SOI Labels and Tags: Satisfaction Guaranteed
Labels and tags have long been a staple of the printing world. While the economic recession introduced new challenges, it ultimately failed to stop the presses. Over the last few years, suppliers channeled their business savvy and began to run leaner operations. As a result, they are now poised for an exciting 2011 filled with digital solutions, fast turnarounds and creative design.
To learn more, Print Professional turned to the experts. Here to weigh in on the current state of this sector are:
• Matt Collier, president, Flamingo Label Company, Clinton Township, Mich.
• Kevin Pachla, founder, Label Network, Madison Heights, Mich.
• Steve Porter, director of marketing, Labels Custom Resale Group (includes Discount Labels and Lancer Label), New Albany, Ind.
Print Professional (PP): What are your thoughts on the current state of the labels and tags industry?
Matt Collier (MC): I am very optimistic of the label and tag industry going into 2011. After a rough few years, I am still seeing some growth and strong demand in most of the markets we serve. Much of this business we do not see going away or being replaced by non-print technology that is being experienced now by the commercial print sector.
Labels and tags remain the most cost-effective way to mark products, packaging, shipping containers and boxes, and a vast variety of other applications. Labels and tags that are used in a secondary printing application by the end-user, such as thermal or laser printer labels, continue to show growth. This continues to be a strong market since it is a very efficient way for companies to create shipping labels, code products in the packaging line or create unique labels on demand. Demand for label and tag products in the short term appears to be stable, and the indicators for growth for this market in the long term appear to be there. As most label and tag converters have done in the past few years, we have trimmed staffing and held off on large capital investments. However, in my opinion, the companies that have fared well as a result of this will be very strong going into this decade.
Kevin Pachla (KP): The printing industry, in general, has been going through huge changes that will continue. The manufacturing of labels and tags is evolving at a fast pace, which means us producers and suppliers have to stay on the leading edge to satisfy our diverse customer requirements.
Steve Porter (SP): Labels (specifically product labels) continue to be a growth segment of the print industry. Growth is supported from/by businesses introducing (or modifying) products to market at a rapid pace. The Freedonia Group forecasts the NA label market to grow 4.5 percent annually and will be $19.2 billion by 2013.
PP: What do you think the biggest changes will be this year? What will drive them?
MC: The biggest changes I expect this year will be with digitally printed labels and digital solutions for short run jobs. I expect most label and tag converters to have a digital solution or a plan to acquire a digital solution by the end of 2011. There are more and more options for digital presses and finishing systems coming on the market every year. The initial investment costs have come way down in the past few years. Customers are demanding shorter and shorter runs to avoid holding inventory and also to avoid obsolescence. So, we are already adapting to these changes as we see runs getting shorter and shorter. Within the next year or two, having digital printing capability will no longer be an advantage; it will be a necessity.
We invested in a digital press and finishing system in 2010. We plan to expand our digital capabilities even further in the next year or two. We are now able to provide our customers short-run full color labels at a very low cost. Our digital press continues to run at near full capacity every day.
KP: I'm finding that customers like options, so product expansion and additional features for our online customers, plus around-the-clock customer service to satisfy global and the more demanding regional clientele are our current priorities.
SP: General market trends we have seen include: a move towards smaller quantities, a move towards more private brands, a move to reduced cost of production and warehousing inventory, a move towards fewer resources and a move towards seeking value from sources.
PP: What are the biggest challenges you expect this year in terms of the label and tag business?
MC: I think the biggest challenge we'll face this year is learning to handle the increase in demand that is happening as a result of economic recovery. We are a leaner company in 2011; it will be a challenge to determine where and when to add resources and new equipment to handle the demand meanwhile staying lean and efficient. However, we do see ourselves adding staff this year as well as investing in some new equipment.
... Another challenge we are facing this year is an increase in raw material prices, particularly in label stocks. We faced several price increases from our paper vendors in 2009 and 2010, but have had a difficult time passing these costs on to our customers. Most end-users of label and tag products have spent the last few years trimming budgets and trying to find ways to decrease their label and packaging costs. At the same time the raw materials for these products have increases, putting the label/tag converter in a very tough position. As a result, we've been forced to be more efficient in other areas to compensate for the increase in raw materials cost.
In the next five years, I expect the biggest challenge to come from industry consolidation and web-based print companies. First, further industry consolidation will make it more and more difficult for the small converter to compete.
KP: A big challenge businesses are facing now is allowing credit. For the customers [who] require terms, we must be stringent and thorough with credit checking and monitoring. As for others, more payment options such as PayPal should be available.
SP: The way our customers do business is changing. They're feeling increasing needs to differentiate themselves in ever-evolving markets. They're under pressure to change marketing messages quickly and try new approaches. Their purchasing trends are driving shorter print runs with very quick delivery.
