Early last year, Muratec America, a traditionally office-equipment-centric division of Japan’s Murata Machinery Ltd., announced its entry into the label printer market. We suspected then the firm may have found an interesting new market to explore, and have kept an eye on the venture. A little over a year after that initial launch, we caught up with Muratec America President Jim D’Emidio.
How did Muratec get involved with label printing?
We were introduced by a Japanese company that was trying to get into the U.S. market. We started studying it after being introduced to the concept by them and realized that this market is very similar to the market for color copiers 25 years ago. Back then, if you wanted a color copy of something, there wasn’t actually such a thing as a color copier, so you went to a print shop. They would have Heidelberg presses, and they were generally analog products, and you had to buy a large enough quantity to get the price down for it to make sense.
That is how the label market is right now. Over 90 percent of all the labels in North America are printed by printers; they are called “label converters.” Typical customers would be breweries, food producers, chemical manufacturers, etc. They are offset flexography printers and the client needs to order a large quantity for the pricing to make sense. If they don’t use them for whatever reason, they have to throw the remainder away. There’s a lot of natural waste. We have found that short-run digital color label presses that allow the end user to print their own labels instead of depending on a print shop presents a great market niche. They have only been on the market for three or four years and represent a lot of opportunity.
We believe that same sort of transition will happen in labels as happened with color copiers, and we believe the BTA dealers can train and educate the end users on how they can print color labels themselves, much as they did years ago creating the market for color copiers. There is a learning curve to this, because you have to learn a lot of things about media – there are lots of different materials that are used. Vinyl, polyester … and then you can also put coatings on it, laminates, etc. There’s a lot of money to be made – not only do you sell the traditional toner and drum supplies, but you can also sell the media. Media can be very expensive, especially if it is meant for outdoor display. So we think labels are right in a dealer’s wheelhouse, creating an annuity stream by selling hardware, service, supplies and now media.
What is the equivalent today on the label side that you are selling that equates with the color copier you referred to “back in the day”?
We are focusing not on the low-end packaging labels for warehouses, but instead the midrange color label digital presses. These products can have a list cost of $20,000 to $200,000. They’re designed to print from a few hundred to 200,000 labels a month or more, depending on how big the labels are.
So they can handle short run and larger quantities?
Yes. As an example, we have placed one of our machines in a university and they print parking stickers. They have different parking stickers for students, faculty and maintenance, and they each have a different number. With our solution, they can do that easily. So instead of having to send out that print job, they can do it on demand, and with the same machine the university can also print out marketing materials, bumper stickers and other kinds of labels. They’ve found a lot of different uses already, where before they were farming this work out and it was very expensive for them to do that.
Labels are also important for the marketing side of a business. In industries like food and beverage, that’s how they market their products. Take wines as an example – this type of equipment allows a smaller winery to be able to make a short-run label for a wedding, printing perhaps just a couple of hundred. Our equipment allows them to sell those custom labels to their client and make a little bit more money. The same thing can be done for bar mitzvah’s, retirement parties, etc. Short run labels can also be used with food. We have a company in Dallas that makes grilling sauce called Gorill’n Grilling Sauce and the character on their label is a gorilla. They wanted to change his look with every season; a baseball cap on the gorilla when it was time for baseball season, for example, and then when people were shopping they would know the sauce was fresh because it’s baseball season. Then there would be a football helmet during football season, a Santa Claus hat at Christmas, etc.
Muratec has been selling label machines for a little over a year now; tell us a little bit about what this last year’s been like.
We’ve certainly learned a lot. What we’ve found is that the hardest part of getting new clients is convincing an end user to move away from their vendor that has been doing the printing for them and to convince them to do this themselves instead. Customers were saying, “it seems like a good idea, but I’m not ready to do it. I’m going to continue doing it through my printer.”
We’ve learned that this is actually a new idea – very few companies are doing their own label printing. So it takes time for them to wrap their heads around it. I would say the first 40 or so installations that we did with dealers were the low-hanging fruit, where an end user was upset with the print shop that they were using, or unhappy with the cost or what the label looked like, or the volume of printed material they were having to throw away. Either they approached our dealer or they were already a customer of our dealer and they said, “I want to do this.” Now what we’re beginning to see, as this concept is beginning to take hold, there are more vendors beginning to come in and look at it. So I think that’s going to stimulate more end users being willing to look at the concept of doing their own label printing in-house. They’re seeing what can be done, they’re seeing that you can do your own labels and it’s not difficult.
