American Printer's mission is to be the most reliable and authoritative source of information on integrating tomorrow's technology with today's management.
Dec 1, 1998 12:00 AM
After the longest (91 months) and largest (+324 percent) expansion in history, the U.S. economy appears to be slowing down. However, as printing lags the 10 leading indicators by about 22 months, New Year demand will be about the same, but certainly not better, than in 1998.
Ten growth sectors will continue slowly upward and six counter-cyclical demanders will kick in. The remaining nine categories are cyclical groupings, some of which will top out before downturning, while others, such as printing, will lag into the new millennium.
The top category is the telecommunications sector, driven by breathless technology and a global demand to go with it.
Telecom equipment (+32 percent) and wireless services (+29 percent) are the hottest areas while, for sheer size and demand for printed direct mail, signage, publications and charge media, wire voice (+14 percent), long-distance carriers (+10 percent) and cable services (+13 percent) remain the best customers. New applications for the Internet in networking, retailing and on-demand services will add more than $2.5 billion to billings at prepress and graphic design shops. Expect more mergers and new corporate identity print and fulfillment. No printer can afford not to participate in this $13 billion-in-print telecom phenomenon.
Ranked No. 2 is non-newspaper publishing, which will benefit from federal and state surplus money going into education and libraries. The segments of university and professional (+23 percent), el-hi (+20 percent) and adult trades (+10 percent) will be the big beneficiaries. However, growth also is accelerating in CD-ROM CD/I (+39 percent), juvenile (+21 percent), religious (+20 percent) and so-called corporate or 'vanity' publishing (+15 percent).
The 'amazon'ian growth of online and mail-order book club sales will stack up manufacturing bookings to about $7 billion in 1999. On the downside, one-ninth of books will be produced offshore as a consequence of a strong U.S. dollar.
The periodical publishing segment (+13 percent) is increasing in net number and frequency of titles but press run lengths are decreasing with streamlined circulation. Smaller full web and perfecting sheet-fed printers are opening up to this demand, which should exceed $5 billion. Newsletters (+14 percent) and non-periodical publications are not cyclical and are growing modestly.
Computer software, shareware and networking is No. 3 with a sure boot to print sales at nearly $12 billion or nine percent of category revenues. Networking (+350 percent), essential to the World Wide Web (WWW), is the next generation of software. As connectivity between diverse platforms is the new imperative, resident software and storage is yielding to network interpreters and programs that will link not only people and workstations but also home appliances and every device that runs on electricity. Embedded software will be inside the likes of coffeemakers and water heaters.
Command and predictive software will be offered to activate thermostats and thermonuclear power plants, and the open-source free-software movement will learn economics after garnering market share. Connected publications printers will do well, as those in packaged software (+2 percent) will see the beginning of the end.
Besides downloading, software will be marketed in set-up boxes, pockets and other mini-formats requiring different packaging such as blistered packaging. The unseating of Microsoft Windows by the networkers will result in new entrants and the ascendance of Sun, Oracle, Linux and the writers of so-called scripted programs.
Progress in densewave wireless will accelerate development of new applications for more locations.
Mainframe computing architecture and custom software (+23 percent) is coming back thanks to the Internet and a quantum growth in capacity and computing speed. A resurgence in now-depressed overseas demand for personal computers will keep the installed software providers in black ink.
Finally, there will be a big spike in Y2K off-the-shelf upgrade and custom software in the final days of the current millennium. Print direct mail, outdoor, point-of-sale, Internet and ROP will count down the days, hours and minutes left before computers 'crash' at midnight 1999.
Motor vehicles, stalled by a major strike and collapse of foreign currencies in 1998, will need print to fuel lagging worldwide demand.
Overcapacity is prompting car and parts companies to merge, close plants and push sales of leftover vehicles. Print ad spending is forecast to $4 billion, divided between new models (-1 percent) and pre-owned (+9 percent) vehicles. With the roll-up of dealerships under national brand names, expect the emergence of private-label and individualized design-your-own vehicles.
Auto rentals and leases (+12 percent) and vehicle financing/insurance (+2 percent) will begin another round of shakeouts, and look to print for branding and market share values. As this industry is an oligopoly, sales opportunities are concentrated in favor of the well-acquainted. For those who know how to drive, there's $7 billion or more to be sold.
Ranked No. 5 is the beverages section, which thirsts for more promotional print-per-dollar than any other business. Waters/New Age (+39 percent), teas (+20 percent) and dairy drinks (+9 percent) are continuing intense POP, label, carton, outdoor, coupon and event programs from last year. Beers (+6 percent), soft drinks (-4 percent) and juices (+13 percent) will begin comebacks as overseas drinkers recover from parched economic times.
