Printing houses prepare for increasing commercial demand

As early as last year, estimates of printing materials showed potential growth in the wrapping segment calculated at EUR 150 million, the same as promotional materials, which increased their market according to the expansion of retailers and the commercial sector. On the other side, the print newspaper segment estimated at EUR 65 million in 2007, and magazines, which had EUR 47 million in print value, will drop, and new titles will come on the market.
According to statistics from the Romanian Printing Industry Employers (PITR), books had a print value of EUR 25 million in 2007, with increasing demand but small investments due to the modest number of printed copies. Still, most of the existing printing houses on the local market announced millions in investments, mostly in updating printing equipment to keep up with the current demands for quality and quantity, with most of the printing houses targeting the promotional and wrapping segments.
Infopress, the printing house based in Odorheiu Secuiesc, resulting from the acquisition of Infopress printing house by Kvos, an Iceland-based investment company, followed the same pattern of investments, by opening a new printing house in Bucharest, besides the facility owned at Odorheiu. With the Bucharest-based project still ongoing, Birgir Jonsson, president of the group, expects the facility to come online in the middle of 2009. At Odorheiu, the official said EUR 15 million investment would go into production equipment, targeting high-speed finishing equipment that will come online in autumn 2008. With the main turnover attained in Romania, Infopress group expects around EUR 110 million in 2008.
IPG plans to start production activity at its greenfield investment in Hungary in August this year and Jonsson expects to make the facility the leader in quality products, especially because there have been few investments in this field on the local market, according to Jonsson. Infopress group defined its main business focus on the three reached markets of Romania, Bulgaria and Hungary with no present plans to go outside the area. Regarding expansion on the local market, the group has looked at many Romanian printers in recent years and none of them raised its investment interest, the main focus targeting investments in the company itself.
On the printing market, a greenfield investment is the best choice, even if it might present different challenges compared to the acquisition of an already established company, in Jonsson's opinion. “When you build yourself you do not get any hidden problems and you can design the company precisely as you would like to have it. On the down side you do not have very strong connections in a new market so it takes time to build strong sales,” said Jonsson of the investment in Hungary.
He thinks that paper consumption in Romania will more than double in the next five to seven years, currently estimated at around 40 kg per person yearly in Romania while the average consumption in Western Europe is at 250 kg. Based on the data, the printing market will grow at the same pace as consumption. Still, Jonsson says that paper prices are also rising as is the case with all other prices so companies find it harder to pass these cost increases onto customers.
“We have to be more efficient in the way we plan our production and to find further added value services to offer our customers as the margins are decreasing, ” said Jonsson. The group makes more than 50 percent of its revenue from commercial printing such as brochures and advertising materials, the fastest growing segment in the company's portfolio, as many of other players on the market said. Since the printing market is contingent on hi-tech equipment, the digital side of the printing business is estimated to grow fast in the near future, as well.
Gabriel Niculescu, CEO at Eurogama Invest, a printing house based in Bucharest, sees a danger in adapting the investment path to the nonstop updating of hi-tech equipment, due to a false approach to printing technology. The need to update the printing equipment might cut loose from the cost control and Niculescu points to the multitude of small printing businesses which rushed on the market and have since vanished. The difficulties on the local printing market are triggered by the international rise of the price of raw materials and its amplified effects on the local market.
Eurogama Invest will put EUR 8 million by 2009 into printing advertising materials and wrappings, as the two segments have been signaled to grow, being influenced by the increasing purchasing power which results in new FMCG entries on the market and also the growth of marketing campaigns based on different type of printing, according to Niculescu. The firm had a turnover of EUR 14 million in 2007, with Niculescu expecting a growth of 10 percent for 2008. Exports represent 40 percent of the company's turnover and Niculescu said that for 2008, they should surpass 50 percent.
Eurogama holds 50,000 sqm of space in Bucharest, Rociu and Timisoara, comprising offices, production spaces, stock management and logistics. Regarding the expansion plans, he said the company intended to grow in Serbia seven years ago but failed to do so, so decided to focus on regional development in Romania and increasing exports instead. “We attained 40 percent exports in 2007, 7 percent more than in 2006 as percentage in the company's turnover,” said Niculescu.
Another player on the printing market, the Italian group G.Canale&C, which employs 160 workers at the group's Romanian subsidiary, agrees that the future of printing is advertising products and books. Following the growth estimates of these segments on a market with seven main players, the Italian group had crafted investments worth EUR 20 million by 2007 and another EUR 8 million to be spent in 2008 on building a new printing facility and purchasing new equipment to stay in touch with the increasing demand on the market for promotional materials.
“We aim to decrease the production time and to deliver more complex products regarding books and advertising materials,” said Giuseppe Canale, administrator of G.Canale&C. The group also sees potential for the supplementary books and magazines produced by newspapers, such as catalogues or different type of guides. With a turnover of EUR 7.5 million in 2007, the group plans a 50 percent increase in 2008 for the Romanian subsidiary.

By Magda Purice