Sean Milmo, Ink World European Editor10.28.09
The digital ink sector is one of the fastest growing in Europe. But for ink makers, it is increasingly becoming one of the most difficult in which to operate.
A large part of it is taken up by the ink cartridge segment for PC printers, which had total sales in Western Europe of $7.7 billion in 2002, according to CAP Ventures, a market research company.
The cartridge sector is still dominated by the printer manufacturers (OEMs) such as Hewlett Packard, Canon, Lexmark and Epson, which in volume terms have a market share of approximately 85 percent.
However, recyclers, who provide or operate refilling equipment for OEM cartridges or supply replacement cartridges, are slowly gaining an influential foothold in the sector.
For ink producers, the attraction of this aftermarket segment is not its fast growth, but that it is a regional market where the advantage lies with those who have a European presence. Suppliers of inks to OEMs tend to be global.
A lot of ink makers, nonetheless, have the option of supplying both of the two rapidly expanding sectors. However, the requirements are often radically different with each sector.
Of the two, the quickest growth is being registered by the recycling or aftermarket segment. But it is so distinct that it is generating its own new type of independent ink manufacturers. Their main skill is the creation of formulations which match those of the OEMs rather in the development of their own inks.
An added difficulty for ink makers straddling both sectors is that the two camps within the ink cartridge field are not only fighting each other in the marketplace but on the legal and regulatory fronts as well.
OEMs have been taking legal action against recyclers, claiming that they have been breaching their intellectual property rights.
On the other hand, new regulations are working in favor of the aftermarket operators. The European Union has brought in legislation which is attempting to ban the introduction of electronic components like ink cartridges which cannot be recycled.
“It has similarities to the pharmaceuticals market,” said an executive at one digital ink supplier. “There is the research-based, patent-protected sector and the generic medicines sector. The rivalry between the two is so intense that there are few companies and suppliers which operate in both.”
Most of the leading providers of digital inks are at present keeping clear of the aftermarket segment, despite prospects that in the medium and longer term it could take a sizeable share of total ink cartridge sales.
“We are kept very busy fulfilling our commitments to the OEM companies,” said an official at Avecia, the U.K.-based specialty chemicals company which is a major formulator of digital inks. “There may come a time when we will work for non-OEM customers, but we have no plans to do that at the moment.”
CAP believes that the ink cartridge market in Western Europe is currently growing at 15 percent annually. The aftermarket is expanding at a slightly faster rate than the OEM sector, but its share is still only approximately 14 percent to 16 percent, well below its share in the U.S.
On the other hand, recyclers haveapproximately 25 percent of the laser toner part of the digital printing market, mainly because it has been established longer.
“With ink jets, the competition between the OEM and non-OEM groups will become even stronger as the sector gets even bigger,” said Ben Becks, international manager for ink jet inks at Van Son, which supplies both segments, although most of its digital ink business is with OEMs.
“Our strategy is to learn as much as possible about the two markets so that we can satisfy the needs of customers in each one,” he added.
The rapid rise in consumer sales of ink cartridges in Europe looks likely to continue for several years because of the popularity of digital photography.
There is also the long-term prospect that ink jet will steadily build up a large share of the small office segment, particularly as digital printing expands in the lower end of the conventional commercial printing market.
However, the OEMs have various means of making business difficult for the recyclers and their ink suppliers.
“Perhaps the biggest obstacle for the aftermarket companies is the high number of new products the OEMs are launching onto the market,” said Norah Seery, a consultant with CAP Ventures in the U.K. “This makes it hard for the R&D people working for suppliers of compatible cartridges and ink jet inks to know what OEM products to target. Companies in the aftermarket have to have good R&D departments to keep up with what is happening and there are not many big operators in the sector at the moment. This is one of the reasons why there will not in the next few years be a huge leap in the share of the aftermarket in the ink cartridge sector in Europe.”
OCP GmbH, Hattingen, Germany, one of the largest specialist ink makers supplying the European recycling segment, claims that it normally takes between two weeks and three months to formulate and commercially produce an ink for cartridges in a new OEM printer.
“With one new printer, it took us a year to develop the ink at the right quality, but that was unusual,” said Christof Ring, a management board assistant at OCP. “We have to bring to the market inks which are at least as good as those of the OEMs and in some cases they are even better.”
More efficient distribution systems are one of the big drivers behind the growth in recycled cartridge sales. In particular, retail outlets, both online and in shopping precincts, are giving consumers and business users access to outside refilling facilities.
“The shops are an especially welcome alternative to offices using their own refill kits, which can often be dirty and cumbersome,” said one ink company executive. “These shops have been improving their standards so they have begun to eliminate worries about quality.”
Individual aftermarket retailers are now being confronted with the spread in Europe of chains of walk-in refill outlets, which are mostly run on a franchise basis.
After moving into the U.K. only two years ago, Australian-owned Cartridge World has become one of the fastest expanding retail franchises in the European aftermarket sector. Already it has nearly 230 stores in the British Isles and is expanding into France, Germany, Spain and Central and Eastern Europe (CEE).
