2015 Hot Print Markets Analysis: Target Verticals That Fit Your ‘Sweet Spot’ February 28 2015
We ran across this article in Printing Impressions (piworld.com), and we thought it would be helpful information for our distributors and resellers who are looking for niche markets with increasing opportunities for printing business.
This year is a turning point for print with a slight increase in nominal revenues to US$196B (+<2 percent). Low interest rates and commodity prices from an artificially high dollar will appear to stimulate the entire economy before the reality of global imbalances between levels of debt, equities and commodities carry us into the next downturn and something not experienced in 70 years: a currency re-set. Print managements should concentrate in sectors that will be least impacted, and again broaden offerings with multi-channel content and distribution, advocating print as a large and essential part of the mix.
Packaged Foods ($1.233T, +5 percent; with $17.4B to print, +2 percent) will slim down over-extended “brand-widths.” Fewer offerings and less shelf space will disappoint late arrivals to this slowing down, No. 1 buyer of both print packaging and advertising materials. The only segments fattening up are fresh packaged (+8 percent) and pet foods (+7 percent). Roll flexo will be appetizing for variable-shrink, portion-control, aseptic, water-soluble and even edible packaging, while static stacked litho labels and cartons go stale. Increasingly, foreign producers are locating here bringing exotic new-category brands. These will “offset” attritions among the traditional food firms. Digitally-produced containers with local personalization, anti-tampering features and in-line formation will be practical and cost-effective for premium products in upscale markets. Nestlé Co. US (+14 percent) is best positioned in this sector.
Overlapping are No. 8 Beverages ($488B, -3 percent; with $10.5B to print, 0 percent) and No. 11 Food Service ($910B, +6 percent; with $7.0B to print, +13 percent). Drinks are leaking across all categories except teas and coffees (+4 percent). Starbucks (+16 percent) and Keurig Green Mountain (+14 percent) alone will perk up print at nearly US$0.5B during 2015. Mainstreamdistilled/fermented beverages (0 percent) are sobering to a decline in per-capita consumption to less than 2 gal./year. Oregon is the big 1.32-times exception, thanks to its largest-in-the-United States concentration of micro-breweries.
The so-called Big-Beer-3 are aggressively swigging up “craft” brands among the 2,800 independents whose local sourcing of labels, cartons, closures and promotional items will gradually tap out.
Pepsico (+12 percent) is best positioned to re-carbonate the soft drinks (-2 percent) segment with mid-to-low-calorie platforms in its juice and water brands, and by introducing more craft sodas and protein-infused beverages. Coca-Cola (-4 percent) is losing the most fizz as carelessly acquired drink brands go flat. Therefore, Coke’s regional bottlers will be taking control of brand and promotion allocations to the benefit of nearby printers with large-format litho, digital, screen and diecutting/assembly. Red Bull (+9 percent), with 1/50th of the beverage space, will continue as the largest buyer of everywhere-held, event-related merchandise and signage.
FDA anti-obesity rules, part of Obamacare, will require most of the one million eating places to provide calorie and additional nutrition information on menus, menu boards, foods on display, take-away circulars, drive-through signage, etc., before Dec. 15, 2015. Every printer can wait-on this sector, especially full-serve dining, taverns and clubs (+11 percent) as all digest the 395-page (yes, no typo) document. Get a copy!
In the fast foods/casual dining (+5 percent) category, McDonald’s (-5 percent) and others will pare back the number of standard items, but offer more customization for local tastes. Swallowing the Chipotle (+18 percent) model for fresh food quality, Mickey D’s 22 regional managers will be more autonomous in advertising decisions as well—tasty for smaller situated shops. The combo of Tim Hortons (+10 percent) and Burger King (+3 percent), after regulatory approvals, will brew, bake and fry up $0.1B in heatset web FSIs, in-store consumables and OOH signage, all of which will be co-branded.
