Greg Hrinya, Editor09.01.22
The North American label market has found itself in a unique position. While challenges have presented themselves in greater numbers than ever before, the opportunities for success abound. Fallout from the Covid-19 pandemic, supply chain challenges, natural disasters, and a Finnish workers’ strike at UPM have all taxed the North American label market. However, this resilient industry has deftly navigated the obstacles, remaining busier than ever in an attempt to meet evolving customer demands.
LPC Inc. and TLMI recently completed the TLMI Market Watch report, which utilized feedback from a wide range of North American label converters. Their feedback indicates that the North American label market is booming, however, there are questions looming on the horizon.
“We know that in the early months of this year, the majority of TLMI converters were thriving,” explains Jennifer Dochstader, managing director, LPC, Inc. “Nearly 100 converters participated in our research, and more than 80% of these companies indicated that their sales for the first quarter of 2022 were up compared to the same quarter one year ago.
“Business has been good for most North American converters, yet all signs are pointing to a market correction that some economists say has already arrived,” she adds. “Higher prices and interest rates are putting the freeze on consumer demand in some sectors, and data is pointing to a deceleration in US economic activity. We don’t know at this point how these forces will impact our industry, however, if history has shown us anything it’s that the North American narrow web sector is extremely resilient.”
A variety of trends are currently impacting this marketplace. Sustainability has surged, as suppliers and converters alike continue to seek ways to leave a lower carbon footprint. Many global brands, from Procter & Gamble to Coca-Cola, have also been ambitious in setting environmental goals and targets for the next 5-10 years. Plus, e-commerce will continue to emerge as a staple for consumers.
“We are in a new era of packaging that is defined by sustainability and digital,” explains Matthew Seidner, partner, McKinsey & Company. “There are rapidly changing consumer preferences regarding customization. And with e-commerce, I think there is going to be a dramatic shift in focus over the next five years. E-commerce penetration in the United States grocery segment grew rapidly during Covid and is here to stay.”
Meanwhile, label equipment manufacturers have delivered technology that is faster, easier to run and more automated than ever. The goal: more efficiency for you and your customers, and a pathway to handle the increasing workforce challenges plaguing the manufacturing space. Digital printing continues to make inroads, too. These technologies, as well as the issues facing the industry, will be front and center at Labelexpo Americas, which is slated to take place September 13-15, 2022, at the Donald E. Stephens Convention Center in Rosemont, IL, USA. The event returns for the first time in four years.
Hub Labels, a Maryland-based label converter, has exemplified these trends. With an eye on cutting-edge technology, the company has just invested in a new 17.5" press from MPS, which will complement its existing MPS press. In addition, Hub Labels boasts a hybrid press from Gallus and further digital capabilities courtesy of HP Indigo.
“The North American label market is still showing its teeth,” comments Paul Teachout, business development manager, narrow web, Anderson & Vreeland. “With all the current challenges of supply chain and pricing pressures, converters are still maintaining growth and profitability. Although maybe not at the pace of last year, but it’s still very good. Converters and suppliers both have been very innovative in providing new solutions to overcome challenges that may now become the new standard. With every challenge comes new opportunity, and our industry never lets us down in the face of adversity.”
According to AWA Alexander Watson Associates, North America accounted for 18% of the 71,005 million square meters printed globally in 2021. In comparison, Europe made up for 25% of global label printing, while Asia was the leader in the space – making up 45% of the world label market. Pressure sensitive labeling continues to be the dominant labeling format in North America, too. PS labeling accounted for 54% of the market, while glue-applied finished in second at 28%. Meanwhile, the growing sleeve label market finished with 12% of the market share in North America.
From an application standpoint, AWA cites food and beverage as the clear market leaders. In terms of millions of square meters, 33% of North American label applications were comprised of beverages, while food followed closely at 25%. These figures illustrate the trends that were so prevalent during the Covid-19. Household chemicals finished in third at 7%, also tying into the trend of health and wellness that was exacerbated by the pandemic. Pharmaceuticals, health and personal care, and transport and logistics measured in at roughly 5-6% of the market share, according to AWA.
LPC, Inc. acknowledges these trends, too, noting the booming presence of food and beverage. By the same token, other markets struggled to keep pace. “While the need for printed packaging in some verticals surged, other end-use segments struggled,” remarks Dochstader. “The automotive industry was practically brought to a standstill, and select beverage and durables segments struggled. Last year we saw recovery in most of those verticals due to pent-up demand and the world slowly returning to some semblance of normality.”