PP: What are some of the positives happening now or that are on the horizon for this year in terms of the labels and tags business? Are there any hot trends worth mentioning? Please explain.
MC: I think there are several positives happening now in the label and tag market. The first is in the rapidly evolving digital presses and solutions that are coming to the market. More and more options are available to label converters than ever before. The new digital solutions are able to print on more and more materials including clear films and durable films. These solutions are a great compliment to traditional flexographic printing processes currently used by most label and tag printing companies. This trend will continue for the next several years. While digital will never replace much of the traditional label and tag business, it will continue to grow and serve its market niche very well.
KP: The new digital technology, along with new various substrates available in the industry, is allowing us to sell many new options to our customers. Offering expanded variable printing and short run custom labels is now the norm, which allows us to sell more innovative and creative solutions.
SP: Digital and variable data printing have strong growth.
PP: Please describe any new innovative and/or valuable features that your label products offer—in other words, how is your company keeping up with changing marketplace demands?
MC: The most innovative offering we have added is our digital printing and finishing capability. Not only can we now quickly print short run full color labels from about any type of art file provided, we can also digitally finish them. This allows us to cut the label to any size or shape without the cost of expensive rotary cutting dies. We can deliver 1,000 full-color labels that are a custom shape and laminated in under 24 hours. We can also use this equipment to provide our customers as few as 10 labels for test samples or for one-time only projects. As a trade printer, our broker and commercial printer partners get a huge edge on competition by being able to offer their customers this product. They no longer have to turn away short run business, or fear their customer getting "sticker shock" (no pun intended) when seeing the high cost of printing a short run of prime labels the traditional (flexographic) way due to the high make-ready costs, printing plates and cutting dies. There also is the added benefit of being able to revise the label frequently, or even add variable data or graphics to each label.
KP: Over the years, we're finding customers' needs are more wide ranging from large lots of inventory and/or security items to unique custom requirements that may not have been an option a few years ago. Developing label solutions for our customers from design concept to the end product is our specialty. These challenges drive our company and our ability to meet them and keep our customers coming back.
SP: Discount Labels added variable data printing technology several years ago and also installed HP Indigo presses a couple years ago. This technology further enhances Discount's vast capabilities to provide as few as 100 labels up to millions.
PP: How has the industry morale been affected by the recession?
MC: In my opinion, industry morale has been mixed throughout the past few years. Some of the distributors we work with took the recession as an opportunity to expand their product offering and explore new markets. They also worked with us on their label projects to find ways to save their customers money. On the other hand, the woes of the recession had an extremely negative influence on some of our distributors. Reduced profits, loss of business, price-sensitive customers and fierce competition among distributors seemed to be the root cause.
KP: Being in the Detroit area, we've seen almost all industries negatively affected by the stalling of the economy. Bottoming out a couple years ago has brought new perspective. A focus on industry innovation on a stream line budget will be the only way manufacturers, distributors and suppliers will thrive.
SP: During the recession we saw our customers "batten down the hatches" and hold on. Business started getting back on track late '09 and through '10, and it continues to build during the first few months of 2011. We see businesses getting back to business with demand for more full color products as well as distributors more focused on helping their customers tackle opportunities (that may encompass several different products) versus just providing a customer with a single product solution.
PP: What was the most exciting or challenging label/tag request you received over the last year and what was the solution?
MC: [We] designed an IRC (instant redeemable coupon) label for direct application to produce (watermelons and pumpkins). The request was to design the label so it would have the essential retail information on the front (barcode, PLU number, country of origin, etc.) and a coupon for a complimentary product on the backside of the label. The label needed to remain affixed to the produce throughout the supply chain—not an easy feat on a rough textured, bumpy pumpkin—and then have a coupon layer that is easily removed by the consumer in store to be used at checkout. While IRC labels are common in the industry, we created a special solution for the produce to meet all the requirements we faced. Some of the hurdles were restrictions on adhesives due to FDA requirements, the non-uniform rough and damp texture of the produce, and allowing a portion of the label to be removed without any adhesive so it could be used at checkout. We solved the problem through a combination of special adhesives and unique die cuts to allow the label to perform as expected by the customer.
KP: Our customer required a sturdy tag with a perfed area for removal that would hold up in extreme weather conditions. Due to mostly high winds, the tags they were using periodically tore at the perf and flew away. The customer came to us expecting a more costly, more durable, "higher quality" substrate when all that was needed was a re-design of the perf so that the cuts started inside the tag. Problem solved easily and the customer was extremely happy.
SP: We produce a label (for a distributor) that is used in Georgia that is affixed to a car dealer's tag as an expiration date for newly purchased vehicles. It is a self-laminating label where the construction and materials have security features that protect written information and keep it from being altered.
Elise Hacking Carr is senior production editor for Print & Promo Marketing magazine, and managing editor for PRINTING United Journal.