No. 2 Medical/Pharma ($539B, +7 percent; with $15.5B to print, +4 percent) will return to vigor, while No. 7-ranked Health Providers ($3.545T, +<4 percent; with $10.6B to print, +4 percent) continue to suffer from regulatory malaise. Tamper-proof paper packaging will be the cure for pharma (+6 percent), long criticized for non-recoverable packaging. As no big pharma company grew in the last two years, 2015 is the recovery. Pfizer (+3 percent) will be buying pieces of competitors instead of selling parts of itself, and return—as all in the category must—to developing new drugs. Best positioned for print will be Glaxo Smithkline (+12 percent) as it surpasses Johnson & Johnson (+6 percent) in over-the-counter (OTC) products.
Most profound in healthcare is 3D printing, for which we as an industry must set up practice or otherwise perish. Ordered deposits of synthetic substrates and specific function inks are layered or weaved in-and-out of plane, much like a spider lays silk to create its web. Human and animal parts replacement will be the new medicine, eventually replacing chemical palliatives. Print, in this evolution, will rise to life though, to many, will fall on dead ears!
A record number of hospitals (+4 percent) will be merged into the largest 75 groups, which already hold a 1/3rd share. Community Health Systems (+22 percent) will integrate over 100 facilities in 2015, followed by HCA (+7 percent), UHS (+5 percent) and Tenet (+8 percent,) with dozens more. Name changes mean wellness for all graphics from scrips to signs.
No. 17 Personal Care ($433B, +6 percent; with $5.7B to print, +7 percent) is long overdue for a makeover that will be pretty for print. Procter & Gamble (0 percent) will shed dozens of slow- or no-growth brands in color cosmetics, hair and skincare and fragrances (+6 percent). Coty (-2 percent), Unilever (-5 percent) and other acquirers will re-brand these lines with changed packaging and promotional print. From vanity to virus scares, Reckitt Benckiser (+12 percent), along with Kimberly-Clark (+8 percent) and Henkel (+7 percent), will clean up in hygiene/sanitary/household products (+9 percent) while also re-packaging and upping in-store displays.
Many retail pharmacies (+16 percent) will soon offer testing, lab work and medication therapy in an accountable, preventative, managed care model. Prescription waiting and pick-up areas will look more like active healthcare facilities with, yes, all the print collateral associated with that. As Walgreen with Boots (+75 percent) surpasses CVS (+22 percent) as the world’s largest pharmacy, FSI advertising will increase in page counts and frequency. FDA trials, a print-intensive process, will transplant into pharmacies.
Folding one less “sig” to No. 5 is Publishing/Non-Newspaper ($74B, -1 percent; with $11.6B to print, -2 percent), which is “blocking” our few remaining domestic book manufacturers from survival margins even as the popular/trades (0 percent) cover prices rise and unit demand falls. John Wiley & Sons (0 percent), for example, has reduced its overall print CGS by 8 percent while its newest series, For Kids, sells at 10-times the cost of production! Theprofessional/education (-6 percent) segment, meanwhile, is at least increasing VDP in its pricing as it pushes “vanity” textbooks personalized for the instructor and reader.
Book and periodicals (-3 percent) publisher Time Inc. (-3 percent post-spin-off) has already reduced its printing by 7 percent as it struggles to leverage its 23 impressive brand titles to non-print products. No national magazine nor publisher will increase circulations in 2015, and probably beyond, because they no longer want physical output, even if their readers do.
Greetings/gift/partyware (+1 percent) will be most socially-expressed by American Greetings (+15 percent). Now privately held and divested of its display division, it will soon dominate both paper event goods and e-connections. Hallmark, 3-times larger in print, along with lesser long-time participants, are level in print as revenues and store-space collapse. Cards are out-priced to consumers.
