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Web Offset Outlook 2006

Dec 1, 2005 12:00 AM

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Special Report

To view this report as a PDF, click the link below.

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Faced with pricing pressures and the sense that print is simply a commodity, web offset printers have turned a corner during the past year. Once looking to increase businesses by selling more to existing customers, printers now are turning to new markets to find new dollars. In addition, many web printers see internal integration and automation as becoming increasingly important to their continued success.

As the largest segment of the printing industry in terms of volume and total sales, web offset printers dominate the graphic arts. The ups and downs of these web operations have an impact on the industry as a whole, and reflect on a large scale the changing attitudes and challenges of the industry.

Because of web offset’s prominence, AMERICAN PRINTER publishes an annual report for this market segment, prepared in conjunction with the marketing research department of Primedia Business, Magazines & Media, AMERICAN PRINTER’s parent company. The resulting report, combined with clarifying information from various web offset executives, provides a unique view of the current state of the web printing industry, as well as a peek into the coming year.

Web offset in focus
This year’s profile of web printers sketches a picture of an industry in transition. With increased competition from non-print media and a purchasing environment that maintains print is a commodity, web printers are in the process of changing the way they do business. Perhaps more importantly, web printers are changing the way they view their path to continuing survival. Prosperity now depends on agility, creativity and a heightened expertise in managing technology.

Increasingly, too, web printers find themselves in competition with other printers, especially those with large sheetfed perfectors or variable-data capabilities. Always a somewhat seasonal industry, web printers are creatively approaching the challenge of keeping the presses running. After all, when the presses stop rolling, the money stops flowing—often forcing printers to face the possibility of profit margins too low to support their current business.

Complicating matters further are growing customer demands for better service, more innovative products and faster cycle times. With skilled labor still at a premium and the time required to re-engineer operations, it’s often difficult to meet customers’ expectations. But those that don’t step up to the bar will be thirsting for profits. Customers face their own challenges that often require change̵the days of unquestioning loyalty are gone for the printing industry.

It starts in the pressroom
The 2006 survey was conducted online. An e-mail alert was broadcast to 3,512 of AMERICAN PRINTER’s subscribers. The e-mail contained a link to a Web site, which hosted the survey. The majority of the respondents were printers who boasted both heatset and sheetfed presses, but not coldset (30.8%). An almost equal number (19.2%) had heatset only or coldset presses only, with 11.5% running coldset and sheetfed, but not heatset units. Those with heatset and coldset presses, but not sheetfed, also were represented (7.7%). Finally, 11.5% were fully equipped with the entire range of press equipment—coldset, sheetfed and heatset.

A strong showing was made by combination printers, reflecting, no doubt, the interest web printers have in capturing more of their customers budget by offering specialized services. Our survey also indicated that web printers are pursuing new markets, which often have to be supported with other types of presses beyond web. Although we did not ask how many web printers were running digital presses of any type, the survey did show that a majority of respondents view toner-based presses becoming a competitor to web offset in the next three to five years. But more on that later.

On average, plants were running their presses seven days a week (38.5%), followed closely by those plants running five days a week (26.9%) and six days per week (23.1%). We believe this is a reflection of the more robust economy during the past year and the ongoing demand for shorter cycle times from customers.

Interestingly, plants appear to be busier during the past 12 months than in 2004. For example, 14% of respondents were running only four days per week in 2004, while only 3.8% were running four days per week in 2005, according to the survey. Looking ahead to 2006, 46.2% of respondents indicated that their presses will be running seven days per week in the next 12 months, while 23.1% forecast a productive pressroom five days per week. Slightly more than 19% indicated their presses would be running six days per week in 2006. Not one of the respondents saw their presses running less than five days per week.

Efficient operations
With all the pressures that web printers find themselves faced with, makeready is as important as ever. In the 2006 survey, 33.3% of heatset printers stated that average makeready ranged between 45 and 60 minutes. However, a solid 22.2% reported average makeready times from 0-45 minutes. Coldset printers, in contrast, reported the average makeready times to be less than 45 minutes (61.5%), with 23.1% reporting average makereadies in the 45-60 minute range.

Color issues continue to hold sway as the biggest makeready waste culprit. That includes registration, color matching and color settings. Of course, the rise of automated ink key settings and closed-loop color control equipment has helped, undoubtedly resulting in improved numbers for average makeready waste reported in this year’s study.

Back in 2000, web printers reported average makeready times for heatset presses at one hour 43 minutes, with one hour, 15 minutes reported, on average, for coldset presses. Compared to this year’s makeready times of less than one hour for both heatset and coldset, it is clear that printers have used new technology and industry best practices to vastly reduce the down time of their presses due to makeready.

Average makeready waste of 6% and 10% was reported by 50% of this year’s survey respondents. But, more encouraging, is that 38.5% of respondents stated that average makeready waste was below 5%.

