Many small converters (annual sales of less than $10 million) have had banner years in 2021 and 2022. Buoyed by surges in some key verticals like food, transportation and logistics, household chemicals and electronics, the primary challenge for many converters the past few years has been how to manage growth and ensure that their production floors have enough capacity to accommodate that growth.

Due to the different types of work LPC does in the industry, we speak with small label converters across the United States and Europe on a weekly basis. We have a front row seat to the double-digit growth so many of these companies have witnessed over the past two to three years, in addition to the softening that is occurring for many of them now as brands and retailers brace for an economic slowdown and are exercising more caution when it comes to printed packaging procurement spending.

However, smaller converters are facing an additional headwind in today’s supply chain landscape that they previously haven’t had to contend with to the same extent. Research is showing us that brands and label buyers are demonstrating a marked preference for larger converters due to the material shortages and acute supply disruptions our industry weathered in 2022.

These unprecedented levels of larger-vendor favoritism could have profound implications for smaller label converters for the foreseeable future as some of their customers and prospects re-evaluate vendor strategies in an attempt to mitigate risk. While we have seen raw material supply challenges and allocations ease across the industry this year, the bitter pill many of these label buyers felt they had to swallow during last year’s disruptions has already started to play out in the marketplace.

Tracking label-buyers’ preferences over the years
In addition to our regular interactions with label converters, LPC also surveys and interviews brands, retailers, and label buyers on an annual basis. The participation rates of our brand/label buyer survey initiatives are extensive, and in North America we average 80-100 companies taking part every year. These research participants serve every end-use sector and among them are companies like Unilever, Nestle, General Mills, Gallo, Hershey Foods, Apple, Johnson & Johnson, Clorox, Kimberly Clark, InBev and Diageo. This group also includes many smaller regional brands like craft breweries, specialty food companies, cannabis packagers, regional distilleries, boutique pet care brands, and household tool manufacturers.

And the companies in our brand/retailer databases all have one thing in common: They all source printed labels. Some of them have label spend budgets worth millions of dollars every year and others spend only thousands. Still, these are the shapers of our industry. These companies say jump and the rest of us downstream in the supply chain ask how high. And the decisions and behavioral preferences they have can have a profound impact on converters and on converters’ own equipment and consumable goods suppliers.

In conversations with these brands and label buyers in the early months of the pandemic, we noticed a significant trend – companies were looking to increase the numbers of smaller label vendors in their overall label supplier mix. Given the surges in our industry and unprecedented purchasing behaviors by consumers, in 2020 brands and label buyers were finding that smaller-sized converters were more nimble and more flexible and could provide them with rolls of printed labels faster than some of the industry’s largest label houses. In discussions we had in 2020 with some of the larger consumer products companies like Nestle, P&G, Reckitt and the Scotts Company, sourcing and procurement personnel openly talked about how they were wanting to qualify higher numbers of small to mid-sized label vendors.

In 2020 and 2021, smaller converters were sitting in an advantageous position as label buyers prioritized how quickly a small converter could respond to urgent order fulfillment requests and get printed labels out the door and on their way to the application site quickly.

Over the course of the past year the tables have turned, and these same brands and label buyers are now talking about the desire to decrease the number of smaller label vendors they have. In a recent interview, a global director of procurement at a large private label brand stated, “In 2022, we had instances where we couldn’t get the labels that we needed. I noticed that the biggest groups were able to get material while many of the smaller companies really struggled. We may change our mix of vendors moving forward in order to be better equipped if such an event would happen again.”

This company has more than 100 label vendors around the world, and 50% of those vendors are large companies while the other half are smaller, single-site label printers. And this director of procurement’s comments have been echoed repeatedly in our interviews with other label buyers – brands both large and small.

In a brand and label buyer survey initiative, LPC, Inc. recently asked companies to answer the same question they did in the summer of 2020. We asked these companies once again if they prefer to source labels from larger converters who likely have multiple production sites, or if they prefer smaller converters who can often offer a more flexible and personal approach.

