The 300 billion dollar question

7 May 2008



As we approach drupa 2008, Hans Widen discusses ways to stay competitive in the packaging printing market


For 500 years nothing much happened in printing. But now everything is changing rapidly, especially in packaging printing, where new technologies, new markets and new competition raise the question – who will be printing packaging in the future – and what will they print?

Packaging is a huge printing market and, in contrast to most commercial printing areas, it is growing steadily at around 5 per cent annually. No wonder that packaging printing is regarded as the potential saviour of many competition stricken commercial printers and as a safe bet for further developing already established packaging converting businesses.

But is packaging really the easy way out for commercial printers who desperately need more, and better paid, jobs?

Well, it is big. According to Pira International, the world packaging market, excluding labels, was valued at a whopping US$477B in 2005. (An average estimate puts the total labels market at somewhere around US$70B.) Globally, the market has grown at an annual rate of 4.3 per cent since 2004; and the average growth is expected to increase to around 5 per cent at least through 2011. China, India and parts of Eastern Europe might well exceed these estimates by more than 100 per cent.

This is great news for expansion hungry printers, as packaging converting is mainly a printing related business. A look at the global printed packaging market confirms this. In 2005 there was US$216B worth of packaging printing made globally. This healthy market is forecast to reach US$291B by 2011, growing at an annual rate of over 5 per cent. If the label printing market is taken into account, the global packaging printing business is probably worth around US$300B this year and another US$15B next year.

The bad news is that these billions are not easily up for grabs by just anyone. Packaging printing is by far the most competitive printing business you could ever hope to enter. First of all, the really good growth figures are not likely to appear in Europe or the USA. The European market, although huge, might actually prove to be the slowest moving packaging market in the world during the next few decades. The established European converters will fight fiercely to keep their market shares at competitive levels.

So the real growth opportunities will happen somewhere else - mainly where GDP grows the fastest. To capture volume quickly you probably need to be there. But to capture interesting new niches – with the potential to grow intensely – you are probably better off working on a maturing market, such as Europe or America.

Packaging consumption is directly linked to per-capita GDP and the role of emerging markets in the global economy continues to change at a ferocious pace. According to The Economist, the combined output of emerging economies now accounts for more than half of the total world GDP. And according to The World Bank, in the last decade per-capita GDP has nearly tripled in China alone. Numerous sources also predict rapid GDP growth in India in the next 10-15 years.

The challenge

Entering a market at constant war for shares takes a lot of courage, foresight, knowledge and capital, but it is not an impossible task. Certainly not if you are able to start from scratch: not being tied down by unsuitable, inflexible, (not yet paid for) production technology definitely is a merit in a packaging world in accelerating technological change.

Mentally you should definitely start – or restart – your packaging printing career from scratch, since nothing will be like it used to be. That is what you need to get used to – and adapt to.

The sheer burden of investment costs, in the race to follow the major packaging buyers around the world, will create the need for size among converters/printers. Investing in new technology often creates a financial chain reaction, as the constant trend to larger printing formats creates an immediate need for larger format prepress and postpress equipment.

Expect new competing players and totally new and unexpected constellations of players among the global converters. They will appear because they can drum up the necessary investment power, but also because they often need to integrate raw material production into markets with safe long term growth perspectives. But mainly they will have the insight to be early adopters of new converting technology with enormous potential.

On top of it all, strong international brand owners will have the buying power to more or less dictate the printer’s every move. Even if it means making his existing converting equipment obsolete overnight.

To succeed in packaging printing you need to be moving as fast as your customers – and there is every reason to believe that they will be moving at lightning speed. You will also be moving technologically, as well as geographically.

It is not enough to have your packaging printing business start and end with your classic production facilities. To be successful you should be an integrated link in a network of partners to the packaging buying brand owners. You should be a flexible, online, just-in-time, manager of the goods distribution services that keep the brand owner competitive. This will change the way many printers will look at their production lines – and at the personnel they will hire. Excellent printing skills might not be as important as a good head for business.

You will still be printing of course, but the actual printing will be representing a gradually smaller percentage of your turnover. Your production lines will evolve into sophisticated converting units, perhaps working autonomously, taking orders online from your customers and self adjusting production planning to squeeze in the absolute maximum amount of invoiceable jobs per time unit.

But this will only happen if you have proven yourself to be more innovative, reliable, quality conscious and cost effective than your competitors. Many of the systems you could benefit from will be available to study at drupa 2008, which many consider is actually better at presenting new packaging printing technology than its sister exhibition Interpack.

Go to drupa and look for anything that will help you make vast improvements in productivity. That would certainly involve a deep look into what market leading producers of sheet-fed offset presses have up their sleeve. Significantly increased printing formats, with sheet sizes up to around 3m2 could jump start a more productive life for your packaging print shop. Add automatic plate handling systems and the ability to handle a wide variety of special colours, and you have an even more interesting packaging converting proposition.

