When the Graphics and Print Media Alliance (GPMA) delivered a letter to the Government predicting the demise of 3,000 print companies unless emergency relief was forthcoming, it was probably too late already: many printers had made their own arrangements.
Some will inevitably be forced into an unplanned administration with the turmoil that ensues. Many more will have quietly wound up the business, probably passing it on to a former competitor that is staying in business with an agreement for a hand over period to look after long standing customers. It removes capacity from the market in one direction and feeds more work to a hungry press in the other.
Others will shut down part of the production operation for good, concentrating on the profitable parts or those where the company has been able to establish a niche. This will result in companies giving up litho printing to focus on digital printing, whether large format or short run small format.
The plea to Government to save the 3,000 businesses that could close by the end of the year will not change this. That letter also warns that another 3,000 print businesses will become insolvent in the following six months without targeted relief. These may still be saved, if not in their existing form and if the owners are willing to carry on. Many companies have bosses coming up to retirement age, have built a pension pot in the good times, have failed to create a succession plan and will be happy to bow out from the pressure of running a print business in hyper competitive times, let alone these extraordinary times.
The first round of lockdown measures in March triggered an immediate reaction. A BPIF survey taken in May, after the first tsunami wave had hit, showed that 12% of printers had shut down and 75% had drastically scaled back. The remaining 12% were in packaging and labels, or other sectors relatively unaffected by the lockdown. BPIF chief executive Charles Jarrold says that many reported that it would take another 12 months for business to recover to anything like previous levels.
The priority for almost all has been safeguarding cash, both what comes in and what goes out. Suppliers to a large extent have been understanding and have allowed renegotiated payment terms. It has been in their interests to do so. Larger customers too have been willing to pay faster to preserve a trusted supplier.
Companies have been examining overheads, from the cost of factory space to the cost of maintaining presses and waste generated. Equipment manufacturers have recognised this and are starting to offer subscription, pay by use or rental models, particularly for software, but increasingly for print equipment. Heidelberg‘s much hyped Subscription, though not intended for a pandemic, falls into this space.
Printers need too to look at the total cost of ownership of any press, the ongoing cost of maintenance or a service contract, as much as the upfront cost. It only makes sense to invest in a new highly productive press if equipment can be removed elsewhere to balance the step up in productivity. The overall market for print is dipping, so without a radical business plan to swim against this current, the sensible decision is to cut costs of printing each sheet, or each page.
This logic has driven the interest and investment in SRA1 formats in recent years with Heidelberg, Komori and RMGT all able to offer presses in this format. For little more than the cost of a B2 press, a printer can deliver a sheet with double the number of A4 pages.
Heronswood Press is a perfect example. It has installed an SRA1 RMGT924 to replace two smaller presses which were 14-years-old and were becoming a drain because of the cost of maintenance. With an LED UV system fitted, the company also needed to buy only a four-unit press rather than five, because it is no longer necessary to run a coating on the fifth unit to sell the print – a double saving.
In prepress areas, the cost of processing chemistry, disposing of that and the cost of installing, running and the space needed for a processor may be more than balanced by opting for a develop on press plate. The additional cost will be set against the savings made here and on press with a more consistent surface for the press profile. And there is a key benefit from a sustainability stand point. Sustainability, transparency and traceability will be key words to emerge from the pandemic. Buyers will begin to measure the operating practices of their suppliers and the eco profile of the consumables, machinery and processes employed. All brands will want to mitigate any risk to their reputation by no longer using paper from unverifiable sources, which might, in the minds of the public, be linked to deforestation in the tropics.
Printers and the brands they serve will place a greater emphasis on supply chains that can be trusted. And that means using more shorter supply chains and more local suppliers than hitherto. Book publishers have quickly found that buying print from the Far East can save on price, but will have a damaging effect on sales if goods cannot be shipped on time. UK book printers have enjoyed strong revenues as a result.
Catalogue and long run web offset printing is also likely to come back from Europe, as the idea of trucks being tied up in red tape at borders in Kent changes delivery times from between 9-12pm to “sometime next week, we hope.” A preference for local supply may be a consequence of the work from home trend, though this will surely benefit online purchasing of print. Web to print technology providers report a surge in interest.
Many businesses, especially in large format sectors, have been able to direct production towards provision of PPE. Others put together a range of social distancing collateral to be sold through websites.
Others have struggled, smaller high street businesses for example, in particular when the ‘rule of six’ was introduced, curbed print associated with social gatherings such as stag and hen nights. Halving the numbers able to attend weddings rather than easing the restrictions has been another blow to revenue.
“People have been discussing mergers and support for businesses that would otherwise be forced to close,” says IPIA managing director Marian Stefani. “And this is just the beginning. It is the Control-Alt-Delete moment for print where we can reset the industry.”
This is the reality that companies face. Activity levels remain low and while demand had been coming back in August and September, there is widespread concern that the latest round of anti Covid measures, particularly the impact on Christmas celebrations, will further depress revenues.
There is already a glut of capacity over demand, particularly for independent commercial printers. In Germany, the rise of the online trade printers able to offer lower prices and fast turnaround thanks to job ganging on highly automated presses with efficient hands free workflows, caused a cull of small printers in the wake of the 2008 financial crisis.
Many ditched older, expensive to maintain B2 litho presses and retained some digital print capacity to handle on the spot work while using the online printers to produce the run of the mill leaflets and brochures. More complex work would be sent out to a local printer that had retained the capacity for this work. There are indications that this is happening in the UK, not least because the secondhand press market is awash with B2 machines. There are few takers.
The new normal may be a printer that is digital first, supported by litho if needed, rather than a printer that is litho first with digital support. Unless the litho press delivers something beyond four-colour plus coat printing.
“Until 12 months ago we had SRA3 litho,” says one of these companies. “There was simply not enough litho work to justify keeping it. It had been a progressive decline over a longish period.”
Today that company is glad to have done what it did. It runs digital presses, but also online email campaigns alongside print for its customer base in northwest London. The customers either have not noticed or do not care. “We have a good relationship with lots of trade suppliers, all very reliable so we don’t have any issues. And whether we have our own capacity is simply a question that does not come up. Our USP is speedy quotes and great service. That has not changed.
“As long as customers get the job at the agreed price and the right quality on time, they are happy.”
This business will not be unique. Another example is one that has retained a litho capability, because the press is paid for, but rarely uses it, preferring instead to promote large format printing where there is still a margin to be earned.
Printers will need to decide where they sit in future, whether the operation of printing equipment is necessary to a business model that depends on customer relationships. A network of print companies able to provide trade print services will continue to exist, even if there are fewer printers out there.
Marian Stefani says the pandemic should be the Ctrl-Alt-Del moment for the printing industry, with low activity levels resulting in people discussing mergers and other support for businesses that would otherwise close.”
