2014 Hot Markets: Packaging, Pharma Head List
This year (2014) will bring our industry back to 2005, but not sentimentally. Sales will decline 4 percent to the level of nine years ago, but smart printers chasing hot markets should experience positive growth. The losers will be lazy competitors who wait for a recovery that will not occur.
Instead, and better, is a paradigm shift where all we thought we knew is irrelevant and all we need to know is new. For at least some of us, this means providing multi-channel content and distribution, of course advocating print as a large and essential part of the mix. The only other option will be to exit or merge with other legacy printers; a well-underway loser strategy in the New Year.
Packaged Foods ($1.18T, +2 percent; with $17.0B to print, -4 percent) will continue to be the No. 1 buyer of both print packaging and advertising materials, but at a lesser total outlay. Because of higher costs of ingredients, the only place to save is through de-packaging and cutting back allowances to retailers.
FSIs will be worst hit, followed by plastics packagers. New designs in paperboard and thin films will utilize more cube space on retail shelves; taller containers; and more square ones including nested, stacked and printed-on-wrapper-only multi-packs. Litho carton and roll flexo providers will prevail, while litho jar labels, closures and metal decorated cans will recede—permanently.
Printed electronics on packages will replace "best before" notices, and the first intelligent fridges may alert shoppers on their smart phones what's running low, going bad or is needed to complement the meal possibilities on hand. Products that don't ask for a plate, spoon or a stove—mostly single-serve—will reduce food and energy waste. Multi-sensory elements on packages such as textures, sound, articulated movement, scents and hidden images will accompany local personalization: the high school football team on the Wheaties box, locally-grown tags on fresh foods, etc.
Supermarkets and other food retailers will commence the first major redesign of facilities in decades, reducing footprints, but dazzling the consumer with info-tainment rivaling Las Vegas. Near-pack, in-aisle, on-cart, end-aisle, on-shelf, dangle downs, near-field QR codes and augmented reality will engage as never possible before personal communication devices. Best performing segments will be pet foods (soon to be FDA regulated with new labeling), ready-to-eat, reusable-container single-packs and fresh foods minimally wrapped.
No. 6-ranked Beverages ($501B, 0 percent; with $10.5B to print, -3 percent) and No. 13-ranked Food Service ($863B, +4 percent; with $6.2B to print, +5 percent) will extensively re-package and re-brand to revive waning consumer thirst. SAB Miller and Pepsi are changing their graphics and container shapes; Sol's new beer label glows like the sun; Budweiser will be using digital location-based packaging; and a Japanese brewer is peeling-out origami!
Coca-Cola is testing snap-away cans that offer two servings. There are even "topless" beverage containers that double as cups. With all this fizz, POP/POS will "pop," as well as out-of-home print.
Nearly one million eat-in and take-out food service facilities are catering to overworked, time-strapped diners. As the Top 100 chains make up less than 20 percent, there's a big plateful of local print, especially if we combine print with social media engagement at the store level, and Web-based print management at the enterprise level. Food service products are tangible as is our medium. Print-intensive are sanitary packaging, take-home menus, gift/frequent diner cards, table tents/toppers, tray-liners, back-lits, coupons, and all forms of wall, floor, ceiling, parking lot and window graphics.
In economic recovery mode and moving to No. 2 will be Medical/Pharma ($502B, +6 percent; with $15.0B to print, +3 percent). Meanwhile No. 8-ranked Health Providers ($3.4T, + 4 percent; with $9.5B to print, 0 percent) remain on the operating table under the knife of the deceptively-named Affordable Care Act. Big pharma holds all the scrips and will not yield pricing in 37 percent of its global market. Rather, it will increase print-intensive, pull-through, patient-directed ad spending to bring that share up to 50 percent.
Concurrently, health insurance providers are, and will be, feverously heating up their digital in-plants as they notify, terminate and re-direct the least healthy to German-style krankenkassen "exchanges." VDP letter-format and carrier-mount cards will be on steroids.
Personal Care ($406B, +4 percent; with $5.3B to print, -11 percent) will slip to No. 18. Color cosmetics, hair and skin care have long been at saturation, and big names like Estée Lauder and Revlon are slashing ad budgets, but keeping in-store displays beautifully made-up. Avon now sells its catalogs to its reps while it will reduce the print spend by more than 1/3rd.
At retail, everyone is discounting and private labels are proliferating; the latter a small opportunity for label and carton plants. Pharmacies will be overwhelmed with prescriptions as a new, forcibly insured not-healthy portion of the population crawls or wheels its way through crowded aisles and around now-dangerous floor displays. Traffic-builder in-store signage, FSIs and other promo print will no longer be necessary; a killer prognosis for screen, large-format sheetfed and heatset web printers.
