• Home
  • Article
    • Article Archive
    • Digital Archive
    • ENews Archive
  • Buyers Guide
    • Buyers Guide
    • 2025 Online Form
  • Advertising
    • Ad Options
    • Media Kit
    • Editorial Calendar
    • Electronic Files
  • Awards
    • FSEA Gold Leaf
  • Subscribe
  • Video Vault
  • Webinars
  • Amplify
  • Contact
  • Events
    .smi-preview#smi-preview-10580 { --smi-column-gap: 10px; --smi-row-gap: 20px; --smi-color: #ffffff; --smi-hover-color: #90c43c; ; ; --smi-border-width: 0px; ; --smi-border-radius: 0%; --smi-border-color: #3c434a; --smi-border-hover-color: #3c434a; --smi-padding-top: 15px; --smi-padding-right: 0px; --smi-padding-bottom: 0px; --smi-padding-left: 0px; --smi-font-size: 20px; --smi-horizontal-alignment: flex-end; --smi-hover-transition-time: 1s; ; }
    • Skip to main content
    • Skip to secondary menu
    • Advertise
    • Subscribe
    • Contact
    • Events
      PostPress

      PostPress

      Print Decorating, Binding and Finishing

      • Home
      • Articles
        • Article Archive
        • Digital Archive
        • ENews Archive
      • Advertising
        • Ad Options
        • Media Kit
        • Editorial Calendar
        • Electronic Files
      • Buyers Guide
        • Buyers Guide
        • 2025 Online Form
      • Awards
        • FSEA Gold Leaf
      • Subscribe
      • Video Vault
      • Webinars
        • Upcoming Webinars
      • Amplify

        Economy

        Folding Carton Market to Enjoy Measured Growth Through 2026

        March 15, 2023

        Submitted by the Paperboard Packaging Council

        According to the Paperboard Packaging Council’s (PPC) recent Trends: 2022-23 Industry Outlook and Market Data Report, US demand for folding cartons will grow on average by 1.3% annually, with the market reaching 5.4 million tons by 2026. Output growth in nondurables, comprised of many carton-packaged goods, is expected to expand by 0.8% over the five-year forecast.

        Prepared for PPC members by RISI, a provider of pulp and paper industry intelligence, the Trends Report describes how overall economic trends will affect the folding carton market in the near and far terms. The report states that general economic fundamentals in the US economy will remain strong throughout the coming years, for example, with consumer spending growing by 1.8% from 2021-26.

        In addition to the overall economic performance, other factors play an essential role in Trends’ growth forecast for the next five years, including changing consumer spending habits, substitution away from plastic packaging and efforts to reduce plastic waste. Shipment growth will be healthiest at the end of the five-year forecast, as the current business cycle is predicted to peak in 2026. The total value of US carton shipments is predicted to grow from an estimated $9.5 billion in 2021 to $13.3 billion in 2026.

        The folding carton industry is not without near-term challenges. A short, two-quarter downturn in economic output is expected in 2023, likely due to a recession becoming more of a concern as inflation eats into consumer budgets. Economic growth will provide a boost for folding carton producers in the coming year, but overseas production will continue to challenge the domestic market as competition with imports persists over the next five years. Competition from alternative packaging methods and materials also will remain a challenge for domestic folding carton producers, especially with increasing prices of boxboard substrates.

        On the flip side, decisions by some of the largest fast-food companies and municipalities across the country seem to be providing hope that paperboard packaging materials are poised to benefit from their environmentally friendly profile. Plastic substitution and environmentally friendly packaging trends should provide a tailwind for carton growth over the forecast.

        “Trends equips leaders in the folding carton industry with the knowledge they need to prosper in the changing marketplace,” said Ben Markens, PPC president. “Should they make an offensive move? Should they ramp up their defense? Trends helps them figure it all out.”

        In addition to forecasts for the overall folding carton market, Trends also analyzes 17 end-use segments, including confectionery, dairy, dry foods, cosmetics, pharmaceuticals and recreational products. This year, nine categories were classified as growing markets, seven as mature and one as declining.

        The entire 2022-2023 Industry Outlook and Market Data Report for the folding carton industry is available through the Paperboard Packaging Council (PPC). For over 90 years, PPC has been the North American association for converters of paperboard packaging and their suppliers. PPC works to grow, promote and protect the paperboard packaging industry while providing its members with resources and tools to compete successfully in the marketplace. For more information, call 413.686.9191 or visit www.paperbox.org.

        Sun Chemical to Increase Prices in North America

        June 1, 2022

        Sun Chemical, Parsippany, New Jersey, will increase prices across its entire portfolio of packaging, commercial sheetfed and screen inks, coatings, consumables and adhesives in North America, effective immediately or as contracts allow.

        The environment in North America has continued to impact the ink industry. Global geopolitical events have caused sustained pressure on logistics availability and have increased the costs. The constrained accessibility to labor in the market has driven significant wage inflation while contributing to inefficiencies at manufacturing facilities.

        Key raw materials continue to experience scarcity while steel shortages drive costs for steel drums and other packaging components to historic highs. Sun Chemical continues to seek mitigation strategies to these cost increases; however, the magnitude and speed of increases require further action to offset impacts to the business. Sun Chemical will communicate specific increases directly with its customers. Customers with questions can reach out to their local Sun Chemical sales representative. For more information, visit www.sunchemical.com.

        What’s Up with Inflation These Days?

        December 9, 2021

        By Chris Kuehl, managing director, Armada Corporate Intelligence

        By now, every commodity category one can think of has been experiencing dramatic price hikes. Oil is trending above $80, natural gas prices surged by over 500%, steel was up by 216% and during the summer the price of lumber hit record levels. To some degree, this surge was anticipated but the extent of the price hike has been taking many user sectors by surprise. 

        The burning questions are how high do these prices go and how long does all this price inflation last? As any good economist would assert – it depends. There are three broad factors to consider when trying to forecast what happens next. The first is why these prices spiked so high to begin with. The second is how the consumers are responding to the higher costs, and the third is what would cause production and consumption to even out and allow prices to fall.

        The root cause of the issue is not hard to determine. The pandemic-inspired shutdown of the entire world economy shattered demand for the better part of a quarter (Q2 and part of Q3 in 2020). This destruction of the global economy was made far worse by the fact that there was no way to prepare for it. This was a recession by edict and came as most companies were preparing for a pretty good growth year. The world had not dealt with a challenge like COVID-19 before and there were plenty of miscalculations. Few thought the lockdowns would last longer than a few weeks, but they dragged on for months. This left producers with billions of dollars of unwanted inventory. 

        Not only were they shutting down operations due to the pandemic restrictions, but they also saw little demand for the product they had and saw no reason to produce more. This would have been bad enough but scarcely a year later there was another unexpected development. Consumers came out of the gate in early 2021 as if they were on fire. Growth in the second quarter started at a blistering 9.5% pace and ended up at 6.5% (over twice what is normally seen in terms of US GDP growth). The demand for nearly every commodity grew at the same pace. Producers have been struggling to catch up all year, but each process has been more complex than usual.

        Demand has not been as consistent as would be preferred. Office building construction has been hampered by the fact that only about a third of employees have returned to their old patterns and that has meant less interest in this kind of construction. Given that construction is the single largest consumer of steel, there has been trepidation among those producers. Machinery, however, has seen substantial growth. Shortages that have plagued the automotive sector have had an impact on demand as well. The fact is that demand has grown but the potential for decline in that demand has been inhibiting producers. They do not trust the demand they have been seeing as the potential still exists for a consumer pullback if there are further outbreaks of the virus.

        The second factor is how consumers are reacting. In normal years, the spike in the prices would have halted consumption in its tracks. Companies would be unwilling or unable to pay these costs or would be concerned about the ability of their consumers to absorb these hikes. National polls indicate that 40% of companies will raise their own prices to cope with the increased costs they face, guaranteeing inflation will continue building.

