NAGASA - The Compass - Winter 1998

Channel Watch: Consolidation
Consolidation is sometimes feared and sometimes welcomed -- but it is always respected.

Consolidation

Consolidation. The word seems to be on everyone’s lips at the moment. Consolidation is sometimes feared and sometimes welcomed -- but it is always respected. Consolidation occurs both on the manufacturer end of the channel and on the dealer end. Consolidation is beginning to be a way of life among NAGASA members.

Most of the Current Consolidation Seems to be Occurring in the Prepress Area, with the Following Especially Noteworthy:

Kodak and Polychrome combine to form a new plate and film vendor named Kodak Polychrome Graphics.

• Olec acquires Teaneck.
• Linotype-Hell (one of the oldest and most respected names in the business) succumbs to the ravages of the marketplace and casts its lot with Heidelberg.
  
• Gretag and Macbeth become GretagMacbeth.
  
• DuPont-Fuji becomes simply Fuji -- the next step in the evolution of Crosfield, yet another once highly regarded prepress name.
  
• Baseline acquires several product lines.
  
• Anitec is being spun off by International Paper, with the precise fate of the company yet undetermined.
  
• Development Technologies becomespart of Glunz & Jensen, which seeks to be the sole survivor in the mechanical end of the prepress business.

In the Dealer End of the Channel:

• Multigraphics starts to make acquisitions with Hanley Graphic Products, a dealer, and Publishing Solutions, a systems integrator.
• Taussig’s is sold to ResourceNet, which is rechristened as xpedx, creating a distribution network supplying both paper and consumables to the trade.
• BESCO Graphic Systems Corp. acquires Rivard Graphics.
  
• In Canada, dealers with a national presence are beginning to forge relationships with equipment
  manufacturers in which both attempt to partner more effectively.

Signs of channel decay? Not at all -- just signs of a maturing channel and one that is beginning to cope with the anticipated reduction of film usage. Of course, that view may change depending on whether one is the acquired, the acquirer, or merely a bystander.

In the past, manufacturers needed local warehouse facilities to provide quick response to printers. But many manufacturers really never handed over full responsibility for sales to the channel. Instead, they put technical representatives in the field to establish direct linkages with printers. Because of this, many dealers could not afford to develop the depth of technical expertise that is becoming required in the marketplace.As the dealer channel matures, more and more companies seek more efficient means of providing printers and trade shops with the goods they need.

Can dealers rise to the occasion and become self-sufficient enough to make their own way in the marketplace? Will manufacturers be willing to relax their grip on the reins enough to let dealers make mistakes while learning how to better represent them? Will printers and trade shops be willing to rely more heavily on dealers than in the past, while distancing themselves from the manufacturer? Only time will tell. But these things are particularly critical to the growth and continued strength of the channel.

Watch for further consolidation in the channel -- both among manufacturers and dealers. But watch, too, for stronger relationships between dealers and manufacturers. Look for manufacturers from outside the industry to begin to use graphic arts dealers to reach printers and trade shops. Canada -- with an economy of only 10 percent of that in the US -- could serve as a model for channel business below the border. In Canada, the linkage between dealer and manufacturer is stronger and more apparent than in the US. Fuji, for example, has its own captive dealer network. And the type of relationships now being explored in the US by Presstek and Gerber have been the norm for some time in Canada.

Is consolidation inevitable? Most likely! Is it bad? Not necessarily! But smart dealers and manufacturers will explore new relationships in attempts to reach customers more efficiently. And the channel -- more than 50 years in the making -- will survive as the most practical means of supplying printers and trade shops with an extremely varied line of products.