Survey Shows Bright Outlook For Color Producers
- By Megan Hubble
- Oct 01, 2010
Color production is up once again, setting new records for both toner and inkjet cartridges in the 2010 Color Survey. In fact, a greater percentage of respondents produce color toner or inkjet cartridges than ever before, and the average color toner and inkjet cartridge production runs are both significantly higher than in the past, due in part to some very large producers.
So despite a weaker-than-ideal economy, color still seems to be going strong. Perhaps color users are trying to save money by using aftermarket color cartridges rather than their OEM counterparts. Another possibility is that color users might be trying to save money by printing more projects in-house (and thus needing more color cartridges) rather than using often-pricier print shops for their color work.
Remanufacturers may also be turning to color for help with their bottom line, since color cartridges often have higher sales prices which can result in higher profit margins. But it doesn’t appear that the increase in the color market is due to remanufacturers who are just jumping into color — this year’s survey boasts more respondents than ever who have been producing color cartridges for 10 years or more, with very few companies who have been doing color for less than one year. Since there is also a new record for the percentage of respondents whose color production has increased in the last two years — for both color toner and inkjet cartridges — it is likely that the higher color production is due to existing color producers doing more cartridges rather than color newbies joining the ranks.
But despite the across-the-board increases in color cartridges, this year’s top challenge is, for the first time, expenses and profit margins, showing that the monetary side is still a factor. But fewer color producers are worried by the expense of color cartridges than those who do not actually produce any color cartridges in-house, perhaps indicating that the financial barrier to color cartridges is more of a perception than a reality.
This year’s survey reflects the economy in almost real time, with results taken from World Expo in late July 2010. Since economic conditions have not significantly changed since then, these results are likely a good reflection of what is really happening in the industry today. The survey was taken by 113 aftermarket industry members at World Expo, the majority of whom identify themselves as remanufacturers (65 percent this year, as compared to 56 percent last year). One-third say they are cartridge resellers (39 percent last year), and 22 percent are ink/toner suppliers (25 percent last year). The larger percentage of self-described remanufacturers taking the survey this year may also explain some of the increases we have seen in the data.
This year, 58 percent of respondents are from the United States, and 42 percent are from outside the U.S., as compared to 55 percent U.S/45 percent non-U.S. last time. This year’s companies have been in business an average of 13 years (same as last year) and average 270 employees (177 employees last year). This year’s respondents sell half of their products to end users and half to resellers, on average. But 22 percent of respondents sell all of their cartridges to end users, and 32 percent sell entirely to resellers. The remaining 46 percent sell to a mix, with an average of 61 percent to end users and 39 percent to resellers.
The previous survey, which ran in this magazine in early 2009, was actually based on data taken at World Expo in August 2008. The survey before that, the 2007 version, was based on the World Expo 2007 data. Other comparisons may be made to the 2006 survey (offered online) and the 2005 survey (the first year of the color survey, when it was offered online and through mail/fax).
1) Does your company remanufacture color toner cartridges in-house? How many years has your company produced color toner cartridges?
Manufacturing color toner cartridges in-house is very popular with this year’s group of respondents. In fact, 59 percent said they do produce color toner cartridges in-house, up from 48 percent last year and 38 percent in 2007. We saw 38 percent in 2006 and 33 percent in 2005, so this year sets a new record once again. See Figures 1 and 2.
Not surprisingly, respondents have been producing color toner cartridges longer, too, with 30 percent choosing the category of 10 years or more, up from only 6 percent who selected that category last year (no one selected it in 2007).
The other categories are: less than one year, picked by 7 percent this year, 15 percent last year, and 29 percent in 2007; one to two years, selected by 23 percent this year, 25 percent last year and 31 percent in 2007; three to four years, chosen by 17 percent this year, 28 percent last year and 29 percent in 2007; and finally, five to nine years, picked by 23 percent this year, 26 percent last year and 11 percent in 2007.
