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Print duopoly the story of 2016: IndustryEdge

Wednesday, 21 December 2016
By Print 21 Online Article

The establishment of a duopoly in the commercial printing sector was the biggest story of 2016, according to industry bible IndustryEdge.

“Our view is there was no bigger moment than the establishment of a rationalised duopoly in the commercial printing sector. The PMP and IPMG merger was followed almost immediately by the possibly inevitable drawing together of Franklin Web and AIW within the IVE Group,” says the December 2016 edition of IndustryEdge’s Pulp & Paper Edge.

We expect to see the dynamics of paper, ink and chemical supplies change and for the role of merchants, importers and mill agents to change yet again. Conditions for suppliers will be clearer, but no less challenging.

Duopolies have their challenges, as many suppliers to supermarkets in Australia – including tissue manufacturers – can attest. They can also present regulatory and competition challenges from other perspectives. But, in a small market, duopoly is infinitely preferable to a private monopoly.

“The print sector’s mergers were overdue and utterly necessary,” according to IndustryEdge.

They are likely, based on what industry participants are saying, to lead to further rational changes. Some of that will seem challenging and even be disruptive, but the longer-term health of the sector relies on its ability to adapt to changing circumstances.

The difficulty is that as with all industrial scale rationalisations, there will simply have to be casualties. For some that will lead to an anxious and difficult 2017, but for others and for the sector overall, it appears there is light at the end of the tunnel.

‘Mergers between majors’ were inevitable

The result – two dominant players – will seemingly provide adequate competition in the large format web offset market, to satisfy the interests of the ACCC. That is, at least for clients and customers – those buying print.

What is more difficult is the conditions that will exist for remaining printers in this sector of the market. Market opportunities for smaller players are typically greater where there are a larger number of participants at the top of the market. Consolidation and concentration will typically result in a tightening of the market, with margins squeezed by the pursuit of market share and full utilisation of capital equipment. All that suggests the position of those outside the big two will become more difficult, with their options contracted. While that will be challenging, in a market which may by some estimates by over-capacity by as much as 20%, the consolidations are necessary and overdue.





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