Mid-Year Economic Report - Label and Narrow Web - Label & Narrow Web Magazine

The label and package printing industry has been tasked to the limits throughout the Covid-19 pandemic – both in the midst of the outbreak and during the recovery period. As an essential industry, suppliers and converters alike have played a pivotal role in keeping the North American economy churning.

While the immediate future looks bright, there are concerns that will bear watching. Inflation, a new presidency, social unrest, natural disasters, and – of course – the continued fallout from Covid-19 will impact our industry for years to come.

"I believe the current state of the narrow web market is strong and getting stronger," states Paul Teachout, business development manager of narrow web, Anderson & Vreeland. "The recovery continues to gain momentum, and many converters are exceeding YTD expectations. Even markets like the industrial and automotive sectors are experiencing a strong bounceback through a very challenging cycle."

According to Bill Myers, marketing manager, Domino, converters generally reported a "boom or bust" year depending on the markets they served. "Those specializing in markets for products that people consume, such as food and beverage, beer, wine and spirits, pharmaceuticals, to name a few, seemed to do very well," says Myers. "In many cases, they experienced double-digital growth. Conversely, some label converters had a very difficult 2020 in which their book of business may have been in other sectors that slowed down during the pandemic,  such as automotive."

"Many of our customers experienced massive surges in demand and production needs, but many had labor shortages as well," says Patrick Potter, president of Flexo Wash. "Continued advances in technology, both on the converter and the supplier sides, contributed to everyone keeping their quality optimal and production on target despite the pandemic. So far in 2021, we have seen a lot of investment and activity from label converters."

Tower Products' supply chain was fully intact throughout the pandemic, as most of its chemistry is made on-site. "The only real setback has been raw material increases due to both pandemic and weather situations across the country," states Mark Principato, director of flexographic products and international sales, Tower Products.

The pandemic has created widespread and potentially permanent changes that will require the label industry to adapt, notes Mark Miller, VP of marketing for Avery Dennison Label and Packaging Materials, North America. He says, "E-commerce was accelerated by the pandemic and will continue to grow from a new, higher baseline. Hygiene and food safety will also remain important, although specific products, such as hand sanitizers, will return to standard industry growth rates. Avery Dennison expects home consumption to have peaked in 2020, where it will likely reset to a new normal that is somewhere between the peak of 2020 and where the economy was pre-Covid. Convenience, resealable and personalization will remain key trends but not necessarily drive near-term growth.

"In the decade prior to the pandemic, label industry growth – and in particular, pressure sensitive labels – was largely driven by the growth of fast-moving consumer goods in rigid packaging, the shift from wet glue to pressure sensitive labels, emerging markets, convenience packaging and regulatory changes," explains Miller. "If we project the outlook for the next 10 years, some of these drivers will probably not have the same impact as they did in the past. Specifically, consumption growth, pressure sensitive labels and emerging markets are all likely to plateau."

Even though optimism abounds, this has been a tumultuous time for the industry and society at large. "At the onset of the pandemic, there was a spike in sales and as a result, a spike in production," explains Nicole Rivera, director of administration and operations, K Laser Technology (USA). "I believe the labeling industry is in the same situation as many other industries that are having difficulty navigating the 'reopening' of the economy during Covid-19."

Another challenge surrounds the availability of qualified employees. While the industry was already facing a workforce challenge, that difficulty has been exacerbated during the pandemic.

"Consumers are spending, which is always a good sign for our economy," remarks Rivera. "However, it is extremely difficult to find quality leads and employees in this environment."

"This current post-pandemic period has also amplified the challenge independent converters have been facing over the past few years, including attracting and keeping strong talent," says JC McKay, VP of business development, Flexo Label Advantage Group (FLAG). "A big down side of this pandemic has led to a lack of employees in the workforce, unprecedented demand on vendor partners at levels that we've never seen before, paired with a strain on raw materials, freight delays, and inflation resulting in rising costs across the board. An overflow demand on business in all areas of the label market is continuing to be a bittersweet problem, especially because supply falls short of the demand."

There has been a global disruption in raw materials and logistics, which has ultimately resulted in shortages and delivery challenges, too. The industry has also seen a rise in pricing across the board. The challenges have extended beyond the pandemic, too, as natural disasters, such as storms and flooding, have tested the supply chain.