So all of the categories saw declines except for 10 years or more, which saw a significant jump. It isn’t too unexpected that the categories representing longer periods of time will see increases over the years. Since color toner cartridges have been around longer, it makes sense that more people will have been producing them for longer. Perhaps next year we can modify the categories of the survey to find out more information about this upper tier — perhaps new categories might need to be 10 to 14 years, and also 15 years and up.
But the jump in this category does seem bigger than can be explained by the passage of time. Since only 6 percent fell into this category last year, it seems we may have a larger percentage of “old timers” taking the survey this year. This survey was offered at World Expo, as it has been in the last few years, but it is possible that this year’s World Expo was attended by fewer new companies, or at least fewer companies that are just now starting production of color toner cartridges. In a tough economy, fewer companies may be starting up, or possibly, fewer existing companies may be deciding to add the often-costly color toner cartridges to their lineups.
2) What percentage of the total toner cartridges you produce is color? Approximately how many color toner cartridges does your company produce in-house each month?
For those who do produce color toner cartridges in-house, production seems to be up. This year, almost two thirds of respondents say color cartridges make up more than 20 percent of their production run, as compared to 43 percent last year and only 30 percent in 2007.
That means that this year, only 35 percent say that 1 to 20 percent of their toner cartridges produced in-house are color, the category that drew the majority of respondents in previous years (57 percent in 2009 and 70 percent in 2007). See Figure 3.
The most popular category this year is for color toner cartridges to make up 21 to 40 percent of production, selected by 41 percent of respondent, as compared to 17 percent this year and 24 percent in 2007.
The other categories are: 41 to 60 percent, chosen by 10 percent of survey takers this year, as opposed to 12 percent last year and 3 percent in 2007; 61 to 80 percent, picked by 11 percent this year, up from 3 percent each in 2009 and 2007; 81 to 99 percent, selected by 3 percent this year, as compared to 5 percent last year and no one in 2007; and finally, no one this year said that color toner cartridges make up 100 percent of their production line, as 6 percent said last year (also no one in 2007).
Another sign that color production has increased is that the average number of color toner cartridges produced by this year’s respondents is up significantly — to 54,116 color toner cartridges produced in-house per month. This is much higher than the 5,417 color toner cartridges per month we saw in last year’s survey and from the 804 per month seen in 2007.
That is mainly due to some very, very large producers taking the survey. But it isn’t just one company throwing off the average — there are a number of large producers this year. In fact, 14 of the 57 people (or 25 percent) who answered this question said that their company produces 10,000 or more color toner cartridges per month, with respondents giving answers such as 100,000 or 200,000 cartridges per month, and one even producing 2 million cartridges per month! So clearly there are some extremely large producers out there. Again, these larger companies might be more likely to have the funds in this economy to send representatives to World Expo than some of the small producers, but this is still likely indicative of a trend. Consolidation has been a factor in many industries, and ours is no exception. Plus, in a tough economy, more users may be turning to aftermarket products to save money, increasing demand for the industry’s color toner cartridges.
But whatever the reason, it seems that there are more large color toner cartridge producers than in the past. Last year, only 14 percent of respondents to this question produced 10,000 cartridges, and most of those were in the 20,000 to 50,000 range, with only one response of 100,000.
Despite the fact that the average is so much higher than in the past, the median cartridge production is only 200 cartridges. Last year the median was 100, so that is still an increase, indicating that even the everyday producers are manufacturing more cartridges — or perhaps it indicates that the very smallest producers have decided to get out of the color toner business altogether. Last year, 11 percent of respondents produced 10 or fewer color cartridges per month, while this year, it is only 9 percent. This is not a significant change, but might indicate that some smaller producers are reassessing their color involvement.
3) How has your in-house color toner cartridge production changed in the last two years?
