VIEW FROM THE INDUSTRY
Printing Trade Association Predicts Modest Revenue Growth in 2003
By MIRIAM REIMERS
In the past few years, printing sales have closely mirrored overall economic growth.
“Nationwide, first quarter 2003 printing sales were up 2% from first quarter 2002 levels,” according to Ron Davis, chief economist for Printing Industries of America, the largest graphic arts trade association in the U.S.
Although not robust, this is a positive beginning to 2003 after two straight years of decline.
“Projections for 2003 are for the economy’s performance to steadily improve on a quarter-to-quarter basis,” Davis said. “Looking ahead to 2004, the economy should return to trend,around 3.3% growth Full-year 2002 print sales should end up slightly below the 2001 level. Printers’ shipments for 2003 should total around $167 billion, which would be an increase of approximately $5 billion over 2002.”
Although they vary in details, industry analysts predict that 2003 will have little or no growth with total volume less than it was in 2000.
Analysts agree that while print will grow again, it will be at levels less than the general economy and many of the alternative electronic media.
One of the major reasons for the slow improvement in print markets from this recent recession is the sluggish advertising market.
Advertising drives around 60% of printers’ revenues, yet advertising markets have been in the doldrums the past couple of years.
The forecast for advertising spending in 2003 is for modest growth.
It is expected that full recovery of advertising spending should arrive in 2004 in conjunction with the next Olympics and the 2004 presidential elections.
While about half of print volume is heavily advertising dependent, a major portion of the other half depends upon business and industry’s needs for a wide range of printed paper products.
California is the No. 1 print market in the country based on companies, employment and sales,$14.7 billion.
Orange County accounts for approximately 11%,$1.67 billion,of the printing done statewide, produced by 671 companies and 12,691 employees, according to the 2003 Printing Industries Association’s Print Market Atlas.
San Diego accounts for about 8% of the printing market, with 471 companies and 8,920 employees.
Higher Expenses, Lower Sales
Since early 2001, when the California economic downturn began, printers throughout the state have faced increasing state and local regulatory challenges.
The most significant impact is skyrocketing workers’ compensation premiums.
In the past two years, San Diego printers have seen rates increase anywhere from 100% to 200%. For example, one local company of 52 employees, which had only one claim in the last five years, has seen its premium rise from $23,000 in 2001 to $99,000 in 2003.
At the same time, sales have declined by 5% and other regulatory costs have continued to increase.
Although printers are minimal contributors to air, water and other environmental pollution, they still face numerous,and increasingly,heavy fees for the “privilege” of doing business in the state.
Many pay thousands of dollars in state and local air emission, storm water runoff, hazardous waste and lesser-known requirements.
This year, with the current state budget crisis, the state legislature has given several agencies the authority to increase fees two- and three-fold as it seeks revenue wherever possible in the attempt to balance the state budget.
These regulations serve to further constrict the industry.
Over the past few years, the printing industry has transitioned from a growth industry to a mature industry,one that is still growing, but at a pace less than overall economic growth.
Slower growth, increased competition, more sophisticated buyers, plus overcapacity puts pressure on industry profit margins.
The resulting competitive shakeout has brought about a number of mergers and acquisitions among former competitors, driven some printers out of the industry and, in general, produced industry consolidation.
Challenges
Locally, printers face the same issues as many small businesses,competition and price pressure, increasing buyer demands, evaluating and funding new technology, balancing employment issues of developing skilled labor, increasing employee benefits and regulations.
Like many industries, printing has undergone a technological revolution during the past decade.
In moving from analog to digital technology, printing firms have taken advantage of new equipment and processes to increase their productivity. Many new print technologies that allow more specialized targeting and personalization are still in the early stages of use.
And printers have moved more and more into ancillary services beyond traditional ink on paper.
These services include data asset management, fulfillment and inventory management, design services and new e-commerce services.
Printers will continue to produce their customers’ projects,even when they don’t need to have everything printed.
Reimers is president of Printing Industries Association of San Diego, a trade association representing the printing industry through education, information and advocacy.
