HOT MARKETS FOR 2006 — NEW YEAR CELEBRATIONS
Ready to roll, presses in 2006 will be driven two-thirds by “now-or-never” consumer spending and first-in-history “wealth effect” redemptions of real estate. Previously sidelined intergenerational wealth, plus inbound repatriation of a more than $800 billion trade deficit, will push gross domestic product (GDP) growth to more than 6.5 percent, versus 3.8 percent growth in 2005 and 4.4 percent in 2004.
A whopping $13.1 trillion should be the unprecedented GDP! More than one-half of both the consumer spend and the trade deficit proceed will likely be related to real estate (HM ‘06 Number 4) which, arguably, is not real product growth, but rather a hedge disguised as GDP. Print is blind to the distinction, so hold on tight.
We’re in for 5 percent or greater sales growth, and a return to gross margins in the 30 to 35 percent range. This is if we follow the “Hot Markets” road and confine sales efforts to very specific sector opportunities. There is urgency because a mid-cycle slowdown looms in ‘07 when the economic stimuli of recent natural disasters fade, and home equity lines of credit (HELOCs) peak at 4 percent of GDP. The real estate bubble will finally burst under the weight of a 1.3:1 personal debt/income ratio.
Ranked Number 1 is publishing/non-newspaper ($109 billion, +6 percent; with $14.2 billion to print, +2 percent). Professional and educational books ($3.6 billion to print, +4 percent) lead the category. Juvenile, adult trades, CDI and religious ($2.6 billion to print, +6 percent) are growing with blockbuster books and something new: adult picture books—”a union of the simple pleasures of reading and art.”
Harry Makes His Mark
After a year of record runs, led by the 13.5 million first printing for the sixth Harry Potter book (265 million books worldwide to date), the juvenile segment will likely drop back. Periodicals ($6 billion to print, -4 percent) will recede following an ad-page spike in ‘05.
Other non-traditional ($2 billion to print, +0 percent) are foreign language, specific-culture publications, many of which are printed offshore but could and should be sourced here.
Banking/insurance ($2.84 trillion, +7 percent; with $14.2 billion to print, +5 percent) is ranked Number 2. Commercial banking ($11.4 billion to print, +6 percent) will be rebuilding storm-destroyed banks, and changing names as a spate of acquisitions, crossovers and foreign takeovers deposit signage, check logos and some one-third of bank interiors into personalized digital communication, signage and onto paper payment documents.
Direct mail for charge card services in this segment will exceed $1.4 billion. Property/casualty insurers ($1.8 billion to print, -14 percent) need premium growth as disaster claims devastate reserves, but will try to buy on-the-cheap. Life insurance ($2 billion to print, +17 percent) is an emerging opportunity for digital and conventional direct mail.
The Number 3 customer continues to be medical products/pharmaceuticals ($362 billion, +7 percent; with $12.3 billion to print, +8 percent). Pharmaceuticals and wellness buys ($8.3 billion to print, +17 percent) are returning from non-print media. ROP and bind-in placements, P-O-P and packaging will be financed with vastly increased large-scale government purchases for “pandemic” vaccines.
The proliferation of generics to more than a 15 percent market share, with 25 percent annual growth, is the major threat to branded drugs, and is an additional opportunity for package printers. New year settlements of class-action lawsuits against the producers of pain relievers will include prescriptive consumer print media for Merck, Pfizer and others.
Expect new packaging and promotions with “black box” warnings. Drug research pipelines are again filling, along with FDA test-related advertising and collateral. Medical products ($3.2 billion to print, +1 percent) and biotechnology ($0.8 billion to print, +33 percent) are surging.
Related at Number 12 is healthcare ($2.01 trillion, +Categories to Remember
Memory and storage ($2.8 billion to print, +7 percent) will continue to heat up. Network and mainframe computing ($2 billion to print, +10 percent) is building, but hosting ($1.5 billion to print, +0 percent) is hanging. Some printers will partner with Google or another search engine in reciprocal promotion and ad programs.