Wines and spirits (+2 percent) will continue in sales stupor but will pour out new products that should add sparkle to label, folding carton, large-format sheet-fed, screen print and mounting/ diecutting sales. In the No. 6 position will be banking/insurance, a sector effectively merged in the aftermath of deregulation and heretofore prohibited combinations. New IDs for over 30 megabanks and 6,000 locations will deposit record sales at screen printers and installers. As the new nationals and the super-regionals battle for market share, all print providers can bank on almost $7 billion in buys.
Insurance companies, for the first time, will compete with stock brokerages for securities sales; a rally for financial and narrow-web heatset printers. Community banks are at an all-time FDIC registration high, and property/casualty insurers will exceed $300 billion in premiums.
Packaged foods, ranked No. 7, are a mixed shopping bag. Consumption is declining in several categories, notably cereals (-9 percent) and canned goods (-8 percent). The severe 1998 cutbacks in couponing and other so-called below-the-line marketing, will reverse--a redemption for both the brands and the FSI full web printers. Flat supermarket traffic should prompt substantial increases in on-shelf, near-shelf and other POP for $3 billion in print at the checkout.
What used to be the healthiest sector for print--healthcare--is print anemic. Hospital closings and the effects of so-called managed care are driving demands for total print management programs. In fact, the fittest in our industry are checking in or forming alliances to garner most of the shrinking $6 billion in healthcare buys.
A remedy to the woes of healthcare is medical products/ pharmaceuticals, ranked No. 11 with $5.6 billion in print. Drugs and medications (+11 percent) are being released faster as a result of relaxed FDA testing requirements and more over-the-counter availability. Folding carton, roll label, miniature-folded insert and display printers will fill about three-quarters of sector demand. The balance should be to sheet-fed commercial shops in the localities of the leading firms.
This industry has regrouped with a few formidable multinational leaders, and entryis difficult for the inexperienced. However, robust merchandising by drugstore retailers in consolidation presents tremendous print opportunities for sign, screen and non-heatset web printers.
Closely related is No. 14 ranked personal care, which is growth led by haircare/skincare (+12 percent) and oral hygiene (+16 percent). Clean and healthy looks are hot while cosmetics and fragrances (-9 percent) are cooling down for the first time. Don't expect the new product launches of the past. Personal care marketers will be opting for extensions and licensing of existing labels.
Metal decorators and other packaging and POS producers will fare well if they're in with any of the top 25 firms that dominate this nearly $200 billion sector.
Fashion at No. 9 will be a riches-to-rags story going forward. Style and hemlines fall in a zipless economy. There will be a wrinkle in catalog print but a rise in transit and outdoor +/- la Calvin Klein.
More in vogue will be home improvements where consumers are investing heavily in do-it-yourself (+15 percent) materials and hardware, plus househo ld appliances (+28 percent). Furniture and fixtures (+9 percent) are not sitting well, but floor and wall coverings (+18 percent)--mostly printed--are going down and up in lockstep. Swatchbooks, dealer sales sheets, newspaper supplements and direct mail inserts should be $500 million above 1998 with major retailer co-op at record levels. As this sector is historically counter-cyclical, any recession may be very constructive.
Leisure activity products and consumer electronics follow in No. 12 and No. 13 rankings, stemming from growth in home improvements. Sporting goods (+12 percent), led by ab machines (+300 percent) and athletic footwear (+20 percent), is the strength segment. Horticulture is a $20 billion hobby now, bigger than boating, camping and recreational aircraft. In consumer electronics, digital video disk players and software, the iMAC computer and other soon-to-debut products will spark print growth by $1 billion.
Audio/video equipment (+11 percent) remains the biggest segment and printing user, followed by computers and peripherals (+20 percent). Both are constrained, however, by excess production and consumer fear of obsolescence. Expect rebate-related print in media, direct mail and in-store. Better play into the No. 17 ranked recorded and live entertainment sector, which is reinventing itself technically and in content. At-home appreciation of interactivity--beyond games--is bringing about recorded and Internet-download offerings from new providers, including music and cookbook publishers and engineering and architectural firms. Print packaging, labeling and inserts for recorded media will exceed $1.6 billion. Add retail promotional materials for a blockbuster $2.4 billion in print sales.
Ranked No. 15 is travel and hospitality, which will slow in growth but maintain demand for heatset web and sheet-fed color print, forms and screen to nearly $4 billion. Air travel and hotels, at record booking levels, will switch promotional emphasis to foreign markets. Cruiselines, on the other hand, will sail on with 'gray' marketing at home. 1999 will herald the first mega-cruiseships--floating cities that will be featured in print ads, posters, brochures and on onboard amenities. The sector (+37 percent) leaves other travel/hospitality in its wake.
Hotels and resorts (+9 percent) are increasing occupancy by reintroducing cost-effective road travel to Americans disillusioned with rising fares from air transportation (+4 percent). The same low petrol prices that ignited airline profits are fueling long-distance motoring for business and pleasure. Print is taking off in both segments as each promotes their respective capacities.
