Faced with a variety of pressures in a fast-paced market, converters are turning to new technologies, meeting demand with innovation.
There’s a sense of optimism within the label converting community. Despite challenges resulting from the continued trend toward commoditization, label printers are increasingly turning to digital print technologies, as well as new ways to market their companies.
Like their customers, label printers are working in a fast-moving world. Information gets exchanged as fast as one can click, and customers expect quotes to be given and orders to be filled faster than ever. And, of course, with competition fierce, quality demands have never been higher.
Successful label converters are more proactive than reactive. Many are using technology to quickly turnaround orders, and to effectively communicate with customers on job status. A theme has emerged that revolves around speed. Brand owners are looking to partner to with label companies that move quickly, at a lower cost.
For the annual Label and Narrow Web Mid-year Economic Report, we have invited leaders from four label companies of varying sizes, with different business models. The following is a view from the president’s desk of each company’s performance and the strategies they’re deploying in today’s diverse label market.
Among our biggest challenges is how the recovering economy is creating a commodity-type environment. As an industry, we have to fight to keep cost-cutting from diluting the value proposition of our collective capabilities. At WS Packaging, we consistently demonstrate a solutions-based approach that assesses every opportunity to develop long-term partnerships focused on helping our customers succeed.
Our goal is to surround CPGs with a full complement of products – automation equipment, consumables, POS and promotions, couponing, games and sweepstakes, decoration alternatives, labeling options, etc.
This is why we see innovation providing our biggest opportunities. Our ability to seek solutions and bring them to brand owners with a keen eye focused down-channel towards end users/consumers creates a competitive advantage for everyone.
A key driver of our success today, as well as in the future, is how we go to market. The cornerstone of our business model is our trademarked IMPACT Business System, which drives decision-making and touches literally everything we do. IMPACT is the force behind our commitment to offering innovation and developing partnerships that create significant opportunities to help our customers succeed.
To me personally, and to WS Packaging as a whole, innovation is delivering solutions our customers value. We do that by understanding their business and the pain points they face daily. Seeking innovation in everything we do as part of our IMPACT Business System defines the culture we embrace and deploy to the benefit of our customers throughout the entire supply chain. Innovation doesn’t have to be product related. It can also be process related and we’re focusing a lot of attention in both areas.
On the equipment side, suppliers must get ahead of the industry and produce equipment that drives the initiatives, from sustainability to overall efficiency, lean to end-product quality, and beyond.
We see digital printing increasingly becoming a key print medium. Through the combination of imaging technologies, press operator capabilities and material science, brand owners can cost-effectively execute marketing strategies that are extremely proactive instead of reactive. It’s a capabilities environment where speed-to-market is a full reality.
Doing business globally offers tremendous opportunities for converters, especially where you have an established relationship with a brand owner looking to expand globally. The ability of converters to respond to the geographic needs of CPGs, regardless of their market locations, will be greatly enhanced by material suppliers with the requisite supply channels. In order to take advantage of these opportunities and effectively compete, I see deeper partnerships developing between converters and material suppliers as a way to make this happen.
Consolidation in the US converter industry will continue. As the economy improves, investment capital will become more readily available. In that environment, I think we’ll start to see the trend to consolidate accelerate a bit. At WS Packaging, we’ve been busy due to our ability to generate excess cash through our IMPACT initiatives. Opportunities continue to remain strong, so I see conversion continuing into the coming years.
Operationally, the industry as a whole has to embrace sustainability. It is here and a key component of doing business. So in that context, it’s a constant factor in the equation. You cannot effectively compete without being committed to it. We have a responsibility to ensure our manufacturing processes are as green as possible and our waste streams are clean. Those efforts are directly related to how we manage our overall operations. All converters must take this position.
Material suppliers are a key factor in the equation and therefore must be as equally committed in order to make sustainability economically viable. For example, the down-gauging of materials shows great promise. Combining that material science with what we do on the converting side is critical if we’re going to continue to deliver value to our packaging customers.
Suppliers have to not only keep our CPG customers in mind, they also must focus on consumers and the impact their products have on them. Suppliers should focus on their costs as strictly as the rest of the supply chain does. In that context, suppliers should look to converters as a stronger resource for CPG and end user insight. And that’s possible only if we have the opportunity to have a seat at the table when the planning starts.
Fulfilling Customer Expectations:
From the customer side of the table, customer expectations for service and quality haven’t changed, so they’re always top of mind. The expectations are high. We have to get the job done right the first time. Customer volatility continues to be a significant opportunity for improvement. Suppliers who can solve those volatilities without cost risk to those customers have some key advantages.
The growth opportunities in the industry – through technology, organic growth, acquisitions, etc. – are exceptional and obtainable when customer expectations for service and quality are met. We’re as good as our last run. These are the things that make us want to go to work and do a good job.
Like our peers, we face margin pressure on both sides of the equation, compression of lead times and the never-ending search for growth. In the midst of all this, we remain optimistic, while we work hard to sustain and develop competitive advantages to counteract the trend toward commoditization.
In the short run, our growth is tied to the performance of our key customers, and the dynamics of their vertical segment. In Industrial Durable Goods, certain segments are soft, like TV. However, we are encouraged by the return of manufacturing from China. Our experience correlates with widely reported trends: China’s costs (labor, freight, exchange rate, reduction in export subsidies) are increasing, in some cases dramatically. This combines with other trends, like shorter product life cycles and mass customization, which favor local manufacturing.
We see more caution than normal in our Medical Products customers, related to uncertainties over taxes imposed by the health care bill. There is a fair amount of acquisition and divestiture activity that sometimes favors us, and sometimes does not. The landscape is always changing.
