"2024 may be a key turning point for the North American label industry." Ms. Jennifer Dochstader of LPC was invited by Labels & Labeling magazine to investigate the investment plans of North American printing companies in equipment in 2024.
In the fourth quarter of 2023, LPC decided to investigate the current state of the North American label industry and the main factors affecting the installation of flexographic and digital printing presses. The final conclusion was: "2023 will be a challenging year for many companies."
By the second quarter of 2023, many label printers had seen a year-on-year decline in sales revenue. Due to the impact of the pandemic in previous years, the North American printing and packaging market had seen an unprecedented surge in demand. However, by 2023, label printers and their consumables and equipment suppliers reported a completely different situation.
To determine the extent to which the above situation affects the enthusiasm of printers to purchase equipment, LPC conducted an extensive market research and was sponsored by four well-known printing equipment suppliers in the industry: Gallus, HP, Mark Andy and Xeikon. The goal of this research is to obtain in-depth survey feedback from label printers of all sizes and companies serving each end market segment.
LPC said: We hope that our sampling range is wide enough, and finally a total of 102 printing companies participated in the study. We surveyed and interviewed printing companies with annual revenues of less than $5 million, which sell a wide range of products, covering a wide range of fields such as food, chemicals, logistics, retail and personal care; we also interviewed printing companies with annual revenues of more than $35 million, which are industry experts and only serve one or two major fields such as beverages or pharmaceuticals; we also interviewed the largest companies in the market in the industry - multinational printing conglomerates, which have acquired a number of small and medium-sized printing companies at an astonishing rate in the past 10 years.
The following table shows some key collective data collected by LPC.
Some key data from the label converters that participated in the survey:
The production companies participating in this survey have more than 700 flexographic printing presses and more than 160 digital printing presses.
17% of the companies participating in the survey have not yet purchased digital printing presses.
The average number of flexographic plate operations produced per eight-hour shift is 3.9.
The average number of digital print jobs produced per eight-hour shift was 10.3.
The average annual sales volume per flexographic printing press is $1.9 million.
The average annual sales volume per digital printing press is $1.6 million.
The purpose of this survey is simple: to capture the main pain points of printing companies in real time, understand where they find major growth opportunities, and help them better position their companies in an increasingly competitive environment.
The core of this study is flexographic and digital printing presses. After all, the growth of the installed base of printing equipment will play a leading role, driving other demands in the label production process, such as: label consumables, anilox rollers, printing plates, inks, adhesives, varnishes, cutters, dies, printing press auxiliary equipment, inspection systems and MIS software, etc. The printing press is the gear in label production. once it turns, it will drive the rotation of other consumables, equipment and even software packages. Therefore, LPC wants to explore the development of the industry more deeply than ever before to understand some key data.
By 2023, North American printing companies will see sales growth
How big of a challenge will North American label printers face in 2023? This was the first question the survey asked respondents to answer. Some companies said they had increased both flexographic and digital production in 2023 compared to the previous year.
Flexographic volumes fell by an average of -0.36% in 2023 (averaged from the total responses of all participating companies). When comparing sales growth by company size, small and medium-sized converters fared much better than larger companies. Among converters with annual sales of less than $35 million, 37% of printers reported a decline in flexographic volumes. In stark contrast, 78% of converters with annual sales of more than $35 million reported a decline in flexographic growth.
Why is there such a significant difference between the two groups? The answer is that companies have been destocking for most of 2023. Larger printing companies serve larger brands, and rising US interest rates mean that inventory costs on the brand side have become high. These companies, in addition to reducing long-term orders, have also significantly reduced their inventories.
Although brands are actively reducing inventory left over from the pandemic, demand for new packaging has declined due to other economic conditions and increased consumer purchasing caution at the retail level.
These have had a significant negative impact on the industry's largest processors.
The era of flexographic printing presses
A core part of this research is to determine the age of flexographic and digital presses in the industry. This is particularly important for flexographic presses, as there are still a large number of older flexographic presses in the North American market. But how high is this number? What happens when these machines are retired due to aging? What is the future trend for printing companies, replacing old machines with new flexographic presses or purchasing digital presses directly?
To answer the first question, LPC asked each participating company to provide the total number of flexo presses in their production plants and the exact age of each press. These new data were then compared with existing data to come up with the following conclusions.
Conclusion: There are still many old machines in the North American market, and nearly 25% of flexo presses are more than 20 years old. Nearly 1/3 of flexo presses are between 11 and 15 years old. Therefore, it is expected that a large number of flexo presses will be eliminated in the next five years. What we need to understand now is what will replace the vacant market in the future.
In the survey, many companies mentioned the "one for two" replacement method, that is, eliminating two old flexographic printing machines and purchasing a new flexographic printing machine with a wider format. In addition, as the processing speed of digital printing machines continues to increase, in some cases, the adoption of wide-format digital printing machines will in turn drive printing companies to purchase flexographic printing machines with a wider format.
The surveyed companies were also asked to indicate the number of digital printing presses in their production workshops and the age of each digital printing press. As with the purpose of the flexographic version survey, the purpose is to understand the installation and age of digital printing presses in North America.
Conclusion: In North America, more than 25% of digital printing presses are installed between 4 and 6 years old. This is a good sign for digital printing equipment suppliers, because with the rapid advancement of technology, printing companies will increase the frequency of replacing digital printing presses in the next few years.
Printing press purchasing forecast for North American converters
Another core question of the survey asked companies when they would purchase their next flexo, digital and/or hybrid press.
To prevent confusion, a hybrid press is defined in the survey as a “press that has a digital engine with four or more colours in addition to three or more conventional flexographic units and a finishing/die-cutting module”.
Nearly one-third of respondents said they were likely to buy a flexo press this year, the highest response rate ever received by LPC for a flexo press purchase survey. Many respondents have already placed orders for flexo presses in recent months. One of the main reasons driving companies to purchase flexo presses this year is that many companies made the decision in early 2023. During the interview process, many printing companies said that when sales figures began to decline at the end of the last quarter of 2023, they decided to postpone all major capital expenditure plans to 2024.
However, during the interviews, the companies interviewed also mentioned another major reason driving the purchase of flexo presses. Every company emphasized how difficult it is to find suitable flexo press operators. The challenges brought by labor are nothing new. Finding qualified press operators has been a problem for printing companies for the past 10 years or more.
However, in this survey, companies all said that in North America, because it is almost impossible to find flexo press operators for the second and third shifts, they have to buy new flexo presses to increase day shift capacity. In other words, if the presses can operate normally between shifts, then the printing company can have enough capacity, even if the existing operators are unwilling to work overtime or cannot find suitable operators, the problem can be solved.
Looking ahead to the North American label industry, it is clear that 2024 could be a critical turning point. By 2023, the industry is ripe for transformation, driven by sales fluctuations, customer reassessment of inventory levels, and demand for next-generation presses.
Printers are currently at a crossroads, balancing the need to find qualified flexo press operators with advanced technology. Putting these factors together, the shift from strategically retiring older flexo presses to selecting wider, more efficient presses highlights the industry’s shift. Converters will make significant investments in new printing equipment to increase capacity during normal working hours if operators are unwilling to work outside of other normal working hours. This is not only a response to temporary difficulties, but also a strategic shift towards future-proof operations in the context of a highly competitive and rapidly evolving market.
As time goes on, the decisions that printers make in 2024 will not only redefine their operational capabilities, but will also chart a new path for the North American label industry.