The Price War in the Printing and Packaging Supply Value Chain in Nigeria, We are all losers.

The Master Printer- Sir John O. Onuegbulem (KSC)

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Dear Distinguished Readers,

It is quite refreshing to be here again to address one of the many plagues killing the Printing and Packaging industry in Nigeria – Price war or in another parlance the act of dropping price to gain market share or market penetration strategy. In Nigeria today, many business people are already sounding like broken records with the saying “the economy is in bad shape and that there is no business”. When people say these words, it does not totally mean that there are no business activities going on, they are just saying that whatever business they are doing is not profitable anymore as they use to be. It is no gainsaying that profitability is the heartbeat of any business venture.

In today Nigeria, the printing and Packaging industry has joined this bandwagon effect of “NO BUSINESS SYNDROME” and the injury is self-inflicted one. Many stakeholders in this industry are losing businesses and some are closing shops due to the none-profitability way of theirrunning whatever business that they know how best to do. Why will Printers who have been in business for ten, twenty, thirty years suddenly begin to downsize or close down? There are a lot of reasons to be adduced for this sad phenomenon – but the chief of them all is that the companies are not generating enough incomes to keep up the requisite cash flows keep the business alive.

The next question is how did this happen? Once upon a time, all printers are busy undercutting each other in the prices of their products/services. It is still happening even today and I hope we are all going to be wiser soon.

This scheme of under-pricing is not peculiar to the Printers, it cuts across all the value chain of the printing and packaging industry. Please permit to give you some insights how we got here:

Printing Equipment Manufacturer/ Suppliers:  Nigeria is country where people jump into a business that they know nothing about especially by hear say, once they hear that a particular business is lucrative without proper feasibility studies, once the funding is there, they jump into it. The Pioneers in this trade like – Heidelberg, Roland, and most recently KBA, Komori and others have had their fair share of engaging in Price war. Once a new entrant appears in the horizon, instead of giving customers value for money – services/products, they believe that the best entry strategy will be to undercut the already existing players in the market in terms of price.

Take for example, Computer to Plate (CTP) technology, all the major suppliers of this technology have been under-pricing each other and today as I write the business is no longer rewarding to anybody.

The same thing is applicable to those selling Printing presses, and postpress equipment, today all the players are bloody nosed. We have so many suppliers who lackbusiness ethics, they are over promising customers but under deliver on the things they have promised in order to make ends meet.

Printing Materials/Consumables Suppliers: The price war in this sector is fiercer and very intriguing amongst the stakeholders. If you pay a visit to these dealers, you will see that prices of consumables are always fluctuating downwards and in order to sustain the war, many of them are in the habit of stocking substandard products without caring about the health implications and the environmental hazards associated with them.Besides under-pricing each other, they have taken the warsto a new level by granting unsolicited interest free credit facilities to the printers ranging 30 days to even 360 days without considering the cost of funds element involved. Many printers are enjoying this windfall and the consumable suppliers are the ones licking their wounds. It is sad to report that due to theseunwholesome practices a lot of printing materials/consumables dealers have gone belly up.

Printers/Packaging printers: These are the major actors in the Printing/Packaging supply value chain and they are not left out of the price war. In this sector, almost every practitionerhas lost the essence/ethics of costing and estimating which are the bedrock of profitability in the printing business. Standardization and quality have equally taken the back seats, all that matters is price.

In saner climes, the inputs for printing / packaging are governed by certain standards, so also are their pricing mechanism. For example inks, papers and boards, printing platesetc are priced in tonnes or per square metres. Unfortunately Nigeria does not produce any of these inputs locally, so the local operators must adapt the international pricing modules, if they want to make headway.

Dear Readers, I am sorry to disappoint you that less than five Per cent of the Printers/ Packaging printers are pricing their products/services correctly. The others just give quotations to their customers by the use of “the thumb method” without capturing all the costelements.  It is a common occurrence to see that appropriate depreciations and replacement costs of equipment are never considered and this makes retooling of obsolete infrastructures/equipment almost impossible. Many of the players are still using very old equipment and because they do not make provisions for the future growth of the business in their pricing, they close shop after a short while.

Furthermore, due to the price war in the printing/Packaging industry, the print buyers are having the last laugh. The Print buyers are the ones dictating prices because the printers are in the macabre dance of undoing each other in pricing their products/services.

So a walk down the lane of the supply value chain of printing/packaging industry in Nigeria,- from equipment suppliers, consumables, the printers and the print buyers, shows that we are all losers.

The industry is no longer profitable because an “eye for an eye” left the whole community blind.

The way forward is that all stakeholders need to do self-appraisal and make a decision for standardization and quality. The Industry regulators like CIPPON, SPPN must double their efforts to reposition the printing/packaging industry in Nigeria.

The different strata of government support the industry by ensuring that all printable jobs remain in Nigeria instead of ferrying them out to foreign printers’   Thank you

Sir. John O. Onuegbulem (Your Guest Columnist)