On the packaging side, our Gold Coast division benefits from the proliferation of brands in food, health and beauty, wine and the significant growth of microbrewed beer. We consider ourselves a middle-market supplier, not able to serve the largest users (yet), but offering small-company responsiveness to medium-sized customers. In this area, we at Steven Label/Gold Coast feel it’s important to offer a full range of packaging products, not just labels, along with design services to support them.
In general, buyers prefer to deal with fewer competent suppliers, rather than distribute their requirements (all with similar graphics) out to a variety of unrelated suppliers. We expect to make acquisitions in this area to supplement organic growth and extend our capabilities.
Our approach to sales and marketing continues to evolve. Cold calling and its cousin “quote and hope” is essentially dead. Consequently, we are investing in marketing tools (read: lead generation) to leverage the name recognition that comes from 50+ years of work in the industry. Buyers are more sophisticated and technically competent, and our sales force needs to keep pace. More than ever, our salespeople are selling either value added approaches, or managing new product qualifications to take cost out. In either case, the sales task requires harder work, superior selling skills and in-depth product knowledge.
Press technology plays an important role in our ability to drive down costs and offer new services. Improvements in flexo are driving “economic order sizes” down, just as improvements in digital are moving them up. We are very interested in how this crossover point gets pushed around over the next few years. HP Indigo is a great process, which adds flexibility and the ability to print things that simply can’t be done using any other process. We also are using high-speed inkjet, and are interested in how the many high-speed inkjet technologies will match up in overall cost, resolution, color gamut, etc.
We are constantly developing product extensions related to brand security, extended content, variable data processing and others. On the process side, we are developing technologies for web-based tracking systems, QC systems that drive down defect rates, measurement systems that help us improve our performance. In the end, our ability to do a superior job for our customer is what keeps them with us, motivates them to bring us with them when they move to a new company, and to refer us to a peer that is struggling with their current supplier.
Last year was an incredible year for Abbott Label, Inc. The first two quarters of 2013 have continued to prove that domestic production is on the rise and we have certainly been the beneficiary of good-old-fashioned American manufacturing. We’re glad to see movement in the right direction.
I know as the President of Abbott Label, Inc. one of our biggest priorities has been to provide insurance benefits to our employees. They are the company’s strongest assets and therefore can get us through so much, and, like they say, “tough times don’t last, tough people do,” and Abbott Label, Inc. has held and will continue to hold true to this statement.
Our strong commitment to being a performance-driven company has led to some other challenges in 2013. Distributors have grown accustomed to our ability to respond quickly, so synergy among our four plants has been critical in providing desired results. Food packaging, mobile “hipster” printer requirements along with drum labeling needs, to name a few, have seen extensive growth over the past year. We face challenges each day in our planning and strategizing how to keep up with growing demands of our re-sellers.
Pressure on profit margins is something we always face head-on with Lean Manufacturing practices and effective negotiating with our material vendors. Raw materials have been relatively stable, which has allowed us to focus our energy on improving efficiencies rather than combating price increases. Freight is and will always be a major factor but we are able to save our customers on freight due to our strategic locations. We have not seen any major challenges pertaining to labor costs, foreign threats or consolidations. Fortunately, we are not affected much by this. We support one of the few industries where many products that have been specified by our customers cannot be replicated in foreign countries. This gives us the benefit of only having domestic competition.
As a trade-only manufacturer with a strong national footprint, opportunities for growth seem endless moving in to 2014. We are given new opportunities daily. Based on requests from our dealers we’ve invested significant capital in our ability to effectively produce premium prime labels, 1" core items, along with warehouse space to support JIT “run/hold” programs. As an example, we were blessed to have recently opened our fourth manufacturing plant in Chicago which allows us to better provide impeccable service to our customers in the Midwest and Northeast. We have also just closed on our purchase of an 86,000 sq. ft. building to house our new national corporate headquarters in Dallas, Texas. This provides additional capacity to allocate warehouse space for customers.
The calling for digital label manufacturing is being answered by our two new digital units in Dallas. We’re facing stumbling blocks just like every other digital house but suitable production will be under way in no time.
Today’s consumers have evolving expectations that are driving demands on products at a fast rate and the effects of these quickly changing needs can be felt throughout the supply chain – from the big-box stores all the way down to the label converters. With the complete saturation of the internet and social media, consumers now expect the same rate of change and response in their consumer goods. Choices in flavors, sizes and applications are now expected to change almost overnight. In order to keep up with demands and stay relevant in competitive markets, each piece of the supply chain must do what it takes to rise to the challenge of evolving with the market.
For a medium sized converter, we are most challenged with the delicate balance of setting scheduling boundaries based on our thresholds for maintaining a healthy profit while still meeting our customer’s needs. In today’s quickly changing world and the speed in which information is exchanged and processed, most everyone in the supply chain is expecting their requests “just-in-time.” Long lead times and inventory are becoming non-existent and have been replaced with hourly communications via emails and phone calls to fillers, bottlers and brand owners. As a result of so many changing demands from all facets of the supply chain and constant communications, our customer service representatives have become a vital part of our seamless customer experience.
Constant exchanges of information and collaborative scheduling solutions are a team effort with a common goal – quality products delivered to the shelf, on schedule. We recognize that our customers are feeling the pressures of the fast-paced market and as a partner to their business, they are relying on us to deliver quality products, on time, everyday.
Although the challenge of finding balance can seem unattainable at times, being a medium sized converter has given us the opportunity to be nimble and change with our customers. This is something which we feel has allowed us to become an essential part of their supply chain and helps maintain a successful relationship.