"2020 tested the resiliency and agility of the packaging industry in ways few of us could have imagined," states Miller. "The first half of 2021 brought significant challenges to our industry, too. From Storm Uri in February, which caused raw material shortages, to the raw material cost inflation to increased demand. Supply constraints have continued to drive commodity supply and demand imbalances. Due to these imbalances, we expect inflationary pressures to continue through the second quarter. While it is expected to eventually moderate sometime in the second half of the year, price levels for raw materials are expected to remain well above previous year levels."  

The assortment of new challenges has necessitated a move to newer technologies and an emphasis on automation, e-commerce and data.

"We are doing everything we can to mitigate the effects to our customers," says Teachout. "As many have, we have invested in new automated equipment in our manufacturing facilities to improve efficiency and have been very creative in finding new solutions to manage costs with our suppliers. We have also seen growth in our e-commerce online ordering programs, as well as our RFID Vendor Managed Inventory systems. These IOT-based automation platforms streamline the ordering process for all involved and reduce total transaction costs. We are seeing tremendous growth in these processes as converters continue to move to a more automated production flow throughout the organization to reduce operational costs and improve gross profits."

McKay has noticed a stark increase in work for the association's converter members, as well. "Label converters, for the most part, have been busier than ever," he says. "The pandemic has created new or increased business opportunities in many different market segments."

Converters were willing to invest in new technology during the uncertainty of the pandemic, especially if the equipment enabled them to better meet demands and future-proof their business.

"Overall, I am certain that businesses are cautious about how they spend their money. However, investing in new technology, if it's the right technology and the right fit, should be viewed as a tool to drive additional revenue and profit," says Myers. "Domino customers are seeing the benefits of our digital printing systems, allowing them to make more money by increasing their productivity, efficiency and capacity while reducing their costs, waste, material, production time and more."

For example, Chromatic Labels of Irvine, CA, USA, adhered to this theory. The converter acquired a new 8-color Nilpeter FA-26 to improve response times and offer new products to customers. The FA-26 has been engineered for short-run flexible packaging, which will help Chromatic Labels service a wider range of customer needs. The press is optimized for pouches and sachets to wraparounds, shrink sleeves, labels and more. Simultaneously, the company has moved into a new manufacturing facility.

"We are very excited with the purchase of this new state-of-the-art, mid-web flexographic press, which is scheduled to be up-and-running by the end of August," says Mark Gaw, vice president and general manager, Chromatic Labels. "The FA-26 will enable us to improve our response times on existing business, as well as offer new solutions. The purchase of the new equipment required more space, so we have moved into an impressive, new 35,000 square-foot manufacturing facility one half mile from our previous location. We appreciate our long relationships with all of our customers and suppliers, and expect these relationships to improve as we have better resources to support everyone."

Meanwhile, General Data Company has expanded its digital color printing and finishing capabilities with the addition of a new HP Indigo 6900 digital press equipped with a GM DC 350 finisher. General Data is making plans for short runs, variable data imaging, incorporating  security/brand protection features, and more.

"Investing in advanced digital printing technology like the Indigo helps us to be more responsive to the needs of our customers by providing superior quality digital color labels quickly and efficiently, especially for jobs that include multiple SKUs and variable data," says Peter Wenzel, president and CEO of General Data. "We can now also serve new and growing markets that are a great fit for the Indigo's excellent and cost-effective printing and finishing capabilities."

"We need to continue to invest in our business even more so in times of uncertainty to position ourselves for growth," adds Avery Dennison's Miller. "We have made many investments in the past couple of years in our manufacturing capabilities, have made business acquisitions in adjacencies to enhance our business portfolio, and we will continue to look for growth opportunities."

When investing, of course, finances are always a concern – especially with uncertainty on the horizon. In order to promote investment while keeping costs down, Domino also unveiled its in-house leasing program during the pandemic in an attempt to make it easier than ever to acquire the Domino N610i digital UV inkjet label press. "It's a simple, easy, flexible program that offers attractive low rates, fixed monthly payments, a bundled package with service, maintenance, training, printheads, and a future-proof trade-in guarantee program," adds Myers. "There is no large cash outlay, no personal guarantees required, and no bank or third-party leasing companies involved.  You're dealing directly with Domino. We even offer a ramp up program with deferred payments."