Left in the dust are intercity trains and buses (-7 percent), which are neither fast nor flexible. Alternative travel and lodging on riverboats and in timeshares, fantasy 'boot camps,' etc., is sheet-fed print intensive. Participant amusements (+14 percent) should rebound from the first drop (-18 percent) in attendance during 1998. Theme, amusement, nature, action and water parks need print outdoor and literature to turn travelers into their parking lots. Take a drive to find these roadside customers.
Ranked No. 16 is securities brokerage, which because of deregulation, will be a marketing battle for product and market share. Financial printers, who saw thousands of IPOs shelved in recent months, will find more clients chasing more money than ever. Banks and insurance companies, new to this activity, will be prime prospects for these and commercial print providers. There's $3 billion up for bid-and-ask in this most volatile time for a never-settled industry.
Hungry? Foodservice, ranked No. 18, is cooking up a $2.3 billion tab for menus, placemats, tents, tableware, signage, coupons and most anything else appetizing to more diners. Fast foods (+29 percent) will eat away business from more expensive sit-in restaurants (+3 percent). But since the oncoming millennium is sure to be festive, the nightclub, catering and entertainment portion of this business will be well fed.
Institutional foodservice (+2 percent), however, will be starved by declining demand from airline and industry cutbacks. The trend since 1995 has been for consumers to spend more dining out than dining in may reverse after 1999, and this overweight sector will begin to consolidate and trim down. Design and production opportunities will be plentiful during this extended, defensive and redefining period.
Ranked No. 19 is real estate, which began a later-than-expected recovery after 1998 interest rate cuts. Residential real estate (+14 percent) rose more on increased land than housing values, and the slower population and economic growth won't sustain this segment.
Commercial real estate (-1 percent), driven by the economy alone, will be flat to negative as workspace requirements decline due to automation and offsite workers. The elaborate sheet-fed work will also wane except in retailing where store openings exceed closings by over three times. Overall, real estate was a great customer category that's digging its way to the ground with only $2.3 billion in demand (-28 percent).
Another, but more positive, consequence of an economic slowdown is the resurgence of discount retailing, ranked No. 20. Attention K-Mart shoppers--they're back, along with Sam's Club, Cosco and the off-price, off-brand and off-skid counterparts to upscale boutiques and department stores. The cycle will surpass the previous 1993-1995 peak by 11/2 times. On press will be more shoppers, FSIs, coupons and other bulk quantity no-frills non-heatset work. Screen and digital signage to direct the masses through these cavernous warehouses will bring these two processes to record sales growth. Plastic cards and other membership and traffic-reinforcing appurtenances will provide many low-end print sales situations. This sector isn't high style.
A strangely counter-cyclical industry is chemicals/petroleum. When fuel, especially, is abundant, the marketplace booms--except for the refiners. Gasoline and oil (+37 percent) will pump up double-digit prices and profits following the lowest real-relative per capita demand and consumption in history. Expect much more in promotional spending to divert attention away from what's being charged. Premiums, flashy attendants and 'Fifties retro' types of merchandising may replace the person-in-the-cage, and there will be renewed pandering to the environment. Nonsense at the nozzle, yes, but a huge place for POP and giveaway print.
Inorganic chemicals (+30 percent) will compound product offerings that substitute for organic chemicals (+12 percent) that deplete the planet. Technical print, along with labeling and novel packaging will be substantial. So will more mandated compliance materials (and that's why printers love big government).
Speak of the devils, federal and state governments have money to spend on ink and paper. The surplus, which politicians sincerely believe they produced for the public, will be pork for print. Every municipality will spruce up with signage and digital big-art in a new form: camouflage. If an ugly structure can't be razed, erase it.
On a more elevated plane is higher education, ranked No. 22. Recruitment and endowment scored high, thanks in part to catalogs, direct mail, inserts and other descriptive and motivational print.
The same accumulation of capital is a godsend to organized religion and charity, ranked No. 24. Nearly $2 billion from the collection plate will go to printed matter for fundraising some $300 billion more in 1999.
Finally, there's gambling and wagering. From church bingo to Las Vegas casinos, loose change is changing hands, and one can only wager how much. While state-run lotteries, not counted here, are losing their draw, odds are there is or will be legal gaming in your neighborhood, or nearby river or Native American reservation. The aging U.S. population, and popularity of gambling among many immigrant groups, is ante-ing up the market. Gaming tickets and other paraphernalia, illegal to print here, will be legalized to the detriment of Canadian shops now providing them.
Meanwhile, there's very diverse sheet-fed collateral and screen utility print riding on this industry, and the jackpot could hit $1 billion.
Taking the Top 25 markets together, and subtracting out overlaps, the net economic share is about 84 percent of anticipated GNP. More important, the demand potentials are over 93 percent of our total industry projection.
Optimal allocation of sales resources, in a slowing economy, is no ideal--it's a necessity. Profiling each demand sector to its local geographical presence brings New Year confidence that the sectors will be served and the enterprise itself will be balanced.
So, make 1999 a 'ten.'