        Inflation usually comes under control when these prices get so high that people can’t, or won’t, pay them. This time, however, there is another wrinkle. The 2020 recession provoked the usual response – throw money at consumers so that they spend the economy out of the doldrums. That didn’t really work this time as consumers were limited in terms of what they could spend. The stimulus essentially accumulated rather than making its way through the system. At the start of the summer, it was estimated there was over $7 trillion in excess savings in the world – meaning that people and businesses complained vigorously about the higher prices but had the ability to pay them anyway. Until this bubble in the supply of cash dwindles significantly there will be more tolerance for higher prices.

        Four primary business sectors have all reacted somewhat differently. The construction sector has either stalled completely (office buildings) or roared ahead despite the high prices (warehousing, distribution centers and the like). The primary issue has been availability of commodities like steel – there have been waits as long as a year for the materials needed to complete these projects. The second most important market has been the vehicle manufacturers – everything from cars and trucks to farm equipment and heavy equipment. We all know the drill here – shortages of everything from chips to assemblies have forced plants to close for periods of time and reduced the demand for the other products that go into these sectors. The third area has been booming — machinery.

        There has been a surge in capital spending in many sectors of manufacturing as companies make up for lost time and react to the new demand. Finally, there is the oil and gas business, and that growth pattern may start to reverse soon. The demand had been down as concerns regarding the new rules and regulations affecting fossil fuel have been proposed. Will the pursuit of green affect pipeline development? Several large projects have been abandoned already and others have been threatened. On the other hand, the surging price of oil and gas has spurred a renewed interest in developing these resources. 

        The bottom line is that there is demand from a variety of sectors but at the same time there are concerns regarding how long this demand will hold. Production could ramp up to address the current environment and leave the producers back in the same boat they were in the spring of 2020.

        Consumers are now starting to see a real impact on their own budget as these prices work their way into the retail environment. Food and fuel prices reacted right away and there has been shock at the pump prices as well as the costs in the grocery store. The holiday spending season is expected to be solid as consumers come out of hibernation, but that growth will be tempered by the rise in prices. The shattered supply chain, combined with the higher commodity prices, will drive the real rate of inflation past 5.5%.

        That brings us to the most important question of all: When does all this end? What will cause prices to fall and how far do they go when they start to? If one looks at the behavior of prices for the last decade, it becomes obvious that volatility has been the norm. There have been many episodes of higher prices followed by big plunges. The demand spikes and producers react with an attempt to meet that demand and invariably end up overproducing and prices react accordingly. So, what will make that demand start to flag? It already has as far as construction is concerned. Even though there has been a major improvement in the development of transportation-related construction, the expectation for office building is not encouraging. Only about 33% of people have returned to their offices and estimates hold that roughly half of employees will remain in a virtual environment for the next several years (at least). 

        It will take a combination of factors to ease the inflation threat. Demand will have to even out so that producers have an opportunity to catch up. The very existence of inflation will help do that as prices will become too high for many to pay, but with all the excess cash sloshing around in the system that point may not be reached as quickly as usual. 

        Producers will have to gear up to meet demand, but they face a lot of uncertainty. If demand doesn’t hold, they get stuck with inventory again. They are further inhibited by the supply chain breakdowns. Everyone sincerely hopes that 2022 will be the year that something approaching normal arrives but many thought that 2021 would be that year. The best guess at this stage is that price pressures begin to ease by the end of second quarter of 2022. That still means more than six months of higher prices and scarcity.  

        Chris Kuehl is managing director of Armada Corporate Intelligence. Founded by Keith Prather and Chris Kuehl in January 2000, Armada began as a competitive intelligence firm, grounding in the discipline of gathering, analyzing and disseminating intelligence. Today, Armada executives function as trusted strategic advisers to business executives, merging fundamental roots in corporate intelligence gathering, economic forecasting and strategy development. Armada focuses on the market forces bearing down on organizations. For more information, visit www.armada-intel.com.

        Special Effects Help Spur Greeting Card Sales

        December 9, 2021

        By Hallie Forcinio, writer, PostPress

        Holiday greeting cards are flooding the mail despite supply chain difficulties, postage costs and the expectation that delivery times may not be much better than in 2020. About three-fourths of consumers who send holiday cards do so because they know how good it feels when they receive a holiday greeting, according to a fact sheet from the Greeting Card Association (GCA). 

        Sending greeting cards is particularly popular with Millennials, the second-largest demographic of greeting card purchasers. Although Baby Boomers buy more cards, Millenials spend more per card (an average of $6). 

        Electronic greetings haven’t supplanted printed cards and account for a small percentage of overall greeting card sales, according to the GCA. Its research indicates eight out of 10 people agree that greeting cards cannot be replaced by social media and 60% say that receiving cards and letters in the mail “means more to me” than an email. Mailed messages evoke positive feelings with 65% of consumers observing that receiving a card in the mail lifts their spirits. With the added element of surprise, an unexpected greeting “just because” is especially treasured. 

        Posty Cards, a specialist in B2B products, reports minimal impact from digital competition. “In our business greeting cards niche, we didn’t see big migration to email in the first place,” reported Jane Coats, director of marketing at Posty Cards. She added, “We have heard anecdotes from customers who tried replacing printed cards with email and found that they got poor results. Good old-fashioned greeting cards are proving to be even more effective for personal contact in this digital age, especially when more people are working remotely and email security concerns are high. Most would agree that it feels much more personal to find a greeting card in the mailbox vs. a birthday email that’s likely to get flagged as spam anyway. Studies have shown that a real card is much more memorable.” 

        Special effects have wide appeal. Foiled finishes are among the top five greeting card trends identified in a blog by Designer Becca James, posted on February 18, 2021, on Printed.com, a digital printer of customized and customer-designed greeting cards, invitations and other products. 

        Coats agreed, noting “Foil designs on our greeting cards continue to be very popular and account for a significant portion of our sales. Business users from real estate agents to financial planners often select foil designs as a way to portray success and make a great impression on the recipient.” In fact, she said, “We are seeing more customers choose our premium designs that feature multiple foil embellishments on premium paper, such as metallic.” 

        Sustainable products

        Sustainability is another trend in the greeting card industry. “In the last few years, we have seen more and more customers include sustainability as a part of their buying decision,” reported Coats. “And, we have experienced increased sales in our Sustainable Sentiments® line of recycled greeting cards, which includes environmentally inspired designs for users who want to portray concern for the environment. The company is FSC® certified, and products are printed with soy ink on recycled or FSC paper. Cards are packaged with recycled, recyclable materials.”

        The company’s commitment to the environment goes beyond its products, however. “We recognize that using green materials is only part of the picture,” said Coats. “Therefore, our entire facility is certified at the highest level of sustainability for building design and operation — LEED Platinum. We also strive to continually improve the sustainability of our processes. We were one of the first print facilities to achieve SGP certification for our operation, and we are the first printer in the United States certified as a platinum-level TRUE® Zero Waste facility. In addition, 100% of our electricity is Green-e certified, with over 20% generated onsite via solar panels and the balance offset with renewable wind power.” 

        In the United Kingdom, UK Greetings (UKG), a part of the American Greetings family, is taking similar actions. It recently announced all its cards will be offset through the World Land Trust’s Carbon Balanced Paper program. The move will offset nearly 10,000 metric tons of carbon dioxide equivalents associated with the production of the board it uses for the 200 million cards it produces each year. 

        “UKG is committed to reducing our impacts in every aspect of our business,” said Chris Shaw, head of sustainability at UKG. He explained, “Since 2019, we have removed over 250 metric tons of single-use plastic from our cards and reduced our carbon footprint by 400 metric tons simply by improving our energy efficiency. With paper being our primary raw material, we work closely with our suppliers to help ensure that every single card and paper product can be physically traced back to sustainably managed forests. Choosing Carbon Balanced Paper was, therefore, a natural next step in our sustainability journey.” 

