After the year we all experienced in 2020, making predictions for the year ahead may seem like a futile exercise but, here at S-OneLP, there are a few key trends that we will be keeping an eye on in the coming year.
The top 5 label and packaging trends for 2021:
Largely driven by consumer demand and multinational CPG companies committing to sustainable packaging by 2025, we see sustainability as a key driver forcing change in the packaging industry in the year ahead. As other smaller brands follow suit, it’s only a matter of time before your customers will start asking about bio-based materials, compostable films or materials that allow for easier recyclability. We predict there will be some who will shift back to paper products in their packaging as brands explore ways to be environmental stewards on the way to a more circular economy.
The forward-thinking label and packaging producers will, rightfully so, come out on top here, and label and packaging producers should be proactive to this movement and explore sustainable options sooner rather than later.
The legal cannabis market is one we’re watching closely at S-OneLP and for good reason. The legal cannabis market has exploded in recent years, as more and more states pass laws allowing some form of adult medical or recreational use, ushering in an entirely new range of applications for label and packaging producers. The legal cannabis industry is forecast to grow at a staggering 21 percent through 2025 and predicted to reach $46.8 billion that year.
Make no mistake, while this is still an emerging market and comes with its fair share of hurdles, there is serious financial investment coming from large brands that are looking for sophisticated high-end packaging that complies with state regulations and, in many cases, is environmentally conscious.
While marijuana is still federally regulated as an illegal drug, President Joe Biden has indicated support for federal decriminalization, which would further open the door for investment and market growth. Until movement happens at the federal level, states with legal cannabis laws are each governed by a different set of regulations when it comes to labels and packaging and distribution. Further, the legal cannabis market is heavily taxed, and licensing is expensive, leaving razor thin profit margins for businesses and a thriving black market.
We’re optimistic that bright spots lie ahead, but we’re pragmatic enough to know playing in this market will not be without its challenges. We’ll be paying close attention to help our customers navigate this developing segment.
3. Equipment investment
While no one can definitively say what recovery will look like in 2021, many economic experts are predicting that the next 12 months will be much better than the past year. We’re optimistic that the label and packaging industry will fare better than most.
Throughout 2020, some end use segments like food, beer, wine, spirits, and household cleaning skyrocketed while others, like the automotive and restaurant industries took major hits last year. Faced with economic uncertainty, many label and packaging companies put off capital expenditures in 2020. We expect that will turn around in 2021. Thomas Hauenstein, S-OneLP’s Vice President of Sales, is already seeing encouraging signs and interest in S-One’s CatPak eBeam finishing system and Narrow Web Thermal Laminator.
“We are already witnessing a huge uptick in interest in the capex solutions we provide into the label converting and flexpack markets. Many OEM’s have echoed that they are getting a lot of activity as well, which is more than an encouraging sign. I believe that 2021 will get off to a bit of a sluggish start in Q1. However, I believe a lot of companies that are able to quickly shift their offering to adapt to the changes forthcoming will witness record growth numbers in Q2-Q4.”
When the COVID-19 pandemic sent many workers home, label and packaging converters’ essential operations stayed open. However, the pandemic really drove home how essential skilled press operators are, and how vulnerable production is without them – whether it be for extended absences or simply aging out of the workforce. We expect to see more advances in automation as OEMs look to address this by engineering their machines to be easier to use, more efficient and more streamlined, and thus, more profitable for label and packaging manufacturers.
Automation will continue to be an industry buzz word in 2021 and beyond.
5. The rise of craft brands
When it comes to craft brands, as author Ben Zifkin says in his book: “small is going to be huge.” That point was driven home in 2020 when “challenger” brands and small- and medium-sized startups thrived in an economic landscape where retail giants like J.C. Penney, Sears or Neiman Marcus could not. This was thanks largely to innovative and sophisticated social media sales and marketing, an engaged consumer base, money spent effectively, and a lean supply chain.
These smaller brands are taking market share from the big brands, often employing an ecommerce model that has allowed them to continue selling online, while many brick and mortar stores slowed in the wake of COVID-19. Digital Commerce360 reports that ecommerce sales in 2020 accounted for 21 percent of all retail purchases with US consumers spending $839 billion online last year (up 40 percent from the year before).
We believe digital printing will continue to be an asset as these small- and medium-sized brands see the benefits of digital printing: shorter run lengths, personalized packaging, and faster speed to market. We expect the digital packaging market will continue its growth trajectory.
“Digital packaging is one of the markets that we have seen grow rapidly during 2020, and I believe that growth trend will continue sharply up for the next five to ten years,” Hauenstein said. “Digital packaging offers a lot of value to the market such as SKU proliferation, security printing, consumer customizable packaging, short runs for just in time inventory, and quick turnaround time. That coupled with the booming cannabis and craft beer markets, along with the rise in demand for locally sourced products, will create a dynamic shift in that time period in how packaging will be offered.”