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2002 Hot markets

Dec 1, 2001 12:00 AM


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2001 was a disappointing year for the printing industry. A scant 1.5% economic growth in the first half was wiped out in the second, following the most costly catastrophe in U.S. history.

Financial, direct-mail and commercial web printers, after flat or reduced sales, are slowly recovering from the aftermath of Sept. 11. A 4% annualized gross domestic product (GDP) “expansion” is under way, promoted by government deficits and rebuilt destroyed property. This translates to a 6% to 8% sales increase for the printing industry. Two-thirds of the change will be pricing, including increases in materials, shipping, insurance and capital costs. The balance will be real additional demand.

The top 25 markets account for more than $160 billion in printing sales, or about 85% of total industry revenues. How can you use these data? Identify the organizations from each category that are headquartered in your service area. Calculate market potentials and incorporate this information into your sales plan.

The chart on p. 15 gives the overall size of 25 key market sectors. A snapshot of each category follows; each subhead gives print potential in billions (B) of dollars. Here, then, are the 2002 hot markets.

  1. PUBLISHING ($15.9B)

    Non-newspaper publishing will be the largest print buyer in 2002, thanks to cross-media agglomerations and “whole-advertiser” deals, where one company negotiates across-the-board placement as a prime media contractor.

    • Periodicals (+8%) are already accelerating in growth as advertising levels improve.

    • Educational publishing (+14%) will grow, fueled by a baby boom of 10-year-olds to 14-year-olds in the next three years.

    • Religious publishing (+33%) has and will experience a resurgence in these difficult times.

    • Free-standing inserts (+4%) going into 1,480 daily newspapers will stack up as retailers build store traffic to pre-2001 levels. Although four printers dominate this segment, there are ample opportunities for all heatset and open-web printers, and sheetfed plants that cater to underserved businesses.

    • Not so hot: 0% growth is forecast for adult trades and juvenile books and CD/multimedia.

    HOT TIP: Some printers and publishers, such as Courier Corp. (North Chelmsford, MA) and Dover Books (Mineola, NY), have merged or formed on-demand book-production joint ventures. Driven by Internet boutique channels like Amazon.com and powered by formidable digital-asset-management (DAM) programs, these new initiatives present intriguing opportunities for printers.

  2. BANKING/INSURANCE ($13.1B)

    Consolidations and name changes continue to drive one-time stationery, commercial sheetfed, seriographic, check and business-form replacement orders. While 25 bank holding companies account for more than three-fourths of the work, there are more than 9,000 independent financial institutions with almost as many new names in the works.

    • Commercial banking (+19%) will account for more than $4.5B in direct-mail and free-standing insert work, a staple for half-web plants and lettershops.

    • Property/casualty insurers (+51%) will ride high on revenues from sharply upward real-estate appraisals and personal-property replacement.

    • Life insurers (+11%) have been short on print promotion, but current major campaigns may bring $1B in new color print. About $3B in policies, jackets, forms and other collateral will be produced at in-plant printers and through forms distributors and reprographic centers.

  3. COMPUTER SOFTWARE ($12.6B)

    Software will benefit from the Windows XP launch as well as the demand for high-level encryption and data protection.

    • Packaged software (+2%) will plateau as server-side software and networking (+9%) dominate this segment.

    • Memories and storage (+10%) will show surprising resurgence in price and productivity as new semiconductor breakthroughs in chip-making are introduced.

    • Mainframes (+14%) and hosting (+6%) should post slowed growth but, overall, this sector will continue to demand folding cartons, bound books, point-of-purchase (POP) materials, manuals and digital printing, approaching $10B.

  4. TELECOM ($11.1B)

    Reckless federal licensing, acquisitions, divestitures, satellites and the adoption of low consumer-demand technologies have nearly collapsed this service sector.

    • Telephone directories (+15%) and cable services (+7%), the low-tech, high-profit mainstays of printing, are being short-circuited by wireless local area networks (WLAN) and other “orphan” services.

