WWW.IBISWORLD.COM Packaging & Labeling Services in the US May 2019 1

Package deal: Demand for industry services will increase as consumer spending continues to grow

This report was provided to Autobahn Consultants (2134210691) by IBISWorld on 27 October 2019 in accordance with their license agreement with IBISWorld

IBISWorld Industry Report 56191 Packaging & Labeling Services in the US May 2019 Anna Miller

2 About this Industry 17 International Trade 27 Regulation and Policy 2 Industry Definition 18 Business Locations 27 Industry Assistance 2 Main Activities 2 Similar Industries 20 Competitive Landscape 29 Key Statistics 3 Additional Resources 20 Market Share Concentration 29 Industry Data 20 Key Success Factors 29 Annual Change 4 Industry at a Glance 20 Cost Structure Benchmarks 29 Key Ratios 22 Basis of Competition 30 Industry Financial Ratios 5 Industry Performance 22 Barriers to Entry 5 Executive Summary 23 Industry Globalization 31 Jargon & Glossary 5 Key External Drivers 7 Current Performance 24 Major Companies 9 Industry Outlook 24 Sonoco Products Company 11 Industry Life Cycle 24 Verst Logistics Inc. 24 UDG Healthcare PLC 13 Products and Markets 13 Supply Chain 25 Operating Conditions 13 Products and Services 25 Capital Intensity 15 Demand Determinants 26 Technology and Systems 16 Major Markets 26 Revenue Volatility www.ibisworld.com | 1-800-330-3772 | [email protected] WWW.IBISWORLD.COM Packaging & Labeling Services in the US May 2019 2 About this Industry

Industry Definition Industry operators primarily package imprinting package services. The industry client-owned materials on a contract or excludes activity related to the manufacture outsource basis and provide labeling and of packaging or labeling products.

Main Activities The primary activities of this industry are Blister packaging services or skin packaging services Cosmetic kit assembling and packaging services Textile and apparel folding and packaging services Labeling services Mounting merchandise on cards Packaging services (except packing and crating for transportation) Product sterilization and packaging services Shrink-wrapping services Gift-wrapping services

The major products and services in this industry are Assembly and fulfillment services Labeling services Packaging services Other

Similar Industries 31-33 Manufacturing in the US This sector contains some companies that package and label their own goods.

32213 Paperboard Mills in the US This industry manufactures products and materials used by packaging and labeling services companies.

32221 Cardboard Box & Container Manufacturing in the US This industry manufactures products and materials used by packaging and labeling services companies.

32599 Chemical Product Manufacturing in the US This industry provides aerosol packaging services.

32611 Plastic Film, Sheet & Bag Manufacturing in the US This industry manufactures products and materials used by packaging and labeling services companies.

33243 Metal Can & Container Manufacturing in the US This industry manufactures products and materials used by packaging and labeling services companies.

48899 Freight Packing & Logistics Services in the US This industry provides packing and crating services related to transportation services.

Provided to: Autobahn Consultants (2134210691) | 27 October 2019 WWW.IBISWORLD.COM Packaging & Labeling Services in the US May 2019 3

About this Industry

Additional Resources For additional information on this industry www.packworld.com Packaging World www.contractpackaging.org The Association for Contract Packagers and Manufacturers www.pmmi.org The Association for Packaging and Processing Technologies

IBISWorld writes over 1000 US industry reports, which are updated up to four times a year. To see all reports, go to www.ibisworld.com

Provided to: Autobahn Consultants (2134210691) | 27 October 2019 WWW.IBISWORLD.COM Packaging & Labeling Services in the US May 2019 4 Industry at a Glance Packaging & Labeling Services in 2019

Key Statistics Revenue Annual Growth 14–19 Annual Growth 19–24 Snapshot $10.3bn 5.0% 2.4% Profit Wages Businesses $802.7m $2.3bn 10,068

Revenue vs. employment growth Consumer spending Market Share There are no major 15 4.0 players in this 10 3.5 industry 3.0 5 2.5 0 % change % change 2.0

