Print Markets Update — Where Print’s Hot, And Not

AS THE dog days of summer begin to wind down with five months remaining in 2007, printing sales are poised to grow faster than the 3 percent clip of the first half of the year. The U.S. Federal Reserve Bank is now forecasting the nearly 4 percent Gross Domestic Product (GDP) nominal growth rate that we predicted a year ago.

The falling dollar continues to inflate prices in energy and other imports, and earnings growth among companies with foreign operations. At least two interest rate hikes before year’s end are inevitable, which will likely dampen retail sales and speed up mega-merger activity in every sector.

All of this is good news for our industry. Consumers have been outspending the overall economic growth, and retailers will buy catalogs, ROP and outdoor/point-of-purchase (POP) to keep their customers’ spending beyond their means. Increasing dependence on offshore earnings and capital will mean more multi-lingual advertising and packaging, and business combinations will bring name changes and a boom from business cards to outdoor signs.

Discretionary: The hottest Discretionary category is Travel/Hospitality (+27 percent), reflecting the biggest increase in printing, as the cheap dollar draws record numbers of foreigners to the country and keeps Americans at home. Nearly 1 percent of the $762 billion in travel/hospitality revenues will go toward buying print. Personal Care (+12 percent) is grooming for $346 billion, with 1.8 percent to print, principally in packaging, publication advertising, inserts and POP.

Along with Entertainment and Gambling/Wagering (each +9 percent), Leisure Activity (+5 percent) and Fashion (+1 percent), these discretionary units should account for nearly one-fifth of all printing.

A record number of blockbuster films, a proliferation of casinos, and more horticulture and hobbies with an aging population, are the principal movers. Down-dressing is hurting specialty retailers where same-store sales are in threads.

Discount Retail (-17 percent) is the only Discretionary component in demand decline. Same-store sales are down—from the great “Wal-to-the-small-Stein-marts”—because of increased prices of imports and a financially stressed underclass that can’t absorb the increases.

Durables: A lesser selling oppor- tunity (at less than one-sixth of all print) is to the Durables. Real Estate and Automotive (each +4 percent) drive this group with $12.3 billion and $8.9 billion in annual print procurement, respectively, mostly folded sheetfed, digital narrow and wide-format, outdoor, OEM parts and packaging. Home Improvement (-5 percent) at $6.2 billion in demand needs print to rebuild, but isn’t buying it. Or, maybe we’re not selling them (the print buyers).

Publishing/Non-Newspaper and Financials: The largest two demand sectors continue to be Publishing/Non-Newspaper (+11 percent) and Financials (+5 percent), each with more than $15.6 billion or nearly one-eighth of total printing.

Book Manufacturing (+14 percent) leads the way, but may be challenged with fewer best-sellers and impending declines in juvenile and educational/professional publishing next year. Greeting Cards and Gift-Wrapping (+6 percent) are a pleasant surprise, but Periodicals (-3 percent) will soon be in freefall.

Publishing is cyclical, traditionally, so a slower rate of growth portends heatset web pressroom shutdowns at year’s end. The excess capacity resulting from double-wide cylinder presses and faster makereadies is irreversible, and postage/distribution cost increases are nails in the coffin of long-run printing.

Investment Brokerage (+10 percent) and Banking/Insurance (+2 percent) are in contra-position. The former will increasingly benefit (and use more print) because of the return of overseas investment and the falling dollar, while the latter is consolidating and slowing print spends. The top 40 banks/insurance companies buy nearly two-thirds of category print and will level in 2008, as a business-lending bubble bursts. Concentrate on consumer credit providers and securities brokerage and mutual funds firms for new direct mail, digital personalized and POP sales.

Health/Medical: Health/Medical (+6 percent) is leveling at one-tenth of all print, half the $21.2 billion print spend along the East Coast. Pharmaceuticals and Wellness (+7 percent) will inject $8.3 billion in ink, followed by Health Insurance/Third-Party Administration (+19 percent) with $5 billion. Medical Products (-6 percent), Hospitals (0 percent) and Biotechnology (-14 percent) are painfully withdrawing from our medium, and all others, as Congress considers universal coverage and price controls.

Technologies: The Technologies sectors (-6 percent) collectively buy one-tenth of all print, with one-third on the West Coast. Computer Software (-7 percent) and Telecom Equipment/Services (-17 percent), with $9.8 billion and $8.3 billion in buys, respectively, have migrated to their own virtual media.

Soon-to-go are outdoor/POP and direct mail, and soon-to-be-gone are software packaging and directories. The only positives are Consumer Electronics (+13 percent), where hot-selling wireless digital devices and the onset of high-definition video will download more than $5 billion to print by year’s end.

Foods/Beverages: Foods/Beverages (+3 percent) are a mixed bag, at about one-tenth of print. Packaged Foods is boxed in at $9.8 billion in packaging, POP and promotional work. The trend toward “de-packaging” that’s happening in Europe is several months away, but will have a major negative impact.

Similarly, Beverages (less than 1 percent) are flat at $8.8 billion to print. Most segments are saturated, and new products in energy and negative-calorie drinks are not pouring well. Digital wide-format, flexo and roto plants are overbuilt for future demand. Only Food Service (+12 percent) is heating up, with new chains and menu lineups. The transfat phase-out is appetizing for small press and digital print shops; and outdoor, FSIs and signage will be full-course for heatset half-web, large-format sheetfed and wide-format digital providers.

Society: Least hot are the categories within Society (-2 percent). At less than one-thirteenth of total print, the largest buyers at $7.1 billion—but in alarming decline—are in Security/Protection (-4 percent). Data/document integrity and security are up, but radio frequency identification (RFID), last year’s darling of print, is giving way to nanotech and biometric recognition systems that have huge deposition potentials for modified presses. Smart labels and intelli-protective packaging are also on the horizon.

At $3.1 billion in print procurement is Government/Federal and State (+5 percent). For sales/advertising printers, this bid-and-bleed chase should not be part of one’s marketing program. The other two societal sectors, Higher Education and Religion/Charity, are worse at negative growth. The less than $6 billion in buys are non-profit.

Energy: There are some other exciting, though smaller volume, places to sell print. Energy (-15 percent) will turn around as biofuels are introduced next year. New suppliers from Brazil, Canada, Mexico and other countries will pump up the demand for signage, ROP and outdoor to perhaps $3.5 billion. Business Professional Services (-13 percent) should also turn to the plus side, once a spate of law, consulting and accounting firms roll up.

The objective is efficient match-up of the foregoing combined markets with our combinations of offerings. Shown here are the relationships of the peaks to the valleys. Be on the top and on-top. PI

About the Author
Vincent Mallardi, C.M.C., is a well-known printing forecaster and presenter at major industry events. He has also been the author of “Hot Markets” for the past 27 years. The complete 196-page “Hot Markets for 2007-2008” and database access are available by e-mail to the author at vince@pbba.org.