Commercial Printers Face Rising Costs and Customer Expectations; a Shakeout Looms
The 30 largest commercial printers in Orange County held their ground in 2000 but are starting to feel the pinch of a slowing economy and rising utility costs. Many local executives say they are bracing for a shakeout.
According to this week’s Business Journal list, the group of 30 printers based or operating here saw aggregate OC revenue increase 7% to $483.5 million and OC employees tick up 1%,keeping pace with last year’s figures. (The list is ranked by OC revenue for the 12 months ended March 31.)
But there’s a definite change in the air.
The burst of the dot-com market combined with an overall slowing in the economy, the threat of rolling blackouts, and soaring gas and electricity prices have sparked consumer uncertainty and cautiousness, according to Bruce Carson, president of The Dot Printer Inc. in Irvine.
“It’s a very tough market right now,” Carson said. “There’s a lot of people on hold, and when they’re on hold they’re cutting back, being conservative and delaying projects.”
Some printers are being affected more than others, depending on the services that they offer. But all are faced with the added pressure of watching paper prices, which rose last year and may again in late summer, though that now seems less likely.
A paper-price hike planned for spring didn’t stick because demand was down, according to Bill Johnstone, general manager at Wallace Technical Services LLC in La Palma.
Still, he isn’t expecting significant relief any time soon.
“I think that the tough times are going to continue for an extended period of time,” Johnstone said.
The result: Printers are entering a transition period.
“We have a classic model of capacity to demand. There’s more capacity and not enough demand,” said Chris Madison, president of No. 6 ColorGraphics, Tustin. “That means its going to flush out some printers.”
Companies able to weather the shakeout will be those that can excel at technology, keep prices reasonable despite higher operating costs and satisfy customers who want quicker turnarounds, Carson said.
Top 7 Unchanged
Despite the challenges, the seven largest printers on the list, including No. 2 Wallace and No. 3 Dot Printer, held their spots from last year. Wallace’s revenue increased 4% to $47.2 million. Dot Printer increased its revenue 9% to $30.6 million and grew its work force 6%.
Dot Printer’s Carson said the company opened a new binding division about two years ago in a 50,000-square-foot facility in Costa Mesa and has grown the fulfillment and distribution end of the business.
Meanwhile, No. 1 Los Alamitos-based Trend Offset Printing Services Inc. (which prints the Business Journal) saw revenue increase 14% to $114 million. Its OC employee count jumped 5%.
President Todd Nelson said that last year the company, which also operates a facility in Texas, opened a 150,000-square-foot operation in Jacksonville, Fla., enabling it to attract more customers.
“We have more and more national companies attracted to our regional presence in Southern California, which is fueling a tremendous amount of growth,” Nelson said.
Plus, he said, Trend added new technology to handle target-market work for advertisers that are watching dollars.
“We have not yet seen the slowdown in the economy impact us at this point,” Nelson said, noting that the company purchased its own portable back-up power to run during summer months when more rolling blackouts are expected to hit.
In the meantime, No. 4 Creel Printing of California, Costa Mesa, held its own (revenue remained at $24 million). No. 5 Creative Press Inc., Anaheim, reported a 16% growth in revenue. No. 6 ColorGraphics reported a 12% spike in revenue to $19 million and No. 7 Fisher Printing Inc., Orange, got a 6% revenue boost in the 12-month period.
ColorGraphics’ Madison said the company has grown its client list this past year by providing speedy and prompt services. That becomes even more critical, he says, as competition gets more intense.
Ten printers posted double-digit gains in 2000. One,Newport Printing Systems in Irvine,reported a decline of 8% in revenue to drop to No. 10 from No. 7 last year.
Eight printers had no change in revenue.
Those reporting double-digit revenue increases include No. 8 Dual Graphics, which saw revenue increase 15% to $15.5 million while its employee count remained essentially flat.
Dual vice president Jim Joyce attributed the gain to the firm’s ability to meet rising customer expectations, and said that it is becoming critical to keep up with technology, which is “gaining momentum.”
“Technology keeps advancing and customers are expecting more and more” in terms of quick turnarounds and prices, Joyce said.
Double-Digit Gainers
Others that posted double-digit gains include No. 15 Westamerica Graphics Corp., Foothill Ranch; No. 17 Gardner Lithograph, Buena Park, which saw a 22% increase; No. 23 K & D; Graphics Printing & Packaging, Orange; No. 27 We Do Graphics Inc., Orange; and No. 28 Style Craft Printing and Graphics, Santa Ana.
No. 25 Meridian Graphics, Irvine, formerly known as Gunther’s Printing Inc., posted the largest percentage increase, 44%. The company, which reported a 46% increase in employees, was purchased by Steve Ard last year, and since seen many changes, including $4 million worth of new equipment.
Gardner Litho owner David Gardner said that last year he invested in an eight-color press and electronic pre-press equipment, enabling the firm to handle direct-to-plate printing. He said the new equipment helped his firm land big projects that in the past the facility would have been hard-pressed to handle.
The new work included a 300-plus-page book for the Los Angeles Museum of Art and a 300-plus-page book for The Irvine Company.
Gardner said he will continue to push to grow the business. He said the company prints Ansel Adams posters and calendars in the spring, its biggest chunk of business, but is pressed to fill in other times of the year.
“We know that business is slow and all printers are hurting a little bit,” Gardner said. “We’re scrambling really hard to fill it up, and so far it looks like we’re holding our backlog fairly well. But it’s tight.”
Eye on Paper Prizes
Plus, Gardner will have his eyes on paper prices. He said that printers do not operate at margins that allow them to absorb paper-price increases and must pass them on to their clients.
“It impacts every printer in the sense that the cost of jobs rises and people may make the decision not to do it all,” he said.
But Dot Printer’s Carson points out that printers have more leverage today with paper manufacturers.
“In a general sense, there’s nothing that supports price increases and today we have a lot of ability to negotiate in that area,” Carson said. n