-5 1.5

-10 1.0 Year 11 13 15 17 19 21 23 25 Year 12 14 16 18 20 22 24 Revenue Employment SOURCE: WWW.IBISWORLD.COM p. 24 Products and services segmentation (2019) 6.5% Key External Drivers Labeling services Consumer spending E-commerce sales 14.0% Assembly and fulfillment services Demand from snack food production Demand from cosmetic and beauty products manufacturing 48.6% Packaging services Corporate profit Demand from generic pharmaceutical manufacturing 30.9% Other p. 5

SOURCE: WWW.IBISWORLD.COM

Industry Structure Life Cycle Stage Mature Regulation Level Medium Revenue Volatility Medium Technology Change Medium Capital Intensity Low Barriers to Entry Low Industry Assistance Low Industry Globalization Low Concentration Level Low Competition Level High

FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 29

Provided to: Autobahn Consultants (2134210691) | 27 October 2019 WWW.IBISWORLD.COM Packaging & Labeling Services in the US May 2019 5 Industry Performance Executive Summary | Key External Drivers | Current Performance Industry Outlook | Life Cycle Stage

Executive Summary Revenue for the Packaging and Labeling wages and per capita disposable income. Services industry generally fluctuates in This drove increased consumer spending line with consumer spending trends, as during the period, driving discretionary industry operators earn most of their consumer purchases of FMCG. revenue from contract package and Manufacturers responded with increased labeling services provided to fast-moving production, and industry operators consumer goods (FMCG) and gained more business as a result. pharmaceutical product manufacturers. Concurrently, packaging requirements Industry companies primarily package for medical and pharmaceutical goods and label customer goods, adding value have become more stringent, raising for clients through efficiency gains. demand for industry services from clients Accordingly, improved consumer lacking the appropriate capabilities to spending over the five years to 2019 has perform such tasks in-house. Demand for supported industry growth. As US industry services has also grown from consumption has risen, manufacturers e-commerce retailers that require dimensionally efficient packaging that simultaneously portrays their brand to Economic growth during the five-year period, consumers during unboxing. particularly in the form of increased consumer Over the five years to 2024, IBISWorld anticipates that the industry will continue spending, has driven industry revenue growth growing, albeit at a slower pace than it has over the past five years. During the have expanded production, thereby coming five-year period, industry revenue increasing the number of products that is expected to increase an annualized need to be packaged and thus 2.4% to $11.6 billion. Growth in the increasing demand for industry number of adults aged 65 and older is services. Overall, industry revenue is expected to drive growth for anticipated to increase an annualized pharmaceutical products. Meanwhile, as 5.0% to $10.3 billion over the five years implementation of the Drug Supply to 2019. In 2019 alone, revenue is Chain Security Act (DSCSA) continues, expected to increase 3.4%. this will drive demand for industry Economic growth during the five-year services as pharmaceutical period, particularly in the form of manufacturers seek to become more increased consumer spending, has driven operationally efficient in light of already- industry revenue and profit growth. The increasing costs. Consumer spending and unemployment rate declined e-commerce sales are also expected to significantly, putting upward pressure on continue driving growth.

Key External Drivers Consumer spending E-commerce sales Higher consumer spending directly E-commerce sales represent a growing affects the number of goods that segment of total retail sales. In general, manufacturers need to package to sell. higher reliance on e-commerce tends to Industry operators act as a key cog in the reduce the number of physical locations supply chain between manufacturers and that companies maintain as they seek to consumers. Therefore, when spending compete for higher-margin online sales. increases, revenue tends to follow. In 2019, As a result, these companies are more consumer spending is expected to increase. likely to outsource packaging and

