2009 Hot Markets -- Thawing In a Frigid Economy

EVEN AS THE overall economy plummets to well below zero in real GDP, the New Year has some “highs” in the forecast. There are some very warm and, yes, hot spots for print, but marketers must rise above the clouds of gloom and change the climate. It will leave competitors feeling under-the-weather. The No. 1 demander of print will be, no joking, banking/insurance ($3.5T, +8%; with $14.3B to print, +investment/brokerage ($1.0T, +7%; with $4.9B to print, -39%) will continue its crash in print. Investment banks/syndication ($1.2B to print, -68%) and securities brokerage ($1.4B to print, -57%) are slashing staff, offices and branding, as well as their throats. Just as relationship marketing comes of age with robust print personalization, this business fails us. Mutual funds ($2.2B to print, -12%) must stem redemptions and stir up new investors with direct mail printing and FSIs. There will be fewer funds and managers, but nearly as much work, as the old names like Lehman Brothers change, and others, like Merrill Lynch, are rebranded as part of other firms.

Disappointingly, at No. 2 will be publishing/non-newspaper ($97B, -10%; with $14.2B to print, -8%). Fewer titles, page counts and run lengths are three-knife trimming this sector. Juvenile/adult trades/ CDI and religious publishing ($3.1B to print, 0%) will lack best sellers, and reader incomes to buy them. Scholastic Publishing is off 46%, post- “Harry Potter,” while all retail book sales are down more than 7%. Professional/educational books ($3.6B to print, -11%) are folding to versioned, digital micro-publishing, digital distribution as with Bibliovault, and online courses and content.

Macmillan’s “Global Reader,” Amazon’s “Kindle” and other mobile services will grow at a 50% pace. Pat Schroeder, head of the Association of American Publishers, sums it up: “Publishers don’t own paper companies or printing presses. They don’t care how you read it, as long as you read it.” Lest we forget (as a generation of readers has) periodicals ($6B to print, 0%); there’s no comeback. Content is outdated and circulation is by outlaws.

Every major magazine publisher is down except for Oprah Winfrey’s Harpo Productions (+12%). More than a hundred full-web printers will disappear in 2009 as periodical publishers dissipate. No salutations are in the mail for greeting cards ($0.9B to print, -10%) as spending (and manners) recede. There’s more red ink: Once-promising other/non-traditional publishing ($0.6B to print, -63%), made up of FSIs, marriage mail and ethnic upstarts, is half of its former self. The imminent closing of the Borders chain speaks (not reads) “volumes” about the new disease of illiteracy in America.

Need some appetizing news? No. 3 ranked packaged foods ($896B, +16%; with $13.2B to print, +17%) is the hungriest print buyer. Food inflation, and a cultural return to home cooking (and cookbooks), will abundantly feed folding carton, closure, thermoforming, wrap and roll label producers. The Top 40 food providers will continue to give up a substantial 20% or more share to foreign food marketers, now green fielding into the United States. Barilla, Nong Shim, Bimbo and Weston are among several hundred now-onshore entrants (and new buyers) for domestic packaging and promotional printing.

Dried foods/snacks and frozen/microwavable foods ($7B to print, +26%) will heat up, followed by other/fresh-packaged foods ($3B to print, +20%). Less warm will be pet foods and bottled/canned foods ($beverages ($394B, +8%; with $9.8B to print, +11%) and No. 16 ranked food service ($699B, +medical products/pharmaceuticals

($414B, +3%; with $12.3B to print, +2%). Pharmaceuticals and wellness ($7.8B to print, -8%) are anything but healthy, as patents expire and generics prevail. Packaging, point-of-purchase (POP), ROP and bind-in placements are in decline with the dearth of new medicines. Medical products and biotechnology ($4.5B to print, +12%) will counter traditional pharma with a flourish of new products. It’s where we must be in the waiting room.

Connected, at No. 11, will be health providers ($2.6T, +13%; with $7.8B to print, -2%). With universal healthcare now a “when,” and not an “if,” bad debt-riddled hospitals and non-hospital care ($2.0B to print, -13%) segments will be asking for relief and, in turn, will be ordered to cut their marketing. Analysts are also concerned about growing liability exposures among EMSs and diagnostic labs. Health insurance and third-party administration ($5.5B to print, 0%) will be the only PMOs (print maintenance organizations).

Computer software ($520B, +20%; with $11.1B to print, 0%) is No. 5. Besides the excitement that Google engenders, and those trying to take over Yahoo, there’s genuinely something new in the New Year, and it’s being delivered by Amazon. Elastic cloud computing (EC2) will shake up the enterprise and Internet segments by allowing “everyone” to write network applications and rewrite network infrastructure. Oracle, Citrix and most other database, middleware and programming tools will be cloud cross-licensed now that it’s out of beta testing.

EC2 will also create demand for virtual server platforms to enable even Windows users to cloud up. In the future, Amazon may not be remembered as an online retailer, but for its transformational technology back in ’09.

