Digital Printing for Packaging Industry

Q1 2015

www.cir-strategy.com

Cambridge Investment Research consulting for strategy

Examples of relevant work done

Tech roadmap for Xaar printheads back in 2004, successfully exploited High-Value Manufacturing Conference Series since 2002 (36 conferences delivered averaging 100 execs)

Technology strategy for Domino in digital labels in 2009 PIRA Inkjet Inks for Packaging Report 2006, Digital Textiles Reports 2012 & 2014

Commercial Diligence for Domino plc just before they purchased PostJet in 2012 for GBP£6.5Mn with presentation to Board of Directors IP Strategy for Plastic Logic 2013

and... Market Entry Strategy for DP Start Ups/Spin-offs e.g. Inkski

Work on labels for Epson “Beyond the Tech Enablers” - 2008 Reports on Global IIJ & Labels sold Globally, EU, APAC and NA - 2009

Mapped entire Cambridge High-tech Cluster (750 scaleable technology firms)

2 large recent & ongoing Direct-to-X digital printing in packaging clients

Workshop – Co-creation

- Joint creation of a better plan with CIR proposals of contribution (workshop) - Separate client / CIR reflection on the joint creation

- Joint conclusion of the results from the activities above and proposed next steps (what have we learnt and have we proven to be able to work together)

1 • What is the nature of the opportunities from digital printing?

2 • How real is the interest from customers in the digital package printing opportunity?

3 • What is the competitive landscape & market potential?

4 How economic is digital for the packer or processing factory?

Areas of focus:

• Structural changes to market | their effects on the business • Market readiness, timing & growth rates

• The use case & customer value-proposition • Business model concepts | Scenarios & options (via Route to Value)

• Business propositions & validation • Routes to Market | Accessing technology

• Recommendations to Board

Overestimating the Short Term, underestimating the Long Term:

Digital printing waves* observed in last decade

2004 – signage & displays

2008 – labels 2010/12 – ceramics

2012/14 – textiles 2016/18 – packaging?

…Wait and see or Don’t miss this boat?

* Moving from unknown to an established or even saturated market in relatively short period of time, year given represents approximate “take-off”

Source: CIR Dec 2014

42 interviews on digital for packaging achieved

Aug-Sep 2014 Technology supplier - equipment (printers, print finishers and line machinery)

36% N=15 –

Packaging (12) & Labelling (2) Converter 33% N=14

– Brand owner or retailer or packaging filler / food producer

29% N=12 –

Consultant / Packaging Gurus 2% N=1

Evidence of Related Patent Activity in last 5 years around

digital for packaging (CIR Patent Search Team)

Adverpack LLC Atlantic Zeiser GmbH (Germany)

Ball Packaging Europe Gmbh (Germany) Colgate-Palmolive Company

Cuch Simon R ( Us ), Cyan Tec Systems Ltd ( Gb )

DIC Corp Durst Phototech Digital Tech ( At )

Fuji Xerox Co Ltd Fujifilm Corporation (Japan)

Gizeh Verpackungen Gmbh & Co Kg ( De )

Graphic Packaging International, Inc. Guangdong Dongfang Jinggong

TechnologyCo

Heidelberger Druckmaschinen Ag Heineken Technical Services B.V. (Nl)

Hewlett-Packard Development Company, L.P.

Hitachi Ind Equipment System Co Ltd INX International Ink Company ( Us )

KHS GmbH (Germany) Kimberly-Clark Worldwide, Inc.

Konica Minolta Holdings Inc Krones AG ( De )

Machines Dubuit (France) Mars, Incorporated

Memjet Technology Limited (Ireland) Mimaki Eng Kk

Osiris Technology B V ( Nl ) Plastipak Packaging, Inc. Pressco Technology Inc. Primera Technology, Inc.

Procter & Gamble Company, The Reynders Etiketten N V ( Be )

Seiko Epson Corporation (Japan)

Smurfit Socar Packaging ( Fr ) Sun Automation, Inc.

Superfos Packaging As ( Dk ) Tetra Laval Holdings & Finance S.A.

(Switzerland) The Coca-Cola Company

Till GmbH (Germany) Toppan Printing Co Ltd

Toshiba Tec Europ Imaging Systems SA ( Fr ),

Toshiba Tec Kabushiki Kaisha (Japan) Videojet Technologies Inc.

Weng An Zhongya Color Printing Packaging Co Ltd

Westvaco Packaging Group Inc (Us), WM. Wrigley Jr. Company Xeikon Ip Bv (Netherlands)

Xennia Technology Limited (United Kingdom)

Xerox Corporation Xinxieli Package Products Shenzhen Co

Ltd

hp indigo (ep ip) ABG Intl (dfs w/ hp indigo) Xeikon (fn pkg fc iml, ep) KHS – d2s ij (pet) Krones – d2s ij (pet hclient) Till – d2s ij (any mat) ToneJet (w/ Ball) – d2 metal cans es FFEI – Graphium – h m prt ij flxo Sacmi Machines Dubuit d2s pet ij Hp scitex – d2 corrug ij efi (corrug fp fc) ij

Durst (corrug) ij FujiFilm Screen (fc corrug) ij Sun Automation (d2 corrug) DPS (Brother?) ij VIPColor lbls fc fp por paper Primera lbls fc fp Cyan Tec rtr rts Heidelberger w/ Gallus, CSat (h m prt) mark andy (h m prt) Nilpeter (h m prt) lbls fc fp Colordyne lbls tags sheets Epson (lbls - fn pkg) INX Digital Edale (dfs)