        By choosing Carbon Balanced Paper, UK Greetings will fund the protection of 635 acres of threatened habitat in the Khe Nuoc Trong region of Vietnam, a remnant of biodiverse tropical forest in a land blighted by deforestation. The area provides a sanctuary for a rich array of threatened wildlife, including one of the world’s rarest large mammals, a bovine, known as a saola, or “Asian unicorn,” as well as Critically Endangered species like the Sunda pangolin (a scaled anteater) and the red-shanked douc langur, a species of monkey. “We are thrilled to support World Land Trust in their efforts to protect the world’s most biologically significant and threatened habitats,” concluded Shaw. 

        Supply chain challenges

        Although Posty Cards expects business to return to pre-pandemic levels this year, Coats admitted that staying ahead of supply chain issues has been a challenge. Lead times on paper have increased dramatically, and material and delivery costs are rising. “So far,” she said, “delivery of our products has not been impacted.” However, even if deliveries can be made on time, rising costs “could force future price increases.”  

        Working Through the Bindery – From the Pandemic and Supply Chain to Paper Stocks and Adhesives

        December 9, 2021

        By Liz Stevens, writer, PostPress

        PostPress recently spoke with four experts to catch up on recent events and developments in the binding and adhesive areas of the industry. We asked Chris Eckhart, Eckhart & Co. Inc.; Mitch Holsborg, C&C Bindery & Packaging; Matt Cassidy, BC Adhesives; and Paul Steinke, Standard Finishing, to share how their businesses have changed throughout the pandemic; to offer advice on what to ask when looking for a perfect binder; to give suggestions for choosing the right adhesives and for dealing with various paper stocks; for thoughts on training or finding operators; and for key takeaways from dealing with supply chain shortage challenges.

        Pandemic pivots

        It seems that a lot of trade binders have had to really look at their businesses and figure out the best niches in which to survive and prosper in today’s marketplace. How have business models changed due to COVID-19, and how have business operations adjusted to working during a pandemic?

        Chris Eckhart, whose Indianapolis, Indiana, company Eckhart & Co., Inc. specializes in mechanical bookbinding, all forms of softcover (adhesive) bookbinding and tangential binding and finishing services, felt that emerging opportunities rather than corporate plans have led to many recent business changes. “I’m not so sure that these changes and new niches are driven by strategic decisions made by management teams,” he said. Eckhart pointed out that there now is more automation and technology in bookbinding and finishing equipment to maximize efficiency and reduce labor requirements. But the equipment is expensive and capital resources are finite, so businesses are selective about the equipment and technology they invest in, and that investment then drives a company’s focus and niche. “Bottom line,” he said, “these niches have been driven by the equipment, automation and technology that are available. The reality of it is either you have this automation and technology, and you can compete, or you don’t have it and you can’t compete.”

        Mitch Holsborg, president of C&C Bindery and Packaging of Farmingdale, New York, echoed Eckhart’s assessment. “Technology has been one of the most important parts of pivoting,” said Holsborg. C&C has diecutting, mounting, coating services and foil stamping in addition to bookbinding, and the company leaned on those parts of its business model while the demand for commercial work was weak. “Then we pivoted once again and used a lot of our capabilities to make bookbinding more profitable through value-adds,” he said. C&C began specializing in perfect binding and Wire-O during the pandemic instead of saddlestitching, folding and cutting. “We tried to use a value-add to attract more work,” Holsborg continued. With our ability to foil stamp on covers and to do film lamination, spot UV on covers and inside pages, we began doing something that nobody else was doing at the time.”

        From his perspective at BC Adhesives, an adhesive distributor in Franklin, Wisconsin, Matt Cassidy, territory manager, saw the same kind of change in his customers’ businesses and believes smaller runs of digital print work make sense to keep in-house: “I think they are realizing that this technology is out there and that they need to jump in and be competitive with it.” He also has seen expansion in the adhesive-specific work done by customers. “My binders that used to only do EVA,” he said, “are starting to invest in some PUR capability. Some customers are starting to specialize but they are also expanding into more types of work.”

        Paul Steinke, director of sales, Standard Finishing, Andover, Massachusetts, a North American distributor of print finishing and paper handling solutions, agreed that automation has been a key component in how customers have adjusted their businesses. “Automation has been important to some of the prospects looking at our equipment, and some of our trade binder customers are changing their business into quick turnaround service organizations,” he said. He noted that some customers could not make capital investments during the pandemic and that they therefore had to rely on trade binders for quick finishing to keep customers satisfied. “Even prior to the COVID-19 pandemic,” he went on, “perfect binding was relatively strong, but in the last 12 months, we were surprised at how much the book publishing market grew. Some said, ‘Oh, everybody is staying at home and reading,’ but it still is amazing how much demand has gone up. Overall, addressing labor challenges and automation are important factors since they can make businesses more efficient.”

        Binding equipment, adhesives and paper stocks

        What questions should one ask when looking for a new or used perfect binder?

        Paul Steinke advised that the first consideration should be the type of work to be produced, whether it will be very short-run, quick turnaround work or longer-run jobs with a longer timetable. “That’s very important to look at,” Steinke said, “because the decision to go with full automation or semi-full automation is affected by your type of work. Secondly, it is important to look at the types of paper stocks and substrates you use; those affect the type of binder as well as the type of adhesives you should use.” Steinke also recommended taking a close look at the binder’s construction. “In perfect binding, the milling process for spine preparation can be very rugged,” he said, “so you have to make sure that the equipment is very well built, and that the maker has a good reputation for reliability and construction.”

        Chris Eckhart seconded Steinke’s advice, based on a recent binder purchase for his own company. “We understood what kind of jobs we planned to run,” he said, “knowing that if you run 500 books, then you want one binder, but if you consistently run 5,000 or 10,000 or more, then you want another kind of binder.” Eckhart’s market was book manufacturing and so he chose a binder with gathering pockets and a high feed volume suitable for large book runs.

        What factors are important in choosing the correct adhesives? 

        “This is a pretty in-depth question,” said Cassidy. “There are a lot of different glues out there in the bookbinding world. It’s not just ‘here’s our one spine glue and here’s our one side glue.’ To start, you need to look at what type of books you are making – hardcover, soft cover, lay-flat books – and second, what type of equipment you have.” The type of equipment can dictate which adhesive is required. “Then,” said Cassidy, “it is crucial to consider what types of stocks will be run most of the time, and the likely run speeds. Those are probably the two most critical things for us as we talk to prospective customers.” And, said Cassidy, the quality of the books influences the adhesive choice. A provider of low-cost books will choose different adhesives than a maker of specialty or other high-end books. 

        Cassidy also weighed in on working with recycled stocks. “It can be difficult to get good adhesion with recycled papers,” he said. “There’s just not a lot of fiber in those papers. The remedy is not necessarily the glue to use; a lot of the solution lies in doing good spine prep – how you are building that book. That’s really where all your quality begins.” 

        “From the equipment standpoint,” said Steinke, “we primarily look at two different types of adhesives; it’s either EVA, which is multi-purpose for most substrates that have good paper fiber, or it’s PUR – polyurethane-reactive adhesive – for the stocks that have a little more challenge, a little less paper fiber.” He explained that with recycled stocks, high clay content stocks and enamel stocks, PUR adhesive is more adaptable for producing binding strength. “Over the past few years,” he said, “we have seen an increase in PUR requirements in the smaller binding systems whereas, traditionally, PUR has been popular in the large systems for long runs.” Now, even single-clamp binders at an entry-level price point are offering PUR. “Some of that is being driven by case binding,” Steinke said, “Case binding traditionally has been sewn book lots and then going into a casing-in process. I think with digital printing and the ‘I need it now’ environment, some of the migration to PUR is because it is less labor-intensive than sewing.” 

        While these may be the main things causing a switch to PUR adhesive, Steinke noted that it is important to understand the different types of jobs that customers run and their turnaround times, because PUR adhesive requires more curing time to build a strong bond. “You can’t PUR-bind a perfect bound book and then immediately put it in a shrink wrap,” he said, “It must have access to the air to fully cure. Another thing to take into consideration is that PUR relies on moisture in the paper and moisture in the environment to cure, and this affects the manufacturing process as well. PUR is a more challenging in drier parts of the country and less challenging in humid areas. Though all these things must be taken into account, we are seeing an uptick in the PUR requirements in our perfect binders.”

