Packaging and Labeling Services

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 1,600 contract packaging establishments in the US generate revenue by charging fees (or a “toll”) for packaging customer products in finished form. Turnkey packaging refers to projects in which the contract packager purchases inventory for the customer and takes responsibility for final packaging services. Firms may also generate revenue through telemarketing services or the resale of merchandise.

Unpredictable Work Flow From Customers

Demand for contract packaging firms can be extremely unpredictable.

Capital-Intensive Operations

Packaging operations require significant investments in plants, equipment, and machinery.

Industry size & Structure

The average packaging contractor operates out of a single location, employs about 42-43 workers, and generates $5-6 million annually.

    • The packaging and labeling services industry consists of about 1,600 establishments that employ 61,900 workers and generate $8 billion annually.
    • Firms that generate less than $10 million annually account for 88% of industry participants but only 25% of revenue.
    • Firms that generate between $10 million and $25 million annually account for 7% of participants and about 19% of revenue.
    • Firms that generate more than $25 million annually account for 5% of participants and about 56% of revenue.
    • Some large contract manufacturers, such as Aphena Pharma Solutions and Hearthside Food Solutions, have integrated contract packaging operations. Packaging materials manufacturer Sonoco offers contract packaging services.
                                      Industry Forecast
                                      Packaging and Labeling Services Industry Growth
                                      Source: Vertical IQ and Inforum

                                      Recent Developments

                                      Nov 10, 2022 - Increasing Focus on Digitalization
                                      • As packaging firms come under increasing pressures from higher energy and materials costs, sustainability goals may take a backseat to digitalization efforts aimed at streamlining operations and reducing costs, according to GlobalData. Senior Consumer Analyst for GlobalData Jenny Questier said, “Packaging companies will be feeling the pressure from both rising costs in the supply chain and the reduced spending power of consumers meaning that they will need to do as much as they can to cut costs in the middle and that will inevitably come through digitalization.” Efforts to wring costs out of operations may come from technologies, including artificial intelligence (AI), 5G, and the internet of things (IoT). One example includes using AI to better forecast supply and demand peaks, which can optimize inventory management and reduce costs while enhancing supply chain efficiency.
                                      • Commercial printers and packaging firms posted robust revenue and profits in the second quarter of 2022, according to Semper Workforce Solutions’ most recent survey released in late September. Many firms notched record second-quarter profits: 70% of survey respondents said they had a net profit margin of 8% or more. However, the Semper report suggested that firms should use their windfall to build a cash safety net to cope with interest rate hikes. Most printers and packaging firms reported strong propensities for hiring but have shifted from internal referral strategies to heavy use of job boards and temp agencies. Despite increased economic challenges, most firms expect strong sales in Q3.
                                      • Amid high demand for new food products and formulations, more consumer packaged goods (CPG) firms are looking to expand the manufacturing capacity they own, according to Food Dive. The trend of owning manufacturing capacity is an about-face from the recent past when food brands favored outsourcing production to focus on keeping products relevant for consumers. After struggling to meet demand during the pandemic, food companies are looking to own plants to maintain tighter end-to-end control and reduce inefficiencies, costs, and supply chain risk. Firms are turning to mergers and acquisitions with rival brands and co-manufacturers to grow manufacturing capacity.
                                      • The value of the global labels and printed packaging market is expected to rise from $456.3 billion in 2021 to $473.7 billion in 2022, according to a recent report by paper, print, and packaging consulting firm Smithers. The market is then forecast to see average annual growth of 3.1% and reach $551.3 billion in 2027. Flexographic printing is forecast to see average annual growth of 2.4% through 2027 and is expected to remain the most widely used printing process due to its widespread use in long-run corrugated board, flexible plastics, and labels. However, digital printing will be the fastest-growing label and packaging printing process category with annual average growth of more than 10% through 2027. Label and packaging printers face some challenges, including investing in equipment that can print on more sustainable substrates, such as flexible barrier papers and molded fiber.
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