Atlantic Zeiser (ip) VideoJet ip d2p Uteco dfs flxo Spartanics dfs SEI dfs Hinterkopf aerosol metal cans Wifag Polytype ij Highcon (dfs fc w/ xeikon) Presstek fc Kodak (Prosper, Stream) w/ Bobst (dfs corrug) Xerox vdp rtr/sheet Canon Oce vdp rtr/sheet Landa (nanog fc)

Companies already developing & marketing digital packaging printing & finishing systems

Global Label & Packaging Market Growth

Source: PIRA 2013

6.6% CAGR

4.2%

15.5%

22.7%

fc and fp 40-45% CAGR forecast

Global packaging will reach $1Tn by 2018 (PIRA)

Euro

Bn

18.2%

“Packaging has gone from an afterthought to an integral part of the product”

- a packaging converter

Evidence for market pull How strong is your or your customers' interest in using direct-to-package digital printing?

N = 30

Average = 3.50 or

“Middling to Strong” (median / average) “Strong” (most common answer)

Other US research into packaging Q4 2013

Source: Karstedt Partners

How Brand owners and retailers view the benefits of digital printing

Other US research into packaging Q4 2013

Source: Karstedt Partners

Does interest level change with a premium level of 15% to 20%

Evidence for market activity If you may at some stage require to buy digital direct to pack printing equipment,

which of the following would best describe your current position or approach to this:

Median response

& a surge in beta installations exp. Q4 2014 & 2015

Perceived barriers to adoption of digital direct packaging printing

All barriers around technology, printing, finishing are thought to be solved within 4 years and then any delay to adoption is organisational

1st= Consumer engagement 1st= Faster turnarounds “Time to mkt segment” 3rd Advertising promotions: Limited editions 4th Advertising promotions: Local events 5th Regionalisation 6th Seasonal information 7th Languages

Customer drivers & Decision-Making Units

Marketing dept

Production/logistics

Regulatory/ICT

Order of importance from survey:

OtherUS: commercial printers in maturing market

seeking new segments e.g. packaging

“profitable short-runs segment”

high

•  Key to marketing and sales strategy for digital direct to packaging will be accessing all 3 depts at brands

Strategy

Source: Harvard Business Essentials Series: strategy (generic aspects)

connect projects to changes, objectives,

goal, values

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Towards a better plan…

CIR roles

1. Methods 2. Validation – hands on

3. Assurance – independent review

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Towards a better plan

METHODSDesign structure

SegmentationConfidence

Value network & key case sub-networkImpact assessment

Opportunity prioritisation & OptionsBusiness Proposition, Value Proposition

Service designYour route to value

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Value network and dynamics

Steps for Value Network Analysis Set-Up

1.  Identify Participants (all stakeholders) – NODES

Upstream and downstream External & internal

Complementary Assets

2. Identify Expectations – FLOW LINKS Tangible & Intangible

3. Define scope and boundary, context and purpose – UNIVERSE

Primary & Secondary Stakeholders

4. Validate participants, expectations & sequencing – LOGIC Propensity to change of stakeholders

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Confidence

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Confidence table

Example

NOTES

1 Sources of confidence are adapted for each client and project.

2 We do not use 100% confidence, as this is usually impossible to

achieve.

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Routes to Value

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Routes to Value

The RtV View* explicitly links planning with execution.Allows for impact of any decision to be understood.

StrategyTactics

*The RtV Map is a directed graph.

Our method ensures that everything aligns to a strategic goal and that the impact of decisions is clear

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Structuring the decision context

Routes to Value – visible strategy

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Routes to Value – visible strategy

Identify emerging user need

Option 2

Option 3

PROJECT – choosing options

Analyse discourse stream

Cost Conf. Time Conf.

£20K 70% 6 wks. 60%

Dependencies

Agree license

Competencies

Ontologies and target users

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Routes to Value – visible strategy

Increase number and length of accounts

CHANGE – making it explicit

RESP. Ed

Meter

Revenue as % of total revenue :

C F A T

15% <=25% 50% <=66

% Current Fail Acceptable Target

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Routes to Value – visible strategy

E.g. Increase the lifetime value of customer

OBJECTIVE – Clarify goals

RESP. Ed

Meter

Annual spend over 5yrs £K pa

C F A T

55 70 100 250

Scale of measure

Metrics of measure

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Tracking confidence in outcomes

Uncertainty is the best predictor of outcomes.

Gollet. C., University of Toulouse

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Impact assessment

Customer lifetime value and impact assessment

LifeTimeValue function Life Time )-(( )Transactions

number of, Average

Transaction Value,

Cost of Acquisition+Cost of

RetentionNumber of

Transactions in a period, e.g. a

year

i.e. number of periods

(number of years, when year = period

LTV f LT ) - (( )Tn, ATV, CoA + CoRimpact: l = low m = medium h = high 0 = no impact © Nicholas Coutts 2011 – 2014 All Rights Reserved

OPTION TIME COST IMPACT IMPACT IMPACT IMPACT IMPACT

Reduce price

l l h h h o o

Improve web site

m h m m h h h

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Towards a better plan

VALIDATION

Specific market and customer dataInterviews; Research; Intelligence; Insight