Realities of Russian printing market in 2012

Написал: Максим Мережко





Time files fast! It seems that drupa 2008 was only yesterday and we still see reports in magazines about new products shown there. But four years have passed by and now it's already time to get ready for drupa 2012. Over these four years there were drastic changes both in world economy in general and in printing industry in particular. Shortly after drupa 2008 the world was hit by global economic crises, and it is still not clear if it is over or not. The government assures "yes," and already prepares us for the next one... However, the state of global economy should not be of immediate importance for those who visit drupa. It's more crucial for them to get a clear picture of what is going on in printing and graphic arts industries. The exhibition will tell us about global trends meanwhile in this article we'll try to review what happened to the Russian printing market over these four years and what to expect from it in the future.


Time files fast! It seems that drupa 2008 was only yesterday and we still see reports in magazines about new products shown there. But four years have passed by and now it's already time to get ready for drupa 2012. Over these four years there were drastic changes both in world economy in general and in printing industry in particular. Shortly after drupa 2008 the world was hit by global economic crises, and it is still not clear if it is over or not. The government assures "yes," and already prepares us for the next one... However, the state of global economy should not be of immediate importance for those who visit drupa. It's more crucial for them to get a clear picture of what is going on in printing and graphic arts industries. The exhibition will tell us about global trends meanwhile in this article we'll try to review what happened to the Russian printing market over these four years and what to expect from it in the future.

 

Printing never was a major industry branch in Russia. Estimations done at time of drupa 2008 show that "the consumption of printed products per capita" in Russia was around 13 EUR per person. The country was far behind the market leaders — USA, Japan and Germany, for which this index was around 500, 400 and 350 EUR respectively. It was on par with China and India with 12 EUR and 14 EUR. Yet, of course, there are still a lot of countries in the world that consume much less paper than Russia. If we believe in this index and its estimations over past 4 years the situation in Russia has changed. The consumption of printed products has grown to exceed 18 EUR per capita (and we can not here ignore the fact that over the same period of time the population of the country declined). The main cause of such growth is increase in packaging consumption, as well as increase of prices for printed products per unit. Of course, in more energetic countries the same index changed more substantially, for example, in China it has grown almost three times and now is more than 35 EUR per capita (and this is really a huge volume if we remember how many people lives in this country!). In four years China nearly caught up with Brazil with 40 EUR value of the index. We can also notice that for well developed countries this index virtually did not change, even in USA in the midst of a crisis two years back.

Russian printers may ask: "So, where this figure and volumes comes from?" It appears that if we compare it the prosperous pre-crisis years the printing volumes now should have increased by 25%. And at this point it's important to grasp the essential difference in economic approach "here" and "yonder." Other countries (both well developed and still developing) produce printing products on their own territory and also try to print for their neighbors. While here in Russia we not only happy to place all our print orders abroad, but we also import the vast majority of consumer goods and significant quantity of food already wrapped in packaging, and this printed products also counts in optimistic percentage of the index above. The bitter reality says: when you see the index called "consumption of printed products per capita" you should be aware that it does not actually reflect the situation on printing market in Russia. There are many parties who are interested in not index like that but in the actual state of Russian printing market and the changes that occurs here, so someone should do alternative calculations and estimations for it.

Kursiv Publishing House started to conduct its own regular market researches in 2009, at the beginning of the crisis. The purpose was to get a better idea of what's happening to the market, because there was no established reliable sources for such information. This researches are based on surveys that are presented to top managers of various printing companies, as well as on calculations that use numbers and data officially reported. The first research conducted in the mid-2009 showed that Russian printing companies have lost around 30% in total number of orders and up to 50% of its turnover. It was not only the number of orders that was reduced, each order lost sizable portion of its cost and has become cheaper for customers, mostly at expense of printers profit. The major collapse of the printing industry in Russia was avoided primarily because many printers were able to learn quickly new tricks how to survive in "new economy realities" (of course, they did it by optimizing the salaries of employees as their first step). By the time another market researches was conducted in 2010 most printing companies already have reported that they were able to adapt to new conditions and start a new happy life. Although the production volume in 2010 did not increase substantially, printers made some profit by reducing costs and optimizing business.

The economy crisis is not the only force that affected the present development of printing industry in Russia. There were other factors that had a serious impact on the market. Among them there were common global trends as well as some local specialities.