“We expect to increase by 50 percent to approximately 300 the number of stores in England and Wales this year,” said Richard Fox, U.K. sales and marketing manager at Cartridge World, which outsources its ink supplies in Europe.
“Demand for our services is strong because we are able to provide replacement cartridges at a price which is up to 60 percent cheaper than the OEMs and customers trust the quality of our ink formulations,” he added. “Also we’ve done a lot of marketing to make people aware of what we have to offer.”
The emergence of large franchise chains in Europe is a boost to ink makers serving the ink cartridge sector because it provides an opportunity to reduce their own distribution and production costs.
“It is easier to supply big customers when the orders are in tons rather than kilograms,” said Mr. Ring of OCP. “But there are a lot of small individual refill shops in Europe which we will continue to serve even though they want quantities as low as 50 kilograms. We use transport companies and our own agents to deliver orders to them.”
Among a new breed of retailers in digital inks are Photo-Me International (PMI), Bookham, Surrey, England, which runs a worldwide network of 26,000 photobooths, most of them digital and located in the U.K., France and Japan. One of its fastest growing businesses is in mini-labs sited in shopping areas and places like railway stations, which process and print digital photographs.
The company has recently announced plans for a new network of Digital Media Kiosks (DMKs) capable of printing from both conventional digital cameras and cameras in the new generation of mobile phones.
“These phone cameras are mainly for transmitting photos from one phone to another,” said Francois de Freitas, PMI’s international marketing manager. “But people also want to print out the photos. Yet there are very few retail facilities for doing this. We foresee a rapid growth in demand for DMKs.”
PMI is also setting another trend for retail operations in digital photography by becoming backward integrated into the manufacture of processing equipment, both for itself and third parties, one of which is Kodak. “We don’t make our own inks but instead have a centralized system for buying them in,” said Mr. de Freitas.
Within the aftermarket segment, however, a growing number of manufacturers of equipment for the sector are also broadening their scope into the making of the ink as well.
CBR Engineering AG, Switzerland, which makes equipment for remanufacturing OEM-compatible ink cartridges, also produces and markets its own inks under the swiss+ink brand name.
The aftermarket sector is also attracting specialty chemical companies seeking to become bigger players in materials for digital printing and electronic displays.
Sensient Technologies, Milwaukee, WI, has recently taken over Formulabs Iberica (FISA), Barcelona, Spain, a specialty ink producer which is a big supplier to the European non-OEM ink jet sector.
The aftermarket and retail sectors in digital printing is, like the OEM segment, becoming an expanding area for ink makers with a broader technological scope than conventional ink producers. The big question is how long it will take for the two markets to converge rather than to run parallel with each other.
A large part of it is taken up by the ink cartridge segment for PC printers, which had total sales in Western Europe of $7.7 billion in 2002, according to CAP Ventures, a market research company.
The cartridge sector is still dominated by the printer manufacturers (OEMs) such as Hewlett Packard, Canon, Lexmark and Epson, which in volume terms have a market share of approximately 85 percent.
However, recyclers, who provide or operate refilling equipment for OEM cartridges or supply replacement cartridges, are slowly gaining an influential foothold in the sector.
For ink producers, the attraction of this aftermarket segment is not its fast growth, but that it is a regional market where the advantage lies with those who have a European presence. Suppliers of inks to OEMs tend to be global.
A Tale of Two Markets
A lot of ink makers, nonetheless, have the option of supplying both of the two rapidly expanding sectors. However, the requirements are often radically different with each sector.
Of the two, the quickest growth is being registered by the recycling or aftermarket segment. But it is so distinct that it is generating its own new type of independent ink manufacturers. Their main skill is the creation of formulations which match those of the OEMs rather in the development of their own inks.
An added difficulty for ink makers straddling both sectors is that the two camps within the ink cartridge field are not only fighting each other in the marketplace but on the legal and regulatory fronts as well.
OEMs have been taking legal action against recyclers, claiming that they have been breaching their intellectual property rights.
On the other hand, new regulations are working in favor of the aftermarket operators. The European Union has brought in legislation which is attempting to ban the introduction of electronic components like ink cartridges which cannot be recycled.
“It has similarities to the pharmaceuticals market,” said an executive at one digital ink supplier. “There is the research-based, patent-protected sector and the generic medicines sector. The rivalry between the two is so intense that there are few companies and suppliers which operate in both.”
Most of the leading providers of digital inks are at present keeping clear of the aftermarket segment, despite prospects that in the medium and longer term it could take a sizeable share of total ink cartridge sales.
“We are kept very busy fulfilling our commitments to the OEM companies,” said an official at Avecia, the U.K.-based specialty chemicals company which is a major formulator of digital inks. “There may come a time when we will work for non-OEM customers, but we have no plans to do that at the moment.”
CAP believes that the ink cartridge market in Western Europe is currently growing at 15 percent annually. The aftermarket is expanding at a slightly faster rate than the OEM sector, but its share is still only approximately 14 percent to 16 percent, well below its share in the U.S.
On the other hand, recyclers haveapproximately 25 percent of the laser toner part of the digital printing market, mainly because it has been established longer.