As we would expect from the answers to the previous questions, color toner cartridge production has increased for the vast majority of respondents. In fact, 81 percent say that production of color toner cartridges has increased in the last two years, up from 74 percent in 2009 and 2007 (70 percent in 2006 and 59 percent in 2005, the survey’s first year). Another 8 percent say it has decreased (2 percent last year and no one in 2007), and 11 percent say production has held steady, compared with 24 percent last year and 26 percent in 2007.
For those who saw an increase, the average was 27 percent. This is down from 39 percent last year and 59 percent in 2007. So while more people saw increased production, these increases were slightly more modest than in the past. But a 27 percent increase is still significant in a fairly stagnant economy.
The percentage of respondents who say they have seen color toner cartridge production rise has been increasing since the survey started in 2005. There have obviously been less-than-stellar economic conditions over the past few years. The 2009 article was based on data from the August 2008 World Expo, which was knee-deep in the recessionary period, (which is generally accepted to be December 2007 to July 2009 for the United States economy, even though, the U.S. did not see two consecutive quarters of growth in the GDP until the end of 2009.). It was possible that this survey would be the first to see a decline, but it did not turn out that way. It should be noted that only respondents who do currently produce color toner cartridges in-house answer this question — so any respondent who has given up color production in the past two years would not be included. Obviously anyone who no longer produces cartridges has seen production decline, but it would not be counted by this question.
4) Does your company remanufacture color inkjet cartridges in-house? How many years has your company produced color inkjet cartridges?
Now, looking at the inkjet side, we see that the upward trend continues. This year sets a new record for color inkjet production as well, with 43 percent of respondents indicating that they produce at least some color inkjets in-house each month. This is up from 34 percent last year, 36 percent in 2007, 25 percent in 2006 and 16 percent in 2005. So once again, we have set a new record for color production. See Figures 4 and 5.
Long-term production of color inkjets is also more popular than ever. The most popular category is those who have produced color inkjet cartridges for 10 years or more, selected by 37 percent of respondents, up significantly from 8 percent last year and 0 percent in 2007.
Nine percent of respondents are new to color inkjets, producing them for less than a year (10 percent last year but 29 percent in 2007). Another 9 percent chose the category of one to two years, down from 19 percent last year and 26 percent in 2007.
The three-to-four-years category was selected by 19 percent (22 percent in 2009 and 21 percent in 2007). The five-to- nine-years category was picked by 6 percent, compared to 41 percent last year and 24 percent in 2007).
So more people have been producing color inkjets for longer periods of time. Again, it will probably be necessary to change the categories a bit next year so we can get more information about how long people really have been producing color inkjets.
5) What percentage of the total inkjet cartridges you produce is color? Approximately how many color inkjet cartridges does your company produce in-house each month?
The results to this question actually do not follow what we saw for color toner cartridges. There, we saw a more clear-cut jump in production. But here, numbers have shifted around a bit. See Figure 6. The most popular category is in the middle — 39 percent of respondents say that about half of their inkjets (41 to 60 percent) are color. Last year it was 35 percent and it was 32 percent in 2007.
But this year we see more respondents in the lowest tier — 15 percent say that 1 to 20 percent of inkjets are color, up from 6 percent in 2009 but similar to the 14 percent we saw in 2007.
And we saw a major drop in the second smallest category (where respondents say that 21 to 40 percent of their inkjet production is color cartridges), with only 17 percent choosing that category this year, down from 37 percent last year and 40 percent in 2007.
Other responses include: 61 to 80 percent, picked by 17 percent this year (12 percent last year and 14 percent in 2007); 81 to 99 percent, selected by 7 percent this year (5 percent last year and 0 percent in 2007); and 100 percent, chosen by 5 percent this year (5 percent last year and 0 percent in 2007).
It is difficult to ascertain why the numbers have changed so much this year. Previously, the majority of respondents fell into the categories of 21 to 40 percent or 41 to 60 percent. In fact, in the last two surveys, 72 percent of survey takers were in one of those two categories. This year, only 56 percent selected those two options. It seems that the inkjet percentages are spread out a bit, more evenly distributed across the lower four categories (the 80-percent-and-above categories have never been as popular).