The market is still seeing fallout from the Covid-19 pandemic, specifically in regards to certain materials and applications. “Since Covid started there hasn’t been a playbook, but the one playbook I’ve adhered to is ‘my suppliers are my partners,’” explains Thomas Dahbura, president, Hub Labels. “If there’s one thing I’ve learned and tried to apply throughout the pandemic, it’s just be compassionate. Fortunately for us, we have a good group of people. We look out for each other. One of the things I’ve tried to do during Covid is put the bottom line second and put people first. It’s paying off because our people are resilient and appreciative.”
“The North American label market continues to stay strong, although focus has changed multiple times since the onset of the pandemic, when the market shifted to the production of essential products – pharmaceuticals, personal care, household chemical – while sales in other areas, and therefore labeling, waned,” explains Dan Riendeau, strategic business unit manager, packaging, FLEXcon. “As restrictions were lifted, however, the market experienced a surge in demand for all types of labeling, including durables, electronics, industrial, etc., and current market reports predict that demand will only increase. This bodes well for label printers and suppliers.”
“In the final months of 2021 and the first quarter of 2022, supply shortages across critical raw material categories reached a crisis point. Decades-long just-in-time converter purchasing behaviors were replaced with ‘just-in-case,’ as converters’ warehouse spaces were filled with labelstocks and other materials to prevent production shutdowns and the inability to fulfill customer orders,” adds Dochstader.
With paper shortages a fact of life, allocation has taxed converters to the max. “You’re handcuffed right now,” notes Dahbura. “If a product line becomes unavailable, you can’t pick up the phone and call another supplier because they have you on allocation. One supplier might be selling the material cheaper than your supplier, but other suppliers can’t sell it to you because you’re on allocation. And the problem is, I’m competing with companies that are buying materials at that lower price, creating a huge imbalance in competition.
“Right now, we’re scrambling trying to keep up with material shortages,” Dahbura adds. “Fortunately, we have a good supplier that we’ve partnered with, so supplier relationships are really important. We tend to partner with one paper vendor, and they’ve been pretty good to us.”
The challenges facing the industry have necessitated creativity at all levels, notes Teachout. “Increased demand has led to longer lead times, and the recent inflation growth has only compounded the pricing pressures,” he explains. “Converters are implementing strategic sourcing strategies and objectives to ensure the company’s overall business and sustainability goals are being met. This could include many things, from standardizing operation methods to preferred supplier programs. Any opportunity to refine process and practices that can facilitate operational efficiencies and cost reduction is being taken to cope with the supply change crisis.”
Implementing contingency plans is critical. In Hub Labels’ case, Dahbura had the foresight to plan ahead. “I think we’ve made some good decisions in past years,” he states. “We were an early adopter of polyester liners, so as the market is having trouble sourcing a 40# paper liner, I don’t have that problem because we had already converted a lot of our operations and a lot of our customers over to polyester liners.”
Flexibility has been key, too. For example, many companies have had to rely on second and third vendors for their label orders. The uncertainty has also necessitated greater communication than ever before.
“Flexibility and a willingness to accept an alternative product for the occasions where a component for a desired product is unavailable has been important, as well, and FLEXcon is always willing to work with customers to identify suitable substitutes in those instances,” states Aleasha Markley, VP of supply chain planning, FLEXcon.
“Providing better visibility into order status and freight and communicating delays has been essential,” adds Markley. “This has included identification of gaps in internal systems to get better visibility in real time. Another key focus has been looking for ways to pivot more quickly as customer needs and constraints change. This has been centered around forecasting with customers to get some of that visibility up front, and it has made a big difference for FLEXcon and our customers in terms of planning and fulfillment.”
According to LPC, Inc., supply issues outside of the narrow web industry’s direct supply chain have also had a profound impact on the businesses of converters over the course of the past eight months.
“In the research we did for the TLMI Market Watch report, we wanted to gauge the effect that issues beyond the label supply chain were having,” comments Dochstader. “For example, if a bottling company is unable to obtain enough plastic resin to manufacture all of the products that their own customers require, this would in turn result in this company purchasing fewer labels from its label vendors. We asked converters if this is affecting their businesses, and if so, just how much these issues are affecting their bottom lines? Averaging out all of the converter data that came back when we asked this question, we can say that supply chain issues outside of our direct industry have impacted converters’ revenues by an average of 4.8%. Clearly this dynamic is also affecting the bottom line of the majority of converters in the US and Canada.”
Of course, the biggest impact on converters’ businesses from supply chain issues came directly within the industry. Dochstader notes that one in five TLMI converters indicated that supply chain issues within our own industry have impacted their revenues by more than 10% in 2022. The TLMI research reinforces the need for continued transparency throughout the supply chain, as cited by several of the panelists taking the stage at the TLMI Converter Meeting this past spring.