Publishing/Non-Newspaper ($75B, -4 percent; with $11.8B to print, 0 percent) at No. 4 is self-destructing as incompetent executives use new media as an excuse to scuttle print and pay themselves while their balance sheets shred to goodwill and intangibles. The Time Inc. spin-off and the sale of Forbes Media will show how little investors regard books and magazines even though global demand, especially for English-language print, is increasing. Only in the United States are titles, page revenues and circulation decreasing.
In professional/educational books (-6 percent) there's a tri-opoly (new word) that's herding educators and students into custom-content VSR and e-books by outrageously pricing static-bound versions or withdrawing them altogether. Oppositely, adult/children's trade titles are not being printed in sufficient quantities to be available anywhere except online, thus discouraging demand. Periodicals, trimmed in size, torn in page counts and cut in circulation, will be dumbing down content.
There are pockets of excitement, as in interactive publications, art books and prints, pop-ups, glow-in-the-dark, deluxe commemorative special editions with slipcases, 3D, faux paper fashion accessories and other high-value enhancements. Self-publishing, sold online and run digitally, provides high quality, very-short-run production of literary works, greeting cards, calendars, vanity wall coverings, photo books and most anything else. The marketplaces for these are less than 5 percent penetrated, so there's time to get in.
Ringing up to No. 3 is Telecommunications ($1.5T, +2 percent; with $12.0B to print, +5 percent). Sector growth is deceiving; some categories like mobile, other wireless (+43 percent) will be on an FSI, POP/POS and transit print binge while others, like directories, will continue downward at -22 percent.
Cable/satellite could be technologically displaced by 2016 as "cord-cutting" and migrations to streaming PC2TV. The cable industry will fight back with its "TV Everywhere" Wi-Fi for subscribers' movement, so there will be a lot of print in the fight for survival. Mobile apps and QR codes are also a "must provide" by smart printers (not an oxymoron), along with mobile site and SMS (short message service) management as essential complements in a cross-media interactive program.
Related, but crashing, are tech sectors, No. 14 Computer-ware ($790B, +4 percent; with $6.2B to print, -13 percent) and No. 20 Electronics ($761B, -4 percent; with $4.5B to print, 0 percent). Because most labeling and packaging are offshore, U.S. print demand is out-of-home and at retail locations. Apple will pursue lifestyles and loyalties while the other entrants tout price. Best Buy and other major outlets will maintain but not increase FSIs, bind-ins and in-store print; on hold or pause.
Banking/Insurance ($4.2T, +5 percent; with $11.6B to print, +4 percent) will withdraw to No. 5, as its financial relation Investment/Brokerage ($1.3T, +4 percent; with $5.2B to print, -6 percent) crashes to No. 19. These "institutions" are going where the big money is, and it's not in commercial banking. Retail branches will shrink into kiosks (screen and digital print-intensive), and mobile banking (+30 percent) will be widely promoted via POP/POS and out-of-home in cross-media campaigns.
Insurance and investment banking will intensely market both risk and wealth management using production digital VDP and PURLs for 1:1 direct stimulus-response delivery, bound instructional documents and hyper-personalized presentations. Conventional static newsletters, offering-circulars and other narrow web and sheetfed work, will remain flat as these sectors install in-plant production digital capabilities for security and control.
Now to the three durable goods sectors: No. 7 Real Estate ($2.0T, +5 percent; with $10.4B to print, -3 percent) is foreclosing on our medium even as it is recovering. Residential new and resale housing is building with promotion principally to the so-called "millennial" generation, which does not search using reflective copy.
Only among renters and retirees are web-produced guides and newspaper/magazine ROP and inserts cost-effective and, as these demographics are declining in the housing marketplace, volumes are falling—forever. In luxury estate residential, condominiums and commercial real estate, digital view-books with personalization in multiple languages is growing along with excess property for sale. Signs are hanging in there, though now with QR codes hinged to them.
Automotive ($2.0T, +6 percent; with $8.4B to print, -6 percent) is No. 9 and shifting in two directions; in forward toward a 16.5 million vehicle year, and in reverse to a drop of $0.6B in print buys.
Total print ad spending will slip below online in the New Year when the reduction of showroom print is included in the mix. ROP and insert print tanked last year as labels, décor, packaging, manuals and digital rollfed OEM (mostly in-plant) raced upward of $4.0B on increased unit production. This trend will continue to 2016 when production levels subside.
The remaining spots into which a general printer can drive are retail dealer groups (co-op sheetfed/web FSIs and wide-format digital POP), auto-traders (open-web classifieds) and auto aftermarket parts/services (retail signs, packaging, POP/POS, FSIs, labels, etc.), which will fill-up on $1.2B in ink-on-paper.
The third durables sector, No. 17 Home Improvements ($797B, +3 percent; with $5.6B to print, +10 percent), will hammer homeowners with direct mail, door-hangers and anything else that nails both the "do-it-yourself" and remodeling buyers. The strongest growth since the housing boom, which peaked in ownership (highly-leveraged you remember) at 69 percent (2004), means print is building back.