The majority of brands and label buyers who participated in our research in 2020 also participated in our most recent surveys and the trend is clear: According to sourcing and procurement personnel at the brand level, there’s more of a preference than ever toward larger label converter vendors over smaller converters.

Actionable strategies for small converters in 2023
Given these additional sourcing-preference headwinds that smaller converters may be facing in today’s business climate, what’s a smaller label printer to do? In addition to market research, LPC provides marketing and communications services to converters and some of the things we’re focusing on with our smaller converter clients currently include the following:

1. Don’t shy away from long-form content. Many brands and label buyers rely on their label vendors to keep them up to date on new print methodologies, material construction properties, best label application practices, and different types of services converters offer like prepress/design and vendor-managed inventory options. Long-form content like blogs, e-newsletter pieces, LinkedIn articles and Q&As are some examples of things that should be included in the small converters’ marketing arsenal. Companies need to think beyond just website content and sporadic social media posts. Every successful label converting company is one part manufacturing facility, one part engineering consultancy, one part chemistry laboratory and one part innovation think tank. Small converters need to make sure that their customers and prospects are continuously learning about their core expertise areas and unique offerings.
2. Sustainability matters. And it matters even to small brands, whether it’s a craft brewer, cottage food company, cannabis packager or regional wellness brand. These companies want to know that they’re doing business with a conscientious label supplier that cares about the impact it’s having on the planet. Don’t think you have a sustainability story? Create one. It doesn’t have to be a complex, formal strategy. The majority of smaller converters often have at least one sustainability evangelist within their own four walls. The only requirement of having a sustainability story is that it’s authentic. When it comes to sustainability messaging, genuineness is always more convincing than salesmanship.
3. Don’t let database be a dirty word. LPC, Inc. has worked closely with label converting companies for more than a decade, helping them build up their lead databases and to develop strategic ways to reach these prospects. We’ve seen all types of converter (and supplier!) databases and for every small label converter, their prospect database is always a work in progress. We’ve seen small converters’ prospect databases number in the thousands, and others number in the low hundreds. There are some great tools that can help converters build up their lead databases. It takes a commitment however, and as David Ogilvy once said, “Don’t count the people you reach. Reach the people that count.”
4. Put supply chain security front and center of some of your messaging campaigns. It’s critical that smaller converters’ clients and prospects know that their companies are constantly shoring up inventories and leveraging their labelstock suppliers to ensure they have exactly what their label-buying customers need, exactly when they need it. Mitigating risk is front-of-mind when it comes to printed packaging procurement in the current business landscape and small converters can speak to their customers and prospects in a way that lets them know that they have the systems in place to assure constant, and uninterrupted, supplies of materials.
5. Take social media more seriously. Printed packaging sourcing and procurement personnel have some of the shortest tenures in the industry. The average tenure for someone who sources, or manages the sourcing of, labels is currently 12-14 months. Often, as soon as a converter’s label-sourcing contact understands what that converter brings to the table and a relationship has been developed, that sourcing contact is gone. Social media helps converters to tell their unique stories on a continual basis to their customers and prospects, regardless of how long those customers and prospects have been in their positions.

The past few years have delivered tremendous growth for many small label converters. Companies have added flexo and digital capacity and have invested in key tools like automation, off-line finishing systems, prepress technology, CRM systems and print embellishing technologies. The challenge for small converters in recent years has been how to manage growth most effectively. Due to the recent mindset change of their customers and prospects however, the challenge for converters in the years to come could be how to sustain that growth.

About the author: Jennifer Dochstader is a co-founder of LPC, Inc. and has spent her life in the printed packaging industry. Founded in 1998, LPC is a leading industry research, due diligence and marketing communications firm specializing in the label, flexible packaging and folding carton sectors. Jennifer can be reached here.