“With ink jets, the competition between the OEM and non-OEM groups will become even stronger as the sector gets even bigger,” said Ben Becks, international manager for ink jet inks at Van Son, which supplies both segments, although most of its digital ink business is with OEMs.
“Our strategy is to learn as much as possible about the two markets so that we can satisfy the needs of customers in each one,” he added.
Growing Opportunities
The rapid rise in consumer sales of ink cartridges in Europe looks likely to continue for several years because of the popularity of digital photography.
There is also the long-term prospect that ink jet will steadily build up a large share of the small office segment, particularly as digital printing expands in the lower end of the conventional commercial printing market.
However, the OEMs have various means of making business difficult for the recyclers and their ink suppliers.
“Perhaps the biggest obstacle for the aftermarket companies is the high number of new products the OEMs are launching onto the market,” said Norah Seery, a consultant with CAP Ventures in the U.K. “This makes it hard for the R&D people working for suppliers of compatible cartridges and ink jet inks to know what OEM products to target. Companies in the aftermarket have to have good R&D departments to keep up with what is happening and there are not many big operators in the sector at the moment. This is one of the reasons why there will not in the next few years be a huge leap in the share of the aftermarket in the ink cartridge sector in Europe.”
OCP GmbH, Hattingen, Germany, one of the largest specialist ink makers supplying the European recycling segment, claims that it normally takes between two weeks and three months to formulate and commercially produce an ink for cartridges in a new OEM printer.
“With one new printer, it took us a year to develop the ink at the right quality, but that was unusual,” said Christof Ring, a management board assistant at OCP. “We have to bring to the market inks which are at least as good as those of the OEMs and in some cases they are even better.”
Retailing Advantages
More efficient distribution systems are one of the big drivers behind the growth in recycled cartridge sales. In particular, retail outlets, both online and in shopping precincts, are giving consumers and business users access to outside refilling facilities.
“The shops are an especially welcome alternative to offices using their own refill kits, which can often be dirty and cumbersome,” said one ink company executive. “These shops have been improving their standards so they have begun to eliminate worries about quality.”
Individual aftermarket retailers are now being confronted with the spread in Europe of chains of walk-in refill outlets, which are mostly run on a franchise basis.
After moving into the U.K. only two years ago, Australian-owned Cartridge World has become one of the fastest expanding retail franchises in the European aftermarket sector. Already it has nearly 230 stores in the British Isles and is expanding into France, Germany, Spain and Central and Eastern Europe (CEE).
“We expect to increase by 50 percent to approximately 300 the number of stores in England and Wales this year,” said Richard Fox, U.K. sales and marketing manager at Cartridge World, which outsources its ink supplies in Europe.
“Demand for our services is strong because we are able to provide replacement cartridges at a price which is up to 60 percent cheaper than the OEMs and customers trust the quality of our ink formulations,” he added. “Also we’ve done a lot of marketing to make people aware of what we have to offer.”
The emergence of large franchise chains in Europe is a boost to ink makers serving the ink cartridge sector because it provides an opportunity to reduce their own distribution and production costs.
“It is easier to supply big customers when the orders are in tons rather than kilograms,” said Mr. Ring of OCP. “But there are a lot of small individual refill shops in Europe which we will continue to serve even though they want quantities as low as 50 kilograms. We use transport companies and our own agents to deliver orders to them.”
Among a new breed of retailers in digital inks are Photo-Me International (PMI), Bookham, Surrey, England, which runs a worldwide network of 26,000 photobooths, most of them digital and located in the U.K., France and Japan. One of its fastest growing businesses is in mini-labs sited in shopping areas and places like railway stations, which process and print digital photographs.
The company has recently announced plans for a new network of Digital Media Kiosks (DMKs) capable of printing from both conventional digital cameras and cameras in the new generation of mobile phones.
“These phone cameras are mainly for transmitting photos from one phone to another,” said Francois de Freitas, PMI’s international marketing manager. “But people also want to print out the photos. Yet there are very few retail facilities for doing this. We foresee a rapid growth in demand for DMKs.”
PMI is also setting another trend for retail operations in digital photography by becoming backward integrated into the manufacture of processing equipment, both for itself and third parties, one of which is Kodak. “We don’t make our own inks but instead have a centralized system for buying them in,” said Mr. de Freitas.
Within the aftermarket segment, however, a growing number of manufacturers of equipment for the sector are also broadening their scope into the making of the ink as well.
CBR Engineering AG, Switzerland, which makes equipment for remanufacturing OEM-compatible ink cartridges, also produces and markets its own inks under the swiss+ink brand name.
The aftermarket sector is also attracting specialty chemical companies seeking to become bigger players in materials for digital printing and electronic displays.
Sensient Technologies, Milwaukee, WI, has recently taken over Formulabs Iberica (FISA), Barcelona, Spain, a specialty ink producer which is a big supplier to the European non-OEM ink jet sector.
The aftermarket and retail sectors in digital printing is, like the OEM segment, becoming an expanding area for ink makers with a broader technological scope than conventional ink producers. The big question is how long it will take for the two markets to converge rather than to run parallel with each other.