“One of the things that we did very well was to become very transparent with our customer base,” said Catherine Heckman, business unit director, Bostik, while presenting at the annual TLMI event. “We had to get really, really good at listening, and for some customers we’ve set up weekly meetings with them. At one point we had a converter in an extremely urgent situation, they were literally going to run out of product within a week’s time, so there was a lot of jockeying on our end to make sure their production didn’t shut down. The best part of that was that they came back to us a few months later, complimenting us on our transparency, and said that they now had ample inventory levels and didn’t need their allocated shipment of adhesive one week, and that we could go ahead and send it to someone else who really needed it.”
M&A has certainly changed the landscape for suppliers, as well. “The M&A activity has brought a new level of welcomed investment and growth to our industry,” states Teachout. “Where we once served 100 customers, we are now serving 10 who have 10 sites. This has created tremendous opportunity for both converters and suppliers. In many cases, with people and companies dealing with new names and processes, communication will be key to ensure that the culture that created success will continue to thrive in its new environment.”
“Consolidation is a now a gateway, as it creates a new space for new print companies to start up,” adds Donna Covannon, director of marketing, North America, Xeikon. “As they form, they often do with digital first, which allows for a broader offering, affording the needed agility to be successful. These new print companies have the agility to address the needs of the next generation of consumer and print buyers.”
Sustainability is no longer a buzzword in the label and package printing industry, either. Environmental-friendliness is a “need-to-have” more so than a “nice-to-have” these days. That demand is showing from customers, too, especially as consumers become more discerning in their product selection.
“Consumers are demanding sustainable impact, which is making the entire value chain focus on sustainability,” explains FLEXcon’s Riendeau. “Brands are asking for sustainable solutions, which has prompted an increased interest from our converter base. FLEXcon has become a sustainable consultant for some of our converters, enabling them to communicate to their customers the benefits of our sustainable options.”
To meet industry needs for sustainable printing methods and environmentally-friendly packaging production, Xeikon has developed TITON technology, a new toner formulation offering all the benefits of UV inks without the disadvantages. TITON builds on the core value of Xeikon dry toner technology, which, due to the absence of any liquid (mobile) components, is the most food-safe technology in the digital landscape, even with only paper as the main functional barrier, says Covannon.
Despite the numerous challenges facing the North American label market, industry experts are still optimistic. “Innovations will continue in substrate solutions, machine technology and sophistication, sustainability expectations and goals, as well as continued consolidations,” says Teachout. “I think we will not only see continued investment into our wonderful industry but the consolidations will not stop with converters alone. This trend will continue to expand through the supplier base, associations and even exhibit promoters. But as for the future for labeling in North America, it is as bright as ever.”
“Automation is a big step for our industry, and everyone is looking at it throughout the market,” explains Jim Kehring, West Coast regional sales manager, ABG. “We see a huge increase in desire for faster speeds, for longer runs, more SKUs, and ultimately getting the work out faster at lower costs.”
ABG has partnered with CERM, Esko, and Hybrid Software to promote automation and connectivity throughout a workflow. Enhanced workflow connectivity provides a faster, more accurate setup and reduces the risk of operator error. Plus, it promotes a seamless job changeover process. By reducing operator/machine interaction with automation, converters can reduce waste and downtime, adds Kehring.
This has been evident at the converter level, too. With label printers looking to do more with less – especially in light of the workforce challenges facing the manufacturing space – automation provides numerous benefits.
“I think what the future holds for us as printers is automation,” states Hub Labels’ Dahbura. “You have to automate wherever you can and leverage technology. With our press technology, we’re doing that on the front end, and on the back end we’re looking at robotics to help deliver materials to presses. Everywhere I can I’m looking at which jobs can I replace with automation. I can spend more money on the people who are doing the work that is really impactful for our customers.”
This has played out on the supplier side, too. For Xeikon North America, it is experiencing growth in the entry level market, which has been addressed with the REX (Xeikon Refurbished) offering. “Converters who are just starting out or are flexo shops first getting into digital find our REX offerings to be just the right solution to address their needs,” explains Covannon. “These solutions enrich their offering and enable them to limit their risks.
“We are also seeing growth in our high-end and mid markets,” she adds. “Our dry toner and inkjet solutions coincide, especially as companies are considering offering different technology under one roof to serve customer needs. Especially now, this gives them the flexibility to serve many clients.”
Heidi Chambers, business and brand development manager, HP, says digital printing is the fastest growing printing process at 3.5% CAGR. Plus, packaging will experience the biggest growth in digital print. “According to updated data from Smithers Pira, digital packaging will top $35 billion by 2026,” she adds. “Covid has been a driver of growth in digital print for packaging.”
