In the past two years, the mass closure of print firms has put enormous pressure on the ink market. Bad debt coupled with fluctuating raw material prices has created incredibly challenging trading conditions, making it difficult for the ink industry to plot a strategy for the future. Despite this bleak outlook, some suppliers have coped admirably, reorganising their businesses in an attempt to differentiate themselves from the competition.

But what does the future hold for the sector in general and what changes  will the years of economic recovery bring?
Firstly, despite the UK officially crawling its way out of the recession in Q4 2009, the threat of printers failing to meet their financial liabilities has not gone away, according to Stehlin Hostag UK managing director David Ward. "Bad debt is a major concern," he confirms. "Last year was very bad for debt, with the commercial sheetfed sector hit the most. We ink manufacturers were stuck in the middle of it."

Flint Group's marketing manager Peter Baird agrees, predicting that bad debt could continue to be an issue in the months ahead and that the industry must take appropriate action if it is to avoid exposing itself to further problems.

Guarded recovery
"The fact that the UK is officially out of recession is of course good news for the entire value chain in the printing industry," says Baird. "However, we must still be cautious. The end of the recession could lead to companies starting to re-stock depleted inventories in the belief that there will be an upturn in business. While we all hope the upturn will come sooner rather than later, it's doubtful we will see big jumps in demand in the short term. So without a cautious approach, bad debt could become a real problem as cashflows become stretched further and further."

Bad debt is one thing; the issue of pricing is another. An obvious step to offset some of the losses accrued over the past few years would be to raise prices, but Arets director of UV Colin McKenzie reckons that it's unlikely that ink prices
will rise across the board, with prices likely to increase on specific products.

"The exception to that rule," he predicts, "would be if the euro exchange rate fell much below the current rate of around €1.14 to the pound."

When you're totting up the cost of inks there is, of course, another crucial factor besides exchange rates that comes into play: raw materials costs.

At the moment, with oil prices fluctuating from one week to the next, it's tricky to judge in the long term exactly how these price movements will affect the market. While many printers believe that the price of ink has sky-rocketed, Grant Penfield, group managing director at Shackell Edwards Druckfarben, claims that inks have actually come down in price over the past 25 years. He cites the example of an A4 colour process set of inks, which 25 years ago was 20% more expensive than today's market price.

Cost control
"The printer has always had the benefit of lower pricing," says Penfield. "With even less competition and higher raw material and manufacturing costs, prices still continue to be under pressure. Printers cannot afford to pay higher prices for inks and consumables. The weaker pound has meant that margins have evaporated for the ink and consumables suppliers - companies are struggling."

As a result, Penfield believes that the ink sector needs to increase its prices, but he predicts that they will continue to fall during 2010.

"We have organised ourselves to grow and remain profitable at lower prices," he says. "However, many of the ink and consumables suppliers have failed over the years, through poor management, to differentiate pricing to their customers based on service levels. As a result, they have nowhere to go to improve profits other than reduce overheads by closing branches and making staff redundant."

So if they can't push up the price of their products, what can ink manufacturers do to ensure their long-term survival? One option is to restructure their business and explore new opportunities and revenue streams. Stehlin has invested heavily in its technical team and, as a result, it has launched a number of applications that it believes will be important for its customers and its own cashflow in 2010. The most recent is !-Check, an online improvement management system. Thanks to these measures, Stehlin Hostag's Ward says the company has vastly reduced its losses. 

"The business is aiming to get back into profit this year and our parent group Huber has remained profitable globally," says Ward. But while there is a general feeling of optimism, he says that there is still some way to go.

Flint's Baird is in agreement. He predicts that there will be further consolidation among printers, which usually results in reduced volumes. However, the knock-on effect of the consolidation to date is that there has been more transparency between ink suppliers and print firms.

Suppliers are making greater efforts to monitor the profitability of individual customers - the upshot of this is that, in some cases, they've refused to do business with a printer.  "This means losing out on business, rather than doing it at a loss or extremely low margin," says Arets' McKenzie.

While all of the signs may point to a sluggish recovery, there are opportunities out there - for instance, Penfield identifies scope for growth in the large perfector market. However, these opportunities will be limited. The year ahead is not for the faint-hearted but suppliers are making greater efforts to get closer to their customers and in doing so map out a strategy that will help them to move forward. As Penfield points out: "It's not how good you are in the good times, but how good you are in the bad times that will get you through."

FUTURE TREND: LOW-MIGRATION
Demand for low-odour and low-migration products for food packaging is likely to grow during 2010, according to ink suppliers. This growth will be fuelled by the increasing numbers of brands looking to switch to low-migration cartons in an attempt to improve food safety standards.
The main challenge for manufacturers of low-migration inks is that they have to perform equally as well on press as standard inks. Print industry insiders say the whole supply chain needs to work together to ensure a sustainable solution can be found and it is no longer an option to ignore this industry-wide issue.
Arets director of UV Colin McKenzie says the most efficient way to achieve low-migration cartons is through the use of low-migration UV inks, and that though this year will see debate on which system is best, UV low migration solution will be predominant in food packaging.

EMAS: STEHLIN HOSTAG
Stehlin Hostag recently became the first UK ink company to become Eco-Management and Audit Scheme (EMAS) certified, one of only five print-related companies in the UK to have achieved the certification so far.
EMAS is designed for companies committing themselves to evaluate, manage and improve their environmental performance.

The scheme claims to be the most robust and credible of its kind, adding four pillars to the requirements of the international standard for environmental management systems ISO 14001. These are: continual improvement of environmental performance; compliance with environmental legislation ensured by government supervision; public information through annual reporting; and employee involvement.

Angela Hayden, Stehlin’s UK chartered safety and health practitioner HSQE manager, says that the main challenge in securing EMAS was ensuring that the statistics were accurate and up to date.

 We also had to ensure that the people producing them were fully conversant with them and could explain them fully. So statistics might rise, but they have to explain and justify rises and what measures are being put into place to reduce, she adds.

She adds that the process opened the company’s eyes as to what the real business issues were. For example, just by looking at trying to reduce cardboard usage in packaging has led us to look at how we can reduce the polystyrene chips used in the boxes. We ended up buying a piece of equipment that takes our waste cardboard and cuts it so it could be used instead of the chips. It acts as a filler for boxes and, as it’s recycled waste, this reduces costs and storage issues and the costs of waste skips and disposal.