The meeting room in the centre of Heidelberg’s stand looks down over one of the most crowded halls at Drupa. To one end is one of the newest and most impressive machines at the show – Heidelberg’s XL 162, a six-colour plus coater weighing 300 tonnes. On another side is the new B2 XL 75 running with a foil application unit and between the die cutters and carton gluers that signal Heidelberg’s entry into the packaging market. And everywhere there are people, jostling for a view, asking questions, reaching for samples. By contrast the meeting room is austere, white and cool. And Heidelberg ceo Bernhard Schreier is calm and cautious about appearing too confident. The company has suffered choppy seas thanks to adverse exchange rates and the vagaries of the economy. Its share price has drifted down as investors seek more exciting homes for their money. Or perhaps they feel that print has matured to such an extent that a company with such a massive market share as Heidelberg has has nowhere to go.

Schreier does not share this analysis. For certain the commercial printing sector in the developed world is not expanding rapidly. “In the industrialised countries there will be fewer printers in the future,” he says, “so we can only sell a press to a company in a country like the UK, US or Germany if he can produce more with it. A press needs to improve his capacity to make money. Such a printer will not replace his old press just because it has fallen apart, because the press will not fall apart. It has to do more.

“The step in productivity from a Speedmaster 102 to an XL 105 is 30%. The question the printer must ask is ‘Is the demand there for this and will the cost per page drop?’ That drives the decision. In short the industrialised countries will be a replacement market because we are increasing productivity faster than the market is growing and so there will be fewer printers.”

That might be a gloomy prospect had Heidelberg not already started to change gear. In the 1990s the company tried expansion by moving into web offset, newspapers and especially digital. It has since pulled away from all those sectors stung by the heavy financial and r&d investments required. It has retained its interest in finishing equipment and in prepress, which thanks to the merger with Linotype-Hell began the process of transforming Heidelberg from a press manufacturer into the solutions provider it is today, even if it did not recognise this at the time.

Schreier is adamant that Heidelberg is not going to return to these areas, leaving open the question of where the growth that shareholders crave will come from. Will Heidelberg once again become an acquisitive company, prepared to buy its way to growth?

It has expanded its board with Jurgen Rautert becoming sales director, freeing Schreier as ceo to concentrate on corporate strategy and meeting the increased demands for communication with the financial community. Stephan Plenz becomes r&d and production director, overseeing expansion in China, while Dirk Kaliebe remains cfo with a new focus on efficiency measures.

Further acquisition is one option Schreier admits. But it will be done carefully. On the eve of Drupa, the company announced that it was buying Hi-Tech Coatings for an undisclosed sum and some named it as a potential buyer of Agfa. “I would rather buy the specialist companies like Hi-Tech and partner with big volume producers in plates and inks,” he says. The company derives €700 million from service support and consumables and plans to raise this to €1 billion in three years, mostly through expansion of its Saphira consumables products. Schreier continues: “Saphira is now a global brand. We can offer a printer all the consumables he needs from one roof, including specialised consumables like coatings which are adapted to our presses and press room chemicals which can help enhance the printing process. Hi-Tech is one of the pieces that brings high value for customers. It produces quite decent margins and it makes sense for us to acquire companies like this.

“But with the big companies, partnering offers better value. We can’t add value by producing plates or inks better than they do already and to have us as a partner with a global reach would be very favourable for them because most of these companies are very regionalised. So there is value for them if we can help grow their consumable sales to countries they are not present in and because we are purchasing in large volumes we can add value for our customers.”

The task of merging a sizeable business, taking on additional manufacturing facilities, thousands of staff and so on, is not one that Heidelberg would relish.

But consumable sales are a vital part of the future. These are ongoing during periods when press sales are slow, and as the number of printers declines thanks to the efficiencies described earlier, incremental improvements to volumes will mean a stable demand for consumables. Service is another area which needs expansion and will provide steady income flows. “We want to cover two thirds or three quarters of the fixed costs of our sales and service organisations by the consumables business which means that they will be less dependent on the fluctuations in the equipment business,” he adds.

Heidelberg’s name on a consumable is equally important for a second prong of the strategy going forwards, that of expansion into the developing world where the Heidelberg brand is trusted. At Drupa the leap in visitor numbers from India, China and other parts of south east Asia together with those from central Europe and South America was one of the features of the event. Heidelberg is intent on grasping its share of these new rapidly growing markets. Ten years ago, says Schreier, Heidelberg’s rest of the world sales stood at 17%. Today one third of its business is with the emerging world: “And I predict that in two to three years it will be beyond 40%,” he says.