The popularity of digital label printing spurred Xeikon to develop an inkjet line to complement its well-established dry toner technology. “Most label printers determine which business initiatives they want to pursue,” comments Covannon. “We continue successfully converting our Jetrion base to Panther, PX UV-IJ. In addition, dry toner customers are adding PX UV-IJ for a fully-covered shop. It is the versatility of our proven portfolio that is the cornerstone of our business and enables our customers to grow for success.”
According to data from LPC, Inc., though, conventional press purchases are seeing a resurgence. However, the future should be bright for both digital and conventional label printing presses.
“The TLMI research indicates that the overall outlook for capital expenditures among converters remains robust across most CAPEX categories,” explains Dochstader. “While digital press purchasing projections among converters were down this year compared to 2021, if the TLMI research is any indication, 2022 will go down as a banner year for conventional press purchases. One in four TLMI converters indicated that their companies will purchase a conventional press in 2022, one of the highest projections we’ve seen for conventional press purchases in the past five years.
“While we foresee conventional press sales outpacing digital press sales in 2022, the TLMI data shows us that we can expect next year to paint a very different story,” she adds. “One in five converters indicated that they will be buying a digital press in 2023 while less than 10% of companies indicated that they planned to purchase a conventional press next year. We predict that from 2023-2025 we will once again see digital press sales outpacing conventional press sales by a wide margin.”
According to Covannon, having both digital and conventional assets allow converters to choose the most efficient method for the job at hand. This is ever more critical with the continued supply chain challenges. “This uncertainty means that there is more of a focus on which job goes on which technology,” she notes. “For instance, making choices for digital and flexo – for a site that has both, that can offer positives and negatives for both technologies.”
Resource Label Group (RLG), with its versatile network of companies, has been on the leading edge of the label and package printing industry. With companies situated throughout the US, RLG has addressed how it has driven success in this market.
Resource Label Group has been incredibly active in recent years in the M&A market, bringing in companies to bolster operations. This has been especially advantageous during the challenges associated with the Covid-19 pandemic and supply chain. If one company is struggling to receive materials, Resource Label Group has the ability to allocate the necessary resources from another company in the RLG family. This ability has led to success for the converter.
“I think the last two years have made us do things that we probably wouldn’t have done at the rate and speed at which we did them,” explains Mike Degus, senior vice president, marketing and business development, Resource Label Group. “Having that scale and backup supply capability has allowed us to move production between locations and provide stability to our customers.”
Most recently, Resource Label Group acquired Everett, MA-based QSX Labels. The early-2022 move expanded the company’s regional strength in New England and overall position in the label and packaging industry. QSX Labels represents the 23rd acquisition for RLG.
“This is really a people business,” says Degus. “We believe the solution to the current labor issue is much broader than competing against your local Chipotle about getting a new operator. We’re trying to make Resource Label a place where people want to work and can make a difference with a ‘have fun, get it done’ mentality. We’re in a really fun business, and I think a lot of times we forget about that.”
“Culture is everything,” adds Tim Bohlke, director of sustainability, Resource Label Group. “That’s why I joined RLG. Today, the first question younger folks ask is about the culture at your organization. That was never talked about 20-30 years ago. Today’s senior leaders really get that.”
According to Bohlke, the senior leadership team has to be approachable. “The reason I joined was the people,” he states. “There were thousands of printers I could have joined. From our CEO to our VPs, they leave their egos at the door and you have to have that with every employee. And that’s how you build a great culture. It begins at the top, and ultimately our culture is built on our people, and we have great people here.”
Resource Label Group also believes there is a lot of value in not making drastic changes to the companies it acquires.
“Our culture starts with the RLG family and our approach to M&A,” states Degus. “That ‘National Reach, Local Touch’ is really who we are. When someone joins RLG, we consider it joining the family because we want to honor that local legacy and not have a cookie-cutter approach to what integration looks like. That approach is very unique in North America, and it’s something I’m very proud of.
“We don’t look at M&A as competition,” adds Degus. “We want to bring in local brands that fit our business model. We have 27 different brands as part of the overall RLG family. The activity level has increased, but we still feel very differentiated with our approach to the market, and we’re going to attract the right type of owner and the culture we’re building.”
In the future, Resource Label Group will continue to emphasize sustainability across its sites. Bohlke, who has been instrumental in the company’s sustainability strategy, believes this trend will continue to grow as more brands make environmental commitments.
“With the wide variety of customers we service, the gamut of questions we get – from big to small brands – all comes down to education with sustainability,” says Bohlke. “Understanding design for recycling and what the APR is putting out there is critical. You have to ask your customers about their wants and needs. Major brands have done an outstanding job recently, and the evolution of their products has been stellar. There are some brands that maybe need more improvement. But from 25 years ago to where it is today, brands understand their customers from a sustainability perspective.”
