:
- Jack Welch
- Places:
- United States
Vincent Mallardi, C.M.C., is a the chairman of the Printing Brokerage/Buyers Association International (PBBA) and is a Certified Management Consultant in the paper, printing and converting industries. He is also an adjunct professor in economics. Contact him via email at vince@pbba.org