On hold at No. 3 is Telecommunications ($1.483T, -1 percent; with $12.2B to print, +<2 percent). Three of the largest eight advertisers are in this no-place-to-go sector. Consolidations and realignments in mobile, other wireless (+7 percent) signal new brands and cross-promotions with telecom equipment (-6 percent). In-store, transit, FSIs and direct mail will stay level.
Cable/satellite (-6 percent) could be technologically displaced by 2018 with “cord-cutting” to streaming PC2TV. Directories (-5 percent) continue in decline as the few remaining players, like Dex SuperMedia (-14 percent) and Hibu Yellowbook (0 percent), struggle to broaden their ad and search offerings to also struggling local businesses; a crowded destination complicated by Google, Yelp, Groupon—and us! Nearly half of this sector is controlled by fewer than 30 companies; there is not much room for new entry.
Two other tech sectors are downward and sideways. No. 15 Computer-ware($811B, +<3percent; with $5.8B to print, -10 percent) and No. 20 Electronics($722B, -5 percent; with $4.6B to print, +2 percent) are respectively in the cloud and on pause in print. Microsoft (+8 percent) and other software introductions are more than a year away, and ad spending will be minimal. Electronics retail FSIs and in-store graphics will remain level overall.
Shrinking in size Best Buy (-11 percent) will revamp many of its stores, perhaps sharing its space with another complementary retailer. Think Target. Radio Shack (-22 percent), once a major catalog direct mailer, may be the next of many chains to fold as online retail overtakes bricks-and-mortar.
Banking/Insurance ($4.559T, +9 percent; with $10.9B to print, -6 percent) will be in the red with print at No. 6, as Investment/Brokerage ($1.285T, +3 percent; with $4.9B to print, -6 percent) at No. 19 no longer is promoting to individual investors. Commercial banking (+5 percent) will close more branches in over-banked areas, with the only print opportunities among the regionals. Twenty or more will merge with name changes, great for screen signage and litho direct mail and inserts.
Capital One (+4 percent) will continue as the biggest VDP mailer with an investment that’s obviously working. Insurance and investment banking print will be mostly conventional static newsletters, mostly digitally-run offering circulars and some narrow web and sheetfed work. Security printing, covered later here, will offer high returns.
Durable goods sector print will build with No. 4 Real Estate ($2.161T, +5 percent; with $11.7B to print, +11 percent). Rentals (+8 percent) are opening up for open web as home ownership declines to under two-thirds—the lowest proportion since the 1930s. New/resale residential housing (0 percent) is in the cellar and won’t hit 2 million units, a benchmark.
The causes of stringent lending and stagnant job growth will force realtors, builders and mortgagers (+12 percent) to widen the circulations of buyer’s guides, newspaper inserts, signage and brochures. Commercial real estate (-4 percent) is overbuilt in office space, warehouses and, worst, retail—all good for view books, high-end magazine inserts, large-format storefront/building wraps and, of course, “For Rent” signs.
No. 10 Automotive ($2.195T, +5 percent; with $8.2B to print, +1 percent) is steering toward 16.7 million new cars and trucks (+7 percent) in 2015 because manufacturers missed last year’s target and the timing of the replacement cycle. The average age of U.S. vehicles on the road is 11 years, a record that Carmax (+10 percent) and other mega-dealers are exploiting with more used vehicle (+4 percent) stores and lots. While sheet and heatset web work is stalling to online advertising, coldset is curing up with local FSI and shopper publications, as are AutoZone (+23 percent) and other parts and repairs (+16 percent) retailers.
The biggest category of advertisers are auto insurers and finance (+6 percent). Progressive (+9 percent) leads in print with VDP direct mail, out-of-home displays and vehicle wraps. Allstate (+6 percent) is out to regain lost market share as dozens of companies drive into this category.
The third durables sector is No. 16 Home Improvements ($820B, +3 percent; with $5.8B to print, +6 percent). Ace Hardware (+9 percent) will gradually co-label its 3,000 U.S. member stores and 252 competitor conversions as HouseMart. VDP self-mailers with loaded “patronage dividend” cards, plus in-store remodeling graphics are good signs.
