NAGASA - The Compass - Winter 1998

President’s Column
A Note from David J. Steinhardt, President and CEO

Land of Big...and Small

During a recent C-Span interview, President Clinton observed that “America doesn’t need small. America needs big.” The President is both right and wrong. Consider the graphic arts distribution channel.

Mergers are increasing. Dealers and manufacturers are getting larger. Size offers a broader portfolio, providing one-stop shopping for customers, clout to negotiate advantageous pricing, and sales volume to withstand the transition from conventional to digital.

But does the industry have a place for the smaller dealer or manufacturer? Certainly! Small dealers provide service often unattainable by their larger brethren. Small manufacturers, not saddled with the pressure to make the next quarter’s numbers, deliver industry innovations. These smaller companies provide what large ones cannot: physical proximity and personal service that leads to responsiveness and relationships.

For every Shaquille O’Neal who dominates the basketball court with physical size, there is a Spudd Webb who excels because of talent or hard work. Must your company be a giant in the channel? Hardly! But you may not win by playing the game on the big man’s terms.

The Channel In 1998
News from the annual NPES meeting

According to printing industry economists at Print Outlook 98 -- the annual NPES industry meeting that looks at the coming year -- prospects for 1998 are good. While the dramatic economic growth seen in 1997 may not be repeated, an economic recession is not in sight.

Among specific printing industry segments, advertising is expected to remain strong, bolstered by the Winter Olympics and elections. Prepress services are the weakest portion of the industry, with a decline of nearly 6 percent forecast for 1998. Newspapers and business forms printing are expected to grow only slightly, but most other industry segments should remain healthy. Book publishing and commercial printing should be particularly strong, once again outpacing inflation.

The economists were not especially concerned about the economic troubles in Asia affecting either the North American economies or the printing industry. The consensus was that while Far Eastern problems might reduce US and Canadian growth slightly, overall the effect will be minor.

Some discussion of possible erosion in the market for film and plates was heard, but any business shifts should be gradual. As print runs get shorter and more color is used, plate consumption tends to grow. And while film sales are declining slightly, the lack of general agreement on a proofing standard seems to mean that business in 1998 will be steady.

Margins, on the other hand, stand to remain level or shrink slightly. Both manufacturers and distributors may find that they cannot make price increases stick. Thus, as costs rise but prices do not, the ability to increase productivity becomes very important. The shortage of skilled, motivated labor also impacts margins, as businesses often find they must raise wages to attract qualified personnel.

On the whole, economists say that 1998 should be a good year, but probably not a great year. Expect costs to increase faster than prices. Expect good labor to be difficult to recruit. But expect printing to remain a strong element of our basic economy.