HP and the Digital Corrugated Revolution

Since I joined Fespa in 2005/6 it was evident to me that HP was a big player in the world of large format signage printing. So, as Inkjet has totally revolutionized this industry, is the same happening in Corrugated? Will we see similar patterns of change? In advance of the talk I’m hosting at CCE in March I talked to Eviatar Halevi at HP about the market and the potential for digital printing for the Corrugated market. Eviatar is presenting at CCE and takes part in a panel that I host on 13 March.

Do we see a revolution similar to what took place in the signage market?

Some of the core technology is the same but the market is different and there are different market dynamics at play.

For instance, the market for Corrugated contains companies that are much larger and have volumes that are huge. So disrupting this market with a new technology poses different challenges to a market such as signage which is smaller.

Give me an example here

Modern converting houses are already digital in the way they operate the business. You have barcode systems etc and you manage what you see on the floor. However, what is not digital is the graphics. You get the plates and implement and integration. The mix of analogue and digital ends there. And maybe with the advent of digital presses, this will change but right now the connectivity is digital but the process is analogue.

Some of the conversion, therefore, is easier than signage. With signage, in the beginning, there was no digital workflow as it was all mechanical.

For [Halevi, Eviatar] many corrugated plants, the key driver is efficiency and less visual branding. High margins are not typical of the Corrugated industry, unlike the signage market. So if you want to take a share in the market it is efficiency that wins alongside other digital values.

As I have already said the other key difference with signage is size. You know a typical entry company is more than €10 million in size and means it is quite different from signage in many ways. In signage, the operation size is smaller and you can start with less than $1 million. Such small businesses are entrepreneurial in character and are motivated by innovation and value. So conversion, therefore, tends to be easier!

Also, Corrugated plants tend to service national and regional customers whereas signage tends to be local.

Explain the digital journey for HP, what experience and value does HP provide a converter?

The thing to note is this is not the first market we have led in. We already have successfully transformed the photo (sector), and driven big changes in signage, commercial printing, labels, and many others. If we just focus on Scitex - this is where the story is best described - we kind of developed ourselves hand in hand with the typical marketer. Think of any big brand and ask ourselves what was their way of marketing their product 15-20 yrs ago? Back then you had TV, Radio, and Billboards. And somehow as a marketer you had to think of how to split the budget you had between these 3 channels. You had to think about how to do it - do you focus on brand or product? These were the choices you had to make. The technology you had - roll to roll printers working 25 dots per inch but it matched the needs for billboard because you were not being specific. You wanted to tell the same story to everyone. As the viewing distance was long, therefore, dpi is not an issue.

Then the market evolves and then the brand has competition and they want to stand out from the shelf. And you begin to move in store. And maybe you can divert them onto something similar but they are already in the realm of what the store can offer therefore the message is more focused and the viewing distance is shorter so you need higher resolution - so 100-150 dpi and the technology can begin to offer this. This is where posters and POP displays begin to play a role.

Let’s take it to the last step - as a consumer, you hold the product you want to buy in your hand. One of them stands out you hold the advertisement in your hand and it is now very personal so it is 30cm - nearer to 1000 dpi. The technology can now do this.

Scitex history started roll to roll solvent for billboards - then UV ink and it enabled faster and more environmentally friendly printing with UV and then you move to flatbed - as you want to save the money of lamination and then you print onto corrugated boxes and you hold the print in your hand. This is where safety standards begin to play a more significant role. Think of kids, food compliance etc. This is what drove HP to take the bigger challenge and move to water-based ink. UV inks, although simpler to engineer, simply cannot meet the standards that HP wants to offer its customers.

This innovation took place over time and almost tracked the markets development and needs. I think we will see the same with Corrugated.

What is the risk?

I would take it back to the people running the converting business. It is a multi-million dollar investment they have to pay back on a month to month basis so making the best possible choice is important. If they can’t begin to see a return on a running basis then this adds stress into the business. This relates to the maturity of the solution and - do I know how to run digital or sell digital - of course, this is important but HP is there to help any new customer effectively integrate our technology and then find new business.

It is a combination of all of these factors that all customers have to ask.

Some of our customers are value-oriented so they know how to charge a lot more. So for them, it is easier - for others it is a volume game so they need to see savings. The questions they ask is do I have the right economics? Do I even tell my customers that it is digital or not?

So really the risk is in not getting the ROI but HP is there with its vast experience and connections to help mitigate that risk.

 Is flexibility a key driver for the converting industry?

Yes, depending on the customer profile. There are a few areas of value that you can explore with digital. To run campaigns quickly, just in time, with the ability to make last minute changes, people understand this. Some would struggle with how to integrate this, some people know how to find them.

Another one is to use a digital capability as a selling point for my plant. From time to time you will need something of the highest value, that is just in time. Digital gives this solution. I can move some. Less inventory as well. You have to close the loops. Track and trace is also a value that will eventually be a big issue in the future.

For example, if I buy something on the internet I can track it online easily with variable digital printed barcodes so it gives me an accurate understanding of when an order will be delivered. This will take time but it is not beyond the imagination.

 Retail is changing - is this affecting change?

Yes, it is to some extent and HP Is very engaged in motivating and training people to try this incredible technology. Of course, you get a tier 1 type customer who is willing to try things out but you also get Tier 2 and 3 companies who are more difficult to get and to talk to because of various reasons they are more cautious or their production challenges are more complex. The digital conversation for any industry is a long journey so we must be patient and realistic.

What proportion of the industry is now digital in your view?

Corrugated and converting is a 200 billion m2 industry and we are currently seeing maybe 200 million m2 digitally printed per year. So in terms of revolution, it is still early in the process.

What needs to change?

For reaching the tipping point, many things on many levels! Physical level, workflow tools in and out of the plant, this needs education for best practice in combining digital and analogue. Closing the loop with tools. One-off copies. It is a long journey and this is OK.

What advantages does HP have over others?

We have differentiated technology. Since the early days were more focused on higher value with the basic equipment. Our solution offers supreme print quality with the highest safety and food standards.

Also, when you are industrial printing your customers are the same no matter - in HP we have converted so many markets we basically have the same end customers we work in partnerships, projects, knowledge, expertise, tools, and connections that enable successful digital journey.

Beyond that it is confidence - we don’t know everything - we make the bold moves - we partner with somebody who will hold our hands and work together. This is very important.

Do you see a future where digital replaces analogue printing?

Digital will be taking a big share in the industry but it will take many years, if at all until we see 100% conversion. There will be always room for the simpler applications that need shear volume and are not value oriented at all. These, for a long time, will remain analog in nature.

Join us at CCE for a Seminar workshop focused on digital corrugated on 12 March and join Eviatar and I for a panel discussion on 13 March at 12 - check out the programme here http://www.cce-international.com/2019/english/seminars/programme/