Label printers and converters are finding solutions to succeed in the current business environment of raw-material shortages, rising costs and new regulatory compliance.

By Linnea Keen, president, TLMI

The label stock industry plays a vital role in the packaging and labeling of myriad products, providing crucial information, shelf appeal and branding opportunities to consumers. However, like many other industries, the label and packaging companies in the United States have faced significant supply-chain challenges in recent years. From raw-material shortages to transportation disruptions, these hurdles have tested the resilience and adaptability of businesses within the industry. With the effects of the COVID-19 pandemic thankfully receding in the rearview mirror, the industry faces a new set of opportunities and challenges.

Raw-material shortages

One of the primary challenges plaguing the label stock industry over the past year is the shortage of raw materials. With the unprecedented demand for label stock products, suppliers struggled to keep up. This issue was compounded by disruptions in the global supply chain, including labor disputes, capacity reductions and transportation delays. Raw materials such as paper, adhesives and release liners were scarce in mid-2022, leading to increased costs and delayed production.

To mitigate these challenges, suppliers, converters, printers and brand owners all built up inventories to minimize disruptions and serve the fluctuating demand. Over the past six months, production has slowed as inventory has been worked off. For business continuity, industry players must develop strong relationships with suppliers, diversify their sourcing strategies and explore alternative materials or technologies. Collaboration with suppliers and other industry stakeholders can help identify potential substitutes or develop contingency plans to ensure a stable supply of raw materials.

With the market settling down and resuming a normal mode of operation, the current focus has shifted to market volume, where there is demand and production uncertainty – and even erratic behavior. Historically, the label printing and converting market has predictable seasonality and annually grows about 1% to 2%, in line with the US GDP, with Q3 and Q4 being the strongest quarters of the year. This has been very consistent over the 20+ years of TLMI business reporting. As the residual impact of the pandemic and supply-chain challenges settle down, expectations are that both demand and production will return to normal, predictable levels.

Rising costs

The label stock industry in the United States also has grappled with rising costs across the entire value chain. Higher transportation expenses, fueled by factors such as fuel prices, the price of imports and exports, and truck-driver shortages, have significantly impacted logistics operations. Additionally, inflationary pressures increased the prices of raw materials, further straining profit margins.

To combat rising costs, companies can optimize their transportation networks, explore innovative packaging designs to reduce material use and invest in automation technologies to improve efficiency. Automation, in particular, provides a solution so manufacturers can overcome labor shortages and increasing wages. Implementing sustainability practices, such as recycling and waste reduction, also can lead to cost savings in the long run.

Regulatory compliance

The label stock industry must navigate a complex web of regulations governing labeling and product safety. Compliance with standards, such as those from the US Food and Drug Administration (FDA), US EPA environmental regulations, extended producer responsibility (EPR) laws and product-specific labeling requirements, adds an extra layer of complexity to the supply chain. Failure to meet these requirements can result in fines, product recalls and damage to brand reputation.

To address regulatory-compliance challenges, companies should stay current with evolving regulations, invest in robust quality-control systems and maintain clear communication channels with authorities. Collaboration with industry associations like TLMI and participating in industry forums also can provide valuable insights into compliance and regulatory issues.

Future growth

Outside acute market issues, business owners, printers and converters are looking toward the future for growth opportunities and how to win in this environment. Here are some activities our members are focused on:

• Circularity and sustainability, which are driving product development and innovation that meet both government and enterprise sustainability targets;
• Legislation and laws that are pending and being implemented across the country;
• Artificial intelligence (AI) will change the landscape in business across all functions including sales, marketing, human resources, product development and operations;
• Mergers and acquisitions will remain active, leading to further consolidation for both converters and suppliers;
• Adoption of smart labeling, smart packaging, RFID, functional and security materials; and
• Linerless as an alternative in the labeling portfolio.

Conclusion

The label stock industry in the United States has faced a range of supply-chain-challenges from raw-material shortages to rising costs and regulatory compliance. To thrive in this environment, companies must adopt a proactive as well as adaptive approach. By diversifying suppliers, embracing technology, optimizing operations and staying informed about regulatory changes, businesses can overcome these challenges and position themselves for long-term success. Collaboration and knowledge-sharing within the industry will be key to navigating the evolving landscape and ensuring a resilient label-stock supply
chain. 

Linnea Keen is president of TLMI (Nashville, TN). She can be reached at 615-432-5442, email: [email protected], www.tlmi.com.