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Industry Performance

Key External Drivers labeling services. In 2019, e-commerce of such products increases demand for continued sales are expected to increase, industry services. In 2019, demand from representing a potential opportunity for cosmetic and beauty product the industry. manufacturing is expected to decrease slightly, presenting a potential threat to Demand from snack food production the industry. The Snack Food Production industry (IBISWorld report 31191) produces snack Corporate profit foods such as potato and corn chips, Corporate profit measures the amount of pretzels, roasted and salted nuts, nut corporate profit earned across all butters, popcorn and other similar industries. As profit increases, snacks. These products need to be businesses are more likely to purchase packaged before being sent to consumers industry services to fulfill their and retail outlets. Therefore, an increase packaging needs. In 2019 corporate in snack food production increases profit is anticipated to increase. demand for industry services. In 2019, demand from snack food production is Demand from generic expected to increase. pharmaceutical manufacturing Generic pharmaceutical manufacturers Demand from cosmetic and beauty tend to use industry services at a greater products manufacturing rate than other pharmaceutical This industry prepares, blends, industries. These operators are more compounds and packages cosmetics and likely to use contract packaging to other beauty products. Cosmetic and improve margins due to the high level of beauty product manufacturers might price competition between generic choose to outsource the packaging and pharmaceutical manufacturers. In 2019, labeling process to industry operators. As demand from generic pharmaceutical a result, an increase in the manufacturing manufacturing is expected to increase.

Consumer spending E-commerce sales

4.0 2.0

3.5 1.5 3.0

2.5 1.0 $ trillion % change 2.0 0.5 1.5

1.0 0.0 Year 12 14 16 18 20 22 24 Year 10 12 14 16 18 20 22 24

SOURCE: WWW.IBISWORLD.COM

Provided to: Autobahn Consultants (2134210691) | 27 October 2019 WWW.IBISWORLD.COM Packaging & Labeling Services in the US May 2019 7

Industry Performance

Contract packaging and labeling service Current providers depend on demand for Industry revenue manufactured goods that need to be Performance 8 packaged and labeled before being transported to retail destinations or 7

consumers. As a result, the Packaging 6 and Labeling Services industry is vulnerable to general macroeconomic 5

trends that affect levels of consumption, % change 4 particularly the consumption of consumer packaged goods (CPG) and 3 fast-moving consumer goods (FMCG). 2 Over the five years to 2019, steady growth Year 11 13 15 17 19 21 23 25 in employment and consumption have increased demand for CPG and FMCG, SOURCE: WWW.IBISWORLD.COM thereby increasing demand for packaging and labeling services. Over the five years expected to grow an annualized 5.0% to to 2019, total revenue for the Packaging $10.3 billion, including anticipated and Labeling Services industry is growth of 3.4% in 2019.

Demand for industry Demand for industry services is largely an annualized rate of 13.7%. As services dependent on the level of demand for a consumers continue to do more of their large variety of consumer items, shopping online, providers of consumer including pharmaceuticals, cosmetics, goods have had to rethink packaging personal care products, toys, electronics, strategies to adapt to the shifting hardware and various foodstuffs. As a environment. For example, the shipping result, demand for industry services is of e-commerce goods is based on sensitive to changes in economic dimensional weight, by which shipping conditions that affect consumer retail providers determine the cost of shipping expenditure, particularly on CPG and based on dimensional calculations. To FMCG. Favorable economic conditions minimize shipping costs, producers of have supported industry growth during consumer goods have sought industry the period. Most notably, the level of services and expertise to optimize the consumer spending is expected to dimensional weight of their packaging. In increase an annualized 2.9% over the five addition, the rise in e-commerce sales has years to 2019, supported by sustained meant that more goods are sent straight to low unemployment and rising per capita the consumer without ever sitting on store disposable income. Increased consumer shelves. As a result, companies have put a spending has raised demand for the greater focus on the consumer unboxing manufacture of consumer goods which, experience, which is primarily in turn, increases demand for contract determined by the packaging. For many packaging and labeling services. companies, this has increased the need E-commerce sales, in particular, have for efficient or specialty packaging been a main driver for consumer design, which often means outsourcing expenditure during the period. Over the the task to industry operators. five years to 2019, IBISWorld estimates For many industry operators, clients that e-commerce sales have increased at that heavily import and export or that

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Industry Performance

Demand for industry produce a wide variety of products about the potentially damaging effects of services contribute significantly to industry product tampering, such as those in the continued revenue. Packaging and labeling are over-the-counter pharmaceuticals and considered to be noncore functions for foods industries, need specialized secure these companies, but manufacturers still packaging solutions, which tend to cost need to comply with increasing federal more. Again, this makes it more likely that and state regulations pertaining to safety packaging services will be outsourced to and consumer product information. industry operators, particularly as Moreover, companies that are concerned demand for such products rises.