One thing that is certain is that color inkjet production is up significantly. The average this year is 199,120 color inkjet cartridges per month — up from 18,535 last year and 57,298 in 2007. This is definitely a new record.
As we saw on the toner side, it wasn’t simply a few high-production companies, but quite a number of them. In fact, 13 of the 38 respondents (34 percent) to this question produce 10,000 or more color inkjets per month. This includes several responses of more than 1 million color inkjets per month. Last year, only 17 percent of color inkjet producers said they manufacture 10,000 or more per month, and the top producer was doing 500,000 color inkjets per month.
When we look closely, we see that the median is 2,000 color inkjets this year, as compared to 1,000 last year. Another indicator is in the number of respondents producing 1,000 cartridges or fewer. In 2007, 72 percent of color inkjet producers in the survey did fewer than 1,000 cartridges per month, while last year it was 49 percent, and this year it is 40 percent. This likely indicates that there are fewer of the smaller producers taking the survey than in the past, and perhaps indicates that there are fewer small producers at World Expo or in the industry overall.
Perhaps, as we speculated on the toner side, this indicates increased demand for color in general, increased demand for color aftermarket products, or increased industry company size due to consolidation or other factors.
6) How has your in-house color inkjet cartridge production changed in the last two years?
Color inkjet production is definitely increasing. This year, a record-setting 86 percent of inkjet producers say their in-house production has increased in the last two years. This is up from last year’s 65 percent and 2007’s 73 percent. In 2006 it was 64 percent and in 2005, the survey’s first year, it was 74 percent.
Nine percent said their production of inkjet cartridges decreased, down from 13 percent last year (it was 0 percent in 2007). This year, 5 percent said production stayed the same, which is a big change from last year’s 22 percent and the 2007 rate of 27 percent. Since the “stayed the same” responses have shifting pretty much entirely to the “increased” category, that is good news.
As we saw on the toner side, the percentage increase is smaller than in previous years, with 28 percent as the average increase this year, as compared to 33 percent last year and 47 percent in 2007. But since more people are seeing an increase, it likely means more production capacity industry wide.
As for those who saw a decrease, the average was 23 percent, similar to the 22 percent we saw last year.
7) What are the challenges with producing (or reasons you don’t produce) color cartridges in-house?
The biggest challenge with color cartridges is expenses/profit margins, selected by 46 percent of respondents. See Figure 7. In each of the previous two surveys, this drew 31 percent of respondents each year, and it was the second most popular response both years.
Last year’s top response dropped quite a bit this year. It seems that it is less of a challenge to find quality aftermarket components than in the past, with this chosen by 27 percent of respondents this year, down from 39 percent last year and 34 percent in 2007. Perhaps it is also easier to find empties, as the category of sourcing empties was picked by 23 percent this year, as compared to 28 percent last year and 22 percent in 2007.
Finding quality aftermarket ink and toner is also less challenging, with only 20 percent selecting this, down from 29 percent in each of the last two surveys. Technical knowledge is also less of a challenge, with only 20 percent saying this is an obstacle, down from 31 percent in each of the two previous surveys.
Eleven percent listed some “other” challenge (12 percent last year and 6 percent in 2007). These responses include: “Chinese imports,” time and labor,” “not worth the risk, buy (color cartridges) predone,” “not core business,” and the challenge of “getting paid by customers!”
Often the obstacles faced by those who actually produce color cartridges in-house are a bit different from the challenges expected by those who do not produce color cartridges themselves. This year that is also true, although both groups still listed expenses/profit margins as the top issue they face. But 61 percent of non-producers say expenses are a problem, while only 42 percent of producers find the financial aspect a problem. The other area where there is significant disagreement is on technical knowledge, with 33 percent of non-producers saying that is a problem area, while only 17 percent of producers list technical knowledge as a challenge. It may be the case that once you get started, color cartridges are less technically challenging that non-producers might expect. Another explanation is that color cartridge producers are a part of a self-selected group that is more technically inclined.