Restoration Hardware (+30 percent), built since 1979 by, and continuing with, the most printed catalogs in this sector, is on a new move. It is buying large historic mansions to house up to 62 galleries that correspond with the company’s RH editions. In the long-washed-up home appliances (0 percent) segment, the Electrolux purchase of GE Appliances will bring re-branding and OEM work. The sector, overall, will increase FSIs and in-store graphics.
The “discretionary” or non-durable goods and services economy consists of six sectors.
Sailing up one port to No. 9 is Travel/Hospitality ($918B, +4 percent; with $8.3B to print, +11 percent). Twenty-five cruise lines (+2 percent) will buy 1/4th of sector print. The largest, with eight global brands, is Carnival (+5 percent), which will re-dedicate six of its 101 ships for extended, 10- to 14-day leisure cruises this coming autumn. Heatset web rack brochures, window and in-store signage, direct mail and on-board graphics will float this and other programs.Airlines (+6 percent) and hotels/resorts (+7 percent) fly with print-intensive loyalty program cards, statements and incentive direct mail. Both categories will have record revenues in 2015-16.
Dressing down one size to No. 12 will be Fashion ($595B, -3 percent; with $6.9B to print, -3 percent). The sparkling exception is jewelry (+9 percent). Signet (+54 percent with the acquisition of Zale) will own the most stores, store names and designer lines. Tiffany’s (+10 percent) is taking the cue and mix shifting to high-margin designer fashion jewelry.
Clothing, footwear and intimate/accessories (-3 percent) will see more store closings and bankruptcies as consumers walk away from fashion. Online shopping is unzipping catalogs and direct mail—for the moment. After the present shakeout, that may reverse. Gap (+6 percent) and Macy’s (-2 percent) will continue in vogue as the largest print buyers in the sector.
Entertainment ($918B, +1 percent; with $6.7B to print, +11 percent) jumps two places to No. 13 while Leisure Activity ($191B, -2 percent; with $3.8B to print, +3 percent) remains lazy at No. 22. Toys and games (+2 percent) are winding up after a short slide. ToysRUs (+3 percent) plans to add 90 stores to its present 1,600. Most will be located outside the United States, but with centralized marketing. Signage and ad content management for in-country brokered FSIs should be print4Us.
With acquisitions and best-selling toys, Hasbro (+22 percent) may overtake Mattel (-2 percent). Hasbro is also rolling out “Super Awesome Me,” where consumers scan their faces in stores, or text “selfies” to its supplier. Custom figures are 3D printed and shipped—a new business model for our medium to embrace.
Outdoor recreation (+5 percent) is fresh air for catalog and retail outfitters. Cabela’s (+12 percent) will add 19 stores to its 64 present megastores. L.L.Bean (+22 percent) lumberjack-chic duck boots and other rugged wear are so popular that orders from last Christmas took months to fulfill. And all made in the USA.
Live concerts/performances (+8 percent) are coming back off double-digit growth, as are motion pictures (+6 percent). At-venue and in-theater displays will be bigger, and stands will offer more printed merchandise.
Related, but busting down six to No. 18 is Gaming/Wagering ($506B, -14 percent; with $<5.0B to print, -14 percent). State/province lotteries (0 percent) will bet big on multi-jurisdictional draw games with cross-media print-rich, broadcast and online components. The first, “Monopoly Millionaires’ Club,” just launched in 23 states, continues to expand. Scratch-off games should continue winning for print, placed and showed by litho and screen promotional signage. Wager that governments will de-criminalize betting pools and fixed-odds sports gaming, and so tax these “sins” by muscling into the action. Casinos/on-/off-track betting (-24 percent) will close facilities as players cut their losses. So-called “racinos” will be legal in most states (10 at YE 2014); a newer segment with CRM direct mail and on/near-site digital signage.