    • Wireless providers (+4%) will have few new callers, and broadband demand is not developing. Even wired “DSL” broadband will only reach 14% of households, mostly via cable television.

    HOT TIP: Screen, litho and digital printers could benefit from name changes. Analysts are predicting a year of big-time megamergers. Graphic designers and prepress shops should pursue standards manuals and DAM deals. Nonetheless, sustained losses in sector revenues and capitalization may result in a one-third drop in printing demand to $11B.

  5. AUTOMOTIVE ($8.2B)

    Automotive industry sales and production will increase 9% after stalling in the second half of 2001.

    • New vehicles (+11%) will match last year's revenue gains but with fewer and higher-priced units.

    • Auto finance and insurance (+22%) and rentals and leases (+10%) will accelerate with higher pricing and increased liability coverages. Forms, coupons and other utility work could lead to a $3B subcategory.

    • Off-the-road vehicles (+22%) will benefit from expedited energy, infrastructure and commercial building replacement.

    • Not so hot: parts and repairs (+8%) and used vehicles (-6%). Commercial printing, forms, signs and direct mail at the regional dealer and aftermarket level, however, should increase to $2B or nearly a quarter of sector purchases.

  6. REAL ESTATE ($8B)

    Real-estate-related print sales will rise, which is good news for sheetfed, cold-web and digital printers and trade binders.

    Residential new and resale housing (+13%) will benefit from population growth and a pullback in consumer disposable-goods purchases.

    • Record-low real-estate interest rates will drive home mortgages (+7%).

    • Commercial real estate (+7%), which slowed in 2001, will rebound, especially in the wake of more than 19 million sq. ft. of lost office space in New York City. Freight movement restrictions will also help warehousing.

    HOT TIP: Expect to sell more than $8B in the real-estate sector, but watch out for manufactured homes (-9%).

  7. BEVERAGES ($8B)

    Metal decorators, large-format sheetfed printers and roll-label providers will profit from redesigns of carriers, cans and bottles, plus multiple-format and theme labeling. Overall, look for 5% beverage-industry growth but a slight 2% to 3% decline in printing buys.

    • Bottled water (+50%) is growing fast due to public-water-supply contamination fears. Label and ad printing has traditionally been minimal for this category, but that may change as confidence-laden brands emerge.

    • Expect an increase in POP, on-pack and other retail printing for beers (+3%), wines and spirits (+6%), and juices (+5%).

    • Coffees and teas will lead other prepared drinks (+5%).

    • Not so hot: 0% growth is forecast for soft drinks and dairy — they will be level with some cutbacks in print promotional spending.

  8. PACKAGED FOODS ($7.9B)
    • Packaged foods will pull ahead of beverages to 11% or greater growth as consumers eat at home more, and carry packaged foods to work and play.

    • Canned and bottled foods (+1%), the largest category, will increase promotional spending and maintain litho and flexo labeling to a total exceeding $2B.

    • Baked goods, confections and dry foods/snacks (+8%) account for more than $3B, which is good news for commercial, flexo and folding-carton plants.

    • Frozen microwave foods (+6%) will remain a $1B steady buyer of wrappers.

  9. MEDICAL PRODUCTS/PHARMACEUTICALS ($7.9B)
    • Biotechnology (+32%) and pharmaceuticals (+19%) will lead this sector. Pharmaceuticals led sustained media advertising in 2001 and should increase all media and collateral expenditures in 2002 by at least 15%. This could result in $2.5B in sheetfed and heatset web work plus $3B or more in packaging.

    • Medical products (+14%), principally marketed to professionals, will provide about one-sixth of all digital-printing capacity, and possibly, $1B in B2B sheetfed and direct mail.

    HOT TIP: Wellness management (+55%), a new category, will have consumers ordering vital-signs monitoring services from simple, self-testing printed kits to on-line devices for chronic disease sufferers. Many new companies are entering thus segment, and $10B in revenues by 2010 are forecast.

  10. INVESTMENT BROKERAGE/MANAGEMENT ($7.6B)

    This category will recover from the devastating loss of human life in lower Manhattan. Significant replacement and changed-directions printing will boost demand more than 25% to $7.6B after a Q4 2001 dip.