Other responses and percentages choosing each are: sourcing empties, non-producers, 28 percent and producers, 22 percent; finding quality aftermarket components, non-producers 28 percent and producers 27 percent; finding quality aftermarket ink/toner, non-producers 17 percent and producers 22 percent; and other, non-producers 17 percent and producers, 11 percent.
With the exception of finding quality aftermarket ink/toner, the non-producers found each category to be more of perceived challenge than producers actually find the category to be in day-to-day color production.
8) Do you resell outsourced aftermarket color toner cartridges? Do you resell OEM color toner cartridges?
Not everyone who takes this survey produces color cartridges or even produces any cartridges at all.
See Figures 8 and 9. So we ask about some other cartridge categories that survey takers may sell. We asked if respondents resell outsourced aftermarket color toner cartridges. We find that 64 percent sell this cartridge type, up from 56 percent last year and 58 percent in 2007. Reselling OEM color toner cartridges is less popular, though, with 49 percent selling these cartridges, down quite a bit from the 62 percent we saw in the past two years’ surveys.
9) Do you resell aftermarket or OEM color inkjet cartridges?
On the inkjet side, 54 percent resell outsourced color inkjets (54 percent last year and 57 percent in 2007). Reselling OEM color inkjets is the least popular, with only 44 percent of respondents selecting it, down from 58 percent last year and 62 percent in 2007.
It is interesting to note that approximately a quarter of survey takers do not sell any of those cartridge types — in fact, 26 percent of respondents (of those who answered at least one of the relevant questions) selected “no” for all four questions. About half of these respondents produce color cartridges in-house and thus probably only sell what they produce themselves.
The other half of the “no reselling” group does not produce color cartridges or sell them, which means that 13 percent of respondents do not sell any type of color cartridge at all. Last year’s results were fairly similar, when 12 percent of respondents appeared to not sell anything color. This group does not produce color cartridges in-house, nor do they resell outsourced aftermarket color cartridges or OEM color cartridges. While it is possible that a few of these respondents have an entirely monochrome product line, it is also likely that this group represents non-cartridge sellers, including the many suppliers of ink, toner and components who regularly attend World Expo (and thus take the survey). See Figures 10 and 11.
10) Which best describes the color market for your company?
For the first time, the most popular outlook for color is that it is an “important part of our business, but not our main offering,” selected by 39 percent of respondents (28 percent last year). Last year’s winner came in second place — “small part of our business, but growing” grabbed 30 percent both years. See Figure 12.
Thirteen percent (this year and last year) said that color is a “small part of our business and will be our biggest in the future.” Other categories include: “biggest sector of our business,” 8 percent (13 percent last year); “small part of our business and probably will remain that way,” 7 percent (17 percent last year); “we don’t sell or remanufacture any color products,” 5 percent (3 percent last year); and “other,” 5 percent (0 percent last year). The other responses include “ink supplier only,” “toner manufacturer, do color only,” and the optimistic response that they “want to step it up!”
So this year, more respondents than ever before say that color is an important (rather than small) part of their businesses. In addition, fewer people chose the least optimistic category — that color is a small part of business and will likely stay that way — indicating that most people see color on the rise. But unexpectedly, we saw fewer people chose the top category as well — that color is the biggest sector of their business right now. It is possible that this is because there are so many large remanufacturers taking the survey this year. If you produce a hundreds of thousands of color cartridges per month and color is still not the biggest sector of your business, then you likely have a very large business indeed!
But the outlook looks bright for color, with records set in both color toner and inkjet cartridges throughout the survey. More respondents than ever saying that color is an important part of their business, and this year’s survey results indicate that it is likely to stay that way.
For more information about participating in the latest Recharger surveys, visit www.rechargermag.com or contact info@rechargermag.com.
This article originally appeared in the October 2010 issue of Recharger.