LPC Inc. and TLMI recently completed the TLMI Market Watch report, which utilized feedback from a wide range of North American label converters. Their feedback indicates that the North American label market is booming, however, there are questions looming on the horizon.
“We know that in the early months of this year, the majority of TLMI converters were thriving,” explains Jennifer Dochstader, managing director, LPC, Inc. “Nearly 100 converters participated in our research, and more than 80% of these companies indicated that their sales for the first quarter of 2022 were up compared to the same quarter one year ago.
“Business has been good for most North American converters, yet all signs are pointing to a market correction that some economists say has already arrived,” she adds. “Higher prices and interest rates are putting the freeze on consumer demand in some sectors, and data is pointing to a deceleration in US economic activity. We don’t know at this point how these forces will impact our industry, however, if history has shown us anything it’s that the North American narrow web sector is extremely resilient.”
A variety of trends are currently impacting this marketplace. Sustainability has surged, as suppliers and converters alike continue to seek ways to leave a lower carbon footprint. Many global brands, from Procter & Gamble to Coca-Cola, have also been ambitious in setting environmental goals and targets for the next 5-10 years. Plus, e-commerce will continue to emerge as a staple for consumers.
“We are in a new era of packaging that is defined by sustainability and digital,” explains Matthew Seidner, partner, McKinsey & Company. “There are rapidly changing consumer preferences regarding customization. And with e-commerce, I think there is going to be a dramatic shift in focus over the next five years. E-commerce penetration in the United States grocery segment grew rapidly during Covid and is here to stay.”
Meanwhile, label equipment manufacturers have delivered technology that is faster, easier to run and more automated than ever. The goal: more efficiency for you and your customers, and a pathway to handle the increasing workforce challenges plaguing the manufacturing space. Digital printing continues to make inroads, too. These technologies, as well as the issues facing the industry, will be front and center at Labelexpo Americas, which is slated to take place September 13-15, 2022, at the Donald E. Stephens Convention Center in Rosemont, IL, USA. The event returns for the first time in four years.
Hub Labels, a Maryland-based label converter, has exemplified these trends. With an eye on cutting-edge technology, the company has just invested in a new 17.5" press from MPS, which will complement its existing MPS press. In addition, Hub Labels boasts a hybrid press from Gallus and further digital capabilities courtesy of HP Indigo.
“The North American label market is still showing its teeth,” comments Paul Teachout, business development manager, narrow web, Anderson & Vreeland. “With all the current challenges of supply chain and pricing pressures, converters are still maintaining growth and profitability. Although maybe not at the pace of last year, but it’s still very good. Converters and suppliers both have been very innovative in providing new solutions to overcome challenges that may now become the new standard. With every challenge comes new opportunity, and our industry never lets us down in the face of adversity.”
According to AWA Alexander Watson Associates, North America accounted for 18% of the 71,005 million square meters printed globally in 2021. In comparison, Europe made up for 25% of global label printing, while Asia was the leader in the space – making up 45% of the world label market. Pressure sensitive labeling continues to be the dominant labeling format in North America, too. PS labeling accounted for 54% of the market, while glue-applied finished in second at 28%. Meanwhile, the growing sleeve label market finished with 12% of the market share in North America.
From an application standpoint, AWA cites food and beverage as the clear market leaders. In terms of millions of square meters, 33% of North American label applications were comprised of beverages, while food followed closely at 25%. These figures illustrate the trends that were so prevalent during the Covid-19. Household chemicals finished in third at 7%, also tying into the trend of health and wellness that was exacerbated by the pandemic. Pharmaceuticals, health and personal care, and transport and logistics measured in at roughly 5-6% of the market share, according to AWA.
LPC, Inc. acknowledges these trends, too, noting the booming presence of food and beverage. By the same token, other markets struggled to keep pace. “While the need for printed packaging in some verticals surged, other end-use segments struggled,” remarks Dochstader. “The automotive industry was practically brought to a standstill, and select beverage and durables segments struggled. Last year we saw recovery in most of those verticals due to pent-up demand and the world slowly returning to some semblance of normality.”
The market is still seeing fallout from the Covid-19 pandemic, specifically in regards to certain materials and applications. “Since Covid started there hasn’t been a playbook, but the one playbook I’ve adhered to is ‘my suppliers are my partners,’” explains Thomas Dahbura, president, Hub Labels. “If there’s one thing I’ve learned and tried to apply throughout the pandemic, it’s just be compassionate. Fortunately for us, we have a good group of people. We look out for each other. One of the things I’ve tried to do during Covid is put the bottom line second and put people first. It’s paying off because our people are resilient and appreciative.”