Industry structure Larger, vertically integrated industry and trends operators can benefit from economies of Larger, vertically integrated scale by maintaining package- industry operators can manufacturing segments alongside actual benefit from economies of packaging services. This integration aids in controlling input prices and enables scale industry operators to better meet clients’ packaging preferences. For example, this certain prescription drugs as they are has enabled industry operators to tailor distributed in the United States. The goal their products to match current trends, is to enhance the US Food and Drug such as the use of sustainable materials Administration’s ability to control and and package designs that are flexible and prevent the distribution of counterfeit, space efficient. Further, some operators, stolen, contaminated or otherwise harmful including Verst Logistics Inc., have drugs. This has increased regulations and integrated several supply-chain functions the complexity of the labeling process as such as fulfillment, packaging, its implementation has been realized over warehousing and transportation, the past five years. As a result, this has enabling them to act as turnkey-service meant more pharmaceutical companies are providers to clients. This type of outsourcing packaging and labeling services integration has rendered industry to become more efficient or because they do operators more attractive to increasingly not have the in-house capabilities to comply important e-tailers that are looking to with current regulations. optimize the speed of their supply chains. During the past decade, the industry This has also attracted demand from has experienced a high amount of merger retailers attempting to focus on core and acquisition (M&A) activity. The competencies or minimizing their consolidation effect of such M&A activity number of service provider contracts. has outpaced the number of new This has been especially true for operators entering the industry, thus pharmaceutical companies. Enacted in resulting in a slight decline in the number 2013 just prior to the current period, the of establishments and enterprises. Once Drug Quality and Security Act (DQSA) an industry with a majority of private outlines requirements for manufacturers, family owned businesses, contract re-packagers, wholesale distributors, packaging businesses have held dispensers and third-party logistics increasing interest for private equity providers. Title II of DQSA outlines the firms, which have contributed in large process for building an electronic, part to the accelerated M&A activity interoperable system to identify and trace experienced during the period. Over the

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Industry Performance

Industry structure five years to 2019, the number of earnings before interest and taxes) and trends enterprises in the Packaging and steadily increased during the period, continued Labeling Services industry has declined growing from 6.3% in 2014 to an an annualized 0.2% to 10,068 companies. estimated 7.8% in 2019. The price of Conversely, growing demand for plastic materials and resin is estimated to services has driven an increase in the decrease an annualized 1.4% over the five number of industry employees, which is years to 2019, contributing to overall estimated to grow an annualized 2.1% profit growth during the period by during the period to 57,131 individuals in decreasing the purchase cost of plastic 2019. Profit margins (measured as packaging materials.

Over the five years to 2024, and increased regulations surrounding Industry macroeconomic growth and stability will pharmaceutical packaging are anticipated Outlook continue to be the primary growth drivers to boost demand for industry services. As for the Packaging and Labeling Services a result, IBISWorld projects industry industry. In particular, low revenue to grow an annualized 2.4% to unemployment, rising consumer spending $11.6 billion over the five years to 2024.

Driving demand Consumer spending is crucial for industry growth over the next five years. The increased presence of IBISWorld expects consumer spending to e-commerce is expected continue to grow, increasing at a projected annualized rate of 1.7% during to benefit the industry the outlook period. Unemployment is moving forward expected to remain at a low level, putting continued upward pressure on wage continue to focus on making packaging as levels. As a result of both these factors, dimensionally efficient as possible and use per capita disposable income is expected packaging that portrays their brand to to grow at an annualized rate of 1.3% over consumers in a flattering and attractive the five years to 2024. Growth in manner. As a result, packaging is expected household and individual disposable to become increasingly complex, driving income will likely lead to greater demand for the Packaging and Labeling consumer spending on items that require Services industry. packaging, spurring greater demand for Food products will represent a steady industry services. source of demand for industry services Moreover, the increased presence of over the next five years. Revenue for the e-commerce is expected to benefit the Snack Food Production industry industry moving forward. Packaging (IBISWorld report 31191) is expected to needs are particularly high for operators grow an annualized 3.4% over the five that primarily sell online. These years to 2024. As one of the largest operators tend to minimize their physical sources of revenue for the industry it will footprints to improve margins, so provide a consistent source of demand contract packaging services can be used for industry services. Small to limit facility use to core operating manufacturers of snacks and activities. Online retailers will likely supplements will continue to enter the

