NEW TONE IN INK-CARTRIDGE SALES

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New tone in ink-cartridge sales
Printer makers launch cheaper units, but catch is there’s less toner in them.
“Companies understand that consumers are getting miffed at the amount they have to pay for cartridges.”Charlie Brewer, Lyra Research analyst
Printer makers such as Hewlett-Packard Co. and Eastman Kodak Co. have recently introduced cheaper printer-ink cartridges priced at around $15. But consumers may find that paying less at the cash register ends up costing them more in the long run.That’s because there is less ink in some of the new cartridges, so the cost of each page printed is actually higher. Also, some of the printers that accept the new lower-priced cartridges cost more than other printers.Companies are rolling out lower-priced cartridges as they increasingly compete with the growing market of “remanufactured” or “refilled” ink cartridges. Printer makers such as H-P have long sold printers for little or no profit, making up the loss from ink sales. But that business model has recently come under pressure from discount players such as Cartridge World, a chain store that refills empty ink cartridges, and large office-supply stores, such as Staples Inc. and Office Depot Inc., which sell their own brands of remanufactured cartridges. Many refillers offer cartridges at prices up to 50 percent less than those of big printer makers. By 2010, refilled and remanufactured ink cartridges are projected to account for 37 percent of the worldwide ink-cartridge market, up from 29 percent in 2003, according to Lyra Research Inc.H-P, the largest U.S. printer company, late last month unveiled new black-ink and color-ink cartridges for $14.99 and $17.99, respectively, or 25 percent and 28 percent less than previous comparable cartridges costing $19.99 and $24.99, respectively. In February, Kodak rolled out a $9.99 black-ink cartridge and a $14.99 color-ink cartridge. That same month, Canon Inc. released a new black-ink cartridge for $15.99 and a new color cartridge for $19.99, down from $19.99 and $24.99 respectively.

Less ink in cartridge
But a closer look at some of the new cartridges reveals that consumers may be paying higher prices for their printer ink over the long run. In one comparison, an older H-P standard black-ink cartridge contained 11 milliliters of ink, while the new standard cartridge has just 4.5 milliliters of ink. As a result, the cost of printing with the new H-P black-ink cartridge rises to 7.5 cents a page from 4.4 cents a page for the older cartridge, according to Lyra.Canon’s new ink cartridges also come with less ink than their predecessors. Canon’s new black-ink cartridge contains 11 milliliters of ink, down from 16 milliliters in the old version. That bumps up the cost of printing per page to 6.7 cents from 5.6 cents previously. Canon’s new color-ink cartridge contains nine milliliters of ink, for a printing cost of 15.4 cents a page, versus 12 milliliters previously, for a cost of 13.7 cents a page.Meanwhile, Kodak’s $14.99 and $9.99 ink cartridges are tied to the launch of several new Kodak printers, which are priced higher than other printers. Kodak’s printers cost $150 to $300, or about $50 more than some comparable models by rivals.Many printer makers now want to appear to match the refillers’ prices in order to better compete, analysts say. Charlie Brewer, a Lyra analyst, says printer companies started introducing ink cartridges in the $15 range in 2005, after the launch of cheaper, refilled cartridges from office superstores such as Staples and Office Depot. “Companies understand that consumers are getting miffed at the amount they have to pay for cartridges,” Brewer says.

Wider choice of cartridges
Some printer executives acknowledge the new $15 cartridges won’t lower consumers’ costs. “There will be cases where (the cost of printing per page) goes up” with the new H-P cartridges, says Pradeep Jotwani, who heads the supplies business for the Palo Alto, Calif., company. But he argues that offering the lower-priced cartridges gives choices to consumers who don’t print much and who simply want to save money on the upfront purchase.H-P has also introduced some “higher-yield” cartridges for people who print more and for whom cost per print is more important, Jotwani notes. He says there are some cases where the cost of printing per page ends up decreasing. In one example, H-P’s new color-cartridge with 12 milliliters of ink can be measured against an older cartridge that contained five milliliters of ink. In that instance, the cost per page drops to 6.7 cents from 9.5 cents previously, says an H-P spokeswoman.Michael Duffett, a Canon director of inkjet printer marketing, also says customers who don’t print much will benefit. “With the (small) amount of prints being made by this audience, initial ink-purchasing cost becomes a stronger motivation over cost per print,” Duffett says.

The new cartridges are forcing at least one seller of remanufactured ink cartridges to cut back.
In February, Staples decided to stop selling its lower-priced Staples-branded ink cartridges that work with H-P printers, which were manufactured by Inkcycle Inc., an ink and toner manufacturer based in Lenexa, Kan.Scott Rankin, a Staples vice president, says H-P’s new cartridges made it too difficult for the retailer to continue stocking its own remanufactured cartridges since the retailer couldn’t match H-P’s technology in each of the new offerings.”It introduced a new level of complexity into the system,” he says. He adds that Staples will consider whether it makes sense to discontinue its Staples-branded cartridges for other vendors apart from H-P.”Companies understand that consumers are getting miffed at the amount they have to pay for cartridges.”Charlie Brewer, Lyra Research analyst.

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May 15, 2007 at 2:00 PM