Navigating today’s labels and packaging climate

Labels and packaging have seen a dramatic shift in sales and sentiment over the last few months. Entrepreneurs and executives don’t have the same optimism, and employees are getting restless.

Despite the changing dynamics, we’ll weather the storm. In good times and bad, we’re relied upon for marketing, brandbuilding, security, tracking and more — bringing value to just about every industry.

Still, we have some new obstacles. One of today’s biggest challenges is the aftermath of Covid-19. Over the last few years, we’ve tried to avoid material shortages and price hikes by stocking up, adding equipment to handle work we
previously sourced, and hiring new staff. We took aggressive action on short-term issues. While this benefited our immediate needs, it didn’t position us for tomorrow.

So, now we’re left with some new impacts. We’re also facing pressures from our marketplace and economy at
large. Let’s take a look at our five major challenges and see what we can do to navigate them.

1. Overstock Just about every business has excess inventory that it needs to clear. This means all of us are trying to push through the same material to customers, with some competitors drastically undercutting to offload their shops. At the same time, converters are lowering prices to protect their end market. This has caused increased concern and frustration as sales margins have dropped — on the few projects that are actually getting in the doors.

We need to turn this ‘commodity’ thinking around and focus on what has made us successful for all these years: Providing solutions. Show your customers why you’re a valuable resource. Take the downtime to devise a product that answers a marketplace need. Have clients out to your plant. Identify their pain points and rebuild yourself as a partner in their growth, rather than just another supplier.

2. Operational price increases Our profits are also eroding due to inflation in office supplies, professional services,
insurance premiums, healthcare/benefits, ESG costs and even things we stock in employee breakrooms.

If you haven’t calculated the ROI of all your spending lately, it’s time to do so. Examine your biggest costs first, and
don’t be afraid to question long-time vendors. Should you be looking for new benefits providers — or options? Are there incentives that can save you money on health premiums? Are there tasks now done manually that you can save with automation? Are there subscriptions or ongoing services that aren’t essential? A little belt-tightening can help you get through these times easier while creating a
more agile organization.

3. Recessionary concerns The demand for labels and packaging hasn’t changed; the timing has. The purchasing acceleration of 2021 and 2022 has been replaced by a slowdown as customers use the items they stocked up. This, coupled with some pullback due to expected recessionary pressures, makes it seem worse than it is.

These aren’t new issues. Ups and downs are what you’ve faced since day one. The extremes have just seemed like feast and famine. Labels are still the best growth market in the printing industry. And there are always new applications, uses, and products to drive this. As we balance out, we’ll return to the steady pace we’ve been accustomed to.

4. Labor issues Remote work, the rising minimum wage, and the changing attitudes of the younger workforce have
become significant concerns across every industry. This makes company culture, training and mentorship more
important than ever. Now’s the time to readdress how you manage your human resources and internal communications, career progression pathways and employee loyalty programs. These are issues that aren’t going to subside, so the sooner you retool, the better.

5. Mergers & acquisitions slowdown Current trends also have had an impact on M&A, because of the higher financing costs and the unknowns of sellers’ true run rates
(2021/22 vs. today).

These issues make it difficult to value any entity and develop a strategy from which to build. Thus, we’ve seen a bit of a drop and more companies seeking suitors that
can pay cash.

That said, investor interest in labels and packaging continues, because private equity and others believe this is a great place to be long term. Our companies are still sought after as cornerstones, value drivers, and profit-enhancers, though potential candidates should expect greater due diligence. Keep in mind, history is the best judge of your worth so if your fluctuations are drastic, you may want to wait till you have a steadier outlook.

If there’s one takeaway from all of it, it’s that you need to make decisions for the long term. Our market will always have change and obstacles to deal with. You’ll thrive if you stay focused on the future. I’m always happy to consult if you want to get a sense of your best options.