And now there are five—again.
Who would have guessed it? Just when it appeared as though the number of players in the silver halide paper business had bottomed out with the demise of Agfa and, shortly, Konica, leaving the pie for Kodak, Fuji and Mitsubishi to divide, two more players have pulled up their chairs to get into the game: China Lucky and Dai Nippon.
With the industry watching the film business slowly sink into the horizon, it appears the paper business has legs as a smaller percentage of consumer printing is being done at home with dye-sub and inkjet media and a greater percentage at retail and online where silver halide paper dominates. As major paper buyers were bemoaning the fact that the number of suppliers was dwindling they envisioned an era of significant price increases for a key product for which brands are readily switched to save a penny per square foot in price.
But, all bets are off. The paper chase is on.
Look whose sitting around the table:
• Kodak, by most observers the leading silver halide paper supplier in town;
• Fuji, a strong second with tight bonds to large retailers (read: Wal-Mart);
• Mitsubishi, long the price leader and apparent favorite of the independent wholesaler having moved up the penetration ladder with Agfa and Konica going out of business.
And the new entries:
• Dai Nippon, the Japanese company, already a major factor in dye-sub media, who took over the Konica paper facility in Japan on Oct. 1;
• China Lucky, the huge Chinese photo player partially owned by Kodak, that has decided to take on the U.S. paper market—and Kodak.
What is it about the silver halide paper market that, seemingly all of sudden, it becomes the new land of opportunity? For Fuji and Kodak, at least, paper might be seen as a way to offset income lost in the consumables market now that film is giving way to the SD card and its brethren. For the new players, it’s a chance to cash in on a market whose demand may be on a rebound.
The latest PMA figures through July show that the percentage of prints being made at home continue to decline while the percentage of prints being made online and at retail continue to climb. Numerically, both are growing. Online and retail printing are heavy silver halide paper users as the higher price for dye-sub and inkjet media makes it very difficult for a retailer to compete in the 19-cent, 4x6 arena.
The consumption of silver halide paper has dropped significantly since its peak in 2000. When will it hit bottom? Bing Liem, senior vp of Sales for Fujifilm, sees the bottom in 2006; Diane McCue, Kodak’s GM of Paper and Output Systems, said, “The rate of decline is slowing, giving us an indication that we may be near the bottom…”
What then? Diane said, “We would expect to see renewed growth in the next year or two based on continued growth in digital exposures…and printing.” Bing is somewhat more optimistic saying, “…all signs show that we are in for a steady and healthy growth until 2009, when we will be back to 2003 levels.”
In other words, the past looked great, the present is not so hot, but the future is positive. Obviously, positive enough to attract the newbies. The increase in printing to photo paper from digital input is giving the paper folks some encouragement. Diane estimates 60% of consumer digital images are printed on silver halide paper.
No doubt, Kodak and Fuji control the U.S. market. There has always been a piece of the business held by the second-line brands that made for keen competition but with the Agfa and Konica demise, it looked as though we might have an oligopoly brewing. No more.
Dai Nippon is really starting from scratch—sort of. While never having been in the silver halide paper business before, it is a dominant player with dye-sub media. Getting into silver halide was simple enough for them: they just wrote a check to whomever for whatever and bought the Konica Minolta paper plant in Odawara, Japan. Presto, on Oct. 1 they were in the silver halide business with the K-M technology, facility and people. They will distribute in North and South America through Pixel Magic plus some previous Konica channels.
The Odawara plant was also outputting dye-sub media for K-M so it would appear that at some point in the future, when and if silver halide becomes less significant, Dai Nippon could easily shift production to increase its dye-sub capacity.
Konica also has a plant in Greensboro, NC, which is scheduled to close on Dec. 31. Until then, however, they continue to produce and ship Konica paper meaning that Pixel will have sort of a built-in customer base when the U.S. plant shuts down and Dai Nippon makes product available from Japan. The Dai Nippon paper line has one interesting marketing twist by offering paper with either a retailer’s watermark or no watermark at all.