Because this is a new adjacency print business and dealers are not yet accustomed to the unique requirements of these machines, Muratec has built an entire program around onboarding dealers taking on this line. We do a three-day launch with them. We do the service launch with their service people for a day and a half, we do a day with their sales people, sales management, marketing people. And then we have the dealer organize an open house. They go through their database of customers, looking at the SIC code for their food, beverage, manufacturing, chemical clients … finding all those companies in their current contact base, and they reach out to them, asking them if they’re using labels or buying labels from a printer, and they invite them to the open house to come take a look and ask them to bring their label samples. During the open house, using our software that comes with the machine, the dealer can detail exactly how much the cost would be to print the type of labels in the sample the client brought with them. The client gets an instant quote.
We have also developed a relationship with GreatAmerica Financial Services to develop special financing for this equipment, because we believe that these presses will typically be on 60-month leases — these machines are designed to last for 10 years.
Is there anyone from Muratec on site during these open houses?
Yes. We are there as support. We want the dealer and their staff and their service techs to run the machine, but we’re in the background making sure that if they have a problem, we take care of it. What we’ve found is that most dealers sell at least one machine and a lot of times they also get print-for-pay clients.
When you’re saying “print for pay,” are you recommending that the dealer get a machine and offer the services of a label converter to the community?
Yes. It helps the dealer understand the market. They’re going to have a lot of customers that trust the dealer because they have purchased copiers or printers from them for years. If the customer likes the value proposition and is doing maybe a couple of thousand a month, it’s very likely the dealer can also win that business. That then allows the dealer to use the machine, understand it, and get more familiar with the whole label market. That knowledge will help them sell more label equipment to end users who want to do their printing in-house.
That’s an interesting twist to the formula. Not only are your dealers selling to the end user, they’re also supplying to the end user.
Exactly. Many dealers had a lot of bad luck with 3D printing. They’re fearful that if they buy one of these label machines and they don’t stick with it, it just ends up collecting dust in the corner. We think by offering print for pay, it will ensure engagement with the equipment by all different levels of staff and the learning that comes with that will benefit them in future deals.
Tell me who some of the juiciest targets are. You mentioned a few earlier.
Certainly the beverage industry. Microbreweries are a great target and there are, on average, 30 microbreweries a month starting in the United States. The farm and food area, chemical companies. There’s a new worldwide regulation called GHS, which is a global harmonization of labels — now all chemical labels have to have color on them and they have to have certain symbols. With our products, you’re able to put a label on a barrel, immerse it in salt water for five years and still be able to read it. We’re compliant, and that’s what this international law requires. The regulation was developed so when people dump stuff and it’s later found, they’ll be able to read the label even five years later and know what’s in the barrels.
Clearly, a factory like a microbrewery can have a lot of space and house a large label machine, but what about companies with less space? What are their options?
We currently have four machines. We have what we consider a tabletop machine that’s not that much bigger than a larger-sized printer. We also have a midsize machine that’s a little bit bigger. It’s the size of a large printer with a reel-to-reel on it for take up. You can also put a finisher on it that is about the same size.
Our third machine is a full inline higher-end machine that retails for around $175,000. And then the fourth machine that we will present at the ITEX show is what we call a packaging printing machine. It allows you to print on different heights and lengths of cardboard, bubble wrap, wood. This piece of equipment is designed for the packaging industry, which we think is a growth industry, and another adjacency business that our dealers can look at getting into. Going forward in this industry, it’s going to be very difficult to grow organically. These adjacent market opportunities can give our dealers the ability to grow their business organically without taking away from anything. This is new-found business, these are new placements, they are not replacing anything else.
Who are the typical customers for the tabletop machine?
Those are companies that are doing under 15,000 labels. They are using what we call pre-cut media, so they don’t need a finisher. A lot of times you’re going to see inkjets that are dominant in that area because they are very fast, very good color, low cost to run, and simply easy. Once you move into the bigger machines, you’ll start to see custom finishing, you can die-cut any shape — perhaps cutting out a leaf within a label for a wine bottle, for example. It’s fun!
You talked a little about what you’ve been doing in the last year but obviously it hasn’t been all rainbows and sunshine. Tell us a little bit about some of the challenges you’ve faced and how you’ve resolved them.
Well, these are fairly sophisticated machines and these machines are designed for production. Most of the dealers have traditionally sold to the business side. They’ve sold to the CFO, the president, the office manager. These machines are being sold to the operations side. The operations folks need to have these labels to keep the process going. It’s very important that these machines run efficiently, effectively and as advertised. So we’ve had some different challenges because there’s a lot of moving parts and it’s new to dealers, new to their service organizations – there’s a learning curve, but after a while it seems to work fine for them. This is a difficult industry to learn. However, dealers want this to be difficult. There is profit in complex and difficult industries. Difficult industries demand support and service-oriented businesses to sell the technology. If the color label printing business was easy, everyone could do it and that would drive down the price.
