• Direct-selling manufacturers that produce conventional forms as part of their product mix.

• Trade manufacturers who produce conventional forms for all types of distributors and resellers.

• Trade manufacturers who supply products other than forms to forms distributors. The study includes only shipments to distributors who have traditionally sold mainly conventional forms.

• Production from plants owned or controlled by forms distributors.
  

FORMTRAC 2002 covers shipments by over 700 manufacturers who produce or sell forms and ancillary products, or use the forms industry as a distribution channel. This includes approximately 500 forms manufacturers. Since 1995, mergers, acquisitions and business closures have reduced the number of forms industry participants by nearly 100 manufacturers. At the same time, the industry has experienced a sizeable increase in manufacturing participants that supply products other than conventional forms or provide services that can be sold by forms distributors. The industry has also experienced an increase in printing operations owned or controlled by forms distributors, which produce predominantly cut sheet products, commercial and on-demand printing.

FORMTRAC is the only industry study that shows shipments by direct-selling and trade manufacturers on a comparable basis: retail value of products and services. This approach recognizes the value added by distributors, which has traditionally been omitted from manufacturer shipment statistics compiled by the US Department of Commerce and other consulting firms. Since the independent segment represents over 50% of the industry, the value added by distributors is a large component of total industry sales to end-users.

INDUSTRY RESTRUCTURING
Definition of what constitutes the forms industry and analysis of industry shipments has become very difficult due to major structural changes over the last ten years. Wallace Computer Services now produces more commercial printing than forms and is also a large supplier of labels. Standard Register has formed an alliance with Consolidated Graphics and will become a distributor of commercial printing. Moore is undergoing an extensive corporate restructuring and product mix shifts, including acquisition of new service and commercial printing businesses. Reynolds & Reynolds has executed the most radical strategy by selling most of the forms plants to a new business called Relizon. Reynolds & Reynolds is now partly a service bureau and partly a forms distributor with selective forms production capabilities. Relizon is partly a direct-selling forms manufacturer and partly a trade supplier with Reynolds & Reynolds as their main distributor account.

Industry restructuring has also affected the Independent Segment, where some manufacturers use multiple channels of distribution and more distributors have acquired or started manufacturing operations. The most significant impact has been the increase in suppliers from outside the forms industry who now use forms suppliers as a distribution channel. The "outsiders" provide many of the products that are now driving growth in distributorships and are replacing sales declines in mature conventional forms. FORMTRAC 2002 shows that products other than conventional forms were 46.6% of total distributor sales in 2001, and will be over 50% in 2003.

PRODUCT SALES TRENDS
The decline in demand for conventional forms shown in FORMTRAC 2002 is more moderate than past FORMTRAC projections and forecasts in many other industry publications. Continuous forms sales are affected negatively by the 5% to 7% annual shrinkage in the installed base of business and industrial application impact printers. At the same time, the population of high speed web-fed laser and other digital printers is growing and increasing demand for pre-printed or pre-processed rolls. Therefore, total sales of continuous stock and custom forms are not declining as fast as the installed base of impact printers. Distributors have been successful in replacing lost stock TAB forms volume with a variety of other stock paper for laser and ink jet printers, point-of-sale terminals, ATM machines and other applications.

Indirect segment sales of unit sets are declining very gradually, partly because the major directs have periodically closed plants and increased their purchases of unit sets and salesbooks from trade manufacturers. The one conventional forms category where the directs are gaining market share is very short runs of predominantly custom printed or imprinted (on pack-fed equipment) software compatible forms. This is partly due to the superior software-compatible forms marketing, transaction processing and manufacturing capabilities of the directs and partly due to closure of many short run pack-to-pack operations treated as a "sideline" in conventional forms plants.

Overall forms industry product sales (at retail value) declined 2.2% in 2001 because some of the non-forms growth products failed to meet previous forecasts. Promotional and direct mail printing product sales did not grow as expected in 2001 and will probably experience low growth in 2002 and 2003. Direct mail printing has been affected negatively by the 2001 economic slowdown, September 11 attack on the US, postal rate increases and by reductions in sweepstakes promotions. Advertising over the Internet may also reduce demand for direct mail, but this may be offset at least partly by promotional mailings to attract visitors to specific web pages.

Similar factors have decreased previously expected growth rates in distributor sales of commercial printing and envelopes. Standard Register has reduced internal production of commercial printing and closed a large plant. Wallace Computer Services is restructuring commercial printing operations and selling several plants. Commercial printing still represents the largest diversification opportunity for many forms suppliers, and growth rates can be expected to improve in 2003 and beyond due to acquisitions, addition of more digital printing capabilities and improving economy.

For distributors, labels, tags, tickets, plastic cards, advertising specialties, and printing/finishing services have been major growth vehicles and distributor sales of these products can be expected to increase through 2006. Many trade manufacturers, with their large investment in forms presses and collators, have been unwilling or unable to keep pace with distributor sales growth in these categories. The result has been a large influx of suppliers from outside the traditional forms industry who see opportunities in a new channel of distribution. In effect, the product lines and interests of distributors and their traditional form trade manufacturers are diverging, adding to the challenge of defining what constitutes the forms industry.

FORMS INDUSTRY OUTLOOK
FORMTRAC 2002 raises important issues of how the forms industry can be defined in the future and for how long it will exist as a distinct specialty. FORMTRAC 2002 also points to a fragmented industry that is experiencing growing overlap between product categories and threats from new technologies and new suppliers that can shift work from conventional forms presses to alternative production systems. The most serious industry challenge, evident in compiling FORMTRAC 2002 data, is a lack of clear industry leaders and business models. The major directs who formed the industry leadership core in the past are no longer effective in that role due to ownership changes, internal restructuring focus or diminished identification with forms. If the industry cannot develop a new definition of itself and unite under a leadership core of major participants it may evolve into a variety of product specialties and merge into other segments of the larger printing and business communications industries.

FORMTRAC 2002 points to the following broad conclusions about the future of the forms industry:

• The forms industry is gradually dissolving as a clearly identifiable product or market specialty. Technology and market forces are transforming it into a segment of a much larger ($30+ billion) printed business document industry.
  
  
• Document processing and printing technology advances are gradually reducing demand for conventional forms, but the industry is not likely to experience a sudden steep drop in conventional forms sales.
  
  
• Traditional forms industry participants have been successful in replacing losses of conventional forms volume with a multitude of products that can complement forms and utilize existing sales skills and distribution practices.
  
  
• Distributor product mix and growth strategies are diverging from the capabilities of their traditional forms suppliers.
  
  
• The greatest current strength of the forms industry is its role as a large distribution network for products and services needed to operate and promote businesses and other types of organizations. Manufacturing, with huge excess capacity, has shifted from a dominant to a supporting role in the industry.
  

If you would like to purchase a copy of FORMTRAC 2002, click on this link http://www.dmia.org/about/formtrac02.html, or call DMIA’s product sales at 800-336-4641.

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