Best positioned is lottery printer GTech (+49 percent), as it vertically integrates slot-machine maker IGT, and mobile play provider Probability plc. It will be firmly in the global game of licensing content and then sub-licensing distribution to its clients, adding impressive range and value to its output.
Up two shelves to No. 14 is Discount Retail ($1.568T, +6 percent; with $6.3B to print, +5 percent). Following a year of flat same-store sales, the big-boxes will invest a record amount in print: FSIs, direct mail and in-store graphics that will be intended to both emulate and displace mid and upscale retail categories, particularly in fashion and food. Target, Sears, K-mart and others plan to close hundreds of under-performing stores, opening share gain opportunities for the other, healthier players.
No. 21 Security/Protection ($270B, +18 percent; with $4.6B to print, +2 percent) will be the fastest growing sector as threats to life, property and information sharply increase. Data security/integrity (+25 percent) is ubiquitous and unseen, while personal/product safety (+15 percent) is specific and visual. Physical prevention and remedy screams print, though most in our medium are alarmingly inexpert in available and developable applications.
ID theft, home invasion, document counterfeiting and the like require task-specific, multi-film, multi-substrate passes, closures, seals, wraps, labels, voids and more. Honeywell (+9 percent), 3M (+6 percent), and smart flexo, screen and digital, are best positioned across all tangible segments of this soon to be “exploding” sector.
Logistics/Freight ($801B, +<7 percent; with $3.7B to print, -3 percent) remains No. 23. The U.S. Postal Service (+2 percent) will continue as a billion dollar print buyer, and deliver nearly 1/3rd of everything we print. Postage stamps, roll labels, money orders, signage and pre-printed package components will increase or level by region. Printers should take advantage of book rates, Every Door Direct Mail (EDDM), Picture Permit Imprint Indicia and cross-media QRCs and AR to post more customer value. FedEx (+9 percent) and UPS (+6 percent) will increasingly benefit from double-digit online sales growth with “free” shipping, but print spends on forms and envelopes will drop. Also ominous is the quiet fact that both carriers are acquiring printers large and small, and are among the biggest brokers and financers of our medium.
Twenty-five companies, including the USPS and Canada Post, will handle more than 9/10th of all correspondence and freight. There are over 2,700 lesser participants, mostly regional truckers, warehouses, forwarders and local courier services. The best offerings are vehicle wraps, labels and, yes, multi-part forms.
Unchanged at No. 24 is Government/Federal and State ($6.696T, +<4 percent; with $1.9B to print, -5 percent). While distributed digital print flourishes in every bureaucracy, commercial print procurement is folding. The number of government bids at all levels is alarmingly decreasing, and the conditions and expectations are worsening. The only upsides will be facilities management where we take over in-plants from incompetent government “workers,” and privatization where we assume the rights of publication and sale of forms, manuals and other print.
Maintaining a bare overall grade at No. 25 is Higher Education ($191B, +<4 percent; with $1.7B to print, +<8 percent). As tuitions in traditional campus-based, nonprofit and state-supported colleges and universities rise, admissions are declining. Don’t they teach economics? Print demand for development is also falling. Some institutions, while deriding alternative and proprietary education (+9 percent) will condescend to their marketing methods as their share exceeds 1/4th of sector revenues.
Look for more bus and subway cards and wraps, VDP direct mail, event sponsorship signage and promo products, and ROP/FSIs in local print media. Apollo (+5 percent), the largest for-profit operator with more than 300,000 students across seven countries, expends 1/3rd of its revenues on selling!
Inclusively, the HM 25 will account for more than 96 percent of total print. Run your share data by each vertical to see how it compares. Then, become an expert provider for no more than four that make the most sense in your product/market sweet spot verticals, rather than be a commodity bidder in a horizontal position. Market “hot” going forward to 2016 and be around for the years after the commodity sellers weed out.