Store signage/displays, how-to guides, FSIs, furniture catalogs, contractor vehicle wraps, windshield-stuffers, blueprinting and Made-in-USA labels/packaging; all will be there for the selling!
"Discretionary" is economics-speak for non-durable goods and services; 19 percent of total demand and the third most "durable" at a 90 percent retention rate. Travel/Hospitality ($880B, +1 percent; with $7.5B to print, -5 percent) takes off to No. 10, but print will likely miss the flight. This largest of the six sub-sectors will check in with fewer bound guides, maps, tri-folds and in-room amenities. Hotels (+2 percent) will be up as average daily rates and occupancies increase. Renovated and swapped properties will need makeover print, as will the air/rail travel (+7 percent) and cruise lines (+2 percent) segments, both recovering from mishaps and consumer discontent.
Posters, displays and brochures at travel agencies, and travel loyalty program transpromo, could be turnarounds if put on our print itinerary. Destination parks (+
Fashion ($615B, +Porter, will launch with a cross-media app by Richemont's new in-house publishing group. Print management est très en vogue, as well as cross-branding by fashion publications GQ, Esquire and others with specific stores like JCP, Men's Wearhouse, etc. Inserts, in-store, direct mail and catalog print will be best sold through the fashionista media than to the brands.
Gaming/Wagering ($590B, -10 percent; with $6.3B to print, -10 percent) is No. 12 in '14, but with 100-to-0 odds that print will lose big at casinos/off- and on-track betting parlors (-15 percent). Personalized loyalty direct mail, a former winning hand, is folding, and new/renovated rich-in-print casinos are on hold or on the block. Caesar's, the industry leader, is losing more dough than any of its players (more than $1B last year), and is closing/selling off casinos to bet on online/mobile gaming.
Recently OK'd in six states, online/mobile gaming could be legal in all but a few by year-end 2014. Because the United States represents 67 percent of the global market, and most states are desperate to tax "sins," many chips are on the line for online. It will be a winning hand for print with a cross-media flush of NFC pull and SMS push. The state/province lotteries (+2 percent) are easier to play as they deal the bids and are not open to suggestion.
Scratch-offs will continue to be the biggest game, but only a few companies have all the work. Better to go after retail signage, displays, billboards and FSIs. A 2014 event for print will be the cross-state promotion of online lottery subscription.
Entertainment ($909B, -1 percent; with $6.0B to print, +
As with No. 22 Leisure Activity ($195B, 0 percent; with $3.9B to print, -3 percent), consumers lack time and money for sports, recreation and hobbies, and most of these categories are at saturation and in decline.
Oppositely, Discount Retail ($1.5T, +
At No. 21 is Security/Protection ($228B, +3 percent; with $4.5B to print, 0 percent). Imaging technology in good hands can now prevent ID theft, product tampering, counterfeiting, false documentation and all criminal intent. Most in our industry won't take the trouble to master the methods, though we're the ones who logically should be in front of it.
A national ID smart-card is coming, and most everything printed could have a security feature stamped, image-embedded or otherwise included in the substrate or film; a big value-added for the buyer (and for us, of course)!
Logistics/Freight ($752B, +6 percent; with $3.8B to print, -4 percent) is No. 23 and dropping. Overall postal volumes and multi-modal freight shipments are victims of technology, economy and politics. Any revenue growth will be from fuel surcharges rather than demand. Multi-part shipping forms, envelopes, folding cartons and POS print will remain flat. The online retail giants will do everything in-house, including product labels.
Government/Federal and State ($6.5T, +6 percent; with $2.0B to print, 0 percent) will be No. 24. Federal agencies with in-plants will continue to resist the GPO, while state and local agencies shift most print to output or for local publishers/printers to sell such as driver's license manuals, fish and game, etc.
Last, at No. 25 is Higher Education ($184B, +5 percent; with $1.6B to print, +5 percent). Enrollments are dropping, costs are rising and the for-profit (+12 percent) companies posing as universities are taking real market shares. Transit and other out-of-home print, ROP/FSIs and direct mail will get good grades. Expect school mergers and name changes as there are too many institutions, and many are in financial collapse. Development spends are not delivering alumni dollars and are being cut back. Athletics activity should keep poster, program and related print at 2013 levels.
Inclusively, the HM-25 will account for 97 percent of total print. Become an expert provider for a few verticals rather than be a commodity bidder in a horizontal position. Market "hot" in 2014 and be around for the years after the paradigm shift! PI
About the Author
Now in its 35th year, Vincent Mallardi's "Hot Markets for Print Media" is the longest, continuous forecast of the printing industry, by sector, region and product. For more info on the complete report, e-mail the author at email@example.com.
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 firstname.lastname@example.org