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2. Q&A from my last book
Q&A from my last book “Visions and transmissions: Printing – an industry in transition”, released 2013. 2.
1. WHAT HAPPENED TO THE PRINT HOUSES IN THE NORDIC REGION?
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The consolidation is still ongoing. In 2013, the number of commercial printers in the Nordic region had fallen from 15,000 to 1,500. In 2017, we had around 400 and the numbers are still dropping. When everything is settled there can be as few as maybe 80 commercial (mainly) printing houses left in the hole Nordic market. The consolidation will, however, slow down during the upcoming recession. Then again, in a low economy, bankruptcy will be a part of the consolidating effect. Commercial printers must change and transform together with their customers. They must also be wider, find new and more diversified printing applications (large format, packaging, etc.), work with their unique customers thru the hole supply chain. The commercial graphic industry has been polarized. Many of elite group has already transformed effectively into digital. They have added more values and become less cost price sensitive. Gross margins and earnings going slowly up in market that slow down. The prices are ok but the value for the price is to low. Midsize companies that haven’t changed their profitability, business model, or anything else, are stuck in a status quo with no or low operational margins.
The industrial graphic industry, mainly labels, gather new digital sectors where packaging, large formats, and other products thrive. Some companies have expanded their range. They are more directly connected to brand owners desire to order more and more products from a smaller number of suppliers. Here, consolidation also start to make an impact. The label market has already come a long way implementing digital, but it still needs to implement the new business model (the mental part of a transformation).
2. HOW DID THE VAT-STORY TURN OUT?
The Supreme Court of Sweden decided that printing companies had to pay out retroactive VAT-money from 2008 when VAT on the books changed from 25% to 6%. Many corporations took this as refund “profit” but later found out that they had to pay back into their value chain. The impact was devastating. Just take a big Swedish newspaper as one example that had to pay back SEK 300 million in VAT plus had a downhill in their own core business (newspapers) and have to apply for reconstruction, the step before bankruptcy. The debt was in total SEK 2,700 million. The VAT project “Lazarus” (as it was called internally) resulted in a 75% write-off of the creditors’ debt. They then paid back SEK 250 million in the end of 2016, added a new bank loan of SEK 385 million and added new shares for SEK 81 million for 63.9% from a private local group of investors. The VAT-story had massive consequences all around the graphic market. We saw companies being liquidated and retaining the money after bankruptcy. It has been a moral test of the printing industry, even if it was the Swedish Government handled it strangely from the beginning. The Government didn’t outline the VAT-case as (almost) a zero-sum game (private persons and no VAT-organization had the right to claim VAT-funds back).
SOURCE: DAGENS INDUSTRI, 20/06/2016
3. NEWSPAPERS AND BOOKS – WHERE DID THE MARKET GO?
Today, daily newspapers don’t use enough of tools for adding value to attract the reader and our next and younger generation. Newspapers are still losing subscribers. The breakdown of the Swedish newspaper company is only one example of that. Small, local area newspapers are doing much better and the older generation (X) still wants their local newspaper in their hand. But the news must be very local! I don’t need to read about the American economy or Asian business events in a local morning newspaper. I’ll gather world news from other media, sites and platforms. Digital printing technology can add value also for newspapers by increasing the value of advertising, cutting costs and creating more value to readers. One example is a newspaper in Switzerland that uses high speed Inkjet HP PwP presses. Switzerland has three languages, spread over three regions, and every ad can be dedicated to a different region. They now sell multiple ads too one and same spot in the paper that reaches different regions. The book-market is growing and shrinking at the same time. Today, there are not more books printed, but far more titles published as readers read more titles. It’s still a source of knowledge that people acknowledge and it lifts your own status and personal brand, for both the younger ones in “Generation Y” and us older ones in “Generation X”. It’s also much easier and more cost effective to publish books today. Private persons that write books (like this) can easily upload them to digital sites and then have them printed in volumes, as you like. The book market in general will have a stable growth especially children’s books; number of titles will continue to increase in the future. To read physical books instead of reading via iPad or listen to sound books will have a higher personal value and higher status. Variations will and occur from culture to culture also in the future.