Number 6 telecommunications ($989 billion, +5 percent; with $10.1 billion in print, +3 percent) is again connecting. Wireless, including equipment ($221 billion, +20 percent), will demand $2.4 billion in P-O-P and support collateral printing. Government auctions of radio spectrum frequencies and municipal airspace will accelerate Wi-Fi and Wi-Max. Smartphone convergence devices will ring up outdoor/P-O-P print with features that connect users visually to an advertiser.
New customers will be sideband lessees (for highway sensor networks, etc.) and satellite providers. Directories ($3.2 billion to print, +2 percent) are growing offshore and among non-telcos like YellGroup. Telecom equipment ($0.4 billion to print, +4 percent) is flat except for network providers like Nortel. Cable, satellite ($2.1 billion to print, +4 percent) will increase direct mail, publication inserts and outdoor.
Packaged foods ($649 billion, +5 percent; with $8.7 billion to print, +3 percent) wraps Number 7. Pet foods ($0.2 billion to print, +23 percent) for more than 360 million non-human consumers, and fresh packaged products ($3.2 billion to print, +8 percent) are most appetizing for flexo and rotary letterpress shops. Dry foods, snacks, confections and baked goods ($3.3 billion to print, +8 percent) will increase promotional spends and re-branding as consumption wanes. Another $3.1 billion in print will be ingested in closures, litho labels, folding cartons, coupons, FSIs and in-store displays.
Consumers are, however, drinking again. Beverages ($329 billion, +7 percent; with nearly $8.7 billion to print, +5 percent) are bubbling at Number 8. “De gran cru” are wines/spirits ($1 billion to print, +48 percent), which will pop P-O-P, labels and FSIs. Coffees and other prepared drinks ($2.8 billion to print, +7 percent), with new offerings in nutritional soups and drinks, will sip up sanitary paper/converting, coupons and signage.
Beers/malts will tap $2.5 billion in packaging and promotional print. Soft drinks ($39 billion, +5 percent), dairy ($32 billion, -8 percent) and waters/juices ($54 billion, +5 percent) will pour more than $2.4 billion into re-branding and alternative aseptic packaging. Print will turn the faucet onto private water, the successor to municipal delivery, as the next privatization commences.
Food service ($614 billion, +11 percent; with $4.1 billion to print, +5 percent), closely related, is Number 21. The revamping of fast food ($102 billion, +9 percent) outlets is accelerating, with Wi-Fi zones and other amenities. McCafe, a McDonald’s spinoff, will build 850 coffee shops. New signage, interiors and menus, plus couponing and games, could top $1.5 billion in litho, screen and wide-format digital printing. Full-service restaurants ($374 billion, +4 percent) are under consumer spending pressure.
Taverns and clubs and institutional food service will be unchanged at $0.6 billion to print; no new demanders. Even Sysco’s revenues are down to $32 billion, -2 percent.
Stalling to Number 9 is automotive ($1.59 trillion, -6 percent; with $8.6 billion to print, +2 percent). Only finance/insurance ($2 billion in print, +5 percent) is not in reverse gear. However, a rush to a 35 percent market share for fuel-efficient, joint-production subcompacts (Ford/Fiat) and hybrids (GM/Toyota) will steer new brands: Aveo, Versa, Wave, Yaris.
New vehicles ($4.2 billion to print, +5 percent) will therefore drive high-end sheetfed offset, screen and wide-format digital work. Rentals/ leases and parts/repairs will need up to $1.7 billion in print, +4 percent, for re-branding with name and ownership changes. Look to local dealers for $0.5 billion in FSI and direct mail printing to move a glut of used vehicles.
Fashion ($449 billion, +5 percent; with $Plan to Get Smart
Smart labels and packaging for product/personal identification will change appearance and visual information, and provide instructions for home appliances and other consumer devices ($3.9 billion to print, +4 percent). Locks, safes and equipment ($3 billion to print, +0 percent) and data/document security ($0.9 billion to print, +4 percent) will open UV sheetfed, screen, hologram and micro/embed work for keyless entry cards, anti-counterfeiting/copying, theft warning/detection, and other visual, electronic and chemically reactive products.