“The North American label market continues to stay strong, although focus has changed multiple times since the onset of the pandemic, when the market shifted to the production of essential products – pharmaceuticals, personal care, household chemical – while sales in other areas, and therefore labeling, waned,” explains Dan Riendeau, strategic business unit manager, packaging, FLEXcon. “As restrictions were lifted, however, the market experienced a surge in demand for all types of labeling, including durables, electronics, industrial, etc., and current market reports predict that demand will only increase. This bodes well for label printers and suppliers.”
“In the final months of 2021 and the first quarter of 2022, supply shortages across critical raw material categories reached a crisis point. Decades-long just-in-time converter purchasing behaviors were replaced with ‘just-in-case,’ as converters’ warehouse spaces were filled with labelstocks and other materials to prevent production shutdowns and the inability to fulfill customer orders,” adds Dochstader.
With paper shortages a fact of life, allocation has taxed converters to the max. “You’re handcuffed right now,” notes Dahbura. “If a product line becomes unavailable, you can’t pick up the phone and call another supplier because they have you on allocation. One supplier might be selling the material cheaper than your supplier, but other suppliers can’t sell it to you because you’re on allocation. And the problem is, I’m competing with companies that are buying materials at that lower price, creating a huge imbalance in competition.
“Right now, we’re scrambling trying to keep up with material shortages,” Dahbura adds. “Fortunately, we have a good supplier that we’ve partnered with, so supplier relationships are really important. We tend to partner with one paper vendor, and they’ve been pretty good to us.”
The challenges facing the industry have necessitated creativity at all levels, notes Teachout. “Increased demand has led to longer lead times, and the recent inflation growth has only compounded the pricing pressures,” he explains. “Converters are implementing strategic sourcing strategies and objectives to ensure the company’s overall business and sustainability goals are being met. This could include many things, from standardizing operation methods to preferred supplier programs. Any opportunity to refine process and practices that can facilitate operational efficiencies and cost reduction is being taken to cope with the supply change crisis.”
Implementing contingency plans is critical. In Hub Labels’ case, Dahbura had the foresight to plan ahead. “I think we’ve made some good decisions in past years,” he states. “We were an early adopter of polyester liners, so as the market is having trouble sourcing a 40# paper liner, I don’t have that problem because we had already converted a lot of our operations and a lot of our customers over to polyester liners.”
Flexibility has been key, too. For example, many companies have had to rely on second and third vendors for their label orders. The uncertainty has also necessitated greater communication than ever before.
“Flexibility and a willingness to accept an alternative product for the occasions where a component for a desired product is unavailable has been important, as well, and FLEXcon is always willing to work with customers to identify suitable substitutes in those instances,” states Aleasha Markley, VP of supply chain planning, FLEXcon.
“Providing better visibility into order status and freight and communicating delays has been essential,” adds Markley. “This has included identification of gaps in internal systems to get better visibility in real time. Another key focus has been looking for ways to pivot more quickly as customer needs and constraints change. This has been centered around forecasting with customers to get some of that visibility up front, and it has made a big difference for FLEXcon and our customers in terms of planning and fulfillment.”
According to LPC, Inc., supply issues outside of the narrow web industry’s direct supply chain have also had a profound impact on the businesses of converters over the course of the past eight months.
“In the research we did for the TLMI Market Watch report, we wanted to gauge the effect that issues beyond the label supply chain were having,” comments Dochstader. “For example, if a bottling company is unable to obtain enough plastic resin to manufacture all of the products that their own customers require, this would in turn result in this company purchasing fewer labels from its label vendors. We asked converters if this is affecting their businesses, and if so, just how much these issues are affecting their bottom lines? Averaging out all of the converter data that came back when we asked this question, we can say that supply chain issues outside of our direct industry have impacted converters’ revenues by an average of 4.8%. Clearly this dynamic is also affecting the bottom line of the majority of converters in the US and Canada.”
Of course, the biggest impact on converters’ businesses from supply chain issues came directly within the industry. Dochstader notes that one in five TLMI converters indicated that supply chain issues within our own industry have impacted their revenues by more than 10% in 2022. The TLMI research reinforces the need for continued transparency throughout the supply chain, as cited by several of the panelists taking the stage at the TLMI Converter Meeting this past spring.
“One of the things that we did very well was to become very transparent with our customer base,” said Catherine Heckman, business unit director, Bostik, while presenting at the annual TLMI event. “We had to get really, really good at listening, and for some customers we’ve set up weekly meetings with them. At one point we had a converter in an extremely urgent situation, they were literally going to run out of product within a week’s time, so there was a lot of jockeying on our end to make sure their production didn’t shut down. The best part of that was that they came back to us a few months later, complimenting us on our transparency, and said that they now had ample inventory levels and didn’t need their allocated shipment of adhesive one week, and that we could go ahead and send it to someone else who really needed it.”
