North American market navigates key challenges

The label and packaging market in North America has seen significant growth in recent years, driven by various factors such as the post-pandemic boom in e-commerce, technological advancements and shifting consumer preferences. Research shows the market is poised for further expansion.

The North American print label market, estimated at 9.8 billion USD in 2024, is projected to grow at a CAGR of 3.5 percent to reach 11.7 billion USD by 2029, according to research from Mordor Intelligence. Yet key challenges loom ahead.

Economic constraints and higher costs are churning challenges for the industry. This is met by depressed M&A activity amid high-interest rates as converters aim to automate, spurred both by labor shortages and innovation within the sector.

Last year saw the market softening, as converters described in the state of the industry in the 2023 TLMI Market Watch report. The biggest market force impacting converters was customers scaling back-order volumes. In 2024, label converters and suppliers in North America are still dealing with lingering uncertainty.

‘The struggle to balance supply and demand is a key concern as companies try to align their inventory levels and cost of goods sold with fluctuating demand,’ says Jennifer Dochstader, principal of industry research and marketing firm LPC. ‘The majority of label buyers and brands have made their way through the excess inventory levels that were a result of supply chain disruptions and shortages. However, there remains uncertainty about when the high-volume orders will return as converters continue to see an influx of smaller orders and less predictable order patterns.’ Compounding that equation is the woes of the modern-day workforce.

“We’ve been talking about workforce challenges with converters for more than a decade and we have never seen this issue as acute as it is currently”

Like other industries, the labeling and printing world is struggling to fill vacancies as specialist veterans age out of the market at an unprecedented rate. ‘Retaining and hiring quality labor remains front-of-mind for converters,’ Dochstader says.

When asked about technological investments planned for the year, a number of converters intended to purchase a press due to the difficulty of finding a second- or third-shift operator. ‘They view this as the only way they can effectively add capacity,’ Dochstader says. ‘The impossibility of securing operators for night or weekend shifts left them with little choice other than adding to their capacity for more favorable dayshift work.’

Dochstader adds: ‘We’ve been talking about workforce challenges with converters for more than a decade and we have never seen this issue as acute as it is currently.’

All of this means automation is accelerating under the pressure of these labor shortages.

‘The aging workforce and the difficulty in finding replacements for positions on the production floor will continue to drive converters toward modernizing their equipment and automating where possible,’ Dochstader says. Still, she notes this technology-driven approach also presents an opportunity for companies to innovate and stay competitive in a market that is speeding toward digital solutions and sustainable practices.

Depressed M&A

Meanwhile, current economic conditions — from inflation to reduced debt position for lending — are also dampening the industry’s appetite for mergers and acquisitions.

In recent years, aided by unprecedentedly low-interest rates, M&As have been a major driving force in the industry, reshaping the landscape of the North American market. ‘With higher interest rates, the pace of M&A in the narrow web industry has decreased significantly,’ Dochstader says. ‘While we’ve still witnessed some of the industry’s largest players acquire smaller converter companies, private equity has made very few deals this year in our industry.’

Still, it’s not a full stop but more of a halt. ‘As soon as interest rates start to come down, we anticipate private equity re-entering the market with a renewed focus since during the pandemic our industry proved just how resilient it truly is,’ Dochstader says.

Bob Cronin, managing partner of M&A consultancy firm The Open Approach, agrees in his M&A column for L&L: ‘Transactions will not stop; however, we can expect to see the valuations and transaction structure change around these circumstances

Evolution of flexo

In terms of technology, flexo is evolving, further empowering converters.

Flexo made a comeback at Labelexpo Europe 2023, in sharp contrast to Labelexpo Americas 2022, and continues full steam ahead. Wider, mid-web 26in presses have emerged ‘as powerhouses for diversification, giving converters the option to move into new markets, and to be more efficient in markets they already operate in,’ as Andy Thomas-Emans, L&L strategic director, writes.

Aptly, this ‘digitization of the flexo process’ is a key theme at this year’s show, says Tasha Ventimiglia, event director of Labelexpo Americas 2024, as flexo OEMs return to the show at the Donald E Stephens Convention Center from Sept 10-12.

Looking ahead, flexo purchases are projected to outpace digital this year, though LPC expects the latter to pick up again in 2025. A recent LPC survey of 102 label converters across the US and Canada shows ‘a significant number’ of companies that froze CAPEX spending in early 2023 due to market conditions now plan to purchase a press in 2024, according to Dochstader.

Linnea Keen, TLMI president, in the 2023 Market Watch report, said: ‘It’s clear that we are navigating times of unprecedented change and evolution in our industry.’