        Holsborg added a caveat on choosing and using adhesives. “All of the recent trucking issues – trucks held up in depots and delayed in travel – can lead to problems, especially on quick turnaround jobs,” he said. “If you don’t allow books to cure long enough and you put them in a truck that travels in a cold environment or goes to an unheated warehouse, books can develop adhesion issues. It could be due to the recycled fiber in the stock or it may be a combination of things, but we have seen a rise in these types of problems.” 

        Cassidy offered estimates on curing time requirements. “In a perfect world,” he said, “you would have a 24-hour wait before you send out a job, and your books would be fully cured. But that is not the world we are living in.” He has seen, however, new formulations of PUR adhesives that can set up faster. “Some will start to have a good 50-60% cure after eight hours; others are not getting to that point until 12-14 hours,” he noted, while saying PUR is not a panacea. “Some people think PUR is this magic glue that can stick to anything out there,” he said. “We see people who are having trouble with EVA who seem to think, ‘Okay, I am going to go out and buy a PUR unit and solve all of my problems.’ That is not necessarily the case. You still need to do good spine prep; that is the building block for creating the fiber content that allows PUR to create good adhesion.”

        How does the type of paper stock affect gluing, folding and binding in general, and how can problems be resolved?

        When it comes to different paper stocks, said Steinke, spine preparation is a key aspect for perfect binding. “You also have to be aware of ink coverage,” he said, “because that can affect the actual characteristics of different paper stocks as well.” The inkjet printing process can lay down a lot of water-based ink to produce good quality images; this must be considered along with the stocks that are being used. “For perfect binding and some paper stocks, having flexibility to use both types of adhesives is a plus,” he added.

        Eckhart said about flexibility with EVA and PUR adhesives for variations in paper stock: “My suggestion is to be prepared to deal with it; have equipment that can use different types of glue and have relationships with glue companies that can supply various types of glue.”

        Holsborg added input about problems with scoring for various paper stocks. “When you have stock with no grain or mixed grain or the wrong grain,” Holsborg said, “I find that you really need to die score a lot more covers in order to reduce the amount of cracking.” He stated that he also is laminating covers now to solve the cracking problems on the outside on newer stocks and uncoated stocks. “The uncoated stocks are especially a challenge,” he said, “because the grain, especially in the past couple of years, seems to pop off the paper. It is not traditional cracking; it is actually flaking, and we end up having to put a matte film on covers in order to solve the issue.”

        How about some tips for dealing with glues and adhesives on uncoated and coated papers?

        When using adhesives on uncoated paper, Cassidy advised running the adhesive a little bit cooler. “This will make it slightly thicker,” he said, “and you won’t get so much wetting out into the uncoated stocks.” And, as opposed to roughing up some stocks to create more fiber, with uncoated papers Cassidy’s advice is to not beat the paper up as much. “As far as the type of adhesive to use,” said Cassidy, “if you are running uncoated stocks, and you have the flexibility to use either PUR or EVA, people generally use EVA. That’s not to say that you can’t use PUR, but if you are running more coated stocks, PUR comes in handy because it creates a much stronger bond.” For recycled paper stocks, it’s back to spine prep, including notching, micro-notching and different tooling in the milling station to expose more fibers.

        Holsborg stated that for dealing with adhesion problems on different types of paper stock, his company uses a trial-and-error approach. “We round up all the talent we have here to address the problem; then we take it one step at a time and try different things,” he said. “We have developed a system where we will come up with a plan and we will try one thing at a time until something works.”

        The supply chain quagmire

        How has the supply chain meltdown affected binders and finishers? How have they adapted to the situation or even found new business opportunities?

        Eckhart shared his experiences as a bookbinder: “We saw books that may have been produced overseas not being printed or bound overseas because of the disruptions in getting materials or books back to the US.” He noted that the problems abroad and in the states are likely to continue for quite some time. “Stateside trucking, for instance,” he said, “that’s just not going to get any better. We’ve got a high demand for goods, but a shortage of drivers combined with production capacity that is diminishing. These are things that we are just going to have to deal with.” Eckhart advised a closer focus on aspects that are within a binder or finisher’s control, saying, “We have to become more attuned to our inventory. We have to make sure that we have good, strong relationships with vendors and that our suppliers understand our needs. We are going to have to make sure that we understand our needs and what our usage is over the course of a quarter or a half a year.”

        “We learned a very important lesson during the beginning of COVID-19,” said Holsborg. “We pivoted and made face shields for a couple of months in order to have our factories stay open as essential manufacturers. What I found as a solution to supply chain issues was to buy in scale with other vendors and other customers.” Holsborg teamed up with four other similar companies; rather than competing with one another and bidding up prices, they joined forces to buy materials – plastics, foam, elastic – in volume.

        Steinke described the supply chain challenges from the perspective of an equipment manufacturer. “We have seen more manufacturing being kept in country,” he said. “I think that is a reaction to the increase in demand for binding that we have seen since the pandemic began. Shipping out of the Asia Pacific region is a challenge (Standard Finishing’s Horizon equipment is from a Japanese manufacturer), and we saw that impact as early as the third and fourth quarter of 2020 with limited container availability and shipping delays.” Steinke’s company has had to stretch out its forecasting and be prepared for more delays in receiving inventory. “We typically shift inventory and make sure to supply everything to customers at the very end of our calendar year; I have already been doing that since February of this year,” he said. “Those are the kind of things we have been working through, but the silver lining, I think, is that there is more business staying in our country and that is working out for the good of everyone.”

        Cassidy weighed in as an adhesive distributor. “We have been hit hard from several different aspects,” he said, “including the port problems on the West Coast and the extreme weather down in Texas shutting down polymer refineries. I have spent my time making sure we are keeping customers running.” Cassidy pointed out that, in this situation, it is beneficial to have a relationship with a distributor. “We can offer a shelf of products that individual manufacturers cannot, offering products from some manufacturers that have remained strong in certain technologies and others that have remained strong in different ones.” Cassidy helped some customers test secondary products or test new products to use as alternates. “As Chris Eckhart said, you have got to keep track of your inventories and your usage. With adhesives, that means making sure you are not over-applying and that you don’t have any broken seals that are leaking glue. There are lots of moving parts, but this is why you partner with suppliers and why suppliers partner with their customers. When times get difficult, you work together to find the best solutions to keep you going.”  

         

        We Got What We Wanted… Now What?

        September 9, 2021

        By Chris Kuehl, managing director, Armada Corporate Intelligence

        For the last few months, I have been back on the road giving talks – a welcome respite from those infernal Zoom calls and webinars. I have been calling these presentations “Be Careful What You Wish For: You Just Might Get It.” We all fervently desired an end to the lockdowns and pandemic protocols, and then we got some of that wish. Now I am remembering what I didn’t miss about traveling. 

        On the other hand, I am getting the first-hand information and feedback I didn’t receive over the past year, and in all these conversations, there have been three concerns at the very top of the list for businesspeople all over the country and in sectors as varied as manufacturing, construction, accounting, retail, transportation and so on.

        Concern #1: labor supply

        The very top of the list has been labor supply. This certainly is not a new issue, but it has reached a crisis point for many. Almost every executive I speak with has asserted they have been turning down business. They simply cannot meet the demand as they don’t have the people they need. This mostly is an issue with the more skilled positions, but the majority assert that even lower-skilled jobs have become impossible to fill. Many factors are at work to make this issue more vexing – most notably, the extension of government benefits through the summer. The fact is that these extensions are not the prime reason for this shortage. Workforce participation has been falling for years and now is as low as it was in the 1970s when women generally were not part of the workforce. This participation issue is due to retiring Boomers, reduced immigration levels, skill mismatch, location issues and so on. 

        No simple answers exist, and those who assert that all that is needed are higher wages have not been paying attention. Even the promise of good pay and benefits has not been enough to draw people into the workforce – and beyond this, it often is impossible for a company to continually offer higher wages if there is to be any hope of protecting the profit margin.