M&A has certainly changed the landscape for suppliers, as well. “The M&A activity has brought a new level of welcomed investment and growth to our industry,” states Teachout. “Where we once served 100 customers, we are now serving 10 who have 10 sites. This has created tremendous opportunity for both converters and suppliers. In many cases, with people and companies dealing with new names and processes, communication will be key to ensure that the culture that created success will continue to thrive in its new environment.”
“Consolidation is a now a gateway, as it creates a new space for new print companies to start up,” adds Donna Covannon, director of marketing, North America, Xeikon. “As they form, they often do with digital first, which allows for a broader offering, affording the needed agility to be successful. These new print companies have the agility to address the needs of the next generation of consumer and print buyers.”
Sustainability is no longer a buzzword in the label and package printing industry, either. Environmental-friendliness is a “need-to-have” more so than a “nice-to-have” these days. That demand is showing from customers, too, especially as consumers become more discerning in their product selection.
“Consumers are demanding sustainable impact, which is making the entire value chain focus on sustainability,” explains FLEXcon’s Riendeau. “Brands are asking for sustainable solutions, which has prompted an increased interest from our converter base. FLEXcon has become a sustainable consultant for some of our converters, enabling them to communicate to their customers the benefits of our sustainable options.”
To meet industry needs for sustainable printing methods and environmentally-friendly packaging production, Xeikon has developed TITON technology, a new toner formulation offering all the benefits of UV inks without the disadvantages. TITON builds on the core value of Xeikon dry toner technology, which, due to the absence of any liquid (mobile) components, is the most food-safe technology in the digital landscape, even with only paper as the main functional barrier, says Covannon.
Despite the numerous challenges facing the North American label market, industry experts are still optimistic. “Innovations will continue in substrate solutions, machine technology and sophistication, sustainability expectations and goals, as well as continued consolidations,” says Teachout. “I think we will not only see continued investment into our wonderful industry but the consolidations will not stop with converters alone. This trend will continue to expand through the supplier base, associations and even exhibit promoters. But as for the future for labeling in North America, it is as bright as ever.”
Getting automated
Automation has increasingly emerged as one of the best ways to tackle myriad supply chain challenges.“Automation is a big step for our industry, and everyone is looking at it throughout the market,” explains Jim Kehring, West Coast regional sales manager, ABG. “We see a huge increase in desire for faster speeds, for longer runs, more SKUs, and ultimately getting the work out faster at lower costs.”
ABG has partnered with CERM, Esko, and Hybrid Software to promote automation and connectivity throughout a workflow. Enhanced workflow connectivity provides a faster, more accurate setup and reduces the risk of operator error. Plus, it promotes a seamless job changeover process. By reducing operator/machine interaction with automation, converters can reduce waste and downtime, adds Kehring.
This has been evident at the converter level, too. With label printers looking to do more with less – especially in light of the workforce challenges facing the manufacturing space – automation provides numerous benefits.
“I think what the future holds for us as printers is automation,” states Hub Labels’ Dahbura. “You have to automate wherever you can and leverage technology. With our press technology, we’re doing that on the front end, and on the back end we’re looking at robotics to help deliver materials to presses. Everywhere I can I’m looking at which jobs can I replace with automation. I can spend more money on the people who are doing the work that is really impactful for our customers.”
Going digital
As Hub Labels‘ Dahbura comments, “Digital continues to play a role in how we run and shape our businesses.”This has played out on the supplier side, too. For Xeikon North America, it is experiencing growth in the entry level market, which has been addressed with the REX (Xeikon Refurbished) offering. “Converters who are just starting out or are flexo shops first getting into digital find our REX offerings to be just the right solution to address their needs,” explains Covannon. “These solutions enrich their offering and enable them to limit their risks.
“We are also seeing growth in our high-end and mid markets,” she adds. “Our dry toner and inkjet solutions coincide, especially as companies are considering offering different technology under one roof to serve customer needs. Especially now, this gives them the flexibility to serve many clients.”
Heidi Chambers, business and brand development manager, HP, says digital printing is the fastest growing printing process at 3.5% CAGR. Plus, packaging will experience the biggest growth in digital print. “According to updated data from Smithers Pira, digital packaging will top $35 billion by 2026,” she adds. “Covid has been a driver of growth in digital print for packaging.”
