The phones started ringing around the industry on the morning on 24 March. It was not good news. Customers were cancelling campaigns, pulling out of orders and shelving discussions about new projects. This was the morning after the night before, when prime minister Boris Johnson ordered a lockdown on the country, and the printing industry fell off a cliff.
Display printers that specialise in the exhibitions and the events sector simply had no work. They began making staff redundant. Online printers who can see orders for business cards, stationery, marketing collateral and banners as they arrive through websites instead watched blank computer screens. The printing industry has experienced recessions before, but then as the country entered recession, it was as one print boss puts it, “death by a thousand cuts. This was instant”. It was a beheading. And businesses were bleeding.
The announcement a few days later of the Job Retention Scheme allowing companies to furlough staff with the government paying 80% of the wage bill and has undoubtedly saved businesses and jobs. For now. The Coronavirus Business Loan Scheme (CBils) promised to save more companies and jobs, but has perhaps not been as universally welcomed.
Not everyone has been accepted for the emergency funds. If the business was not profitable before the pandemic hit, why would it be worth supporting, ran the logic. The decision after frantic lobbying by the BPIF and IPIA, and others, to ensure that print could be counted an essential service has allowed some printers to carry on.
BPIF chief executive Charles Jarrold says that in a first survey, those responding were not all BPIF members. There had been an almost immediate 70% drop in orders, 73% of businesses were open while 12% had closed completely. As many as 95% of businesses have used the furlough scheme to avoid the need to make redundancies.
A follow up showed that the industry was scaling back up, but it would be nowhere near a return to normal. If the economy is going to shrink, then print will shrink with it and there will be thousands of jobs lost across printers and suppliers. A quarter of all UK business are expecting to make redundancies.
Among the suppliers is Heidelberg, which had announced a plan to cut 2,000 jobs worldwide ahead of the lockdowns across Europe. Around 250 of these will be in overseas subsidiaries, the UK included, with an average 20% reduction in numbers because the smaller industry will no longer support anything other than the leanest organisations.
The BPIF’s findings about the disappearance of work are endorsed by data from Heidelberg presses collected via Prinect and normally used to spot problems that need addressing. The UK’s commercial printers were among the hardest hit of any country in the world. Packaging printers were slightly better off and a fortnight after the first survey, packaging print seemed to be getting back to normal levels of business.
“There’s not enough known at the moment,” says Ryan Miles, managing director of Heidelberg UK. “There are too many unknowns for a lot of printers, especially in the commercial space: what kind of set up will they need, over what period and, ultimately, how their business will or will not be affected.
“It is very hard to take good business decisions if you don’t have the facts. There is no clear example to follow as a guide to coming out of this.”
This will mean, he says, a need to examine the balance of equipment that a company operates and ensuring the right combination between digital and litho printing. For Heidelberg, the decision is also between commercial print and packaging. The latter is proving more resilient and is where the company’s focus has been in recent years.
Koenig & Bauer’s data agrees. Commercial press usage had dropped 50%, carton printing had fallen 15% according to data recorded by its remote diagnostic technology. Both relate to the more modern presses sold by the manufacturer. Older machines and those sold by machinery dealers will not be connected to these networks and may have found volumes even more depressed.
Volumes have held up better in specific sectors: print for food packaging, for pharmaceuticals, for the NHS, for government and for newspapers has been necessary. Likewise its use in direct mail has been key to fund raising efforts by charities, to emotional well being of those in isolation who receive a printed greetings card and to support the flood of ecommerce activity that has replaced a trip to the shops.
Some printers decided to close for the immediate future and some have remained closed. The IPIA’s survey for the BEIS calculated that the crisis may wipe out one-fifth of the industry by the end of the year which will be inline with Bank of England’s forecasts for GDP and a 12% shrinkage in the economy for the year predicted by IHS Markit’s health check based on figures from the Chartered Institute of Procurement and Supply.
Mergers and acquisitions will be on the cards. Businesses will close. Some owners will decide to close, sell any assets and leave the industry, having been worn down by the struggle of the last few years. Another swathe will downsize radically, moving out of litho print to focus on digital printing, either large format where prior to the lockdown there had been growth, or short runs serving an immediate need from a local market. Any longer run litho work can be placed with online trade printers. Again this was frequently mentioned by respondents in the IPIA’s report about how the lockdown would affect its members.
What is clear is that whatever happens in the economy at large, the printing industry will not be going back to 2019. It is not going to be business as usual. Any crisis will accelerate trends that were already underway: automation, online print purchasing, the litho to digital transition. Simon Biltcliffe, chief executive of Webmart, says: “Digital interaction has jumped ten years in the way we we receive and deliver print and marketing materials. The adoption of portals has been unbelievable. We have had our marketing portal for some years, but it was hardly used. Now within two weeks of lockdown it has become part of the fabric of our business.”