What is the title of the person the dealer is looking to sell these machines to?
It’s generally whoever’s dealing with the end product and how the end product gets produced. If it is a manufacturing operation, it’s whoever is running the shop. If it is a farm, it would be the farm manager. In some companies it is the president, but it’s generally not the office manager. The office manager or the CFO may calculate the financing or determine whether they should buy or lease the machine, but ultimately it will be the director of operations who is deciding whether this piece of machinery supports what they’re trying to do. And in most cases it does. In most cases it gives them a lot more flexibility, it cuts down on waste, and it allows them to change their marketing messaging more often if they want to.
Can you talk about a dealer you’ve worked with who is doing really well with your label machines?
We’ve been surprised with success both in small dealers and big dealers. We had a smaller dealer that was able to sell two of our label machines to a manufacturing company that was doing outdoor lighting. They tested it in their chamber, because their labels had to stay on in cold environments, hot environments, humid environments, dry environments, everything. They were able to test everything and our machines performed perfectly and they are very happy. It cut down on their costs because they weren’t doing huge runs of these labels but the labels needed to be legible for years in an outdoor environment, so they ended up buying machines for two different shops. The best part is that our dealer could not get into that major account with copiers. Now that they have a relationship, they’re able to place copiers and printers into that account as well. This dealer is also printing labels with their in-house machine for a variety of other companies that are not ready for their own machine yet.
We also have a very large dealer that is located in a state where cannabis is legal and they have found multiple areas in the cannabis business to place machines because this industry needs label packaging for a lot of their products, and they also want colorful labeling for marketing. A lot of time, people buy the product based on what the label looks like.
That’s the same way I buy my wine!
The farm-to-table movement is also creating some great opportunities for label presses. We have a machine placed in San Diego for a company that grows specialty herbs. They pick the herbs, package them, label them, and put them in FedEx pouches and ship them to restaurants all over the United States. So that herb is less than 24 hours old when the chef uses it.
What is the learning curve on a piece of equipment like this for a dealer that’s been selling office print?
It takes between six to nine months to get very comfortable. In that timeframe they should be able to sell a couple presses and also be offering print for pay on labels. Once they’ve done that, they’re going to be very comfortable understanding the media. We’ve hired some specialists within Muratec from the label industry that understand media, understand the customers and their unique needs and these specialists will be very useful in helping our dealers that are entering this new market.
You mentioned you have specialists in place for the dealers’ open houses. What other services, support and training are you providing to the dealers?
One of the areas completely foreign to someone new to this is the label media. There are literally hundreds of different media that are out there, from foils to color to a large variety of other things. Ink is also very important in labels, along with toner. Our team can advise the clients, depending on the label and depending on how many they need, guiding them on which media is a better way to go and with which type of machine. If the dealer desires it, we will also go out and install and train the client alongside the dealer.
One of the best things we do for dealers, even before they sell a machine or buy a machine for in-house use, is encourage them to send in to us sample labels or specs from their prospects that we will print out on our equipment and send back by FedEx so the client can inspect the samples and ensure they meet their requirements before any equipment is purchased.
There is great potential for dealers to earn additional revenue by selling supplies related to the production of the labels. They can sell applicators to put on wine bottles and food. That’s part of the process of the finished product, putting labels on the actual item. That’s another area where the dealers can sell additional products. Applicators, splitters, rewinders, winders and other options — all of those items could be needed by a client.
What do you want dealers to take away from this interview?
The print market is contracting. We all know dealers are going to need to find adjacent activities to keep their revenue streams flowing. If they don’t do this, they are going to have to do something else. We think this is really close to their traditional business model and because of that presents a unique opportunity with little competition. This fits in their wheelhouse, and it affects at least 20 percent of their customers. A dealer can go through his client base and look at the different companies and can certainly know which ones are in manufacturing, which ones are in food, which ones are in beverage, which ones are in the farming industry and all of those types of companies have a need for this.
All the machines are being sold at or above list. Long term, we believe that these products will be an essential piece of equipment in most companies. It just takes time for the end user to feel comfortable printing on their own. Believe it or not, many dealers did not jump into the color copier market because they thought it was too difficult. This is a tailor-made business for BTA dealers. This industry is going through an analog to digital revolution like copiers did 25 years ago. This is a perfect adjacency business for dealers to add hardware, supplies and service.
This article originally appeared in the April 2017 issue of The Imaging Channel.