By Doug Fruscione, Director of Procurement & Estimating at W. A. Wilde
Like a bidding war at an auction house, the printing business has been undergoing a fairly silent, yet the biggest consolidation this industry has ever seen. In addition, there have been an unheard number of plant and company closures resulting in a shrinking of the industry. This has led to a unique environment for buyers like us and a shift in the industry that has always been dominated by small business.
To first understand the impact of this current trend, you must take into consideration that printing is not just a big business–it is the biggest. US domestic printing is an $83+ billion industry that tops the automakers in terms of size and the number of people it employs (1+ million). Sounds pretty outrageous until you stop to think about it. In a society that’s constantly in search of access to information and literally obsessed with record-keeping, it stands to reason that printing is ubiquitous. From new car manuals to tabloid newspapers to t-shirts to those little tags on mattresses, nearly every product calls on the printing industry somewhere along the line. Put in that light, the numbers don’t seem so far-fetched. So the big question is: if the printing industry is suddenly starting to be controlled by a small group of industry leaders and many of the 70,000 plants in the country are shutting down, what happens to principals such as market competition and market controls such as “supply and demand”. . . not to mention the people and personnel it effects?
In the last year alone, as the economy has struggled, the industry giants have been buying up large portions of the market through mergers and acquisitions. This has pushed out the middle part of the market and, at the same time, made it difficult for smaller shops that make up the largest percentage of the industry to compete. Huge print companies like RR Donnelly, Quad, and Quebecor have acquired other players like Cenveo and Bowne and have solidified their hold on the market. Even in our own backyard, six very prominent regional shops have succumbed to economic pressures. This is a result of the economic times, coupled with a reduction of work available and renewed competition by these large national companies. With everyone competing for a slice of a much smaller pie, it has become increasingly difficult for these smaller shops to storm the weather.
As the volume of work continues to shrink and the number of players competing continues to shrink, we as buyers are faced with a market place driven by issues such as risk aversion and longevity tied to heavy pricing pressures. The landscape for print companies is really changing. Former relationships are always in question these days, and price and fiscal viability have become the benchmarks by which these companies are measured. The good news is that those with solid portfolios and strong business practices seem to be rising to the top. There is no question that once things have found equilibrium that there will be more work going to fewer players and that we as buyers will have fewer choices, less competition driving the marketing, more pressure to use the big companies, and less influence.
So for an industry that has remained fairly unchanged for so long, the next few years will usher in an era of reinvention and realignment. I believe that companies that have a business strategy that can readjust, be nimble, and be reliable will rise to the top and may be in a position to challenge the goliaths on the block–others may soon find themselves on the auction block.
What do you think smaller firms need to do to survive and thrive in this market?