|
If you own or run a converting or package-printing business, everyone seems to ask you the same question: “How is your business doing these days?” Of course, the answer varies a lot by the type of business you and your customers are in, and how diversified your customer base is. In this economic climate, most label converters are in a little bit better shape than other businesses, because a large portion of labels are used on small-ticket items such as food or health and beauty, and these items are not as affected by a recession as are larger ticket items like automobiles, furniture, and housing. Also, most converters tend to be smaller businesses that are privately owned. These owners are more conservative by nature and are not likely to have large amounts of debt on their balance sheets. This makes them better able to focus on the long term instead of quarter to quarter like public or private-equity-backed companies.
However, this doesn’t mean that converters are not going to be adversely impacted by this recession. Some may have had customer concentration in industry segments that have been hit hard. Others may be hurt by customers stretching out their payments or even going bankrupt. Overcapacity in the industry has also been a problem for quite some time, and the economic slowdown will mean much more of it. This tends to result in “margin squeeze” as more and more competitors fight over smaller pieces of business. Many converters may resort to desperation pricing as they find themselves getting into deeper trouble. While their customers might enjoy the lower prices for the short term, in the long run, these customers get hurt by lower quality and service, and by driving out innovation and new capital improvement in the surviving converters.
Converters are also caught in an interesting pricing anomaly. Most consumers (especially purchasing people) are keenly aware of the price of oil. The price of a gallon of gas is the most well-known commodity price in the world today. Last summer when oil soared to $147 a barrel (www.oil-price.net), prices were increasing everywhere. Today, oil is a fraction of that cost and purchasing professionals expect price reductions everywhere. However, the largest commodity in the converting world is paper, and the paper suppliers have been solidly focused on taking capacity out of the system. So, converters are being caught in a squeeze between customers that demand price reductions and suppliers that demand price increases.
How do you survive or even thrive in these bad times? You need to do what you always do—provide great quality, service, and value. Increase efficiency and drive out waste. In the meantime, help the economy. Go out and buy something. pP
Terry R. Fulwiler, CEO of the WS Packaging Group of Companies, is a graduate of the University of Michigan, where he received a Bachelor of Science in Aerospace Engineering. Fulwiler was named the 2000 Converter of the Year by the Tag & Label Manufacturer’s Institute.
Companies Mentioned:
 |
|
Best Practices for Print Automation
Competing for Print’s Thriving Future