The pandemic has also accelerated the focus on burgeoning technologies like digital printing. The necessity for quick turnarounds and smaller-batch orders really emphasized the value of digital over the past 18 months.

For instance, Stuart Reeve, president of Mammoth Labels & Packaging in Columbus, OH, installed the Domino N610i digital UV inkjet label press in February 2020 right before the pandemic. He says, "Overall, our base of business was impacted positively due to a large percentage of our customers being in the food and beverage industry. With adding the Domino, it allowed us to bring in over $1 million in digital printing business we were outsourcing to another vendor. It just made sense to bring all that business in-house to allow for larger margins and give us 100% ownership and control of the work. Our digital sales grew 93% in 2020."

Meanwhile, John Abbott of Abbott Label doubled down with Domino during the pandemic – turning to the K600i digital UV inkjet printer to help with variable data printing. "Right after we bought the Domino N610i digital UV inkjet label press, Covid hit, and now everybody needs labels," says Abbott. "From the QR codes to the consecutive barcodes, that's where the K600i came in. And the reasons we went with the K600i: one, quality. The barcodes are unbelievable. And two, speed. That thing can go up to 492 fpm. You can run this stuff, and it verifies it. So, time is money. With the Domino, there's no downtime, and it's been heaven for us."

"Label converters realized in 2020 more than ever that digital printing is a great asset for being able to pivot quickly, where they can produce a record number of labels in a short time, enable brands to quickly change their messaging and branding while staying ahead of the game," adds Myers. "And digital is a wonderful complementary technology to converters' flexo presses. By having digital, they can choose the best tool for the job. If you have lots of SKUs, multiple changeovers, short to medium runs, put it on digital. One SKU for a long run? Put it on flexo.  Do you need to add embellishments, varnish, cold foil, spot colors? Put it on hybrid. Choosing the right press for the job is key in being productive and efficient, and the state and health of the label industry continues to be tested. Those label companies that can pivot quickly and provide labels to brand owners in the quantities they need, when they need them – they will be the ones who are most successful and thrive."

It's no secret that mergers and acquisitions will continue to play a pivotal role in the economic landscape of the industry in the future. 2021 has already seen several big moves, with acquisitions completed by Fortis Solutions Group and Resource Label Group and on to suppliers like Avery Dennison and Maxcess.

According to K Laser's Rivera, this trend will continue to play a key role within the industry, noting, "There seems to be a record amount of small- and family-owned businesses that are being acquired."

"Acquisitions and consolidation are happening in our industry now more than ever," says FLAG's McKay. "Large consolidators are consistently looking to grow their footprint, while external investment firms with little to no experience in printing have recognized the opportunities available in the profitable label market and are looking to make acquisitions to expand their diverse portfolio. While independents are being targeted for acquisition, many will remain independent because, well, they love it. Independent label converters, like our members, all started their businesses for a reason. They love producing quality products with personalized experiences for their customers. They started from nothing, grew their businesses and now have a team of people that they provide jobs, experiences and satisfaction every day. Some even have family members in the business and look to maintain their independence for future generations."

According to McKay, one of the biggest threats to staying independent in the label market is resources, or lack thereof, to the independent converters. "That's where FLAG comes in," he adds. "Our sole mission is to provide our members (independent label converters that love being independent) with the cost savings and resources comparable to a consolidator or large national converter. The label industry will continue to consolidate, and FLAG will be here for the independent converters to support one another, all while maintaining their independence and doing what they sought out to do when they started their businesses."

With M&A activity already at a bustling pace, Anderson & Vreeland's Teachout believes this trend will only accelerate in the years to come. This will create a plethora of opportunities. "Over the past decade, M&A activity has changed the landscape of the narrow web tag and label market," explains Teachout. "The pandemic has only created more opportunity. Private equity firms have seen the strength and resiliency of our industry. The narrow web industry is an essential part of our culture on a global stage, which makes it very attractive. When we consider the fact that 65% of the North American narrow web market is still single roof tops, the M&A activity will continue to be in front of us. Converter groups will continue to grow in regional locations to provide for brand owners, consolidations will continue and we may even see groups consume each other – possibly on a global scale."

