22 January 2020

North America: consolidating, diversifying

The North American label market in 2019 was marked by a flurry of high-profile mergers and acquisitions, splashy start-up businesses and further diversification into flexible packaging. This mature and fragmented market is expected to grow between 2 to 5 percent each year. Though the industry continues to appear healthy, the challenges that have plagued it for the past few years show no signs of retreating. Sustainability remains a hotly discussed topic and a skilled labor shortage and aging workforce continue to squeeze the entire supply chain.

The North American label industry sees investment from private equity, as it grapples with ongoing issues. Chelsea McDougall reports

Much of the mergers and acquisitions activity in 2019 was driven by growing interest from private equity in the labels space. The year started with a blockbuster merger between two of the region’s biggest label suppliers, when Multi-Color Corporation was acquired by Platinum Equity, the PE group that owns WS Packaging.

In 2019, Fortis Solutions Group, owned by Main Post Partners, acquired Infinite Packaging and Label Technology. ProMach, a package machinery company owned by Leonard Green Partners, acquired Jet Label to expand its label base, and Inovar Packaging, backed by AEA Investors, acquired Flexo-Graphics.

Meanwhile, New York-based Macaran Printed Products took a different approach to succession planning when it announced that it is now 100 percent employee owned. CEO Nick Van Alstine said the ESOP was a way to protect and reward its employees who played a role in the company’s success.

New kids on the block
While other parts of the industry were consolidating, there were several new greenfield start-ups that came online in 2019 to target a growing segment: digital flexible packaging production.

The North American flexible packaging market is valued at 25.3bn USD and expected to reach 30bn by 2023. By contrast, the label market is valued at 13.2bn USD, so it’s no surprise that many label converters are looking at this as a lucrative route to diversify their businesses.

Suppliers are reacting to that trend. Labelexpo Europe 2019 saw a number of press manufacturers showing mid-web presses, including Bobst, Lombardi, Nilpeter, MPS, Mark Andy and Omet.

US-based digital flexible packaging producer ePac (founded in 2016) has invested 100m USD in 24 additional HP Indigo 20000 digital presses to double in size as the company continues its global expansion. Similarly, Wisconsin-based GOpak was founded earlier this year with an HP Indigo 20000 digital press and eBeam curing CatPak system from S-One Labels & Packaging. Nosco is also targeting the flexible packaging market with a 20000 press and Pack Ready Laminator from Karlville.

HP has traditionally cornered the digital flexible packaging market, but worth a watch are developments from Xeikon and Colordyne’s aqueous pigment print engines from Memjet and its partnership with MPS. MPS announced at Lablexpo Europe 2019 that it will incorporate the Colordyne module into the MPS EXL-Packaging product line, targeting mid-web flexible packaging applications. Xeikon is targeting the pouch market with its Flexflow digital print and lamination system for pouch production. The company confirmed earlier in the year that converters can print pouches with its dry toner technology in a project with CS Labels.

Adding to the 2,300 label companies in the North American region were a few new traditional players. Catapult started in central Florida earlier this year with a fleet of Nilpeter presses. In addition to its acquisition mentioned above, Fortis Solutions expanded operations to Napa Valley, California, in a facility that will provide pressure-sensitive labels to the wine, craft beer and spirits industries.

Converters in this region should pay close attention to the cannabis packaging market. Canada has legalized marijuana, but the government keeps tight regulations on cannabis and its packaging. In the US, cannabis companies continue to come online, as more US states legalize marijuana for both medicinal and recreational purposes. However, cannabis is still a federally classified drug, which presents its own set of branding and banking issues.

But challenges persist. As has been written on these pages over the past few years, workforce struggles continue to plague manufacturing, and its effects are holding the industry back. The US Bureau of Labor statistics estimates that there are nearly 500,000 manufacturing jobs that remain vacant today. Many label converters have said they would consider adding capacity – new machinery, or additional shifts – but don’t have the operators to run those presses. So far, the industry has been short on answers on how to address the talent shortage and aging press operators that will take the specialized skills with them to retirement. This is a key challenge that requires creative solutions.