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

                                      Mar 16, 2023 - Glass Bottles, Folding Cartons to Gain in Popularity
                                      • Sustainability is a driving factor behind an expected rise in the popularity of glass bottles and folding carton packaging, according to the recent Future of Packaging and Sustainability report by PMMI Business Intelligence. Folding cartons will see the most significant jump in popularity between 2021 and 2025, with average annual growth of 1.4%, up from 0% annual growth between 2016 and 2021. Folding cartons will reach annual unit sales of 38.9 billion by 2025 amid rising demand for paper-based packaging that’s compostable. Demand for glass bottles will also improve after negative average annual growth of -0.5% between 2016 and 2021. Between 2021 and 2025, average yearly glass bottle growth will rise by 0.3% and reach 24.4 billion units.
                                      • Printing and packaging firms’ profitability was down in the fourth quarter of 2022 compared to Q3, according to a recent survey by Semper Workforce Solutions. Firms said their profitability in Q4 was 4-6% compared to 8% or higher in Q3. However, nearly all respondents reported higher revenues in 2022 than in 2021. Looking to Q1 2023, printing and packaging firms said they expect sales to drop, mainly due to rising interest rates. Labor remained the top concern for printing and packaging companies in Q4, although most indicated that labor supply was loosening and upward wage pressure was easing.
                                      • One-fifth of organizations will likely alter their sustainability goals as their stated deadlines approach and milestones are unlikely to be met, according to a recent report by Gartner. Prior commitments to using 100% recyclable packaging and eliminating plastics will shift to an emphasis on life cycle assessment (LCA) metrics. Firms are expected to pivot to LCA measures of sustainability that emphasize using less and more efficient packaging as a means to reduce carbon footprint. Gartner suggests that while firms that shift their sustainability goals could initially face accusations of “greenwashing,” those risks might be outweighed by the benefits of having more realistic and attainable climate goals.
                                      • Most consumers would react positively toward companies that increase their use of glass packaging, according to a recent survey commissioned by the Glass Packaging Institute (GPI). More than 90% of survey respondents said they would have a positive view of a firm that increased its use of glass packaging. Almost 25% of those surveyed said they would like more food and beverage companies to offer products in glass packaging. A separate recent survey by Ball Corporation showed that recyclability and reusability were the packaging attributes that are most important to consumers.
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