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I. Market Factors
Let me start off with two important statistics about consolidation I found in a very interesting presentation that Charles Pesko, the managing director of InfoTrends, gave just a few months ago at the ON DEMAND Printing and Publishing Conference:
• Since 1990, there has been a 20% reduction in North American printing plants.
• Since 2000, an average of 1000 plants have left this market every year.
The question is, WHY? First, a few macroeconomic factors.
As you know, globalization has meant we’re facing increased competition from all sides, especially Asia in our case. The rise of China as a new economic power doesn’t affect us in timely niches such as printing daily newspapers or even magazines, but it’s certainly having a considerable impact on the book printing market and some commercial work around the globe.
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One possible way forward is to focus on printing niches. That is, whatever you do, be the best at it, and the volume will follow. | |
Another more recent factor not necessarily reflected in the statistics I just cited is of course the impact of the US-Canadian exchange rate. Over the past few years, a more North-South supplier-customer axis had been developing, replacing some of the older print trade routes across and within Canada. The rising US debt and energy costs are of course helping the Canadian dollar gain strength, weakening the Canadian manufacturing sector. Many politicians, especially those currently in power, would have us believe a strong dollar is a sign of a strong economy. And for many people it is. But it seems to me that too many people are downplaying the future impact of the dollar on Canadian industry, especially in regions like Ontario and Quebec.
Globalization, the foreign exchange rate, rising energy costs and of course the Internet’s impact are the macroeconomic factors that are adding to the changes we are all facing.
Ever expanding customers continue to merge and acquire, and are in turn looking to consolidate their supplier base. They want trustworthy suppliers who can simplify their work and follow them wherever they are located.
What will that mean for us? It means that fewer suppliers will be competing for the spending coming from fewer, larger customers. But how do we ensure we’re one of the members of the printing species who stays in the race and wins?
I think many of us would consider our industry to comprise three types of printers: small, large, and mid-sized. A Research and Markets report last week shows that despite continuing consolidation, the North American printing industry is still highly fragmented. The largest 50 companies hold only about 30 percent of the market. Most North American printers that are considered “large” have annual revenues under one billion dollars, and the majority of companies operate one plant, employ fewer than 20 people, and have annual revenue under $5 million.
Increasingly in the future, the pie will be split between small niche players and large consolidators like Donnelley, whose sheer size allows them to follow their customers everywhere around the globe.
Some printers, who cannot compete with large players on geographical reach, economies of scale and reinvestments, and cannot beat small players on price or local service relationships, will therefore have their challenges. We can expect to see more streamlining and grouping together of operations, something we at Transcontinental, like you, have been facing over the past five years.
But this is by no means inevitable or true in every case. Remember, it’s not the size of the company in the fight, it’s the size of the fight in the company.
One possible way forward is to focus on printing niches. That is, whatever you do, be the best at it, and the volume will follow. You either have to be first, best, or different. At Transcontinental, our approach to growth has been to try to be the best in our niches by using a different approach. Hence our investments in newspaper printing outsourcing, direct marketing, and short-run book printing, to name a few of our niches.
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