        Concern #2: inflation

        The second issue on the list is inflation, and this is no shock. The surge in demand as the lockdowns ended corresponded with a collapse in the supply chain – and suddenly, the commodities markets were exploding with hikes as high as 180% (lumber). Oil gained by over $40 a barrel in four months and metals have been up as well. Wages did not rise at first as there still were many unemployed, but they certainly rose for the people that had the skills. In the ten Midwestern states, wages went down for manufacturers in only one (Kansas). All others saw hikes between 5.0% and 11.0%. The surge in commodity pricing was to be expected and likely is to be somewhat transitory as producers strive to catch up. Wages are another story. Once these come up, they don’t come down – and companies have to adjust to these higher labor costs by hiking their own prices. Once wages start to come up, there will be inflation chasing as higher prices are imposed to deal with wage hikes … and that stimulates even higher wages. The Federal Reserve has been referring to the current inflation situation as transitory, since it is assuming inflation threats will ease once the suppliers are able to meet demand. 

        Basically, two motivations exist for commodity-based inflation. The first, is a genuine shortage of some commodity or product. A good example from the past was the impact on oil prices due to the OPEC embargo back in the 60s, when producers withheld oil and there was not enough on offer to fulfill need. There have been other shortages of materials due to supply chain disruption or natural disaster, such as when the Japanese were hit with the Fukushima disaster and plants were shut down. These inflation surges persist for an extended period of time. The other motivation for inflation is when demand shoots past the ability to keep up. This is a much shorter-term issue as producers have the ability to meet this demand once they have time to gear up for it. That is the situation we find ourselves in now, and the shortage doesn’t last long. Producers are scrambling to meet this unexpected demand – they want to protect their market share, and they hate to leave money on the table.

        Concern #3: continuation of growth

        The third issue revolves around how long this growth continues. The estimates for this year verge on the spectacular – anywhere between 6.0% and 7.5% (depending on the holiday spending season). Next year is expected to be solid as well, but with growth at around 4.5%. After that, the pace slows to the normal annual average of 2.5%.

        Given this, what should companies do to react to the fast growth now? There is a temptation to do what is required to meet current demand, and that would mean paying higher wages, accumulating commodities and inventory to ensure supply, investing in extra capacity and so on. What happens when growth slows? It is an awkward choice – either leave money on the table this year and risk losing market share to competitors or risk having far too much capacity, inventory and labor when the economy slows down. There is a reason more companies go out of business during a recovery from recession than during the recession itself. It is very tempting to pull out all the stops to meet demand – companies rush to buy new machines, expand capacity and hire people. They end up paying a premium for all this expansion – costlier machines, expensive construction and higher wages. What happens when the demand flags? Most of these expenses can’t be reversed and the costs overwhelm. This is what creates the “zombie” company – the business that is not making enough to service its debt, let alone grow and expand.

        What’s coming next?

        First, labor shortages will remain a major issue for the next several years. There are no quick solutions – training and education take time. Dealing with the labor issue will mean accelerating reliance on technology, automation and robotics. Every task will have to be assessed to determine if there is a machine alternative. 

        Second, inflation is here to stay, but it is not likely to hit hyperinflation levels. The Fed has tools to affect the money supply and will start pulling back on stimulus. The inflation levels will drop a little, but will stay higher than they have been in most of the last decade.

        Finally, we see growth slipping as early as Q2 of 2022 but not collapsing. Returning to normal will feel like a slowdown as compared to what we have been seeing in the last year, but it really will be just getting back to a more sustainable pace. 

        The bottom line is that it is going to be tough to compare to either the truly miserable 2020 or the unusually robust 2021.  

        Chris Kuehl is managing director of Armada Corporate Intelligence. Armada executives function as trusted strategic advisers to business executives, merging fundamental roots in corporate intelligence gathering, economic forecasting and strategy development. Armada focuses on the market forces bearing down on organizations. For more information visit www.armada-intel.com.

        When You See a Fork in the Road, Take It

        March 12, 2021

        By Chris Kuehl, managing director, Armada Corporate Intelligence

        Yogi Berra’s wise words resonate more these days than ever. We are in a topsy-turvy world: The pandemic has devastated part of the economy, but not other parts. The service sector has been slammed with the worst recession seen since the 1930s, while much of the rest of the economy has carried on as before. Housing is strong, manufacturing is mostly back to normal, exports and imports are at their usual levels, and so on. To add to the litany of business challenges, there has been the most contentious election in decades and the most chaotic transition in over a century. The result is a somewhat flummoxed business community unsure of what to expect now. To the rescue comes the economist – famed for our ability to predict the past! There are three scenarios in play right now as far as the melding of economics and politics.

        Scenario 1: For the optimist

        The first scenario has the support of 25% of analysts. This asserts there will be three important developments between now and the middle of the year. The first and most likely is that vaccine distribution will reach acceptable levels by the start of the summer. There still is debate over what herd immunity will require, but it is thought to be defined by at least 240 million immunized people in the US.

        Once that level is reached, the load on hospitals will decline and lockdowns will start to lift, allowing a service sector recovery. This is the second assumption – a grand reopening of the sector where consumers once spent the majority of their disposable income. This has been referred to as the “great divergence,” as consumers will switch from buying stuff to buying services again. The third development will be a resumption of some normal working patterns. People still will be working at home to a degree, but many will be back to their offices and workplaces. That has significant implications for the oil sector. Oil demand will be up, and it is likely to exceed supply for a while – and that spells inflation to a degree. Prices that had been between $40 and $50 a barrel will creep up to between $60 and perhaps $80, at least for a while. That also will mean higher prices for the raw materials.

        Scenario 2: For the realist

        The second scenario essentially twins with the first. It also assumes there will be progress as far as vaccine distribution and the subsequent economic recovery, but there are additional issues that will have an impact on the economy. The most important will be the influence of politics. The Biden administration has a typically long list of changes and actions it wants to work on (as always takes place when there is a change in leadership). Which of these policy directions actually will emerge this year? One result of the dead tie in the Senate is the emergence of the centrists as power brokers. Nothing of real consequence will pass without their support, and that means paying close attention to four centrist Republicans (Mitt Romney, Susan Collins, Lisa Murkowski and Ben Sasse) and three centrist Democrats (Joe Manchin, Jon Tester and Kyrsten Sinema). This group likely will temper big tax hikes and big projects such as the Green New Deal or Medicare for All. Look for tweaks and alterations as opposed to big shifts.

        There has been a sense thus far that Biden favors incentives over restrictions and penalties. This means encouraging the development of alternative energy as opposed to attacking fossil fuel use head-on. It means focusing trade relations on export promotion as compared to restricting imports. This scenario is attracting about 50% support from economists and underpins the assumption that growth will be between 4.0% and 5.0% by the end of the year.

        Scenario 3: For the pessimist

        There always has to be a negative scenario as well. Roughly 25% of analysts still assert that everything will not develop as expected and the 2020 recession will drag on through 2021. The major issue remains the pandemic, but just as important is the reaction of the consumer and of government. Just because the vaccine is widely distributed by April and May, there is no guarantee that cautious governments will reopen. It could be the end of the year before many states and cities allow restrictions to lift. Then there is the willingness of consumers to pick up where they left off. Will people go back to the restaurants and bars, attend events, be willing to go back to the office and travel for business? Many will, but is that enough? There are three hurdles for the economy to clear: 1) acceptance of the vaccine, 2) acceptance by government sufficient to reduce the restrictions and 3) acceptance by consumers sufficient to resume old patterns.

        What’s next?

        The data thus far supports the notion that enough people ultimately will accept the vaccine for herd immunity to occur. In December of last year, the polls suggested that around 30% were unwilling to take the vaccine, but that number now is less than 15%, as there have been few reports of bad reactions to the drug. The reduction of pandemic protocols is another story altogether. Thus far there has not been much reduction of restrictions as the pandemic numbers have not changed. It is assumed that more controlled situations will reopen first – restaurants and retail. Events and anything that draws crowds of strangers will be the last. The optimists think there will be openings by late spring, and the pessimists assert it is more likely to be late summer.

