A Long and Winding Road
Times are tough; there’s no doubt about it. Costs are rising, competition is fierce and the economy is in a tailspin (or nose dive, depending on your perspective).
“This was a difficult year for the [tag and label] business due not only to macroeconomic issues, including high energy costs and continuing high raw material inflation, but also because of growing competition to labels and tags in the packaging industry itself,” noted Corey Reardon, president and CEO of AWA Alexander Watson Associates, McLean, Va.
The rising costs of materials—across the board—are at the top of most printers’ list of issues. A majority of tag and label printers are relatively small businesses that can get caught in the supply chain pricing squeeze between large suppliers and, sometimes, even larger customers. It’s a tough place to be.
Reardon sees little relief in sight. “There is no sign of a softening in oil and raw materials inflation, so margins will be squeezed at all levels of the value chain,” he said. “This is true in the prime label market particularly, where brand owners (themselves suffering from spiraling oil-associated costs, etc.) are aware of supply-side pressures, but need to mitigate necessary increases. Suppliers are doing their best to find cost-cutting solutions.”
It’s All Relative
Even with the tough economic times, the tag and label printing and converting industry is in a better position than many other industries to weather the storm. As a matter of fact, Reardon reported that the overall global market for labels grew from 4 percent to 4.5 percent in 2007.
“In the medium-term, there are real opportunities for growing the overall market for tags and labels as the developing geographical economies around the globe stabilize, and western-style consumerism becomes established,” he predicted. In this assessment, Reardon singled out what are referred to as the BRIC countries—Brazil, Russia, India and China.