4. AND THE PRINTED PHOTO MARKET?
Yes, printing is turning homewards to Sweden as we predicted. As an example, photo books ordered at a Swedish/international photo book site today links back to Sweden and becomes locally produced again. Someone asked the simple question: is it environmentally correct to order photo books in Sweden just to see them being shipped from abroad or transported from far away? Does that go along with your brand environmental policy? The trend is to print where your need is, made in Sweden – produced in Sweden. “Trustful Branding” is today an important factor of value also for the graphic industry.
Gelato group as one example is today a player in this, like a of print-Uber. They aim to be the biggest platform for print in the world without owning a single printer or press. Gelato connect print houses to their print cloud and orders can
then be printed close to the customer, saving time and money. Their services are used both by consumers B2C and companies B2B (a whitepaper solution), print on demand. Everything is digital, the transportation can be kept to a minimum and the sustainability-check is in place. Physical photos have a high demand especially in decoration, design, wallpapers, lampshades, t-shirts, coffee mugs and so on. It’s precious memories that create value and real emotions. Customers want to live “with” them in various ways. It’s also in line with the “ME”-trends (more on that later in this book) that we see in both Generation Y (millennials) and Generation Z (the teenagers of today).
In the graphic industry, the excursion to low-wage countries is no longer the trend. Low-wage countries are catching up with high-wage countries in labor costs plus that digital technology requires less labor per dollar. The previous trend of producing print in China for a lower cost has dithered and the Chinese also today have their own huge and strong domestic market. The digital disruption by default creates lower wage costs. On the road from analog to digital, digital will slim the manual work and with that the number of employees. A print operator in Sweden can costs about EUR 5,000 per month, and a part of the mental transformation is accepting being more business per person for the same amount of money as in the past – doing more business with less cost. Yes, it can be tough and emotional to change. If any European printer moves or expands outside of their home country today, it is more often due to some kind of grant from the government or the EU. You can apply for EU grants to make an investment in a printing business, for example in Poland instead of Sweden, which still can affect a business decision – but we see less of that and more local grants where possible.
6. DID THE ECONOMIC CYCLES ACT AS PREDICTED?
I predicted a high economy 2013-2017 and that is what happened. The curves went up and now (September 2018) it’s still high and outside of the normal curve. We are now in the longest high economy of the last 100 years, longer than the one that ended September 2007 and the one in 1929 that was followed by the biggest recession, which is known as the Krueger crash. We are now passing the consolidation phase and housing prices started to dip. Sweden, with an upcoming election in September 2018, and today with a too weak currency (around 10.60 SEK for one euro), is holding its breath (consolidate) waiting for the downhill race in the economy roller coaster. The low economy slope will help us go through change
and transformation as packaging now turns to digital. When it has gone up it will go down and then we know it will go up again, and so on.
7. ANY SURPRISES REGARDING EXTERNAL FACTORS?
Donald Trump is today the biggest influencer acting in the biggest economy worldwide. Is he unpredictable? Yes! Is he an external factor? He keeps pushing the economy upwards, far outside of its normal curve, which historically will generate faster and deeper recession. His actions of “making America great again” trying to change the trade business (USA against China), whether it will go to full action or stay rhetorical, is following the trend of today’s market values going more local after a long time of globalization.
Brexit was a surprise, also for the UK, except for fitting (again) the trend of going more toward local values. It’s the same as Trump but in a different way and a step toward our next big shift; “the paradigm shift”. Another surprise external factor has been the ongoing negative or very low interest rate that has continued for so long. Market traders are also pushing the market; in their mind, it has been too slow for too long. They need volatility to increase both selling and buying, that’s how traders get their business.
8. SMART AND INTELLIGENT PACKAGING – IS IT HAPPENING?
Smart packaging as a design and use has been around for a couple of years. The printers who get into the next level products of today, all get into it. Smart ways to open, close, carry, and repack for easily returning e-commerce. Here is a lot of new sustainable, re-circular media popping up with new and smart finishing solutions that make new things smarter. We see smarter solution’s both in-line with production or near-line serving multiple machines. The digital technology will also boost this transformation through a lot of new possible disruptions, with fewer steps to produce. Intelligent packaging has not really kicked in yet. It’s still in the phase of implementation and will follow as an upcoming evolution in packaging – I will try to address that more later on in this book. Tag along!
“A LOT OF TIME PEOPLE DON’T KNOW WHAT THEY WANT BEFORE YOU SHOW THEM” - STEVE JOBS