M&A activity is not limited to converters, either. Earlier in 2021, Avery Dennison acquired the business of Ohio-based acpo Ltd. for the purchase price of $87.6 million. "Our acquisition of acpo will further strengthen our leadership in core label materials segments," says Mitch Butier, Avery Dennison's chairman, president and CEO. "By adding acpo's well-regarded and complementary overlaminate product, we are increasing our product portfolio and adding even more value for our customers."

Avery Dennison's Miller says that the move was made to further Avery Dennison's capabilities in the label and flexible packaging markets. "Overall, we do not expect to see a pause or slowdown in these activities," adds Miller.

The Covid-19 pandemic tested the label and packaging industry like never before. Supply chains were stressed to the max, and employees were required to brave the uncertain societal conditions to continue delivering for their markets.

Suppliers and converters were tasked with making on-the-fly decisions to support their teams and their customers. There was no playbook for these challenges, but many companies adapted in stride.

"Like all businesses during the pandemic, Flexo Wash was forced to react and adapt quickly to its customers' needs," says Potter. "We quickly communicated with all of our customers that our supply stream and inventory would not be impacted and that we would be operating as a fully-functional business. Though we stopped all travel for service and sales, we quickly transitioned to virtual demos, service calls, sales, installations and trainings in lieu of face-to-face meetings. While these adaptations benefited everyone in the process and kept customers and employees safe, it was a long year not seeing our customers and friends face to face."

Tower Products' Principato believes many of the processes and procedures instituted during the pandemic will remain in some shape or form. "Throughout most of 2020, you weren't allowed into most facilities," he states. "You either had to communicate via FaceTime or Zoom, which actually presented many opportunities to interact with key individuals. I have to imagine that this type of  'new' communication will be the norm for the foreseeable future."

There were challenges along the way, but the industry's poise and resilience was on full display. "As many of us were, the first quarter of 2020 put us to the test," comments Anderson & Vreeland's Teachout. "I am very proud to say that our A&V team and network of suppliers rose to the occasion. As the hoarding began last March, the entire supply chain was put to the test as fears of shortages loomed. We were able to manage this quite well, as our chain of nine distribution centers were stocked and ready to meet the demand. The pandemic created a once-in-a-lifetime opportunity to show how essential our supply chain is to our customers. We were reminded that the most important thing is to secure a consistent and predictable delivery of products to our customers so they could satisfy the changing demand of their brand owners. We did this using multiple tools. Our online ordering process continues to grow as e-commerce accelerates purchasing trends, and we continue to manage out distribution network with our partners to ensure the right products are staged in the most efficient locations to ensure quick delivery without logistical concerns."

FLAG, for example, has gone to great lengths to support its partners. This includes staying on the forefront of the latest capabilities that can help drive efficiency for both converters and suppliers. To help support its members during the pandemic, FLAG put together a Covid contingency planning group with over 40 member participants.

"These members all committed to support one another if a Covid outbreak were to happen in one of their plants, allowing them to give peace of mind to their customers knowing they would still be able to fill their orders," explains McKay. "One aspect of FLAG that our members have always appreciated is the ability to send overflow jobs or outsourcing a project that requires capabilities they don't have in-house to a trusted partner. This has been particularly relevant during the pandemic.

"With the absence of in-person meetings and expos, our monthly FLAG Lunch & Learn series has been a tremendous opportunity for members to learn about new processes and products while providing an excellent forum for our vendor partners to connect with members," adds McKay. "FLAG Peer Groups, small groups of member companies who meet monthly on a virtual basis, have provided the opportunity and support to learn what others are doing to handle the issues and hurdles they are all facing. Approximately 25% of our member companies are involved with FLAG Peer Groups; a number that continues to quickly grow as our members look to increase their resources and make strong connections with industry peers."

Another positive to come out of this turbulent time has come in the form of management and leadership. "There is also a heightened awareness for converters and suppliers alike regarding the health of employees, ensuring the safety and well-being of their teams," says FLAG's McKay. "New HR challenges when communicating with their teams regarding personal health information of their employees, specifically for Covid, and the policies each company puts in place."

