Kodak 2001 Annual Report Download - page 33

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film industry volume was down slightly in 2001 relative to 2000; however,
the Company maintained full-year U.S. consumer film market share for
the fourth consecutive year. During 2001, the Company reached its
highest worldwide consumer film market share position in the past nine
years. The Company’s traditional film business is developing in new
markets, and management believes the business is strong. However,
digital substitution is occurring and the Company continues its
development and application of digital technology in such areas as
wholesale and retail photofinishing. Digital substitution is occurring more
quickly in Japan and more slowly in the U.S., Europe and China.
Net worldwide sales of origination and print film to the
entertainment industry decreased 4% in 2001 as compared with 2000.
Origination film sales decreased 12%, reflecting a 9% decline in volume
and a 3% decline due to the negative impact of exchange. The decrease
in origination film sales was partially offset by an increase in print film
of 4%, reflecting a 9% increase in volume, offset by declines
attributable to exchange and price of 3% and 2%, respectively. After
several consecutive years of growth in origination film sales, this
decrease reflects a slight downward trend beginning in the second half
of 2001 due to continued economic weakness in the U.S., which caused a
decrease in television advertising spend and the resulting decline in the
production of television commercials. Additionally, the events of
September 11th caused a number of motion picture film releases and
television show productions to be delayed or postponed.
Net worldwide sales of professional film products, which include
color negative, color reversal and black-and-white film, decreased 13%
in 2001 as compared with 2000. The downward trend in the sale of
professional film products existed throughout 2001 and is the result of
ongoing digital capture substitution and continued economic weakness in
a number of markets worldwide.
Net worldwide sales of consumer color paper decreased 11% in
2001 as compared with 2000, reflecting a 4% decline in both volume
and price/mix and a 3% decline due to exchange. The downward trend in
color paper sales existed throughout 2001 and is due to industry declines
resulting from digital substitution, market trends toward on-site
processing where there is a decreasing trend in double prints, and a
reduction in mail-order processing where Kodak has a strong share
position. Effective January 1, 2001, the Company and Mitsubishi Paper
Mills Ltd. formed the business venture, Diamic Ltd., a consolidated sales
subsidiary, which is expected to improve the Company’s color paper
market share in Japan. Net worldwide sales of sensitized professional
paper decreased 2% in 2001 as compared with 2000, reflecting a 4%
increase in volume, offset by a 4% decrease in price and a 2% decline
attributable to exchange.
Net worldwide revenues from on-site and overnight photofinishing
equipment, products and services decreased 16% in 2001 as compared
with 2000. This downward trend, which existed throughout 2001, is the
result of a significant reduction in the placement of on-site
photofinishing equipment due to the saturation of the U.S. market and
the market’s anticipation of the availability of new digital minilabs.
During the fourth quarter of 2001, the Company purchased two
wholesale, overnight photofinishing businesses in Europe. The Company
acquired Spector Photo Group’s wholesale photofinishing and distribution
activities in France, Germany and Austria, and ColourCare Limited’s
wholesale processing and printing operations in the U.K. The Company
believes that these acquisitions will facilitate its strategy to enhance
retail photofinishing activities, provide access to a broader base of
customers, create new service efficiencies and provide consumers with
technologically advanced digital imaging services.
Net worldwide sales of the Company’s consumer digital cameras
decreased 3% in 2001 as compared with 2000, reflecting volume growth
of 35% offset by declining prices and a 2% decrease due to negative
exchange impact. The significant volume growth over the 2000 levels
was driven by strong market acceptance of the new consumer EasyShare
digital camera system, competitive pricing initiatives, and a shift in the
go-to-market strategy to mass-market distribution channels. These
factors have moved the Company into the number two consumer market
share position in the U.S., up from the number three position as of the
end of 2000. Net worldwide sales of professional digital cameras
decreased 12% in 2001 as compared with 2000, primarily attributable to
a 20% decline in volume.
Net worldwide sales of the Company’s inkjet photo paper increased
55% in 2001 as compared with 2000, reflecting volume growth of 42%
and increased prices. The inkjet photo paper demonstrated double-digit
growth year-over-year throughout 2001, reflecting the Company’s
increased promotional activity at key retail accounts, improved
merchandising and broader channel distribution of the entire line of
inkjet paper within the product group. Net worldwide sales of
professional thermal paper remained flat, reflecting an 8% increase in
volume offset by declines attributable to price and negative exchange
impact of 7% and 1%, respectively.
The Company continued its strong focus on the consumer imaging
digital products and services, which include the picture maker kiosks
and related media and consumer digital services revenue from picture
CD, “You’ve Got Pictures” and Retailer.com. Combined revenues from the
placement of picture maker kiosks and the related media decreased 2%
in 2001 as compared with 2000, reflecting a decline in the volume of
new kiosk placements partially offset by a 15% increase in kiosk media
volume. This trend in increased media usage reflects the Company’s
focus on creating new sales channels and increasing the media burn per
kiosk. Revenue from consumer digital services increased 15% in 2001 as
compared with 2000. In addition, the Company experienced an increase
in digital penetration in its Qualex wholesale labs. The principal products
which contributed to this increase were picture CD and Retail.com. The