That is a massive swing with huge consequences for the business. “They need different products from the machinery point of view,” he continues, explaining that the highly sophisticated networked and automated machines that are necessary to boost efficiencies in the developed world are overkill in countries where the costs of labour remain low.

The pragmatic answer is to build presses to meet this demand in conditions that are similar to the customers. Two years ago Heidelberg began production of folders in China, expanding that factory last year to include some press types. Now a third assembly hall is under construction, its most significant move yet. This is going to build a B1 press. Schreier says: “We have needed to explore production in China of bigger formats than we do at present. So we are building a third hall to produce a modified 70 x 100cm press because we need to have machines with a lower sophistication level than for the industrialised countries.”

Production will begin next year following construction of the expanded factory later this year. “This will be our third production hall in three years. We will be looking for more space to extend production further in years to come.”

There have been hints that Heidelberg may need to look at sourcing components from low-cost economies to help reduce the costs of production of its German plants, should raw material and energy cost increases not be covered by a growth in sales as a result of Drupa. After the first few days sales seemed to be on course, but it will not be until July that the board can sit together and work out what level of production capacity is needed to cope with the orders and whether it will have to trim costs in general administration or other areas like r&d. “There is uncertainty over the fate of the economy,” he says, “which is hitting decisions about investment. We know that we are going to have to take decisions about what capacity we need after the show; how many presses, how many folders we need to build and how many people we will need to build them. We know that general business costs of administration and r&d are more and more expensive and we need to adapt somehow because if the top line becomes weaker, we need to have measures that address the bottom line as well.” An announcement will come with its Q1 financials at the start of August.

The third element of Heidelberg’s 2008 strategy, one that was very evident at Drupa, is its move into the packaging sector. This has been a sector where it has had some success: the CD range of machines were so called for their Carton Diameter impression and blanket cylinders. It has also acquired die cutters and carton gluers through the purchase of Jagenberg. Modifications have included adding the XL feeder to the die cutters to increase performance. There is a version of its Prinect prepress workflow targeted at the packaging sector. But now it has moved decisively into large format printing based on the success of its XL 105 press platform. It has announced the XL 145 (though due to space considerations, says Schreier, this was not seen at Drupa) and the XL 162. Those looking closely at this latter press would have seen a machine frame capable of sustaining a machine in the 185cm format. That it also has a Suprasetter platesetter capable of imaging a plate to this format suggests that Heidelberg has considered a larger format machine and is prepared to introduce the press when it considers the timing auspicious.

It also needs to offer uv curing as part of the XL 162 to encourage interest from UK carton printers and this will be introduced next year. Internally Heidelberg has adjusted to handle requests for special press configurations, another feature of the packaging sector and something which is helping Heidelberg to become a more flexible producer, which has been a problem in the past.

Packaging is attractive because it remains a largely untapped area but is one which Schreier says is equivalent to commercial print. For one thing packaging is not vulnerable to electronic substitutes and for another it will be some time before digital printing can challenge offset. Pointing to the XL 162 he says: “That machine can generate 30,000sq m of production in one hour.” It’s a devastating response to those suggesting that machines produced by Xerox, HP, Xeikon and the like can take on offset in carton printing.

Elsewhere the distinction is less clear-cut and Heidelberg knows that digital is eating in to its B3 format business. Its first answer, the Quickmaster DI, has been shelved and its second, the SM 52 Anicolor, has increased the competitiveness of offset. Printers in this sector have a real choice. “It will come down to the cost of investment and the costs of running a press. It is no longer a question of quality, the question is what do I as a printer want to do?

“Do I print on a variety of substrates from recycled papers to high-gloss coateds and what does my customer require from me? And the answer is going to be different for different applications.

“It’s like choosing a car: do I want a truck to carry heavy loads, a people carrier because I have a family or something else? This is the choice that people make about a press.”

Any thoughts that Heidelberg is about to plunge into digital technology are dismissed. “There are plenty of digital press companies willing to partner with us, but where would Heidelberg be able to add value except at the point of sale or the point of service? We might be interested if our customers started to demand it, but we will not move into the production or development of digital presses.”

The fear 10 years ago was that digital was about to sweep offset away as litho had done to letterpress. Today there is greater choice and a recognition that the worst case scenario will not happen. Schreier is therefore confident: “At the moment offset has a 70% share of the market and digital has 10%; even if offset falls to 60% and digital doubles to 20%, that will not change the world. We know we can continue to make a living from offset printing.”