Utilizing standardized printing in different forms will probably be a must for the packaging printer who needs to be able to guarantee total colour consistency. Watch how digital printing technology significantly speeds up its capacity and printing quality – but don’t forget to look closer into what offset and flexo press manufacturers have done recently to enable economical short run printing.

Even smarter data communication systems that allow not only what JDF already does, but ”connect the press to the world” signify another step towards the ultimate situation where your press could eventually act as a printer in a demanding global network and, more or less by itself, accept or reject jobs around the clock. Look for tools that give you better access to quick and reliable job calculations, and tell you which jobs are going to earn you money and which will cost you.

Saving money

Cost cutting technologies are probably going to be an important part of drupa 2008, as several recent studies have revealed that many printers are literally throwing money away. The total waste volume at many offset printing facilities is said to approach 5-7 per cent and that would, in itself, represent the difference between profitability and non-profitability for the vast majority of printers.

There is every reason to look seriously into investing in technology that cuts waste levels dramatically. When production runs are getting shorter and makeready operations become more frequent, disaster could be lurking for printers who cannot get it right at once.

Hybrid press technology might be the most promising way of improving productivity, as it allows more complex (and more profitable) jobs to be run in one pass. Today’s hybrid presses might combine two printing methods but we may soon see hybrid units with a much wider variety of stations, for example, flexo, offset, screen, gravure and digital printing.

But that is probably just the beginning of the hybrid story. Future packaging presses – or rather let us call them in-line packaging converting units – could combine different substrate sources on demand. They could print everything from heavy board to super thin plastics films or foil; they could laminate, lacquer, hot and cold stamp foils, emboss, integrate separately manufactured units like closures and opening devices; they could die cut; they could crease, fold, glue and assemble the packages – and even transport pack them and send a detailed invoice when the job is finished. They might as well fill and seal certain non-food products while they are at it.

Hybrid technology allows both maximum productivity and maximum flexibility. Modern direct servodrive technology and super efficient automatic on-line quality control methods allow very different jobs to follow each other through the integrated converting factory with virtually no downtime.

It is an embarrassing fact that even well equipped printers today, in their ambition to accept just-in-time delivery requests, often struggle with press downtimes exceeding their total production time. It is also an embarrassing fact that most presses sleep as tight during evenings and nights as their owners. Heavy capital investments are often utilized at less than half the rate of their capacity. This increases write-off time, slows down equipment renewal plans and conserves the printer’s technology base at a sometimes dangerously low level. Increased uptime is the first step towards better profitability for many packaging printers.

But to really succeed in packaging printing you should look continuously for new options and try to be first to adopt, or at least understand and evaluate, groundbreaking, possibly disruptive technologies that could allow manufacturing by printing methods.

First and foremost you should look for technology that adds value to the packaging through the use of existing equipment. You routinely print bar codes, so why not learn to print other types of codes, such as hidden security, matrix or other two-dimensional printable data carriers that can add value to your converting with virtually no investment costs.

Look at what using unique hybrid screening has to offer, discover the potential of printing Braille and other coding, either with embossing or the use of heat expanding inks. Investigate how holographic foils can be integrated in the printed image; explore the use of optically and forensically invisible marking taggants that can be added to printing inks in minute quantities to combat counterfeiters.

The next step would be to print electronics. Soon the packaging world will enter an era where item level RFID will be adopted. According to IDTechEx there could be over 400B RFID labels fitted to consumer goods by 2015, creating a global RFID market worth US$25B.

Trillions of tags will be used every year as each consumer pack will carry an individual RFID unit, with an antenna, either laminated onto the package in the printing press or printed with conductive inks. Around the corner are also printed chipless electronic RFID circuits, produced with digital “micro inkjets” or state of the art flexo units in the hybrid press. Other hidden – printed – electronic product codes are being developed. Printed electronic price tags are also to be expected soon.

But this is only the beginning. Printed electronics will quickly develop much further as low cost disposable flexible printed screens are emerging. Sooner than you think, these displays might appear on consumer packaging panels to tell you clearly what the actual quality of the content is. A few years later they might develop into disposable video screens that run a movie on how to use the product – in the language you prefer. More likely they will carry advertisements, perhaps with sound – thereby paying for the package. All this will be powered by integrated printed batteries you make automatically in the printing press.

Identification, traceability and anti-counterfeiting measures are so hot today that any packaging printer who specializes in these technologies will have a very promising future. Effective anti-counterfeiting packaging technology could save astronomical amounts – and create growth opportunities for printers.


Related Articles
Drupa 2008: Focus on print
Drupa 2008: A fine finish
Drupa 2008: The final countdown

Byline

Hans Widen is the manager of Swedish industrial news agency Business News AB and founder of the packaging magazine Packmarknaden Scandinavia



Inkjet printers Inkjet printers
Hans Widen Hans Widen


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