    • Stockbrokerages (+3%) will improve marginally as reduced volatility — and commissions — bear down on this category. Heavy web-press direct mail will be required to build activity after the greatest retreat in the history of U.S. equity markets.

    • Mutual funds/management ($206B; +22%) will rebound after substantial redemptions in late 2001. Open-web and sheetfed perfecting plants will gain with $1B in new work.

    • Not so hot: 0% growth is forecast for investment banks — the IPO and merger days won't return in the near future.

    HOT TIP: The good news is this sector is in every city, and about $1B may be created by savvy salespeople suggesting inserts, invitations, reports, seminar programs and financial forms and instruments.

  11. FASHION ($7B)

    Fashion print won't wear well as catalog production declines one-tenth to $2.5B (after a one-third collapse in 2001). Fad merchandise with patriotic or protest themes, and licensed sports-related designs from such events as the Salt Lake City Olympics or the return of “Air” Jordan will be in vogue.

    Printers may add value by offering security, anti-counterfeiting, collectable and smart features to tags, labels and packaging because volumes will be flat: (clothing, footwear and intimate apparel +3%).

    • Security-conscious consumers' move to precious stones and metals will be good for jewelry (+20%).

    • Accessories (+17%) should also sell well as “feel-goods” and for value retention.

    HOT TIP: Both jewelry and accessories can be high-end sheetfed and digital color customers. The 40 largest firms in fashion place two-thirds of printing, leaving many boutique and generic producers up for grabs.

  12. HOME IMPROVEMENTS ($7B)
    • Remodeling (+32%), floors, walls and windows (+18%), and tools and materials (+10%) should nail down $4.5B, mostly in cold-web and sheetfed free-standing inserts and direct mail, and screen-printed signage and samplebooks.

    • Modest improvements are forecast for home appliances (+5%) and furniture (+5%), both of which have been beset by retail failures and consumer disinterest.

    HOT TIP: This is a great marketing opportunity for creative print sales reps, but they must work fast. This sector will consolidate to about half the present number of participants before the next business cycle.

  13. DISCOUNT RETAIL ($6.7B)
    • The off-price and outlet store market (+17%), which is dominated by general, apparel, toys, office and home-accessories superstores, has become the fastest retail growth segment.

    • Hypermarkets and clubs (+15%), with only four large participants, will be less than one-third the nearly $7B in full-web, signage and display work. Since Sept. 11, same-store sales have risen 7%, versus department stores, which have declined 5%, the largest spread ever. This is a double-edge sword as the latter will reduce ad printing, while the former doesn't need it. This is apparent on a company-by-company basis: for example, the 26% spread between Gap Inc., a big print buyer, and Kohl's, a marginal one.

  14. PERSONAL CARE ($4.9B)
    • Color cosmetics and fragrances (+5%), and hair, skin and suncare (+5%) are in decline relative to population change — magazine inserts, promotion and POP are barely at 1999 levels of $2B. Fancy-finished coated, foil, embossed and diecut packaging will look good, however, at greater sales.

    • Hygiene, sanitary and other products (+8%) will continue to hold steady, a positive development for flexo and folding-carton buyers.

  15. TRAVEL/HOSPITALITY ($3.9B)

    Printers are benefiting from this sector's trend toward raising promotional expenditures, totalling at least $4B.

    HOT TIP: Concentrate on hotels (+8%) and cruise lines (+22%). Airlines (+6%) are likely to slump until mid-year. Beware of destination parks (-4%), some of which are couponing for visitors who may never return.

  16. CONSUMER ELECTRONICS ($3.7B)
    • Although home entertainment (-4%) is approaching saturation, printing will be up one-third as sector revenues rise by less than 3% from 2001.

    • Players and receivers (+6%) such as DVDs, presently at one-tenth penetration, will begin to excite the new stay-at-home consumer.

    • Personal computers (+1%) and peripherals (-15%) will be hard sells with most printing at the retailer level.