By Rock LaManna

For curious onlookers who plan to hold their businesses or pass everything to the next generation, this article is not for you. Building a business to sell? Tune in.

Can you hack the brave new world?
You don't have five years to get there. You have two years. Three years max. By 2025, it's going to be a brave new world in our sector. The top players are not fooling around.

In our research with buying organizations, deal volume will continue to grow until early 2024. The power structures and consolidators in the specialty graphic arts sector will be wrapping up years of deals. Will they want you? Maybe. If not, you'll be selling to a competitor for a lower multiple. Either way, if you don't sell by 2025 you may find you have one choice. Hold on and play the cards you have.

Are you a delusional seller?
You know why Ponzi schemes peter out? The last guy who joins the game is the one holding the bag. There are no more suckers to lure in who can subsidize the players at the top of the pyramid.

I'm not saying M&A is a Ponzi scheme, but the buy-sell environment in any industry has its risks. If you buy to sell or build to sell, you're gambling on the right buyer being there when you're ready. You want to better your odds? Control the game. Build better. Grow higher. Sell sooner. Get out while there are still players in the game.

Is your plan good enough?
To sell in 36 months, you need cash, people, strategy, and the ability to relentlessly execute your plan.

Cash: If you think you can go through this process without free-flowing cash, good luck. It takes money to buy a company and money to position one to sell.

People: One of the first things we do when we meet with a new consulting client is look at their all-star lineup. How is the org chart laid out? Who's really in charge? Who "gets it"? Who has the managerial chops to keep the business going during the hand off? Gaps in talent – managerial, sales, operations – reflect on the owner. If you can't attract the best people, what's wrong with you?

Strategy: If you have bought and sold businesses on a 5-year timeline, congratulations. Whatever you did before you now have to do in half the time. It's not the pandemic that put us in this position. It's the new economy and the new reality. You'll work twice as hard and move twice as fast to get to the same place. And that's in all aspects of business – not just M&A. For anyone who doesn't believe execution is key to strategy, you'll find out the hard way.

Ability to relentlessly execute your plan: Building and selling is not something you do in the evenings or weekends. It's a 24/7 process that requires dedicated people. It requires a team of experienced advisors. It requires your providers to put your needs first. It requires your internal people to keep moving systematically toward the goal line.

Too old and slow?
Don't kid yourself that we're all in recuperation mode after the pandemic. You're not winning just because you stayed busy over the past year.

Guess what? Many of your competitors had no issues with keeping people employed. They didn't suffer the ups and downs of the economy at large or the fluctuations of the local market. For them, there's been no need for a reset as we've come out of the pandemic – no starting gate where everyone politely lines up. They didn't take a pit stop or honor the yellow flag during the past 16 months. If they look like they're right next to you, it's because they lapped you. You're eating their dust and you don't even realize what you're tasting.

You're about to have your meatballs kicked by:

• People who are younger, smarter and better-funded than you
• People with more energy and less mental fat
• People who understand data, technology and supply chains better than you do
• People who have the drive and excitement to win at the labels and packaging game
• People who know how to assess opportunities, minimize risk and make money – lots of money.

It's clear. Whatever advantage you do have, make the most of it. Whatever changes are needed, make them now. If you don't know what you should be doing, you're in trouble.

What's your point, LaManna?
In your head you're hearing two voices: the ego voice and the inner voice. The ego voice says, "You're full of it, LaManna. Too old? Too slow? Too mentally fat? I don't need this garbage." The inner voice says, "There is a kernel of truth here. I need to pay attention."

This is where you take action… or turn the page. This is a moment like no other. You're in a place you've never been. You're more aware than you've ever been. The world, your business – and you – are in a heightened state. There's a doorway to a new way of doing business. You're on the threshold of the new reality, whether you like it or not. Step. Forward.

While not every company thrived during the pandemic, especially those companies facing extreme supply chain challenges, the future is definitely looking bright as stabilization occurs. The markets that remained dormant during a stretch of months during 2020, such as the automotive labeling sector, are starting to see some pickup. With that said, a host of industry experts are bullish on the future.

