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Print & Roll: Find Out Where the Action Is in the EMEA Consumables Market

Joanna Pupkowska, Program Manager, Consumables (EMEA)

Mario Lombardo, Senior Research Analyst , Western Europe

EMEA = Western Europe, Central & Eastern Europe, the Middle East, and Africa

Jun-10© IDC 2

Covered today....

Source:/Notes:

1. Consumables Research Program: Research Background &

Methodology Overview

2. Consumables Market Crisis Implications

3. Consumable Developments: Future Assumptions

Jun-10© IDC

Consumables Research Program: Research Background & Methodology Overview

IDC consumables tracker is run in 17 EMEA markets on a biannual basis.

Product coverage:

- Inks & toners: cartridges, bulk ink/toner, ink/toner refill kits, CISS

- Excluded from the research: developers, fusers, printing heads, printing drums

Market segments:- Original

- Compatibles

- Refillers

- Counterfeits

Information sources:

1. Shipment data reported by vendors on a consumables SKU level (both local & HQ offices approached for

data);

2. Qualitative feedback from local OEM offices on the size of specific market segments (e.g., addressing local

Brother vendor office with a question on threat from local Brother compatibles)

3. End-user study results (e.g., asking end users about the share of original consumables in their total purchase

volumes)

4. Quantitative sales data reported by IT distributors on an SKU level (both local distributors’ subsidiaries and

HQ offices approached)

5. Consumable market modeling based on detailed information on hardcopy peripherals installed base (broken

down per OEM brand, speed segment, and technology)

6. Feedback from refillers and from distributors most strongly involved in parallel import/export activities with

regard to consumables

3

Jun-10© IDC 4

Consumables Market Crisis Implications

Source:/Notes:

#1 In 2009, most OEMs reported significant drops in sales of original consumables, with toner sales

having suffered most.

#2 OEM falls in value terms were smaller than the decrease in volume due to OEM price increases.

#3 Average consumption rate per device dropped in both ink and toner segments in response to

saving measures adopted among both home users and business users.

#4 With printing infrastructure renewals being held back in 2009, vendors face an old installed base..

#5 Compatibles thrived in the worsening economic climate, with all EMEA markets reporting

significant increases in sales of compatibles.

#6 While compatibles increased across the whole of EMEA, the performances of third-party refilling

services varied across the region.

#7 Counterfeit supplies present little danger to vendors in Europe, yet they are a threat in the Middle

East.

Jun-10© IDC 5

#1 Overall Consumables Sales Drop

Overall consumables consumption started tumbling at the end of 2008, leading to a 12.2% drop in H1

2009 vs. H1 2008 in EMEA.

The observed drop in transactions resulted from printing reductions, business downsizing, slashed IT

investments.

Toner unit sales dropped by 11.7% year-on-year in 2009; OEM sales were down 20.6%.

Ink sales dropped 6.8% year on year in 2009; OEM sales were down 16.7%.

• The market for ink consumables peaked in 2007 and declined in 2008 and 2009 year on year.

• The slight rebound seen in 2H 2009 is of no great significance.

• The market launch of more single-color ink tanks inflates unit volumes.

Figures vary widely by geography and vendor.

0

20

40

60

80

100

120

140

160

180

1H 2008 2H 2008 1H 2009 2H 2009

Millio

n U

nit

s

Ink

Toner

0

20

40

60

80

100

120

1H 2008 2H 2008 1H 2009 2H 2009

Millio

n u

nit

sInk

Toner

Overall EMEA Consumables Market EMEA OEM Consumables Market

Jun-10© IDC 6

#2 OEM Drop in Value Smaller Than Fall in Volume

In terms of value, the overall EMEA consumables market shrank by 9.3% year on year in 2009.

OEM price increases were observed particularly at the end of 2008 and in H1 2009

• Ink price: up 13% on average retail price in € countries in H1 2009 year on year

• Toner price: up 18% on average retail price in € countries in H1 2009 year on year

• $ trend impacted prices

OEM ink revenue fell by 18.1% year on year in 2009 in EMEA.

OEM toner revenue fell by 8.1% year on year in 2009 in EMEA.

OEM revenue decreased far more sharply in CEE countries – ink and toner revenue down by more than

-30%.

The impact on the use of third-party supplies was substantial.

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#3 Average Consumption Rate Drop in Ink & Toner

The ink consumption rate is slowing in most EMEA markets.

Average volumes for ink printing are slowing – -20% year on year in 2009.

Home photo printing is not a strong driver.

The toner consumption rate has slowed consistently throughout EMEA.