The first and probably the most painful aspect of new realities for printers was a drop in production runs lengths for all types of printed products — newspapers, magazines, books, marketing materials and even packaging. There are many reasons for it of simple economic nature. The publishers are no longer willing to overpay for excess runs of their magazines and newspapers (as they did before in blind hope that they may sell it somehow). Now they print to a minimum — well calculated circulation that includes subscription plus assured retail distribution. The leftovers must be disposed of and this is economically impractical. In previous years, they could turn a blind eye to it — the loss on copies not sold is typically not that serious while larger numbers for circulation could be a source for corporate pride and something to boast about before advertisers. The similar situation happened to the books printing: not so long ago it was normal to print larger numbers of copies, and then try sell them during next two or three years. Now no one is eager to put printed books (and money) into cold storage for such a long time. As for marketing and advertising materials printing, in previous two years many customers decided just not to waste resources and not to order any. In Russia there were always some strange conceptions about what advertising is and what it is for: when a company is doing well and its profits are fat it thinks "so be it, we can afford to spend some money on advertising." Under normal economy conditions the situation should just the opposite — a company should advertise more aggressively when it hits hard times, needs to survive and attract new customers by all means. Well, Russia does have its own rules and marketing logic too.

The second serious problem for the Russian printing industry is a hard price pressure. Prices of printing declined quite substantially over two years, the average price reduction was about 15-20%, and for certain types of products it was up to 35%. At the time it seemed that it's almost impossible to continue do business in such circumstances, nevertheless most printers managed to survive partially due to large profits and funds they accumulated in times before, partly because they quickly performed costs reduction, business optimization and increased job productivity. A good way to increase profitability was to change the operating model and switch from "runs-oriented" approach (the longer runs, the better) to "jobs-oriented" (it's more profitable to print many small print runs than only few large ones).

Finally, as another important factor that made influence on the printing business in Russia, we can mention a worldwide trend — "transition from paper-based to digital forms of information." In our country it caused a higher level of panic than in Europe or Americas, because in Russian mind emotions prevail over cold economics analysis. "All newspapers will die very soon, because news are faster to find on Internet! Books and magazines are much easire to read and cheaper to buy on tablet devices! All advertising will move to Internet search engines very soon! Probably only labels and packaging printing will have the rights to exists..." This kind of opinions were voiced not so long ago not only by those with "Internet addiction," but also by some top-managers of large Russian printing companies (of course, it does not mean that they do not have Internet addiction too).

Anyway actual market research numbers tell us a different story. Recent analysis of the situation conducted in 2011 gives us all reasons to hope that printing industry in Russia will continue its development in the future, and it will be quite successfully at it too. According to Kursiv Publishing House research:

• Total number of jobs printed in 2011 increased by comparison with 2010 by 16%. If we will add to this another percentage value that was achieved between 2009–2010, it will show that total amount of printed jobs has already approached the pre-crisis values. However, runs of printed jobs did not improve so well with time, 2011 gave us increase in this area around 3-4%.

• The book printing market did not show severe shrinkage that introduction of tablet devices was expected to cause, yet many digital content resellers report increase in sales of their digital books. Research data shows that the book market has decreased by less than 5%, primarily in cheap black-and-white paperbacks area. (The charts on these pages show that the book market has rose rather than declined, but these charts show the number of jobs that was printed and not the total volume of books production, without taking into account runs length.) Several book printers report the growth in number of orders and in cost of a printed copy (book printing in Russia finally becomes more sophisticated with better product quality). This allows a profit to be made, even with shorter runs.

• The newspaper printing market in Russia was quite stable over years. There was even some growth for "small newspapers" that have single city, single district or even single small village as their readership. It's a good sign that such development is sponsored by general public interest, and not by some political or regional economic power, as it was in the mid 90s.

• The printing market for corporate and promotional products now in the process of slow restoration. Competition in various business areas becomes tougher and requires the usage of all available marketing tools including paper.

As a final word for this review, it is worth to look to the charts that show country's "consumption of printing equipment." In 2011 the Russian market "consumed" more equipment than it was in 2010, and much more than in 2009. It is important to note that 2011 was "the year before drupa," when many prospecting buyers choose to wait till the show and either purchase equipment right on manufacturers stands, or after seeing some new, revolutionary technology decide to readjust their printing business in some dramatic brave new ways.

 

 


 

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Number of printing orders for different areas of the market. After a significant drop of 2009, there were noticeable improvements in 2010 and 2011, although it did not reach original volumes of 2007-2008 yet. The growth is noticeable in all product types

 

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Number of orders (blue) and profit margins (red) for printing companies in Russia. The reason for decline in profits (in 2009 it was almost zero) was not only a general decline in number of orders, but also reduction in print runs, tough pricing pressure, non-payment crisis and other negative factors. Optimization of businesses in 2010-2011 helped many printers to survive and start to make a profit again

 

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Average order price, printing costs and profit over the recent years

 

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Graphic arts equipment bought by printing companies in Russia. In 2011 there was significant increase in purchases of all types of equipment. The chart is based on import-export data analysis for the industry



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