Off will be uniformed security apparel and sign work since the Transportation Security Administration and its private derivatives are completely fitted out.
Home improvements ($907 billion, +25 percent; with $7.5 billion to print, +1 percent), with disaster demand, needs no new print, and falls to Number 14. Floors, walls and windows ($1.8 billion to print, +37 percent) are ratcheting up web and screen work along with home appliances ($2.1 billion to print, +11 percent), furniture ($0.8 billion to print, +24 percent), and tools and materials ($1.8 billion to print, +29 percent). Remodeling services ($1 billion, +25 percent) will demand sheetfed, duplicator and digital output.
Discount retail ($997 billion, +10 percent; with $5.7 billion to print, -25 percent) overlaps as a big-box sector at Number 16. Hypermarkets and clubs ($3.9 billion to print, +0 percent) are leveling with fewer new outlets and grand opening publicity. Instead, stores are remodeling and repositioning with in-store and brand extension screen and heatset web printing. Off-price stores/outlets ($3.4 billion to print, +7 percent) are taking over local merchants and will lead the sector in sales and locations.
Travel/hospitality will reserve Number 15 ($699 billion, +5 percent; with $5.6 billion to print, +2 percent). Record occupancy rates raises print demand in hotel and resort lodging ($3 billion to print, +20 percent) for sheetfed and half-web heatset plants. Close to home, weekend tourism is the new target, while cruise lines ($1.1 billion to print, +10 percent) make waves with the alternative of cheap sailing.
Loyalty programs, robust in personalization, are migrating from airlines ($0.9 billion to print, -11 percent) where advertising and utility printing (e.g., tickets and jackets) are crashing. Destination parks ($0.6 billion to print, +6 percent) are roller-coasting up as auto fuel hikes decrease travel distances. Outdoor, couponing, inserts and brochure print are looping.
Personal care ($302 billion, +15 percent; with $5.6 billion to print, +5 percent) is Number 17 for ‘06. Color cosmetics and toiletries ($2.8 billion to print, +7 percent), hair, skin, sun care ($1.1 billion to print, +21 percent) and fragrances ($0.5 billion to print, +15 percent) are attractive for in-store signage, swatches, scent strips and labels/ packaging.
Sanitary/hygiene, etc., ($1.1 billion to print, +21 percent) will consist of new-generation protection and hazmat removal products—the consequence of terror threats.
Entertainment ($646 billion, +1 percent; with $4.5 billion to print, +5 percent) will rise to Number 18, featuring motion pictures at ticket sales ($0.6 billion to print, +10 percent), which will become digital, dimensional and interactive in ‘06. Broadcast/premium cable/satellite will convert to digital cable, computer-to-tv and HDTV, enabling added services. Direct mail and subscriber inserts from major networks to minor podcasters should surpass $0.5 billion in print.
Live concerts, participant/spectator amusements ($2.4 billion to print, -4 percent) will drop some sheetfed work, even as costs of admission increase 3 to 5 percent. The coming attraction for recordings/sound and video ($0.3 billion to print, -5 percent) is product downloading with Netflix and TiVo, which will deliver entertainment online and on-demand.
Meanwhile, telecoms will roll out TV set-top boxes with streaming data from the search engines. Direct mail, outdoor and premium sales will scream. Toys and games ($0.5 billion to print, +2 percent) and video rentals/subscriptions ($0.1 billion to print, -7 percent) are moving oppositely. New non-exploitive games, including in hand-held DS format, will be print marketed to women, and could eventually double the $11 billion segment.
At Number 20 and Number 21, respectively, are leisure activity ($186 billion, +0 percent; with $4.5 billion to print, -6 percent) and consumer electronics ($689 billion, +1 percent; with $4.3 billion to print, +9 percent). Computers and peripherals ($1.5 billion to print, +10 percent) are now becoming central. Digital hubs, such as Apple iPods with video iTunes, will make available fee-based, commercial-free tv shows and countless additional content.