    • Toys and games (-6%) will continue to decline as consumer income allocation moves toward higher values.

    HOT TIP: DVDs are becoming more popular, which means POP, packaging and advertising for this medium should rise. High-definition television (HDTV) should be on hold for another year, despite mandatory conversions to digital signals by 2006 (when broadcast will, of course, be obsolete). In the unlikely event that economic expansion exceeds the forecasts, expect new products and renewed print media demands in Q3.

  17. LEISURE ACTIVITY ($3.7B)
    • Print is blooming in horticulture ($27B; +8%), with litho seed envelopes, instructions, marking products and packaging totalling $500M.

    • Music and art, not estimated, are showing remarkable resurgence and are worth a sales effort. If a trend develops, the printing potential could be $1B more than the total of $3.5B predicted for the entire sector.

    • Not so hot: 0% growth is forecast for sporting goods as well as gyms and clubs. Wheelgoods (+2%) and fitness equipment (<1%) aren't much better.

  18. HEALTH CARE ($3.7B)

    Spending on printing will be an anemic $3.7B. This is less than half the level of five years ago.

    • Health insurance (+5%) will account for more than half the sector's printing as outdoor, newspaper-insert, direct mail and mall-intercept collateral seek an audience.

    • Hospitals and practices (+2%) will not be significant buyers, except for small-job shops, forms distributors and quick printers.

  19. ENERGY ($3.7B)

    Intense consolidation in electric and natural-gas generation/distribution (+27%) is under way in anticipation of state-to-state deregulation, even after a notable failure in California. Name and logo changes will bring big orders to screen, digital, miniweb and envelope producers.

    Petroleum (+38%) at the pump will exceed last year's rate of increase as the U.S. pursues the war on terrorism. Printing should account for $3.7B.

  20. ENTERTAINMENT ($3.7B)
    • Out-of-home amusements (-17%) will be the biggest buyer at $1.1B, using outdoor and other large-format litho, screen and digital print to lure people back to destination parks and local attractions.

    • Motion pictures (+15%) will use more POP and outdoor media than ever, as delayed releases face unprecedented competition.

    • Live performances (-9%) will rebound — patrons will buy programs, souvenirs and advertising at better than last year's $300M.

    • Recordings, sales and rentals (-3%) will package and print at $900M, though Internet downloading will have a big impact, and eventually take 50% or more of this category. The top 44 companies are less than 40% of the industry, but buy more than 50% of the printing.

  21. FOOD SERVICE ($2.7B)
    • Institutional foodservice (+9%) faces airline and cruise industry declines.

    • Fast food's (+4%) traffic-building coupons and contests should benefit half- and narrow-web printers.

    • Full-service restaurants and clubs (+2%) will order sheetfed free-standing inserts and new themed materials to woo consumers who are eating out less often.

    HOT TIP: More venues will close than open in 2002, which means a 5% to 7% decline in overall printing to $2.7B. Salespeople should target the 60 chains that account for most of the market.

  22. HIGHER EDUCATION ($2.5B)

    Most of higher education's $2.5B in print will be spent on development (+13%) and athletics (+23%). Note that 78 universities account for three-fourths of this demand.

    HOT TIP: Catalog and direct-mail pages and counts will continue to diminish as applications exceed placements. Beware of small colleges, many of which are in danger of closing.

  23. BUSINESS SERVICES ($2.4B)

    Workforce/human-resource services (+3%) will buy direct-mail and collateral print as outsourcing grows. Ten firms share half the field and most of the $1B in category print. Consulting (+5%) and security (+23%) will soon follow with at least this level of order-making.

  24. GOVERNMENT (<$2.2B)

    The federal government now finds itself in the sign, symbol and ID business. Digital, screen and litho work for the Dept. of Defense, Homeland Security and other federal agencies charged with defense and public safety should bill more than $500M. Tax shortfalls will bring deficits for federal and many state governments, but informational printing will surpass $2.2B, the second biggest year for our industry.

