SHOP TALK
Printers Say Industry Showing Signs of Modest Turnaround
Could the printing industry be turning for the better?
The numbers, according to the Business Journal’s list of top printers on page 66, seem to indicate so, though insiders say it’s tough to tell.
Some see definite signs of improvement, others say the industry faces as tough a set of challenges as ever.
In the past few years, the printing industry has been hit by a number of issues facing most California manufacturers, including high workers’ compensation and healthcare premiums, skyrocketing energy costs and the state’s labor laws.
On the positive side is the general pickup in the economy, which has boosted advertising budgets, magazine page counts and other printing-related sectors.
Reporter Jennifer Bellantonio asked industry executives for their outlooks for 2004-2005 and to discuss the specific challenges facing the industry. Following is an edited version of their comments.
LARRY BURNETTE
Vice president of operations
Creel Printing Co., Costa Mesa
Outlook
The printing industry has been very difficult to predict since the Sept. 11, 2001 terrorist attacks.
The economy affects the printing industry as well as many other industries. Last year we saw a slight upward trend and this year is slightly better. However, even with the increase this year, the pace of the business is more of a “start and stop” cycle rather than a continuous steady flow of business.
Even with the increase, it is difficult to get too optimistic about a continued increase because the economy is so unpredictable now due to the daily fear of another terrorist threat.
Challenges
The key issues that are impacting our industry in California are the cost of workers’ compensation and healthcare insurance.
We also are faced with one of the highest costs of electricity and gas in the U.S. Presses require air compressors, pollution control devices, chillers and other auxiliary equipment that consume a lot of electricity and gas.
It is much more difficult to compete with out-of-state printers. In the past, the main difference in out-of-state competition was labor. Now it is labor, workers’ compensation, wages, California labor laws, environmental controls and utilities.
The printing industry must continue to drive down cost through continuous process improvement and investing in new technology that is faster and more efficient.
DOUG GRANT
President
Westamerica Graphics, Foothill Ranch
Outlook
Industry experts predict only moderate growth in printing revenue in the next one or two years, in the range of 3% to 5%.
Although this is up from recent years, there still is a lot of excess capacity in our market. There probably will be more consolidations and strategic acquisitions, as printers and related graphic providers seek to improve production efficiencies and expand services.
Printers like Westamerica, which desires to grow at a faster rate, must achieve that growth through strategic targeting of higher growth industries, perhaps at the expense of other printers in our market.
Challenges
Overcapacity leads to tremendous pricing pressure, which in turn leads to a perception of printing as a “commodity.”
A major challenge for each printer is to truly differentiate itself in the minds of its clients. Many offer expanded services like fulfillment, digital printing, or Web development, for example.
Workers’ comp insurance costs are a huge issue for our industry.
Most printers I know have seen premium increases of 400% to 500% in the past few years. Workers’ comp premiums are higher than group medical premiums in many companies.
Recent legislation (signed by Gov. Arnold Schwarzenegger) will help, though we are told that it will be next year before we see any real premium rate reductions,and they’ll only be 10% to 15% reductions at that.
STEVEN ARD
President
Meridian Graphics Inc., Tustin
Outlook
Rumors abound that there’s going to be a few more people that will close their doors. That’s kind of scary,especially when companies have been investing in equipment.
If we keep taking care of our business and working hard, we’ll be all right. But I see the industry shrinking overall.
I see another hard year in front of us. We bought a $2.5 million to $3 million printing press. But we look around and I see people closing their doors.
Challenges
The Internet has bit into the printing industry. That’s removed a little bit of printing. Printing in one respect has become more of a commodity.
It seems to me years ago people would spend thousands on printing jobs. Now it’s who can get it done cheaper and faster. The old-time guys have had a hard time adjusting to that.
TODD NELSON
President
Trend Offset Printing Services Inc.,
Los Alamitos
Outlook
In the Web printing market we serve, we’re seeing that the economy has picked up quite a bit in advertising sales, which is increasing the sales for our advertising publications. It’s very robust right now. We haven’t seen this for a couple of years.
An indicator of improved times: Paper prices are going up significantly in the next 60 days. Whenever paper prices go up, it means the market is tightening. It’s good for the printer; it’s bad for the publishers.
Challenges
As the economy is starting to increase, there are more startup publications. Trend plans to keep a good eye on the creditworthiness of publishers and customers to make sure they’re financially sound to do business with.
The only big unknown that all printers are dealing with is what happens if we have a big terrorist attack.
KENT BARKOURAS
Chief executive
Mybar Printing Corp., Irvine
Outlook
The outlook for the industry appears to be strong due to reduced competition from the previous five years of fallout and an increase in advertising expenditures in many industries. Specifically, healthcare, hospitality, real estate, insurance services, travel and financial service industries show above average growth potential of at least 10%.
Those printing companies that have spent the last couple of years focusing on improving efficiencies, including restructuring their operations with improved technology and equipment, will have a significant advantage over those companies that have not made any improvements.
In addition, the need for Web-based ordering capability is growing stronger every day and those companies offering a solution will be able to grab additional market share.
Challenges
The key issues that the industry faces are high workers’ comp costs and overcapacity. Workers’ comp rates for us have been controlled due to our increased efficiencies, primarily due to faster equipment. We have 25% fewer employees producing 30% more impressions, versus last year.
The industry has so much used equipment on the market that can be purchased for 20 cents on the dollar, minimizing the barrier to enter the marketplace thus increasing capacity. Some of us have upgraded all of our equipment, which now prints 50% faster while reducing set-up times by more than 60%, thus providing us with more capacity using the same amount of presses.
CRAIG EVANS
Director of sales and marketing
ColorGraphics, Tustin
Outlook
The printing industry has not had the demand in recent years to match the available supply. As the general business environment continues to recover in Orange County, printing and advertising budgets are increasing across the board. Printers that can adapt to the changing market conditions are going to continue to thrive. Those who have difficulties adapting are going to struggle.
Challenges
The biggest issue in the printing industry is staying competitive with the other advertising media choices that companies have.
Keeping postage costs under control is a key, because the method of delivery is typically two to four times the cost of the printed piece.