"The current recovery and resilience of our industry is very promising," notes Anderson & Vreeland's Teachout. "Operational investments and M&A activity are still at the forefront. It is an exciting time to be in our industry as we have proven to be essential, innovations in technology continue to proliferate, automation will lead to autonomation, and our workforce will be driven by IOT and smart factories. Interest rates continue to remain low sparking investment activity, but there will be a point where the economy and advancements meet head on. There should be no concerns if we plan for what we see is coming, or what we don't see coming like the past year. If we do, then we will be prepared to meet any challenge presented."

In the future, there will be continued demand – from brands and converters alike – to meet certain trends. For example, sustainability will continue to be a driver for all throughout the supply chain. In fact, many brands continue to promote environmental goals in 5- and 10-year increments, and beyond.

"We've made an ongoing commitment to operate a sustainable business and serve as a force for good, both environmentally and socially," says Avery Dennison's Miller. "Over the next 10 years, growth drivers for labeling may evolve, but sustainable innovation – big and small – will certainly be a key driver for growth. With regards to sustainability, we believe the step-changes in our industry will happen when we partner together to tackle the big challenges and help drive real change. There is an opportunity for all players along the value chain to work together to drive a more circular economy."

"We like to think we have a product for every need in a flexographic pressroom, when it comes to environmentally-sensitive cleaning chemistries," says Tower Products' Principato. "We have an on-site lab at Tower, which we utilize directly for customers' needs to ensure they have a match. Almost all of our products – especially flexo cleaners – are water-based and environmentally compliant. We have worked diligently with states and local municipalities over the past number of years to make sure of this."

"Businesses across the board are seeing more demands for sustainability, and this remains a major focus for Flexo Wash," comments Potter. "We work with our consultants and trade associations to monitor changes and stay ahead, both for us and for our customers. For our industry, we recommend that printers start evaluating their cleaning processes as the first step. What is most important is keeping your work environment and your employees safe. With Flexo Wash, you choose the best and most environmentally friendly solution for your operation. In addition to new products and built-in upgrades, we have a line of environmental solutions that can be combined with the different Flexo Wash cleaning units to reduce or eliminate water and/or liquid consumption if that is what you choose.

"We are fortunate to serve an industry as healthy, diversified and growing as the label and package printing industry," adds Potter. "However, all of us must be mindful that as the economy reopens to society, shopping and lifestyle changes are changed. We must remain vigilant in our pursuit of the most environmentally friendly products and processes as possible."

While the immediate future is bright, there are still some questions looming on the horizon that will need to be answered. "The economy as a whole is headed toward uncharted waters," says FLAG's McKay. "Many factors are leading to the unknown, including the unpredictable global pandemic, a new presidency and an influx of cash into the hands of consumers all over. As interest rates begin to rise again, the price of goods will rise along with them. From gasoline to the real estate market, we are seeing some of the highest prices we've ever seen before. With everything rising together, like wages, cost of goods and the overall cost of living, businesses may find themselves headed down a very scary road with operational costs continuing to increase beyond levels of sustainability."

"What's important to remember is to focus on the things that we have control of, the things we can do to be productive and helpful," concludes Domino's Myers. "Be respectful of others, help others and be positive. We will get through this. But we'll get through it better if we all work together."

If you've bought and sold businesses in the past, you understand you must plan strategically and move quickly. For the brave new future of M&A you also need to do the following: 

Talk to your tax professional. Get a clear picture of the tax ramifications of your buy-sell timeline. Can you – should you – accelerate your program before tax laws potentially change?
Factor in inflation. In the US, there is a federal commitment to keep interest artificially low. That's a lid holding down some pretty powerful forces. If interest rates explode, can you still buy or sell on your preferred timeline? Prepare for contingencies.

Build a stronger team. The pandemic has destabilized the workforce. The employment landscape is changing. Top people are jockeying for position. Many are looking for better companies, better pay or better work-life balance. Can you get these people for cheap? No. And once you have them, focus on creating a company where people want to stay for the long haul. Retained talent and culture integration are crucial to a successful merger or acquisition, whether you are the buyer or the seller.

Adopt an innovator's mindset. Look at creative ideas with a longer pay-off that competitors may not have the patience for. Consider adding services, not products, to deepen customer relationships. Empower managers to innovate through autonomy rather than a rigid corporate playbook. Deploy learning across the organization rather than perpetuating silos. Learn to be lean and resilient. These strategies will strengthen your business against competitors, make you more attractive if you seek to be acquired, and help you create unique
market differentiators.