        The final wild card is the consumer. Have the new ways of doing things taken hold? Will people want to go back to the office? Will they want to shop in the brick-and-mortar shop again or has the online option taken over? These are questions that can’t be answered adequately at this point.

        On top of all the scenarios that are rooted in the pandemic response, there will be discussions regarding what the US political situation will mean for the economy. Trump now has departed, and attention is focused on the man who replaced him. Interestingly enough, there is not a great deal known about the plans and strategy that will emerge now. The most significant clue thus far is that Biden has surrounded himself with political veterans and people who worked with him in the Obama years.

        For many industries, there will be pressure to be part of the solution on issues such as climate change, solid waste and other green initiatives. Some industries already have been a target on these green concerns. The push will be toward finding compromises in terms of design and usage for certain types of products. There will be threats and opportunities as the agenda on these issues develop. Thus far, the Biden approach has been oriented toward incentives as opposed to outright regulatory bans, but the latter tactic likely will be employed as well.  

        Chris Kuehl is managing director of Armada Corporate Intelligence. Armada executives function as trusted strategic advisers to business executives, merging fundamental roots in corporate intelligence gathering, economic forecasting and strategy development. Armada focuses on the market forces bearing down on organizations. For more information, visit www.armada-intel.com.

        2020 and 2021: No End to Chaos in Sight

        December 9, 2020

        By Chris Kuehl, managing director, Armada Corporate Intelligence

        It has been pointed out for years that business hates uncertainty more than anything – even certainty over bad news and crisis is preferable to not knowing what is happening. Planning is the essence of business – setting strategies that can be executed and evaluated in terms of whether they are reaching set goals. How does one set strategy in these times? Not only is there a global pandemic that worsens by the day, but the politics in the US have never been so tense, with real doubt regarding whether half the country will accept the outcome. As of this writing, we still are in doubt as regards both of these issues. It would be nice to assume that we have reached a turning point that allows us to put 2020 in the rear view mirror and look ahead to 2021 with a return of life to some semblance of normal… but that seems highly unlikely.

        We have had an election – and one that will rank as the angriest and most contentious in decades. Trump already has demonstrated a determination to declare himself the winner even before the race is decided and has stated that he will oppose efforts to count all the votes. It appears the Senate has not flipped, but that remains in some doubt as well, as many states still are undecided – and that will mean recounts and several weeks of uncertainty over which party will control Congress. The House of Representatives will remain in the hands of the Democrats. It appears there has not been anything close to a “blue wave” and, once again, the pollsters are revealed as completely out of touch with the voters. The state races are varied as well.

        In a normal year, the election would be the focal point for the business community and society in general, but this has been anything but a normal year as the pandemic continues to rage and the reaction to this virus will continue to dominate every political and economic decision well into the coming year. The question that will confront the political leaders will be the same one that confronted them before. To see what lies ahead for the US, one only has to look at Europe right now.

        The “winter wave” of the pandemic has arrived there (as it has started to in the US). The number of cases, hospitalizations and fatalities have surged, and this has provoked a return to the lockdown strategy. In country after country, there have been decisions to shutter public places, ban gatherings, shift schools to virtual platforms and, in some cases, prohibit people from leaving their homes. The impact on the economy has been devastating already, with predictions of a return to full-on recession in the fourth quarter. The estimate now is that Europe will be in recession for at least the first half of 2021. Unemployment will be back to double-digit numbers, tens of thousands of businesses will shut down and governments will break debt and deficit records. This is the fate that awaits the US as the confident assertions begin to fade.

        The Conference Board was looking at two options for 2021 – an upside and a downside projection. The upside expected growth at the end of this year that carried into the first half of 2021 but then faded a little toward the end of the year. The downside saw anemic growth this year and into next but then expected an improvement as 2021 progressed. The good news was that both of these projections had the economy back to where it started 2020 by the end of 2021. The latest iteration of the analysis now has a third option, and it isn’t good. This is the real downside projection and is based on a renewed national lockdown that sends the economy back into a recession. That double dip means an economy that is worse off at the end of 2021 than it was in the second quarter of this year.

        Economic priority #1: coronovirus

        What can we expect as far as economic priorities? Obviously, the only thing that will matter in the next year will be dealing with the pandemic, and that will have profound economic implications. It is more likely there will be a national lockdown of some kind under a Democrat-led government, but it is not guaranteed. The best estimate is there will be an extension of the partial shutdown rather than the total approach taken last spring. The primary focus for the coming year will be rolling out the vaccine. Reports suggest that several versions already are in production and are waiting for the conclusion of the phase 3 trials. Thus far, these have been panning out as expected.

        What happens after this crisis has been addressed? This election has focused very little on issues other than the pandemic, and that creates a certain amount of anxiety as campaigns make a lot of promises that are not intended to be kept. There appear to be three areas a Democratic administration will want to emphasize. The first of these is climate change. This came up repeatedly in the campaign, and it is something that both moderates and progressives seem to be able to agree on. This would likely involve promotion of alternate energy and efforts to reduce use of fossil fuel. The challenge is there is little room in the budget for incentives and promotion of alternatives, and there will be reluctance to return to the days when OPEC controlled the US energy destiny. Fracking is not popular, but it has been key to the US economic rejuvenation over the last several years. If the Republicans continue to hold the Senate, the chances for a shift in energy policy are minimal. Climate change has not been of interest to the GOP thus far, and there is powerful support for the fossil fuel industry in general.

        Economic priority #2: tax reform

        A second priority will be tax reform. There will be a desire to hike taxes on the wealthy on the part of the Democrats, but there also is recognition that the upper 25% of the consuming public spends the majority of its disposable income on services – and this is the very sector of the economy that will need the most help to recover from the recession. The easiest step will be to allow the tax cuts instituted at the start of the Trump years to expire. There has even been some GOP support for this move, given the number of fiscal conservatives in the party that are concerned about the size of the debt and deficit. There also will be talk of cuts in spending, but the reality is that over 65% of the budget is mandatory (social security, Medicare and Medicaid). Another 7% is interest paid to those that bought the government debt, and that leaves 28% as discretionary spending. Spending on defense accounts for over half of that 28%. That leaves about 15% for all other spending, and there is just not much that can be cut these days.

        Economic priority #3: foreign policy and trade

        A third priority is likely to be foreign policy and trade. Alliances with Europe and Latin America are in tatters, and the Biden camp would be far more hostile to Russia than Trump. Neither party is a fan of China, but the business community recognizes the country’s role in global trade. The fact is that foreign policy is the area a President was created to deal with by the founders. The US relies on trade for almost 20% of the GDP, and the last four years have been marked by reductions in export activity. Trump has pursued an isolationist and protectionist approach and Biden favors more traditional diplomacy, but every country in the world now will be favoring policies that benefit their own economies.

        The election has revealed an incredibly divided and angry electorate. The Trump support has been overwhelming in the rural areas, and Biden’s support has been in the urban areas. There had been some faint hope of a moderate middle emerging from among centrist Democrats and Republicans, but that has evaporated and what is left is hard right and hard left in Congress. With the Senate in GOP hands and the House in Democratic hands, the next four years will feature the kind of gridlock and animosity the last four years have featured.

        Chris Kuehl is managing director of Armada Corporate Intelligence. Founded by Keith Prather and Chris Kuehl in January 2001, Armada began as a competitive intelligence firm, grounded in the discipline of gathering, analyzing and disseminating intelligence. Today, Armada executives function as trusted strategic advisers to business executives, merging fundamental roots in corporate intelligence gathering, economic forecasting and strategy development. Armada focuses on the market forces bearing down on organizations. For more information, visit www.armada-intel.com.