On a less dramatic scale, Kodak executive chairman Jim Continenza says: “What we would have done in 2021 we are doing in 2020.” Like many business across the globe, working from home has become the rule for those that do not need to be in the factory, using digital conferencing tools, such as Microsoft Teams and Zoom. And like many other businesses, Kodak has shifted production where it has been able to. It is now a key provider of clear film for production of visors using its base film stock. It is producing hand sanitiser and it is producing PCB films for production of medical ventilators.
Production of much needed PPE has occupied many in print who have employed cutting tables to produce visors, led by Prime Group. Renz has also switched production in Germany from wire and coil binding to production of visors. UK managing director Ian Bullock says that “this has been the only thing keeping us going”. And it has involved providing the equipment to customers outside the printing industry.
The Renz experience is far from unique. Businesses have had to become flexible to survive where normal sources of revenue have been cut off. Diversification is everywhere, using vans that would normally deliver printed matter into ferrying food or medical supplies and PPE.
Duplo is also supplying an air purifier as part of the health products it can offer to customers for their own use or to supply to their customers. Like printers themselves, suppliers found phones going quiet in the days after lockdown. “April was not a strong month,” says managing director Martyn Train. “May was better. Things have definitely picked up and we are having more conversations.”
There have even been sales. “We have sold a booklet maker to a company that has used a bounceback loan to take advantage of attractive interest rates,” he says. The CBils scheme can also be used to fund or part fund investment in new equipment, or can be used to refinance and fill a negative equity gap. “Smarter companies are looking to see what’s available and how best to exploit it. Experience shows that those companies that invest in these periods come out of the period 18 months ahead.”
He is not expecting a swing back as fast as the pendulum dropped, even if there are no further set backs through a second wave of infections, for example. The climb back, he says, will be led by investment in digital ways of production and with greater levels of automation. “People are going to have to get used to doing more with less. People will need to link four or five processes together,” he adds.
This will be driven by a combination of factors. Print runs are expected to fall and thus will be printed on digital presses and will use finishing equipment that matches the press and the automation levels. The multi finisher comes into its own, slitting, creasing and folding in one pass, supervised by one operator who is also likely to be running the adjacent digital press.
Social distancing rules will also favour cellular production with one operator looking after a digital press and the finishing equipment alongside it. This will be a huge change for many small printers occupying premises where operators, finishing machines and pallets of work in progress can be cheek by jowl in a way that is going to be simply unacceptable in future.
Ray Hillhouse is managing director of the Plockmatic offline business based on Morgana and Watkiss technologies. Like Duplo, sales plummeted and where they have come back, he says it has been with inplant buyers. This is hardly surprising. On lockdown, calls about service dropped from 300 a week to just three. It has started to pick up, indicating that some of these businesses are starting to return to work. But it will not be like it was before. There will have to be changes, he says.
“It will no longer be possible to have ten people working in a small print shop and maintain 2 metres distance between them and that will force companies to look at how they produce.”
Morgana has itself been affected. Digital meetings have successfully replaced flights to Stockholm, Riga and the US and this will stay. And there have been changes to plans on how the Watkiss production line would be integrated into the Morgana factory in Milton Keynes. Previously people have been used to working together on the same bench. That is no longer possible.
Like Duplo, Morgana has noted growing sales of its multifinishers and anticipates further growth once the dust settles as more and more work has to switch to digital print. Runs that were several thousand will now be a few hundred, well below the threshold for litho printing and for segregated finishing processes. The small printers that survive will be moving away from litho, says Hillhouse.
IFS has continued to install machines that had been ordered ahead of the lockdown in the weeks since. The company, which became employee owned last year, has avoided the need to furlough all staff. “We have even taken a couple of orders,” says managing director Eric Keane.
The impulse is the same: reducing manpower needs in the bindery and thus complying with social distancing mores. “Few people are in a buying mood,” he says. “It’s a case of waiting for people to get back to their jobs. But those we have been speaking to about automated processes in the last couple of years are still keen to go ahead.” It is a matter of the right timing.
One of these will include a fully loaded Horizon StitchLiner MKIII, laminator and guillotine with installation now underway. Most, however, have delayed delivery, Keane adds. As with others the pandemic is changing how IFS operates. The Horizon showroom near Hamburg is being turned into a television studio, able to run video demonstrations combining cameraman and the operator responding to requests from several hundred miles away.
The customer can send work to the showroom so that it can book an hour long demonstration of a real job. There is no need to travel, no need to be away from work for at least two days for a short demonstration and the remote showing can be followed with a rather safer visit to an existing customer, assuming that customer is happy for strangers to cross its threshold.
In a survey of customers carried out by Muller Martini, 73% said they did not want to have sales people visit their premises for the remainder of the year.
This is going to become the standard way that Horizon encounters customers for the foreseeable future. It makes sense therefore for the company to make the remote experience as engaging and rewarding as possible with investment in training and the right equipment to enable this.
A Xeikon press conference shows how this can be done. In March the company hurriedly pulled together an event using remote off the shelf applications, but this month for a second press conference the company had created a professional television studio where a host could quiz guests around a large table.
IFS may not be capable of this kind of investment, but is changing to suit the new normal. “We know too that in months to come our sales people will not be out and about, so have been training them using Teams and Zoom about how to present correctly over a digital connection,” says Keane.