At No. 6 is real estate ($2.11T, +4%; with $11.0B to print, 0%). Rental housing ($2.8B to print +25%) will be where foreclosed “sub-primees” return to live, and where a new class of multi-unit buyers will take out the banks and then “lease,” rather than rent, formerly distressed properties. (Perhaps, they’ll package these leases and sell them to foreigners.)

Open-web, sheetfed, digital and direct mail printing should go through the roof where salespeople are smart enough to discover this unprecedented ground swell. Dead on arrival will be home-loan modifiers invented by politicians who personally don’t experience foreclosures, but will be touted by ex-sub-prime mortgage brokers in scam mails and deceptive advertising. The markets for residential/new single housing and residential resale ($Telecommunications ($1.11T, +8%; with $9.9B to print, +14%). The global demand for innovative connectivity in the 3G wireless, including equipment and space ($4.0B to print; +33%), will ring-tone outdoor, POP/POS, FSI, packaging, and even handouts downtown that offer upgrades to the Blackberry and Blue tooth-clad commuters.

Fibre-to-the-premises (FTTP), a local wire replacement of legacy copper, will likely prevail after a direct mail and outdoor-intensive ad war with cable/satellite/pay-per-view ($2.2B to print, +20%). The rest of this sector, led or bled by directories ($2.5B to print, -9%), will decline by more than one-half in print demand in the new year.

No. 9 and uncomfortably fitting is fashion ($577B, +2%; with $8.8B to print, +1%). Clothing and footwear ($5.7B to print, 0%) will be overdressed and undersold. Thousands of retailers, chains and independents will strip by the thousands for a one and only signage and ROP ad show. Intimate accessories ($3.1B to print, +9%) will sparkle and excite because some things still prevail over recession. Sheetfed and web catalog printers and mailers be warned: This sector will be fickle in vogue and feckless in longevity.

A total wreck is No. 10 ranked automotive ($1.8T, +8%; with $8.1B to print, -8%). After a nearly 40% drop in unit sales, and a four- to six-month inventory sitting on the lots, this industry will have to jump start from the dealer back to the auto maker. Up to 5,500 car dealers will rev up for their lives as the “Big 3” abandon them.

But ex-Chevy dealers may well sell Cheri’s from China, and others will introduce brands and models with strange or very familiar generic names: the Wal-Mart 9000SX. Mass customization, an invention of Toyota, will define this industry in the near future. Off-the-road vehicles ($0.8B to print, 0%), as well, will be repositioned as on-the-road energy alternatives. POP, outdoor, high-end sheetfed, pressure-sensitive/decal OEM and personalized direct mail will ramp up finance/insurance ($2.0B to print, 0%). Used vehicles ($0.7B to print, +19%) will up open-web RPMs. Congress, which can hardly manage the country, will surely “mismanage” the auto industry, with a winding and bumpy road ahead.

At No. 12 is travel/hospitality ($795B, +5%; with $7.0B to print, -3%). Hotels and resorts ($3.5B to print, 0%) are at sub-REVPAR (the industry term for revenue per available room), but maintaining rates. The print “REV” is in special offers and events, and in relationship management loyalty programs. Robust, personalized direct mail and bind-ins will check in with close-to-home, mini-vacation deals.

Foreign and long distance travel anxieties will force cruise lines ($1.5B to print, +6%) and airlines ($1.8B to print, 0%) to float and fly more collateral and outdoor print that touts safety and value. Coasting downward, as a result of an aging population, are destination parks ($0.5B to print, -30%).

Tied at No. 13 is gambling/wagering ($610B, +11%; with $6.1B to print, +27%). The print jackpots are in restoring traffic to the major casino destinations that have lost share to the neighborhood slot parlors in many states. Loyalty programs, continuous mail-outs and major outdoor advertising will ante up print spends by 15% to $2.2B.

State/provincial lotteries ($3.8B to print, +35%) are being forced to compete with the on-sites and will introduce many new games with attendant needs for scratch-offs, POP/POS and outdoor.

Personal care ($383B, +4%; with $6.1B to print, -10%) will be impersonally neglected at No. 14 in 2009, as consumers cut back on hair, skin, sun care ($1.4B to print, -12%) and fragrances ($0.8B to print, 0%). Most burned will be blister cards, fragrance inserts, samplers, deluxe packaging and POP/POS countertops. The only two segments that will be pretty and bright are color cosmetics and toiletries ($2.3B to print, +11%) and sanitary/hygiene products ($1.6B to print, +12%).

Tough times will be good for No. 15 discount retail ($1.1T, +5%; with $5.2B to print, -5%), but not for the sector’s printers. Big box multi-category stores, as well as those in No. 19 ranked home improvements ($748B, +8%; with $4.9B to print, -28%), are trimming margins for traffic instead of using trimmed print. Catalogs, FSIs, couponing and other items are perceived as not working anymore. Worse, the home appliances, and furniture and fixtures ($1.2B to print, -25%) segments are falling apart with the largest number of store closings in history.

