SOI Labels & Tags: Beating the Odds
What do the labels and tags industry and Daniel E. "Rudy" Ruettiger (of Rudy fame) have in common? If you said, "neither is a very good football player," you'd technically be correct, but that's not the answer we had in mind. The right answer is that both exemplify the feel-good underdog story. Rudy triumphed over his unfavorable socioeconomic status and small stature (and lack of appreciable athletic talents) to play football for the University of Notre Dame. The labels and tags industry? All it did was overcome the biggest economic disaster since the Great Depression.
While labels and tags suppliers never got triumphantly carried off the field by their teammates like Rudy did, their success is just as inspiring. Surviving the recession has been difficult, and some of the other product sectors weren't as fortunate.
"The labels and tags industry has generally done better than many other industries during the economic downturn," said John Shanley, president of Labels West Inc., Woodinville, Wash. "While there certainly are those companies that didn't make it through the downturn, I believe most companies learned valuable lessons about their operations and how to make themselves more efficient. The result should be much better [and] stronger companies when the economy improves."
Shanley's optimism is far from wishful thinking. Many suppliers have experienced growth in line with the Freedonia Group's 2011 projection that the North American label market would grow 4.5 percent annually over the next few years. According to Shanley, Labels West saw sales increases of 3 percent in 2009, 3.5 percent in 2010 and 6.7 percent in 2011, and anticipates a 5 percent growth this year. And he's not alone in that assessment.
"Based on last year's sales, we saw a substantial growth in labels and tags," said Tony Heinl, executive vice president of Repacorp, Inc., Tipp City, Ohio. "We saw sales increases in all markets—stock, custom, RFID, digital and flexo. I believe the Freedonia Group projected correctly."
Obviously, the general trend toward sales growth is a good thing, but it is far from the only positive change suppliers have experienced. Shanley pointed to technological improvements that allow for shorter run lengths and more rapid response times as one example.
Michael Nicholas, president and CEO of Elgin, Illinois-based label converter Continental Datalabel, cited better market conditions and changes in customer attitude.
"Markets have stabilized, allowing us to recover some of the cost increases we have received from our paper suppliers," he explained. "Customers seem more open to durable labels as cost-effective alternatives to more expensive materials."
Keeping up with shifting customer needs is important for any business. The labels and tags industry is no exception. Consumer demand for lower costs and faster response times has required suppliers to be even more flexible in their offerings. "Customers want to be able to order smaller quantities with greater frequency. They want to keep their label and tag inventories low," Shanley noted. "They want to be able to make frequent changes and get those changes to market quickly. And, of course, they want them to look great and not cost an arm and a leg."
Repacorp is being proactive to ensure quick turnaround requests are met. This year, the company purchased software that allows for faster quote turn time for non-standard items and more web-based options for distributors. Heinl believes that supporting distributors in this manner will make them more competitive in the market, resulting in a better overall product for customers.
"We are adding more digital and flexo capabilities and quick turn on our website for quoting and purchasing," he explained. "We are also adding online access to [distributor] accounts to track inventory and enable them to follow their job through our production department and [after it has] shipped."
Heinl also mentioned that because account information will be provided online, distributors will now have round-the-clock access to quoting, account information and inventory.
In addition to rapid response times, tech-savvy offerings have become less of a bonus and more of a necessity. Labels West recently installed a second unit for producing QR code labels, and is involved mainly in the production of codes for marketing, as well as for tracking on food labels. Meanwhile, Repacorp provides QR services in both flexo and digital printing formats and also is heavily involved in the production of RFID tags.
"We have been in the RFID business since 2005, and we offer a catalog with stock RFID labels and tags," Heinl said. "We provide custom RFID label and tag solutions with a variety of inlays, materials and adhesives. Repacorp can encode and imprint your RFID label with up to six colors, front and back. All of our smart labels and tags are 100 percent verified prior to shipment."
Furthermore, Repacorp has taken an interesting, if unusual, approach to the consumer demand for green manufacturing. "Our waste is the label matrix," Heinl explained. "In our Wisconsin plant, we remove the matrix, and wrap it into a bale—just like a bale of hay. We then ship the bales of matrix to a company that makes fuel pellets out of them. The pellets are mixed with coal that is burnt for electricity."
He added that Repacorp is exploring options for repurposing the label matrix for use in the company's Ohio division.
Other companies have continued this industry-wide movement toward outside-the-box thinking, developing innovative label options and attempting to satisfy even the most unusual or difficult customer requests. According to Nicholas, Continental Datalabel developed specialized labels and tags for a wide array of applications within the steel industry, as well as ultra-clear window clings for use in retail settings.
Labels West developed a special process for texturizing label materials. "We had a customer that wanted us to produce a beverage label that looked and felt like leather," Shanley said. "We designed a special embossing technique that allowed us to create a surface that looked and felt like leather. The only thing we couldn't figure out was how to make it smell like [real] leather."
For the most part, the combination of stabilizing markets, an increased focus on fulfilling customer needs and innovative technological options has resulted in positive vibes and increased sales within the industry. Still, not everyone is thriving. Heinl shared some tips to help distributors overcome seemingly insurmountable obstacles.
"My advice for someone struggling to survive, or for a novice distributor, would be to partner with a converter that has been in the industry for a long time and has a large variety of products and support services," he suggested. "The converter should support you with added value, such as online pricing, sales sheets and drop shipping blind under your name and brand."
Shanley concluded by stressing the importance of finding a good all-around supplier that offers a variety of print processes and capabilities. "Make sure [your supplier] is dependable and trustworthy," he said. "Let them ask you the questions. Listen and learn from them. They are your best resource for information and advice."