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Industry Performance

Driving demand market and will also require outsourced anticipated to drive more drug continued packaging services. manufacturers to outsource packaging and The number of people over the age of labeling activities to industry operators. In 65, which are relatively more reliant on addition, drug companies are increasingly medical treatment than other investing in new biopharmaceutical demographics, is expected to continue products. These products are highly growing during the five-year period at an sensitive to environmental factors and are annualized rate of 3.2%. This is expected new to the market, putting these to support demand for contract companies under a particularly high degree packaging services from pharmaceutical of regulatory and public scrutiny. As a manufacturers, both branded and result, the growing need for highly generic. The packaging-related specialized, careful and thorough regulations associated with the continued packaging and labeling could further drive implementation of the Drug Supply demand for industry services from the Chain Security Act (DSCSA) are medical and pharmaceutical sector.

Profit and landscape Due to projected growth in demand from consumers and outsourcing Vertical integration will manufacturers, IBISWorld expects industry competition to increase as some enable operators to better packaging manufacturers expand their control input costs, such as operations to include packaging and paper and plastic labeling services or industry operators integrate supply-chain services to serve as turnkey-service providers. Vertical number of employees and the average integration will enable these operators to wage per employee are both expected to better control input costs such as paper grow. Therefore, total industry wage and plastic, giving them an advantage expenditure is anticipated to increase at over other companies. an annualized rate of 1.5% to $2.5 billion Alongside an expected increase in in 2024. Profit margins (measured as vertical integration, the Packaging and earnings before interest and taxes) are Labeling Services industry is expected to expected to reach 8.5% of revenue in continue to undergo a high amount of 2024, as revenue growth is anticipated to merger and acquisition activity. As a outpace growth in wage expenditure and result, the number of industry enterprises the price of plastic materials is expected is projected to continue falling at a to stagnate. Industry operators are also marginal annualized rate of less than expected to realize cost efficiency gains as 0.1% to 10,049 companies in 2024. they vertically integrate and provide However, total wage expenditure is higher-value services such as specialty expected to expand slightly, as the packaging design.

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Industry Performance Life Cycle Stage Businesses are focusing on improving operating efficiency Manufacturers are increasingly outsourcing packaging and labeling operations Industry companies are consolidating, resulting in a declining number of industry enterprises

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Industry Performance

Industry Life Cycle The Packaging and Labeling Services has experienced a high level of merger industry is in the mature phase of its life and acquisition activity which has cycle. Industry value added (IVA), which reduced the number of companies  This industry measures the industry’s contribution to operating in the industry due to its rapid is Mature  the US economy, is expected to increase rate of consolidation. at an annualized rate of 3.5% over the 10 Outsourcing activity from companies years to 2024, while US GDP is forecast within highly regulated markets, such as to grow at an annualized rate of 2.1% food manufacturing and pharmaceuticals, during the same period. Although higher is also a major source of industry growth. IVA growth than GPD growth is Changes in regulation may necessitate indicative of an industry in its growth life quick and significant changes in cycle phase, other characteristics of this packaging and labeling, and companies industry point to its maturity. may consequently choose to outsource Larger operators tend to have an packaging and labeling, rather than advantage in the industry because they develop and maintain the internal have more capital and are better able to expertise and equipment necessary to absorb investments in high-tech keep up with quick, regulatory-driven packaging and labeling equipment, which changes. Although some industry helps improve operating efficiencies, and operators offer services featuring higher- offer higher margin high-tech services. As tech products, such as radio frequency is typical of a mature industry, growth for identification tags and pressure-sensitive the Packaging and Labeling Services bar code labels, the industry’s services industry is driven by overall economic are not expected to change significantly growth as well as acquisitions, mergers over the 10 years to 2024. In addition, and vertical integrations that enable the Packaging and Labeling services operators to differentiate themselves in a industry is characterized by complete highly competitive environment. Also market saturation as its services are used typical of a mature industry, the by a wide variety of US industries. This Packaging and Labeling Services industry also indicates the industry’s maturity.