0,00

1,00

2,00

3,00

4,00

5,00

6,00

7,00

WE CEE MEA

2008

2009

0,00

0,50

1,00

1,50

2,00

2,50

3,00

3,50

WE CEE MEA

2008

2009

Ink Consumption Rate Toner Consumption Rate

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#4 Vendors Facing Old Installed Base Due to Delayed Printing Infrastructure Renewals in 2009

IT investments have been slashed across all EMEA verticals.

An old installed base has many implications for OEM vendors:

A slowdown in the transition from SF to MFP

A slowdown in color adoption

Less control over installed base and users = more difficult to ship consumables

More cheap alternative supplies available for older printers

Although the recession has had a huge impact on large organizations, IDC’s SMB Purchasing Behavior

in WE: Post Financial Crisis survey revealed little impact on SMBs; 32% of SMBs delayed print

hardware purchases.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

No

Yes

Over the past 12 months, has senior management decided to hold

back on purchasing new printing devices?

Jun-10© IDC

#5 Significant Increase in Compatible Sales Across All EMEA Markets Due to Worsening Economic Climate

The EMEA consumables ink & toner market reported an 8.3% decline in volume year on year in 2009

and an 9.3% drop in value. Despite the overall decline across EMEA, some markets saw increases in

volume ,with end users encouraged by the increased availability of cheap alternative supplies (e.g., in

Ukraine and Turkey).

While shipments of OEMs dropped by 17.9% in volume across EMEA, performance of many compatible

brands improved, with ink compatibles growing by 21.1% and compatible toners by 13.0% year on year.

The originals vs. compatibles sales-volume gap has been narrowing over the last two years, the trend

being boosted by the crisis. In H2 2009, the share of compatibles of the total consumables market stood at

27.6%, as compared with only 19.5% in H1 2008.

9

0,00

20,00

40,00

60,00

80,00

100,00

120,00

H1 2008 H2 2008 H1 2009 H2 2009

Millio

ns

Original Inks Compatible Inks

EMEA Ink Consumables Market Size (Volume)

0,00

10,00

20,00

30,00

40,00

50,00

60,00

1H 2008 2H 2008 1H 2009 2H 2009

Millio

ns

Original Toner Compatible Toner

EMEA Toner Consumables Market Size (Volume)

Jun-10© IDC

#6 Varied Performances of Third-party Refilling Services Across the Region

10

13 500 000

14 000 000

14 500 000

15 000 000

15 500 000

16 000 000

16 500 000

17 000 000

17 500 000

18 000 000

18 500 000

1H 2008 2H 2008 1H 2009 2H 2009

Ink refillers

8 000 000

8 200 000

8 400 000

8 600 000

8 800 000

9 000 000

9 200 000

9 400 000

9 600 000

1H 2008 2H 2008 1H 2009 2H 2009

Toner refillers

Refilling services are on the decline in many markets, despite increasing demand for alternative supplies.

Refillers are losing market share to cheap new compatibles produced in the Far East.

Although ink and toner refilling services increased in volume terms in H2 2009, the importance of refilling

by third parties is expected to decline in the long term.

Ink refilling in 2009: Western Europe = 6.9%; Middle East & Africa = 11.4%; Central & Eastern Europe =

24.8%. The bulk of CEE refilling market volume results from Russia and Ukraine, which accounted for

85.3% of CEE ink refilling market volume.

Toner refilling in 2009: Central & Eastern Europe = 39.5%; Middle East & Africa = 9.3%; Western Europe

= 3.4%. Ukraine & Russia accounted for 90.9% off CEE refilling toner market.

Jun-10© IDC

#7 Counterfeit Supplies of Little Danger in Europe Yet a

Threat in ME

Counterfeits in the Middle East markets accounted for 3.7% of market volume in 2009, as compared with

2.2% in CEE and 0.5% in Western Europe.

Middle East: UAE = 5.8%; Saudi Arabia = 5.9%.

The popularity of counterfeits is constantly decreasing as a result of:

OEM vendors’ anti-counterfeit programs

Growing end-user awareness

Availability of cheaper good-quality compatibles, offering users more options when it comes to attractively

priced supplies

11

Jun-10© IDC 12

Consumable Market Forecast:IDC Assumptions

Source:/Notes:

#1 Economy showing first signs of recovery in 2010 & 2011 will boost original supplies sales.

#2 OEM vendors are expected to curb increasing popularity of third-party consumables.

#3 Demand for color printing in the business sector will continue to rise.

#4 Growing adoption of MPS and pay-per-click contracts will enable better control over printed

outputs.

#5 The share of laser devices in the overall hardcopy peripherals installed base will rise, thus

increasing toner sales.

#6 Consumables value is expected to show growth in 2010–2014.

Jun-10© IDC

#1 Economic Recovery in 2010 & 2011 to Boost Sales of Original Supplies

Original vendors are unlikely to regain historical market shares.