Home entertainment, receivers and players ($2.3 billion to print, +3 percent) will commence HDTV, tablet PC/tv and flat-panel screen promotion with heavy ROP and insert print, billboards and P-O-P. Sporting and wheel goods, recreational vehicles ($3.4 billion to print, +0 percent) and horticulture and hobbies ($0.7 billion to print, +6 percent) will cut back catalogs and increase outdoor and P-O-P.
Gambling/wagering ($447 billion, +8 percent; with $3.6 billion to print, -1 percent) is Number 22. State/provincial lotteries, exploiting recent Powerball-type big wins, will increase promo and imprintable roll product buys to over $2.2 billion. Casinos/wagering parlors ($1 billion to print, +13 percent) are rebuilding on the Gulf Coast and expanding into Pennsylvania, Illinois and other states.
On-track/off-track betting and other non-sanctioned gambling ($0.4 billion to print, +5 percent) is a game of chance books, bet slips, raffle tickets, bingo cards and other mostly imported print because U.S. shops are legally prevented from participation.
Higher education ($123 billion, +12 percent; with $>3 billion to print, +7 percent) graduates to Number 23 in the new year.
Academics, after failing Marketing 101, are finally getting it. Alternative private education ($0.8 billion to print, +21 percent) is taking share from traditional colleges and universities, and is out-spending in print and other media by a factor of three. Flunking is enrollment of foreign students. Homeland security impediments are forcing programs offshore, which means branding schools and American learning with multi-lingual print and distribution.
Tuition will be promoted by the Higher Education Act, which increases student loans by 30 percent. FSIs, catalogs and outdoor/transit advertising should surpass $1 billion. Athletics and cultural activities ($0.7 billion to print, +18 percent) will require posters, programs, signs, tickets and other mostly sheetfed and screen printing. Development ($0.5 billion, +12 percent) should mean robustly personalized direct mail work for digital and heatset web plants and lettershops.
Religion and charity ($358 billion, -2 percent; with $3 billion to print, +4 percent) is Number 24 and slowing from record-breaking 2005, which included a temporary 100 percent tax deduction for givers and unprecedented proceeds to natural disasters. Falling from grace for the first time is religion ($1.1 billion to print, -6 percent), but still blessing print with mostly cold web book, magazine, program and fund-raising packages.
Health/society benefit giving ($0.8 billion to print, -4 percent), especially at the community level, should aid small plant lettershop, sheetfed and digital printers. Every other category of giving will be chasing fewer donations, and so will require more fundraising print. Most desperate will be arts and culture (-21 percent) and the environment (-36 percent) which, together, may demand more than $0.6 billion of our medium.
At Number 25, government/federal and state ($4.242 trillion, +6 percent; with $2.9 billion to print, -20 percent) will fall off as work is unseated by downloads and privatization. Health and human services ($1.1 billion to print, -18 percent) and defense and homeland ($0.4 billion to print, -25 percent) will dominate GPO procurements.
State government ($1.1 billion to print, +0 percent) will continue reverse auctions and other techniques that violate statutes. Protest and prevail over these mendacious compromises of mandamus. Look it up first.
The foregoing 25 hottest marketplaces should exceed 63 percent of U.S. GDP and 93 percent of total printing revenues. Where’s energy? With $2.7 billion to print, -20 percent, it is Number 26, followed by Number 27-ranked business/professional services ($2.3 billion to print, +2 percent) and Number 28 aerospace/defense ($2 billion to print, +0 percent).
Managements should rank the relative presence of each demand sector within the geography of their plants and sales offices. This will be a guide for the proportional allocation of resources, and a more reliable enterprise forecast. Good marketing and better sales!
“Hot Markets” for 2006 is available as a 176-page document with graphs and exhibits. E-mail firstname.lastname@example.org, or call (866) 546-2005.
About the Author
Vincent Mallardi, C.M.C., is a well-known printing forecaster and presenter at major industry meetings. He has also been the author of “Hot Markets” for the past 26 years.
Vincent Mallardi, C.M.C., is a the chairman of the Printing Brokerage/Buyers Association International (PBBA) and is a Certified Management Consultant in the paper, printing and converting industries. He is also an adjunct professor in economics. Contact him via email at email@example.com