        Evolution of Sustainability and Circular Economy and Their Influence on Printing Operations

        June 5, 2020

        By Gary A. Jones, director, EHS Affairs, Specialty Graphic Imaging Association

        Despite what many may think, the concept of sustainability is not new and has been evolving for decades. To some extent, the roots of sustainability were born with the conservation movement that was spearheaded by President Teddy Roosevelt, who worked hard to establish the national parks system. Since then, the focus of sustainability has grown to encompass an examination of just about all aspects of daily life and a search to find approaches, products and services that have a positive impact on the planet.

        Sustainability background and emergence of the circular economy

        Modern sustainability emerged in the mid to late 1980s with the publishing of a report titled “Our Common Future,” also known as the “Brundtland Report,” in 1987 by the UN’s World Commission for Environment and Development, chaired by former Norwegian Prime Minister Gro Harlem Brundtland. The report defined the principle of sustainable development as, “development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”

        There was a period after the release of “Our Common Future” before the sustainability movement became a hot topic for the printing industry. The question about what is a “green printer” began in earnest in the mid 2000s and reached a crescendo near the end of the decade. In response, the printing industry created and launched the Sustainable Green Printing Partnership (www.sgppartnership.org), an independent third-party certification program addressing sustainable print manufacturing.

        During the last decade, sustainability in the print industry focused on the packaging and point-of-purchase displays market, with many print customers requiring their products to be both sustainable and manufactured in a sustainable fashion. Then, in 2018, a sustainable tsunami hit the world, with tremendous ramifications.

        Two events focused targeted attention to the issue of sustainability. First, National Geographic launched a campaign to reduce waste from plastic products, such as single-use bags and straws, called “Planet or Plastics?” The National Geographic initiative not only included an awareness campaign about plastics pollution but also addressed investments in research programs and partnerships.

        The second action, and perhaps the one that had the greatest impact, was China’s implementation of its Blue Sky program that set strict regulations about the scrap material imported into the country. Over the last decade, China has accepted a wide variety of wastes from many countries in the world – including the United States, Canada and Europe – for recycling. It only was able to use a small fraction of the material received, and the rest was either landfilled or left to accumulate. To combat the overwhelming amount of waste that could not be recycled, China outright prohibited certain materials from being imported, and for those they were willing to accept, it set an extremely low contamination rate of 0.5%. The targeted materials for ban included plastics, scrap paper, certain metals and textile materials. China continued to set bans around additional materials and may completely ban all materials.

        This positive leap for China to achieve its national environmental health goals has caused major repercussions for the rest of the world. The ramifications for the US have been particularly impactful as approximately 40% of the total materials collected for recycling were being exported to China. While other countries such as Indonesia, Vietnam and Korea are willing to take some wastes, the amount they can process is not large enough to absorb what China was accepting. These countries, along with other Asian countries such as Malaysia and the Philippines, have been closing their doors to these waste products.

        Push for a circular economy

        The actions taken by China and other countries highlighted the limitations of the linear economy. The linear economy is characterized by the take-make-dispose approach to producing products and services. This approach tends to consume finite resources to produce products which end up in landfills or incinerators. The launching of a new model was seen – the circular economy.

        The circular approach, as envisioned by the Ellen Macarthur Foundation, entails gradually decoupling economic activity from the consumption of finite resources and designing waste out of the system. The circular economy incorporates renewable energy and is based on three principles: designing out waste and pollution, keeping products and materials in use, and regenerating natural systems.

        Sustainability_chart
        Figure 1. Linear, Reuse and Circular Economic Models (Source: Government of the Netherlands, www.government.nl/topics/circular-economy/from-a-linear-to-a-circular-economy)

        The illustration in Figure 1 offers a clear illustration of the differences in material flows between linear, reuse and circular economic models.

        Achieving a circular economy is not an easy path to take as it is difficult to fully eliminate waste. Some products, such as those made from renewable resources, readily are adapted to the circular economy model while others are more challenging. There are many practical barriers to establishing a closed-loop economy. However, changes toward closed-loop or circular economy operations are achievable within specific sectors, companies or product categories.

        One business strategy for closing the production-use-disposal scenario includes shifting from selling products that the consumer owns and eventually disposes of to providing a service with an agreement in which the products remain the responsibility of the manufacturer to repair, replace, refurbish or repurpose. This shift in ownership incentivizes the manufacturer to design for less waste, produce a more durable product and create loyalty with their customers.

        For example, a recent assessment by Ricoh concluded that by 2050 there will be an insufficient supply of many virgin materials at a reasonable cost to support its manufacturing needs. As a result, Ricoh has revised its business model using life-cycle analysis as the basis for decision-making and establishing a series of “Resource Smart Solutions” for product design and manufacturing, re-use, collection, maintenance and materials recovery. Since the company owns 60% of what it sells, it can engage its customers in new business solutions derived from a circular economy approach.

        Government action

        Many argue that government intervention is needed to both encourage and instill a more sustainable environment. Several approaches have been proposed, using the circular economy model, to address reaching this goal. Approaches under consideration involve the imposition of mandates to use a specified amount of recycled materials in products, banning the use of certain products and implementation of Extended Producer Responsibility (EPR) programs. EPR programs are designed to shift the waste management cost or physical collection partially or fully from local governments to producers.

        EPR as a concept is not new in the US, with almost every state having some type of producer responsibility laws covering consumer products such as automobile batteries, electronics, mobile phones, paint, pesticide containers, carpet, thermostats and pharmaceuticals. Several states have enacted landfill bans which have had an increasing positive impact on product recycling.

        Packaging and paper have not escaped the grasp of EPR. Many provinces in Canada and many countries in the European Union have had EPR programs extending to packaging or printed paper for many years. So far, none have been enacted by a state or local government. However, that may soon change with the states of Maine, Massachusetts, New York, Oregon and California.

        Maine’s legislation has come the closest to being enacted. It was debated in this year’s legislative session, but failed to pass. Maine’s legislation would see producers with more than $1 million in annual gross revenue paying into a managed fund, with participating municipalities then eligible to be reimbursed for recycling and disposal costs. The costs imposed would be done on a sliding scale of how “readily recyclable” a material is and those that are difficult to recycle would be charged a higher fee. Unless there is a special session called, it will not be considered again until next year.

        While there has been activity, virtually all government legislative and regulatory activity has occurred at the state and local level. The combination of the National Geographic focus on plastics, including ocean plastics, and China’s Blue Sky program and its ramifications spurred many state and local government entities to ban the use of certain types of plastic-based products.

        Many states have implemented bans on plastic bags, plastic straws, polystyrene food containers and other single-use plastic products. Likewise, some corporations have initiated their own programs. A good example is several large hotel brands are eliminating the use of individually packed toiletries such as shampoo, conditioner, etc. in guest rooms.

        Some states have taken the approach of focusing on setting requirements for certain types of packaging. For example, California has established, through legislative action, a program that sets requirements for state-controlled food service packaging. This new program requires state-owned food service facilities, those operating on state-owned properties or those under contract to a state agency to dispense prepared food using food service packaging that is reusable, recyclable or compostable.

        Marketplace responses

        There are bright spots. Emerging trends around both the use and manufacturing of alternative substrates that are easier to recycle is on the rise. While there is a movement to increase infrastructure recycling using existing technology and new technologies such as chemical recycling, it will be some time before it comes online and sufficient capacity exists to relieve the downward pressure.

        Some brands are shifting away from plastic to paper-based products. Several examples include using paper-based material to replace six-pack rings or the recent announcement by Procter & Gamble Beauty that it will start offering both Old Spice and Secret brand deodorants in all-paper, plastic-free, tube packaging. There is no mention if the paper tube is recyclable.

        For textiles, there is movement to use cellulosic fibers, recycled poly, organic cotton and Better Cotton Initiative (BCI) cotton, which is a cotton sustainability program. For labels that are being used on PET-based containers, there is a move to use labels that are compatible with the recycling process and for other plastics, work is being done on polymers that are more compatible to both mechanical and chemical recycling.

        It also is important to understand that, in addition to new substrates and recycling technologies, there are companies exploring reductions in packaging and package-free options. Lightweighting a package is not necessarily new, along with concentrating certain products to reduce package size. The new options being explored involve selling a single product where the package can be reused multiple times with the subsequent purchasing of super concentrated product that is reconstituted by the consumer.

