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  • 30 Dec 2021

Harness the label industry’s top drivers

M&A and equipment investment are now imperatives

If there’s anything we’ve learned over the last 18 months, it’s that we need to be adaptable. Still shaken by Covid-19, our customers are making product (and correlated label purchasing) decisions with caution. Changing expectations and regulations have disrupted manufacturing, and shortages in raw materials and labor are causing huge problems in supply chains. Add to that, many businesses are scrambling to meet demand for items they never had to worry about before.

Customers want partners that offer them confidence that they’re not getting elsewhere. Confidence that you can manage whatever they need in a timely (and budget-conscious) fashion. And confidence that you can manufacture the printed materials that can help them grow.
 
Savvy label and packaging entrepreneurs are embracing two major trends to stay ahead of the game: investing in new equipment platforms and forging mergers, acquisitions and alliances. Though both activities have always been available growth strategies, they are now imperatives. Yet, these actions are costly and have no guarantees. They need to be orchestrated wisely to ensure you attain your objectives.
 
Equipment and technological investments
 
I’ve always said buying equipment isn’t a strategy but how you utilize it is. What I mean by that is if success were based only on who has the latest and greatest equipment, then the players with the most cash should win. Look at the market, and you can see that’s clearly not the case. It’s the providers with the platform that best fits their customers (and prospects) that are always the leaders.
 
There are plenty of equipment salespeople talking you up on a ‘good investment’. But carving out a CAPEX trajectory needs to be based on responding to the needs, issues and future of your loyal customers. Before you embark on a new idea, make sure it aligns with where your customers are going. More important, make sure it’s one that ensures their growth as much as it does your own.
 
If you stop preparing for change and evolving, you’re preparing to die
 
Many companies (and industries) are struggling with a multitude of issues right now. As label and packaging companies, we’re a key part of their brand. We have the unique opportunity to provide solutions that drive sales and help them surpass some of these pressures.
 
Bring your top 20-30 customers closer. Meet with their executives, purchasers, and sales and marketing leaders and discuss their goals. Companies that understand the needs and issues of their customers’ markets are the winners. A word of caution, however, don’t try to build your business around dying industries. Consider your ‘top customers’ wisely as you make your investments. Investigate their markets and do your due diligence. Make sure you believe in their arenas and possibilities ahead. 
 
Additionally, as you plan your CAPEX, make sure it opens up new avenues for you as well. No matter how reliable your customers are, every great business is great because it continually forges new opportunities. 
 
Merger, acquisitions and alliances
 
Larger, more diversified companies typically have an advantage. But being larger isn’t a strategy. You must have a unique (and in-demand) capabilities base or platform to gain real advantage. With M&A being the quicker way to accomplish this, we’re seeing increased activity from smaller and mid-sized players. This is happening enough that we’re starting to see some new market giants emerging.
 
We’ve always described our industry as fragmented, and even after many years of consolidation, we remain so. Indeed, our $9.6bn US label and packaging market and much larger global arena encompass numerous businesses providing for various portions of buyers’ total needs. With the growing number of SKUs, reduction in shelf life, and changing regulatory content that must be present on the label/package, there’s increasing demand for better solutions and more attractive labels. Moreover, customers globally want the flexibility, efficiencies, savings and opportunities presented by digital. Thus, a digital branch is essential to compete. You must also have the ability and expertise to
serve the needs of different vertical markets – especially those that are thriving in the current economy.
 
As you seek potential acquisitions or alliances, ask yourself these questions: If your top customers grow, what might you need to handle their increasing volumes? What label and packaging gaps exist in your regional areas, and how valuable are they if you can fill? E-commerce is considered one of the biggest opportunities for growth. What technologies/personnel/workflow systems do you need to manage these sales efficiently – and market your company for the greatest impact? Where are your seasonal downturns, and what capabilities/geographic reach do you need to adjust for these? And finally, do you have the structure, people and know-how to identify and penetrate new, profitable markets?
 
Take some time to evaluate and understand your business, the issues and needs of your customers, and your competitors. Can you reach your growth initiatives better by an equipment investment or by an M&A venture or strategic alliance? How can you accomplish these activities without becoming a victim of any new organization? These can be
complex considerations. Gaining the perspective of an outside expert may be key to help you sort through your best options.
 
In the end, labels and packaging is no different than any other business. If you stop preparing for change and evolving, you’re preparing to die. Let’s plan on a long life and develop a plan not just to be seen as a vendor to your client base but rather as a partner to grow and succeed together.

ABOUT THE AUTHOR

Bob Cronin is a regular columnist in Labels & Labeling, writing about M&A activity in the industry.

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