  25. LOGISTICS/TRANSPORT ($2.2B)

    Work-in-process may be spread among more locations, complicating supply-chain management and requiring secure command and documentation procedures that will be printing-intensive.

    • Trucking (+15%) may be re-regulated, but the more than 600 national carriers will ultimately consolidate. Fleet graphics by screen and digital printers may exceed $500M, and promotional materials and mail-outs should provide well-distributed sheetfed work in the Midwest, where most firms are headquartered.

    • Package delivery (+9%) will slow in growth as heightened security measures encumber the process. The Big Three in this segment, however, will become very profitable and more market-driven in advertising and carrier materials.

    • Warehousing/fulfilment (+11%) in tiers two and three, the independent portion of this industry, will become more sophisticated and integrated. Some are, or will become, on-demand printers with in-bound links that will increasingly preclude outsourced or supplied printing. Overall, this sector will buy more than $1.5B in sheetfed, business forms and converted products in the short term, and much more in the future.

The full text of “Hot Markets for 2002,” a 176-page report, may be ordered from the Printing Brokerage/Buyers Assn. International Inc. (PB/BA) (Palm Beach, FL). For more information, call (866) 586-9391 or e-mail vince@pbbai.net.

2002: TRIED AND TRUE SECTORS

RANK/CATEGORY

SIZE*

GROWTH RATE

% TO PRINTING

PRINT POTENTIAL*

1

PUBLISHING

$92

4.5%

17.3%

$15.9

2

BANKING/INSURANCE

2,515

28.9

0.5

13.1

3

COMPUTER SOFTWARE

287

7.8

4.4

12.6

4

TELECOM

792

-6.1

1.4

11.1

5

AUTOMOTIVE

1,697

9.3

<0.5

8.2

6

REAL ESTATE

1,285

10.3

0.6

>8

7

BEVERAGES

293

5.4

2.7

8

8

PACKAGED FOODS

601

11

>1.3

7.9

9

MEDICAL PRODUCTS/PHARMACEUTICALS

223

26.7

3.5

7.9

10

INVESTMENT/BROKERAGE

626

4.5

1.2

7.6

11

FASHION

388

6.3

1.8

7

12

HOME IMPROVEMENTS

523

16.2

1.3

7

13

DISCOUNT RETAIL

685

16.1

1

6.7

14

PERSONAL CARE

222

5.7

2.2

4.9

15

TRAVEL/HOSPITALITY

590

-6.4

0.7

3.9

16

CONSUMER ELECTRONICS

756

-1.7

<0.5

3.7

17

LEISURE ACTIVITY

165

2.5

2.2

3.7

18

HEALTH CARE

1,665

4.3

0.2

3.7

19

ENERGY

2,614

32

>0.1

3.7

20

ENTERTAINMENT

607

-7.8

0.6

3.6

21

FOOD SERVICE

495

2.7

>0.5

2.7

22

HIGHER EDUCATION

83

7.8

3

2.5

23

BUSINESS SERVICES

225

13.5

1.1

2.4

24

GOVERNMENT

N/A

.0

<0.1

>2.2

25

LOGISTICS/TRANSPORT

849

8.2

<0.3

2.2

TOTALS/AVERAGES

$18,278*

0.5%

<0.9%

$160.2*

*Figures in billions
compiled by PB/BA International Inc.

OFF THE LIST

Charity and religion are barely off the list for 2002. It's unlikely, however, that the present rate of giving can continue. Indeed, offerings had declined by at least 5% before Sept. 11, because big givers of 2000 like Ted Turner ($10B), Gordon Moore ($5B) and scores of other media and high-tech executives and corporations backed off from a record $400B in philanthropy.

Religion (+6%) will continue as the largest beneficiary as people return to faith. Environment (-30%), by contrast, will be the smallest recipient. Direct-mail and fundraising collateral printing for the entire category is estimated at $2.1B (+ 5%) as fewer contributions are chased.

Tobacco is also off the list. The so-called settlements which were ordered for printing and media-intensive education are apparently being diverted to pork-barrel projects.