Provided to: Autobahn Consultants (2134210691) | 27 October 2019 WWW.IBISWORLD.COM Packaging & Labeling Services in the US May 2019 13 Products & Markets Supply Chain | Products and Services | Demand Determinants Major Markets | International Trade | Business Locations

Supply Chain KEY BUYING INDUSTRIES 31135 Chocolate Production in the US This industry uses packaging and labeling services for the packaging of chocolates and confectionery, including candies related to specific holidays such as Halloween, Christmas and Easter. 32541a Brand Name Pharmaceutical Manufacturing in the US Brand name pharmaceutical manufacturers and medical companies often outsource packaging and labeling operations to industry participants. 32541b Generic Pharmaceutical Manufacturing in the US Generic pharmaceutical manufacturers and medical companies often outsource packaging and labeling operations to companies in the industry. 33251 Hardware Manufacturing in the US Industry participants are contracted by hardware manufacturers to package and label hardware products, such as nails and screws. 33639 Auto Parts Manufacturing in the US Auto parts manufacturers outsource packaging and labeling operations to industry participants. 44-45 Retail Trade in the US Industry participants often provide retailers with packaging and labeling services for a variety of goods, including toys, electronics and clothing.

KEY SELLING INDUSTRIES 32221 Cardboard Box & Container Manufacturing in the US This industry supplies cardboard containers and tubes that are used for packaging services. 32616 Plastic Bottle Manufacturing in the US This industry supplies plastic containers to meet client packaging requirements. 32721 Glass Product Manufacturing in the US This industry supplies glass containers in various shapes and sizes to meet client packaging requirements. 33243 Metal Can & Container Manufacturing in the US This industry supplies steel and aluminum cans and containers used for packaging services. 33392 Forklift & Conveyor Manufacturing in the US This industry supplies equipment that is used to handle pre-packaged goods, materials and finalized packaged products.

Products and Services Packaging contains, protects and while graphics and artwork attract preserves goods as they are transported consumer attention, provide product from the manufacturer to the retailer information and facilitate brand appeal. and, ultimately, to the consumer. In The Packaging and Labeling Services addition to completely containing and industry mainly provides packaging and protecting an item, packaging and labeling services for the consumer goods labeling companies also provide products manufacturing industries, such as with full color retail markings and textual personal care and pharmaceutical descriptions, including any relevant manufacturers. Manufacturers of these documentation inside the packaging. products generally find it more cost Package design permits retailers to effective to hire companies from this display products on their store’s shelves, industry to package their products, rather

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Products & Markets

Products and Services Products and services segmentation (2019) continued 6.5% Labeling services 14.0% Assembly and fulfillment services 48.6% Packaging services

30.9% Other

Total $10.3bn SOURCE: WWW.IBISWORLD.COM

than set up internal packaging operations. Labeling is also typically provided by The Packaging and Labeling Services industry operators. This is expected to industry also engages in assembly and make up 6.5% of total revenue generated fulfillment, product labeling and several by this segment. Functions of this other smaller services. service include external package labeling services including, coding, marking and Packaging and labeling services internal labeling. Internal labeling This segment packages for manufacturers includes any warnings or directions and distributors in markets, such as incorporated with the product. cosmetics, pharmaceuticals, foodstuffs, IBISWorld expects consumer spending toys, home and garden decor, sporting levels to rise over the next five years. As goods and small hardware. The service of a result, packaging and labeling services packaging can be done remotely or on-site are expected to grow in proportion with depending on the industry operator’s demand for industry services. capabilities and the customer’s needs. Several processes are contained within the Assembly and fulfillment services umbrella term of packaging. This includes Assembly and fulfillment services include bagging, wrapping and bundling, cartoning, any production done by industry case packing, filling and repacking using a operators with the finished client-owned variety of techniques including shrink products. This does not include mixing banding, blister and clamshell packaging. ingredients, as in the case of some Demand for consumer products represents beverage bottling plants, which is the largest source of downstream demand considered a manufacturing activity. for packaging services. Overall, packaging Assembly activities for industry operators services are anticipated to account for include folding textiles and arranging 48.6% of revenue generated by this products for display and package size segment in 2019. Typically, packages and optimization. For specific point-of- materials are purchased from package purchase displays, companies will and plastic goods manufacturers, assemble the stands and shelves to client although some larger companies specifications. Assembly and fulfillment maintain manufacturing segments services are expected to account for internal to their overall operations. 14.0% of industry revenue in 2019.