Cut out non-essential players. Look at the providers in your buy-sell program. Do you need an industry connector? Yes. Do you need a trustworthy CPA and attorney? For sure. Do you need a broker? Probably not. Do you need a vanity M&A agency that will waste your time and dollars? Absolutely not.

Change your banker. This is a key person on your buy-sell team who should take your call on the first ring. Why are you fooling around with someone who doesn't know you, respect you, or understand your plan? If you're not getting the service you deserve, make the change now.

Build your network. Today's deals – the best deals between the top players – are not made out in front of everyone. Read my column about how things are really done and who you need to know. If you think the virtue of your brand and the small orbit of people who feed your ego will get you through, wake up.

Talk to your advisor about ways to transition out of your business. If you're not ready to leave completely, learn about the pros and cons of earn outs, joint-venture partnerships, and minority-stake investors – and the best ways to plan and protect yourself. These options give you time and flexibility, but they come at a cost.

Confidence is key.  You need energy. Mental capacity. Clear vision. Power and stamina. Ability to pivot. Positive attitude. Remember, mental and physical fitness are things you can control. Control them.
Write things out long hand. Nothing can replace a written plan. Get it out of your head and onto paper. This is where the flaws and gaps become visible. This is how you find new ways to gain the advantage. Review your plan and take action. Daily.

Renew your relationships. Make time for your family, your friends and your spiritual side. Figure out what independence and freedom mean to you. There is more to life than business and making money. Don't sacrifice what you have right now, right here in front of you. I have heard this sad story hundreds of times. Don't be the owner who has regrets at the finish line. Money cannot make up for lost time and lost relationships.

If you're reading this and thinking, "I've got what it takes to buy and sell in this new M&A landscape," then there's hope for you. I won't say good luck because you are a maker of luck. Do what needs to be done, and we'll see you out there in the brave new world.
     – Rock LaManna

If you've bought and sold businesses in the past, you understand labels and packaging companies are on everybody's acquisition radar. Entities that are actively acquiring businesses in our sector are not necessarily led by printing or manufacturing CEOs. Their leaders are coming over from growth markets such as high tech, healthcare, financial services, and SaaS. They're coming over from energy, aerospace, telecom and media where regulatory scrutiny, data privacy, and platform consolidation are issues.

Capable leaders in supply chain management and online ordering are also interested in our product creation and delivery mechanisms. These rainmakers have an appetite for deals that give them scope and scale. They know how to size things up quickly. They have the skill set to assess risk using data, conduct diligence, bring in nimble teams, and make bold, strategic moves.

Furthermore, these new-world CEOs are bringing with them proven playbooks in sourcing deals and integrating assets. With that comes more cross-industry relationships. In the report "Expanding M&A Options for New Capabilities" from Bain & Company, "Companies are weaning off the idea that outright acquisition is the only path to bring in new capabilities. They are open to forging alliances and partnerships as well as doing venture or minority investing so that they can share capabilities and minimize M&A risk."

PE firms are looking for ways to foster relationships and buy their way into our market and supply chains. The Bain report explains: "PE firms are now more open to taking minority stakes, especially as they see corporate partnerships as another source of finding future deals. With their significant diligence and transaction experience, PE firms also bring unique capabilities to corporate partners – namely, a stamp of quality to deal execution and a value creation focus, among others. Does this interest from other industries mean higher multiples? Maybe not, but it will make for healthy competition and an active playing field, which benefits all players and certainly keeps things interesting.
     – Rock LaManna

Even though industry members were unable to meet in-person, TLMI delivered an action-packed Virtual Spring Summit recently, highlighting the latest industry trends and providing a forecast for the future.

Alan Beaulieu, president of ITR Economics and a fixture at TLMI events, shared his optimism for the immediate future while raising questions about the country's long-term economic prospects. Beaulieu expects every piece of legislation that President Joe Biden touches to address climate change in some form, and he believes America's relationship with China will continue to change going forward. Plus, a tax increase is on the horizon.

According to Beaulieu, we can expect to see an increase maximum corporate income tax rate to 28%, with a 15% minimum tax on corporate global book income. A 21% country-by-country foreign minimum tax is also envisioned.