Average running waste was reported at below 5% by 53.8% of the respondents; 42.3% reported average running waste of between 6-10%. This is in keeping with studies dating back to the late 1990s for web offset printers, when average running waste was approximately 5%.

Makeready and running waste statistics often are difficult to evaluate because of the lack of exacting waste standards throughout the industry. Variations can exist due to the age of the press, makeready methods, peripheral equipment, coverage, color requirements, etc. In recent studies, newer presses were able to reduce run waste from 2% to 5%. But even the newest, most automated press must have makeready procedures optimized by the crew in order to enjoy such impressive savings.

Spoilage, however, is another thing. Calculated in tons or pounds, a printer’s spoilage should be less than two percent, according to some industry consultants. If your spoilage runs between 2% and 5%, it may be an indication that there is room for significant cost savings improvement in this area.

The fact that average waste and spoilage numbers remain relatively stable across the web offset segment from year to year indicates that there is still work to be done. With paper pricing increases reported in 2005 by the majority of respondents to the 2006 study, printers should continue to carefully monitor waste statistics in 2006.

In fact, slightly more than 69% of survey respondents stated that they had seen paper price increases for coated paper and 53.8% reported increases on uncoated. Across the board, respondents saw paper increases in all categories, including newsprint and SCA. When asked where they expected paper price increases in 2006, 50% stated coated paper, 42% said uncoated and almost 27% looked to newsprint. Almost 80% of web offset printers responding to the survey are looking for paper to become a more expensive part of the mix.

The product mix
Web offset printers were asked to comment on capacity levels in their shop during 2005. Fifty percent of respondents reported they had balanced capacity, as compared to 37% back in 2001. And 30.8% reported insufficient capacity, down slightly from 2001 numbers. Only 15.4% reported too much capacity.

These numbers are interesting in an industry that often claims there are “too many presses chasing too little work.” It seems that the web offset segment is effectively dealing with capacity issues, aided by a much stronger economy than 2001.

When asked what was being produced during the past 12 months on web offset presses, 50% of the respondents said direct mail. General commercial/advertising came in second with 46.2%, followed by catalogs at 38.5% and magazines and magazine inserts also at 38.5%. Books appear to be in steady demand, with 30.8% of respondents saying that they were producing books of various sorts, and newspaper inserts were reported by 30.8% of this year’s survey respondents. Obviously, web printers often produce multiple products within their shops.

In the coming months, web offset presses will again be busy producing direct mail. But some respondents (50%) are seeing an uptick in the demand for general commercial/advertising work. Catalogs and magazines remain a popular part of the product mix, along with newspaper inserts. Of course many printers are specially geared toward various products, and large web printers often have several plants devoted to handling specific products.

Catalog trends
Transcontinental Printing Catalog Group conducted a U.S. Catalog Trends Survey during 2005. Key findings point to an interest in non-print alternatives such as Web sites and e-commerce. These electronic alternatives were seen by catalogers as a high priority in growing mailed catalog sales.

When asked to identify priorities, 78% of the Transcontinental survey respondents said they intended to grow mailed catalog sales, 73% cited growing Web site revenues and 72% wanted to create or enhance a multi-channel offering. And when asked to identify areas of significant investment, 66% of all survey respondents mentioned Internet and e-commerce applications, 54% chose management and use of house files, and 40% selected outside list sourcing, i.e., prospecting. Only 35% of the sample indicated they wanted to increase the frequency of catalog mailings and a minority (26%) selected improving catalog quality. The majority of the catalogers answering these questions printed more than 500,000 catalogs annually.

The Transcontinental survey queried decision makers at 100 U.S. catalog businesses. Survey respondents consisted of both business-to-business and consumer catalogers. The survey was conducted in March and April of 2005.

The focus on non-print alternatives may be a response to what catalogers in the survey said was their greatest obstacle to growth—expenses associated with mailing, distribution and delivery. In spite of the fact that 39% of respondents see distribution as a major obstacle, only 17% say they intend to make significant investments in that area during the next 12 to 24 months.

The typical, day-to-day concerns of catalogers—paper sourcing/purchasing, postal logistics and new press/prepress technologies—were ranked by a majority of survey respondents as important to them. At the same time, solutions that were digital in nature or based on a cataloger’s use of electronics were considered important by roughly one-third of survey respondents—a figure that Transcontinental thought seemed higher than expected.

When asked to select the reasons they would switch print vendors, the majority of catalogers in the survey mentioned superior quality, lower price and faster delivery/turnaround almost equally.

All of this points to the need for web offset printers to offer more services to their clients, especially in the catalog arena. If areas of interest lie in non-print alternatives that drive more sales, then the opportunity exists for printers to offer new services, consultation and expertise that drive those sales. In addition, these new services may be less price sensitive than products produced in the pressroom.

Part 1 | Part 2