Coldset web, POP, labels, swatch products and some packaging will remain on shore, principally in lawn and garden and remodeling (e.g., paints, laminates and finishes made in the United States).

Freight/logistics ($661B, +9%; with $4.9B to print, +4%) is a surprise No. 17 in the down economy, but the biggest players in this sector are now firmly in the printing biz! UPS Stores, FedEx Office, several subsidiaries of Deutsche Post and the government-subsidized postal services are all on-demand and on-the-move.Distribute-to-print is theirs, as well as multi-point printing brokerage, document management and time-sensitive expediting. As yet, few ahead-of-the-curve printers are negotiating subcontract and regional supply deals, some financed by the carriers. Short-run web and color, narrow-format digital and in-plants will be the sweet spots, along with digital and print vehicle signage.

At No. 20 will be security/protection ($199B, +7%; with $4.8B to print, -32%). As governments no longer provide personal and property safety, private firms will—at a price co-paid by insurance companies and philanthropies—fill the void. Foreign operators are buying up small U.S. companies, and there will be major branding, promotional and detection product outlays over the next few years. Flexo, screen, hybrid digital/sheetfed and special-process security printers (a vital part of this sector) will be well rewarded, as demands accelerate past ’09.

Converging at No. 21 and No. 23 are entertainment ($728B, +9%; with $4.8B to print, -8%) and electronics ($619B, -9%; with $3.1B to print, -24%), respectively. Shockingly, online content and distribution so well connects these sectors that print is in disconnect.

Broadcast/premium cable/satellite ($1.8B to print, 0%) are doing more barter than pay-per-print, and the only blockbuster category is motion pictures ($1.5B to print, +15%). Check out the amazing POP/POS at your local theater, and the large-format sheetfed plants and finishers that produce them. This work is recession-proof because the public escapes to films when times are bad.

Home entertainment ($1.1B to print, +4%) product inventories of digital devices—like broadcast cable bypasses for computer-to-TV, telecom TV set-top boxes for streaming data, etc.—will force more FSI print in early ’09. Panasonic is offering consumer financing for its Viera HDTV, and retailers will follow as credit card charges recede.

Leisure activity ($199B, +7%; with $3.9B to print, -5%) will stay relaxed at No. 22. Time and money are short for recreation vehicles and fitness, pools, gyms and clubs (-6%), but there’s more money for print ($1.6B, +5%). Also outdoor sporting and wheel goods ($2.3B to print, half domestically, +11%), and horticulture and hobbies ($0.8B to print, +14%). Packaging, outdoor, POP and magazine inserts continue as the print media of choice.

Higher education ($164B, +17%; with $3.0B to print, -6%) is at No. 24. Too many schools, overheads and non-academic distractions are dragging grades down to a “C”—consolidate or collapse—at most campuses. Down endowments and alumni giving should be prompting fund raising and recruitment print, but the schools are terrible at marketing, even though they teach it. Alternative private education ($1.3B to print, +21%) is taking the course and getting an A+. Transit ads, billboards, signage, direct mail and Internet-to-print are the products the traditional schools will have to employ. Cultural events ($0.5B, +0%) continue as a big buyer of posters, programs, signs, tickets and other mostly sheetfed and screen printing. Curriculum materials (included in the publishing segment) are declining, as Web-based learning tools replace textbooks.

At No. 25 is the biggest entity on earth, the out-of-this-world (and its mind!) government/federal and state ($5.4T, +5%; with $2.9B to print, -3%). Most budgeted print will be in health and human services ($1.4B, 0%)—although, if national health coverage is enacted, the spend would easily double. All of the budget numbers are small change compared to the more than $4 trillion in announced or anticipated bailouts, fronting loans, guarantees, buy backs of bad debt, stock buy-ins and other rewards to incompetently managed, but well-connected, sectors of the economy. (Sorry, print isn’t one of them...well-connected, that is.)

The 25 Hot Markets in the frigid economy should account for more than 92% of total print sales, and nearly 64% of GDP. Off the list are religion and charity ($358B, 0%; with $ 2.9B to print; -1%), No. 26 energy ($4.05T, +16%; with $2.3B to print, -15%), No. 27 business/professional services ($481B, +8%; with $2.0B to print, -13%) and aerospace/ defense ($148B, +2%; with $2.0B to print, 0%).

Rank the relative presence of each category to the geographies of your production facilities and sales offices in order to set the sales agenda for the New Year. It will ring in as something very new. PI

About the Author
Now in its 30th year, Vincent Mallardi’s “Hot Markets Annual” is the longest, continuous forecast of the printing industry by sector, region and product. The complete, 170-page study is available for purchase by contacting the author at vince@pbba.org.