While the immediate impact of the pandemic and vaccine rollout, presidential election, and various other fiscal policies remain to be seen, Beaulieu painted a strong picture for the next few years – into 2022-23. Even though taxes are expected to increase, that move will take some time.

"First of all, I want to allay your fears," said Beaulieu. "The Federal Reserve says interest rates will stay low, so that will be your friend this year. You won't see a lot of increase in 2022-23. Now is the perfect time for you to make acquisitions. Make sure it's paid off by 2030, and keep cash dry for years to come to fuel growth. Of course, you also want to make sure your products are state-of-the-art and innovative and that your supply chain is sound."

Beaulieu also predicts more nationalism heading into the future, with President Biden's plan to "Build Back Better." He said those that make their products in the United States will receive a tax credit, and "one of the safest places to be sourcing from is the United States. The President is pushing hard for 'Made in America.' He wants to invest in America, and he wants the supply chain to return to America. This President is making a strong stand toward China.

"Make sure you're investing in sales and marketing, your process; make sure you're investing in you, from the front office to the back room," he added. "That will increase your profitability heading into the future. Your business is going to continue to be the beneficiary of positive things. Well into 2022 you're going to see yourself busy. Everything that you're labeling and tagging will be doing better and better into 2022."

Beaulieu advised on how to approach the manufacturing industry's workforce challenge, as well. Research shows that on a new employee's first day, 79% are already thinking of their next job. Therefore, a strong culture and a positive first impression are key to retention.

"You're going to have to work harder at retention, doing everything you can to attract people," noted Beaulieu. "Go to an HR expert, asking about attracting and retaining. Show your business to the community, focusing on everything, including how the outside of the facility looks."

Other future trends include a shift toward e-commerce and more rise in the S&P 500. The trend toward e-commerce is not a death knell for the brick-and-mortar store, however.

"It's an e-commerce world, but that's not the end all, be all. You're going to see demand on both sides," he commented. "There's going to be a recovery in retail sales, and nothing but good news as population continues to expand."

While the immediate future looks rosy, the year 2030 could pose a host of problems. Prices are well above profits, and that's dangerous, Beaulieu cautions: "We're in a situation where you can expect trouble down the road, but that's not now. The younger generation should get the most out of the next nine years to grow as much wealth as you can. Meanwhile, the older generations need to protect against downturns and crashes in the future. How do I prepare for 2030? Some part of your portfolio should include equities so you're prepared for what's coming."

Leadership panels
The TLMI Virtual Spring Summit featured an all-star cast of industry experts, ranging from converters to suppliers. The Converter Leadership Panel featured Brian Gale, CEO of ID Images, Michelle Zeller, president of AWT, Thomas Barrett, president of MacArthur Corporation, John Fischer, owner of StickerGiant, and Mark Pollard, CEO of Brook & Whittle.

The panel provided the experts an opportunity to share their thoughts on the state of the industry and how their companies navigated what TLMI president Linnea Keen noted was "an unprecedented year."

"Overall, demand has definitely increased," said Zeller. "Consumers are buying more products at home, so if you're in markets like beverages, you probably saw a good increase. Medical device labeling slowed down with people not having elective surgeries."

Despite positive sales, converters faced – and continue to face – uncharted territories during the Covid-19 pandemic.

"We saw markets up and down significantly," explained Gale. "Overall, things ended up being good for the year. My pet answer is if I fell asleep in March and woke up December 31, I'd wake up and say we had a good year. It's still challenging for our employees, with some spouses working and some not working. Are the kids at home? People still feel angst, and that's a challenge I don't see changing any time soon. We're looking for answers for that."

Fischer acknowledged that his team had difficulties adjusting to remote work and keeping everyone's efficiency at peak performance, while Barrett noted challenges with staffing.
One thing was clear, though. Converters are not shying away from making sensible investments.

"We're investing at a rate we haven't seen before," said Pollard. Putting the machines in is the easy part. It's getting the people trained to run them that's the challenge. We'll continue investing heavily, we just hope we can keep the labor force growing at the same rate."

"We're investing like drunken sailors," added Gale. "You have to. The biggest challenge is lead times. If you're not investing, your business will go away."
     – Greg Hrinya

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