Compatibles will lose some market share after the crisis, but those compatibles vendors that managed to

establish strong market presences in the crisis years will perform well.

Ink market is expected to develop at CAGR of 1.4% over 2010-2014 while toner market is forecast to grow

at 3.4%.

13

280,00285,00290,00295,00300,00305,00310,00315,00320,00325,00

Mill

ions

Ink market forecast 2010-2014

0,00

50,00

100,00

150,00

200,00

Mill

ions

Toner market forecast 2010-2014

Jun-10© IDC

#2 OEM Vendors Expected to Curb Increasing Popularity Of Third-party Consumables

Original vendors will intensify efforts to win back some of the lost market shares, fighting third-party

consumables vendors through the following:

Product strategy: a focus on cost-efficient multipack products and single-color tanks

Development of programs for collecting empty cartridges

Legal undertakings: patent-infringement disputes

Quality awareness campaigns

14

Jun-10© IDC 15

#3 Rising Demand for Color Printing in Businesses to Continue

OEM color laser adoption in the office slowed through the downturn, causing a fall in color toner in 2009

year on year.

However, the percentage of color of total toner sales grew to 31% in 2009 from 26% in 2008.

Many color applications were not axed through the downturn.

The color laser installed base is expected to expand at a CAGR of approximately 14% across the 2010–

2014 period, with color toner expected to show similar growth.

CEE and MEA countries will experience much greater growth than WE.

Cost-per-copy contracts and MPS will continue to drive color printing.

0

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2008 2009

Millio

n u

nit

s

Color

Black

EMEA OEM Toner Sales by Color

Jun-10© IDC 16

#4 Growing Adoption of MPS and Cost-Per-page Contracts

The downturn has been a mixed blessing for MPS providers, with many cuts but also saving measures

(public sector, finance, manufacturing, …).

The need for print rationalization will continue to drive MPS demand.

MPS proliferation in the SMB and large-business segments will inevitably reduce related hardware and

supplies growth.

The structure of the consumables distribution channels will be impacted in the long term, moving

toward a services business model.

A gap will open up between the distribution channel for large businesses and that for SMBs.

Hardware and supplies businesses will separate.

MPS will be effective in combating third-party supplies.

Transactional sales (non-credit or non-lease based)

will decline.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

<10 employees

10-99 employees

100-249 employees

250-499 employees

Transaction Credit deal Lease Managed contract

WE SMB: Generally, how do you pay for your hardware

devices?

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#5 Rise in Laser Devices’ HCP Market Share to Trigger Toner Sales

The transition from inkjet to laser is happening in low-speed segments:

• Slowdown in inkjet print volumes: -20% year on year in 2009

• IDC figures indicate market maturity

• Market launch of more single color ink tanks inflating unit volumes

• Ink market in need of shake-up: new business models to be offered

Demand for high-yield toners and multipacks will continue.

0%

10%

20%

30%

40%

50%

60%

70%

TOTAL <10 emplys 10-99 100-249 250-499

Purchase price

Consumable cost

Output Quality

Output speed

No duplex copying / printing

Reliability

Noise

Other

WE SMB: Perceived Barriers to Business Inkjet Adoption?

Jun-10© IDC 18

#6 Consumables Value Expected to Show Growth in 2010–2014

The consumables market is still very unstable, but recovery is close.

Vendors are managing to keep revenues steady year on year, but only through price increases.

Rationalization of printing infrastructure will increase pressure to lower the cost per page.

The market will show growth in value in 2010–2014.

Toner: Growth in value will be higher than unit growth as a result of price increases, higher-yield

cartridges, and more multipacks.

The currency trend will continue to work against end users. (U.S.-based vendors benefit from the

U.S. dollar trend, but they adjust prices in case of lower revenues.)

Jun-10© IDC 19

Thank you for your attention…

Please see also other of our reports:

Quarterly Hardcopy Peripherals Tracker

Hardcopy Peripherals Qualitative Reports (Analysis, Forecast, and Vendor Profiles)

Managed Print Services (End-User Survey Study)

Outsourced (In-house) Print & Doc Services (Market Sizing & Vendor Share)

Verticalization of the Hardcopy Peripherals Market

Hardcopy Peripherals Installed Base

Hardcopy Peripherals Page Volume and Value

IT Spending per Vertical

Jun-10© IDC 20

Any questions?

We would be happy to receive feedback from you!

Please contact us:

Joanna Pupkowska

Program Manager

Consumables (EMEA)

E-mail: jpupkowska@idc.com

http://twitter.com/jpupkowska

tel.: +48 22 548 40 52

Mario Lombardo

Senior Research Analyst

Hardcopy Supplies (Western Europe)

E-mail: mlombardo@idc.com

tel.: +44 (0)208 987 7239