Be prepared for a triple whammy to negatively impact your package-printing and converting bottom line as the US moves out of The Great Recession. Higher raw-material costs along with persistent high unemployment and a consumer base turned long-term toward frugality will unite to affect business throughout 2010 and likely into 2011.
First, the higher costs: If the seemingly endless stream of price hikes for paperboard substrates in the past few months isn’t enough, throw in rising rates for inks, coatings and adhesives. Do you convert flexible packaging? Don’t think you’ll escape. Plastic resins and film will only cost more as analysts predict oil prices could push to $100 a barrel if the Gulf oil spill continues largely unchecked and shuts down shipping and ports along Louisiana.
Next, the record jobless: The April numbers released last week are two-sided. Yes, 290,000 jobs were added in April, but the unemployment rate rose to 9.9 percent. About 45 percent of the 15 million jobless have been out of work for six months or longer—a record dating back to 1948. Unemployed people just don’t have money to spend on the many consumer goods for which you convert packaging.
Now, the Truly Frugal: The Great Recession may have fostered a growing class of long-term frugal consumers who will not go back to their free-spending habits of 2005. For evidence, look at the significant growth of cheaper private-label brands. A recent survey done for the Private Label Mfrs. Assn. showed that more than 60% of respondents said they plan on buying more private-label brands as they try to stretch their food dollars. Two-thirds of economists queried by a new Associated Press survey believe this new frugality is true. If so, expect some equally long-term impact to sales of consumer packaged goods and a possible shot of anesthesia to the rebound—not to mention your incoming orders for packaging.
What’re you gonna do? This is not all to strike just a negative tone. It’s a warning. What plans are you making to deal with these somewhat unavoidable situations? Maybe you need to print something else besides labels? Maybe you should expand into downstream services such as contract packaging…or upstream services such as structural design and prepress?
So, let me know. What are you going to do?