        A corollary to this approach is refillable packaging, where the consumer returns to the store to refill their individual container from bulk dispensing units. Package-free options already are being explored by smaller grocery stores where products are not sold prepackaged.

        How this impacts the printing industry

        For those facilities involved in packaging and labels, the sustainability and circular economy movement is real. Companies such as Wal-Mart, Target and Unilever have adopted sustainability goals related to the reduction of packaging materials. While attention has been focused on the use of plastics and packaging, increasing attention has been turning to the fashion industry. The drum beat to reduce the impact of “fast fashion” is increasing and getting louder every day. The effect is hitting both the products being produced for customers and the manufacturing operations.

        The pressure on brands to address the waste associated with their products has been growing and will only continue to increase. A second, and possibly most important, impact of China’s Blue Sky program is felt around the country as municipalities have stopped or suspended local recycling programs.

        With China no longer accepting most of the US-generated recycling, the market has disappeared. With the approaches that many brands and other companies are taking to address these issues, those that are producing products, packaging, labels and other supporting material need to understand they could have their businesses severely interrupted and threatened. Imagine the impact if someone’s primary business was producing packaging or labels and the company’s number one customer decided to offer its products as package free.

        With the focus on textiles, packaging and paper waste increasing, printing operations need to become engaged on several fronts. They need to become educated about the changes occurring with respect to new substrates, advances in recycling technologies and recycling services, such as those offered by TerraCycle. This education provides the ability to offer solutions when requested by the customer.

        Establish a dialog with customers to educate them about the current and future changes being driven by pressure from consumers, consumer groups, environmental organizations and government regulation. Given the economic pressures being applied to local municipal recycling programs, it is almost certain that there will be additional government regulation imposed on those that produce products, even if they are currently readily recyclable.

        The benefit of having this type of dialogue is it allows the printing operation to gauge the understanding and options being considered by the customer. Customers are not monolithic. Some are proactive, while others will wait until circumstances dictate action on their part. If some of the ERP laws come to fruition, understanding the impact of various substrates and alternative options that are more readily recyclable would enable customers to pay less of a fee due to their ability to be recycled.

        The education about the changing landscape also allows printing operations to understand the possible changes occurring and potential shifts by their customers to new substrates or the abandonment of current substrates. There are a host of issues that need to be considered, including performance, cost, printability, waste, etc. Understanding how to work with these new or “new to you” substrates will allow for a competitive advantage and allow for a fast response to changes in demands from customers.   

        Conclusion

        The building of a circular economy is not going to be easy. There are many considerations that need to be evaluated as the linear model and the mindset associated with it will be difficult to transform. Nevertheless, the physical realities of the linear model have reached a tipping point as the world has quite simply run out of places to put the waste generated by modern society. Landfilling waste is not a solution as it is just long-term storage and more eloquent solutions are mandatory.

        The path forward for many products is not clear. The key to expanding the circular economy is the engagement of consumers, business, academia and government to provide the demand and proper incentives to find solutions. With government now adopting circular economy legislation, more consumers demanding solutions and some brands adopting circular approaches across their value chain in order to mitigate reputational, supply chain, financial, environmental and regulatory risk, printing operations will need to adopt new business models that align with an emerging reality that discourages waste and encourages resource efficiency with design and innovation. This means they need to become more cost efficient, incorporate renewable technologies and resources, partner with like-minded suppliers and engage with emerging approaches to remain relevant and competitive.

        Gary Jones is SGIA’s director of environmental, health and safety (EHS) affairs. His primary responsibility is to monitor and analyze EHS regulatory activities at all domestic and some international government levels. He provides representation on behalf of the printing and specialty graphic imaging industry. For more info, visit www.sgia.org.

        Print and the Economy in 2020

        March 10, 2020

        By Dr. Ronnie H. Davis, senior vice president and chief economist, PIA

        With the New Year upon us, there is a dynamic mix of economic cross trends, politics, global trends and other issues. Presented below are the current views of Printing Industries of America (PIA) on print markets and the economy for the remainder of the year.

        Mixed signals: Will the longest recovery keep going?

        The $21 trillion US economy is a complex, dynamic amalgam of positive, stable and negative market forces. When upward forces dominate, we have growth. When downward forces dominate, we have recessions. Fortunately, over the past seven decades, upward forces have dominated more than 90% of the time, as they have over the last 126 months. Like the Energizer Bunny, the economy just keeps going and going and going, and it now stands as the longest continuous expansion in US history. Can it continue into 2020 and beyond?

        The current economic expansion started all the way back in June 2009. This makes this expansion the longest in 164 years of record keeping by the National Bureau of Economic Research, the official scorer of the track of the economy.

        2020-Economic-ScenariosUS employment growth has averaged around 200,000 jobs per month – or about double the pace necessary to absorb growth in the working-age population. The labor force participation has risen almost steadily since the end of the recession, while the unemployment rate remains at a historic low. Wages are increasing at a modest pace, and there are more job openings than unemployed workers. The US manufacturing sector remains generally healthy, although it has experienced some weakness lately.

        Looking into 2020, the economic outlook is even more cloudy than usual given the complex set of current circumstances discussed earlier. There are four distinct trajectories that the economy might take into 2020:

        1. Accelerated growth of 2.5% or more, with a slight uptick in growth over this year
        2. Modest growth with a return to the growth rates of 2017 (around 2%)
        3. Sluggish growth with a significant decline in growth, but no recession (around 1%)
        4. A 2020 recession beginning in the early part of the year and running through most of the year (a decline of around 1% to 1.5%)

        Additional outcomes always are possible, but these four scenarios cover the logical options. Each of the four scenarios has a somewhat similar likelihood of happening, with modest growth slightly higher and accelerated growth slightly lower.

        Outlook for print in 2020

        Since the end of the Great Recession in June 2009, print markets have become increasingly strong. As we have previously pointed out, there are six key reasons why print and printers have largely been healthy since the end of the recession.

        On a nominal basis, print markets are growing around 1% to 2% at the present time. For 2018 (the most current data from the US Census), print’s economic footprint totaled $171.4 billion in annual shipments, around 42,000 establishments and more than 850,000 employees. Total print production increased by 3.6% last year.

        Printers’ profits also are generally healthy, based on historical trends. PIA estimates that the average profit on sales for printers in 2018 was around 3%. Profit leading printers (those in the top quartile) earned around 9% on sales. Profit challengers (printers in the bottom three quartiles) earned only 1% on sales.

        Print’s path over the next year depends primarily on the direction of the 2020 economy:

        • Accelerated Growth. If the 2020 economy grows at an accelerated pace of 3% or more, printing shipments will increase by around 2% or more. This rate of growth will produce almost $3.5 billion in additional printing services in 2020.
        • Modest Growth. If the 2020 economy grows at a modest pace of around 2%, print will grow by approximately 1.5%. This rate of growth will produce almost $1.7 to $2.6 billion in additional printing in 2020.
        • Sluggish Growth. If the 2020 economy grows at a sluggish pace of only 1%, printing shipments will edge up only around 0.5%. This rate of growth will produce approximately almost $900 million in additional printing services in 2020.
        • Recession. If the 2020 economy slides into recession, print will slide faster and further – likely falling by around 1.5% or more, depending on the exact timing of the recession. This will be a loss of close to $2.5 billion or more in printing shipments.

        Not surprisingly, just as print sales track with GDP, printers’ profits track with print sales. Based on PIA Ratios data, printers’ profits are high when the growth rates of overall print sales are high. As the sales pace declines, profits fall and eventually move into negative territory as print sales growth approaches zero. If a recession takes place in the next year, print profits will fall substantially. Only profit leaders will end up in the black, with the typical printer breaking even and challengers in the red.

        Next Page »



        The Official Publication of the Foil & Specialty Effects Association
        © 2025 All Rights Reserved
        Peterson Media Group | publish@petersonmediagroup.com
        785.271.5801
        2150 SW Westport Dr., Suite 501, Topeka, KS 66614