Commentary & Analysis
New Survey Report Takes Fact-Based Look at Label & Packaging Market Realities
Filtering what we know from what we think we know about label and packaging market trends is the objective of “Emerging Technologies for Packaging Innovation,” a newly published report from GrCI Cal Poly and Packaging World.
By Patrick Henry
Published: November 11, 2014
Many assumptions surround the outlook for label and packaging printing: some of them sound, others not as reliable. The incorrect ones stem mostly from lack of facts, wishful thinking, and over-reliance on publicity from some quarters about label and packaging solutions.
Recently published to clear up some of the misconceptions is “Emerging Technologies for Packaging Innovation,” the report from a joint research project by the Graphic Communications Institute at California Polytechnic State University (GrCI) and Packaging World magazine. Based on an extensive survey of a cross-section of buyers and producers of labels and packaging, the study aims to draw a realistic and data-supported picture of how production technologies are shaping and driving the market (and vice versa).
One of the study’s foremost conclusions is that trends in the manufacturing and distribution of consumer packaged goods (CPG) make an expanded role for digital printing inevitable. However, the research also indicates barriers to adoption based on the expense of digital systems and incomplete understanding of what digital presses for labels and packaging can do.
Focusing on how digital technologies are perceived by the various segments of its survey base, the report details the uses that each segment will make of digital solutions as SKU proliferation and other trends alter current models of packaging and label production. It also addresses marketing and supply chain issues and notes the prospects for technologies such as augmented reality and 3D printing in CPG labels and packaging.
The 13 corporate sponsors of “Emerging Technologies for Packaging Innovation” include label and packaging equipment suppliers, a packaging company, a packaging materials manufacturer, and industry trade associations. The associations furnished contact databases that GrCI used to conduct a series of e-mail surveys targeting the four market segments on whose feedback the report is based. The surveys drew non-duplicated responses from 288 CPG companies, 51 contract packagers, 160 converters, and 56 commercial printers.
Representing the thinking of the end-using segment, the CPG responses come first in the report’s summary of results. These companies said that the need to bring more product variations and packaging formats to market is stepping up the proliferation of their SKUs (stock keeping units) and motivating them to look at new solutions for coping with shorter runs and eliminating waste.
This is leading most of them straight to digital printing. “With only 26% of respondents not researching digital printing,” says the report, “it would appear technology adoption is not a matter of ‘if’ but ‘when.’" It also notes that 10% of the CPG respondents have their own in-house digital presses for test marketing and focus groups.
The project defines converters as processors of raw materials into labels, flexible packaging, folding cartons, and corrugated cartons, usually with printing included. Contract packagers (also known as co-packers) provide outsourced packaging services to CPGs, but without converting operations.
Better than one-third (36%) of the converters surveyed said that they had already invested in digital printing, and 68% percent said they expect to within three years. About 40% of the contract packagers—providers that the report sees as potential competitors to converters in short-run production if the co-packers adopt digital printing—said they were inclined to view digital printing as a service they would offer.
Over 6,000 commercial printers were invited to participate in the survey. The report notes that even though the number of responses received was small, input from the 56 firms that did take part shows that commercial printers have a genuine if somewhat restrained interest in packaging.
Nearly two-thirds (63%) responded positively when asked about using packaging to offset declining volumes of existing print applications. About one-third (34%) said they currently were offering packaging or label applications. As for future plans, while 18% percent of respondents said they are thinking about entering packaging, more than double that number reported having no plans for it.
Resistance to technology isn’t the issue: 77% of these respondents already operate the digital sheetfed equipment and more than half (54%) have installed the inkjet presses they would need for short-run label and packaging production. According to the report, their hesitation comes more from uncertainty about finding packaging work and from the need to invest in post-processing equipment for packaging.
“Not part of core competency or strategic focus” and “Sales wouldn’t know how to sell it” are among the anecdotal responses from commercial printers to questions along these lines.
The report advises technology manufacturers focused on the packaging market to “consider a business development approach to sales, as it is likely that current customers engaged in commercial printing will take a cautionary stance.”
Although the report says that digital printing has brought the packaging industry close to a “tipping point” of adoption, it also reveals some misgivings about the high cost of acquiring the capability.
Converters were especially blunt about this. One that uses partners for digital printing called the rates charged for these services “outlandishly expensive in most cases." Another identified the investment cost for digital printing technology and lack of enough current market size to justify purchase as barriers to entry. Another wished for an affordable “middle-market solution—print engine with finishing under $350K.”
But as SKU proliferation and other CPG market forces drive label and packaging production increasingly into short runs, print service providers may have no choice but to make the investments that keeping up with the market will require. “In response to these business drivers, digital printing appears poised to accelerate its integration into the packaging supply chain,” the report concludes.
One CPG respondent hinted at the scope of opportunity by commenting, “Digital printing has improved to the point of challenging litho processes and accommodates faster turnaround, lower runs, customization for the demands of the customer. It has enabled us to react to urgent demands, such as regulatory revisions, trial packaging, bonus packaging and promotional materials for shows, demos, focus groups, national meetings, training sessions, etc.”
The full text of “Emerging Technologies for Packaging Innovation” includes a lengthy appendix of respondents’ quotations like those cited above. It can be ordered for $999 from GrCI, which also offers offer custom consulting in the areas covered by the report.
GrCI is an outreach effort of Cal Poly’s Graphic Communication department, created to provide industry professionals with access to the university’s state-of-the-art resources through workshops, conferences and seminars, custom training programs, consulting, laboratory testing, and research initiatives.
According to GrCI, the findings of “Emerging Technologies for Packaging Innovation” cover 5,000 data points, many more than we have space to mention here. But, every response to the survey prompts additional thinking about the new directions that the label and packaging market is taking.
Converters, for example, were asked whether they believed that their traditional printing processes—flexo, offset, and gravure—were sufficient for meeting their customers' needs. Not surprisingly, 80% agreed or somewhat agreed that they were. But Carl Joachim, a GrCI associate and the coordinator of the survey project, had this to say about what the answer may imply for competitiveness in the segment:
“Converters are bound by their existing business model and traditional printing processes, which are long-run oriented. In fact the entire supply chain is synced to long runs, including the sourcing of raw materials (which is why we have material supplier as a sponsor).
“In addition, their relationships with CPG customers are mostly with procurement, not brand marketing, so the benefit of digital is often not appreciated. The converters’ business model just doesn’t recognize digital as a priority right now, often causing them to prefer walking away from short runs, rather than deal with them—unless it’s a big client and they risk losing the work they want.
“If converters don’t adapt to the demands of CPGs for short run, quick turn, etc., someone will. The implication is there will be fast movers that come in as competition to converters that today are not. Consider the argument for co-packers and commercial printers to enter digital package printing. I am currently in discussion with investors that see this as an opportunity.”
Words to ponder from the source of a report worth studying.