The popularity of digital label printing spurred Xeikon to develop an inkjet line to complement its well-established dry toner technology. “Most label printers determine which business initiatives they want to pursue,” comments Covannon. “We continue successfully converting our Jetrion base to Panther, PX UV-IJ. In addition, dry toner customers are adding PX UV-IJ for a fully-covered shop. It is the versatility of our proven portfolio that is the cornerstone of our business and enables our customers to grow for success.”
According to data from LPC, Inc., though, conventional press purchases are seeing a resurgence. However, the future should be bright for both digital and conventional label printing presses.
“The TLMI research indicates that the overall outlook for capital expenditures among converters remains robust across most CAPEX categories,” explains Dochstader. “While digital press purchasing projections among converters were down this year compared to 2021, if the TLMI research is any indication, 2022 will go down as a banner year for conventional press purchases. One in four TLMI converters indicated that their companies will purchase a conventional press in 2022, one of the highest projections we’ve seen for conventional press purchases in the past five years.
“While we foresee conventional press sales outpacing digital press sales in 2022, the TLMI data shows us that we can expect next year to paint a very different story,” she adds. “One in five converters indicated that they will be buying a digital press in 2023 while less than 10% of companies indicated that they planned to purchase a conventional press next year. We predict that from 2023-2025 we will once again see digital press sales outpacing conventional press sales by a wide margin.”
According to Covannon, having both digital and conventional assets allow converters to choose the most efficient method for the job at hand. This is ever more critical with the continued supply chain challenges. “This uncertainty means that there is more of a focus on which job goes on which technology,” she notes. “For instance, making choices for digital and flexo – for a site that has both, that can offer positives and negatives for both technologies.”
Resource Label Group (RLG), with its versatile network of companies, has been on the leading edge of the label and package printing industry. With companies situated throughout the US, RLG has addressed how it has driven success in this market.
Resource Label Group has been incredibly active in recent years in the M&A market, bringing in companies to bolster operations. This has been especially advantageous during the challenges associated with the Covid-19 pandemic and supply chain. If one company is struggling to receive materials, Resource Label Group has the ability to allocate the necessary resources from another company in the RLG family. This ability has led to success for the converter.
“I think the last two years have made us do things that we probably wouldn’t have done at the rate and speed at which we did them,” explains Mike Degus, senior vice president, marketing and business development, Resource Label Group. “Having that scale and backup supply capability has allowed us to move production between locations and provide stability to our customers.”
Most recently, Resource Label Group acquired Everett, MA-based QSX Labels. The early-2022 move expanded the company’s regional strength in New England and overall position in the label and packaging industry. QSX Labels represents the 23rd acquisition for RLG.
“This is really a people business,” says Degus. “We believe the solution to the current labor issue is much broader than competing against your local Chipotle about getting a new operator. We’re trying to make Resource Label a place where people want to work and can make a difference with a ‘have fun, get it done’ mentality. We’re in a really fun business, and I think a lot of times we forget about that.”
“Culture is everything,” adds Tim Bohlke, director of sustainability, Resource Label Group. “That’s why I joined RLG. Today, the first question younger folks ask is about the culture at your organization. That was never talked about 20-30 years ago. Today’s senior leaders really get that.”
According to Bohlke, the senior leadership team has to be approachable. “The reason I joined was the people,” he states. “There were thousands of printers I could have joined. From our CEO to our VPs, they leave their egos at the door and you have to have that with every employee. And that’s how you build a great culture. It begins at the top, and ultimately our culture is built on our people, and we have great people here.”
Resource Label Group also believes there is a lot of value in not making drastic changes to the companies it acquires.
“Our culture starts with the RLG family and our approach to M&A,” states Degus. “That ‘National Reach, Local Touch’ is really who we are. When someone joins RLG, we consider it joining the family because we want to honor that local legacy and not have a cookie-cutter approach to what integration looks like. That approach is very unique in North America, and it’s something I’m very proud of.
“We don’t look at M&A as competition,” adds Degus. “We want to bring in local brands that fit our business model. We have 27 different brands as part of the overall RLG family. The activity level has increased, but we still feel very differentiated with our approach to the market, and we’re going to attract the right type of owner and the culture we’re building.”
In the future, Resource Label Group will continue to emphasize sustainability across its sites. Bohlke, who has been instrumental in the company’s sustainability strategy, believes this trend will continue to grow as more brands make environmental commitments.
“With the wide variety of customers we service, the gamut of questions we get – from big to small brands – all comes down to education with sustainability,” says Bohlke. “Understanding design for recycling and what the APR is putting out there is critical. You have to ask your customers about their wants and needs. Major brands have done an outstanding job recently, and the evolution of their products has been stellar. There are some brands that maybe need more improvement. But from 25 years ago to where it is today, brands understand their customers from a sustainability perspective.”