The drive towards automation in finishing and reduction of manual elements applies equally to machinery for litho and longer runs. “The immediate effect has been that people have postponed decisions,” says Friedheim International managing director Mark Bristow. “They want to see how the market develops before continuing.” That said, digital orders involving Hunkeler equipment, matched to new inkjet presses, are progressing. “There are a few customers interested in the CoBo Stack palletising robot from MBO,” he adds.
It has enjoyed an uplift in its packaging areas which provide material to the online retail businesses. “I glad that at the moment we are not just in graphic arts,” he adds.
In larger businesses automation is already here. Book printers like Printondemand Worldwide and Ashford Colour Press can print and bind books with no manual intervention. And David McGinlay, Muller Martini sales director, says he has a customer that is already taking reels printed on a digital press, feeding these into a stitching line where the individualised booklets are delivered folded, stitched and trimmed with no further touch points. “This is 18 times faster than the old way of running this job,” he says.
If automation is coming at a faster rate with remote meetings and demonstrations a fixture for the finishing side of the business, a greater change is coming in how printers interact with customers.
Online is now a must. During lockdown consumers became used to using websites for their purchases whether food from a supermarket, clothes, drink and even gourmet meals from restaurants that would otherwise have zero revenue. While Zoom has been the highest profile technology winner of the pandemic, Shopify, which allows retailers to trade online, has not been far behind. More than 1 million accounts were opened in one month.
It is a huge shift that will have profound effects on an already ravaged high street. Mid market chains, whether restaurants or clothing retailers, have announced closures as private equity funders wind in their exposure. In turn the property companies owning shopping centres are under pressure as rental income drops. Much of this will be replaced by online shopping and other ways of reaching the consumers’ wallet and purse.
Browsing in shops will be frowned upon, opening the way to a revival in the use of catalogues for browsing. Nobody has yet perfected the concept of browsing a website. And the catalogue will be the gateway to online sales. Print’s position will change.
The concept of subscription purchasing is catching on, from Gucci handbags to razor blades, coffee to cheese. The products arrive in printed packaging and collateral that can easily be personalised to that individual and his or her profile. Print will be about gaining loyalty to that brand.
“We will need to take a different, more open minded approach,” says Webmart's Biltcliffe. “There will be no more ‘business as usual’.”
The immediate need is to communicate with customers as the economy slowly gets underway with more shops and more activities permitted. This will drive use of hybrid mail, Biltcliffe says, through the ability to target a message and achieve benefits from volume mailings.
“Customers no longer care how something is printed, but they will want lots of ideas and options. The printer should be the turbocharger, helping customers get to where they want to go faster. This means generating lots of ideas knowing that only a few that will come off.
“At a simple level perhaps you will receive a flyer as you queue to get into a shop and another with next week’s offers as you exit,” he suggests. Certainly as the lockdown lifts the priority will be on simple print products to deliver straightforward messages that the business is open again. The customers for print will be just as cash strapped as printers themselves.
And the customers will be stripped of excess staff, leaving fewer who have any understanding of print. Transparent online purchasing technology, for individual items, for a planned campaign or for an going contractual arrangement is essential. “It needs to be a platform where the customer is in control, it’s not about finding the lowest price,” says Biltcliffe. “There is a huge shortage of print knowledge.”
Keith McMurtrie, managing director of Tharstern, agrees: “There is the potential for a huge surplus of skills as redundancies are made, while buyers will need to talk to consultants to help them,” he says. These might be freelance consultants or staff that are no longer needed to run more automated production lines and who can share their expertise with customers that are interacting with the printer via a website. Customer experience is crucial. “Zappos sells shoes online. It is a commodity product with absolutely excellent customer service that makes the difference,” he says.
He says he will be working more from home in future, like many across the industry who have found it is not a handicap to do so. Inside a reorganised factory designed to minimise unnecessary contact, systems take control with AI helping make decisions and automatic guided vehicles or conveyor systems for moving materials around.
“Communication becomes crucial,” McMurtrie says. “We can’t have isolated production areas now, we need to communicate better between people and processes.”
Tharstern can make installations and offer training remotely. It is going to become the way that things are done. By necessity the smarter forward thinking printers will be able to cope with the changes. Others will not. Smithers estimates that the printing industry will lose 10% of its revenue for this year and in subsequent years. It is as if a steady decline has for a short while at least become markedly steeper.
“It will not be fun,” says McMurtrie, “but it will propel printers into the technology age and herald the arrival of the smart print factory.”
Trade associations have been successful at pressing their case for government assistance. The reason it has been needed is clear as Charles Jarrold says that the industry lost 73% of its sales overnight when the lockdown first took effect.
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Suppliers have been able to provide spares and maintenance during the lockdown with the imposition of safe distancing and remote service where possible. Equipment sales have unsurprisingly been thin on the ground.
Ryan Miles, Heidelberg UK, explains that going forwards printers need to find the right balance in production technology, that being a difficult decision until there is some certainty for the industry.
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