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Products & Markets

Products and Services Other services logistical services and warehousing. Other continued In addition to traditional packaging services do include activities ancillary to services, industry participants also packaging and fulfillment, which primarily provide support services for their clients, involves sterilization activities and various that are not necessarily considered to be smaller services. Overall, other services industry relevant. This includes support in are estimated to constitute 30.9% of packaging design, testing, re-packaging, industry revenue in 2019.

Demand Demand for packaging and labeling companies, requiring companies to Determinants services is dependent on the outsourcing provide detailed product labels and of packaging and labeling operations by warnings for consumers. Federal agencies product manufacturers. Traditionally, also require these companies to meet safety these companies outsource packaging and standards regarding the packaging of their labeling services when it is more cost products, necessitating measures such as effective to hire industry companies than childproof caps and the application of it is to set up internal packaging specialized sealing techniques. operations. This occurs when Manufacturers may turn to industry manufacturers need to meet short-term operators if regulation dictates a specific requirements, require special machinery, packaging or labeling need that the can save by shipping in bulk or are company is incapable of providing in-house. downsizing operations. Manufacturers can Increases in packing specialization prompt thereby focus on core operations while the use of industry services. Industry avoiding extra labor and equipment costs. operators are typically more flexible than Industry operators provide services to large manufacturers in adapting to changes a variety of industries, including in regulations since packaging services pharmaceutical, cosmetic, toiletry, toy, represent their core operating activity. food and confectionery manufacturing. Regulations regarding shipping and Most products that are packaged and storage conditions can also affect demand labeled are for personal consumption, so for industry services. Customers with demand for industry services is sensitive highly specialized packaging needs (such to economic conditions and consumer as computer component manufacturers spending. Demand for services is not or biotechnology companies) often highly seasonal, although revenue is require sterile or cool conditions to store slightly higher in the second half of the products. Markets that are required to year due to US consumption trends. meet stringent quality-control standards, Manufacturers will outsource packaging such as food manufacturers or drug and labeling to minimize overhead and companies, may also have special costs during periods of increased sales. requirements for the storage of their products. Changes in such requirements Regulation and specialization will further influence demand for Demand for industry services is also industry services because industry linked to the regulatory environment of operators generate additional revenue the markets it serves. Federal agencies from providing packaging services heavily regulate food and pharmaceutical optimized for more stringent demands.

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Products & Markets

Major Markets Major market segmentation (2019) 2.3% Electronic goods 8.6% manufacturers 1.3% Pharmaceutical and medical Apparel and textile producers product manufacturers 2.9% 15.3% Hardware manufacturers Cosmetic and personal care product producers 38.0% Food and beverage producers

31.6% All other Total $10.3bn SOURCE: WWW.IBISWORLD.COM

The Packaging and Labeling Services Personal care and cosmetics industry provides services to a variety of manufacturers markets. The majority of industry This market is composed of consumer services are related to consumer goods. goods producers that operate in the personal care and cosmetics Food and beverage manufacturers manufacturing markets. In total, this This industry does not include packing market is expected to account for 15.3% and crating services for agricultural of industry revenue in 2019. The volume products nor does it include processing and variety of products produced by client-owned materials into a different these operators drives demand from product. Therefore, some food these industries. Products requiring manufacturers would not be considered packaging include lipstick, mascara, skin part of the customer market. However, cleansers, lotions, shampoo, hair styling packaging for food product and snack products, perfumes and colognes. manufacturers that do not require the Companies involved in producing these aforementioned services are considered products typically use contract packaging part of this industry’s customer market. at a greater rate since most of them are In 2019, food, beverage and snack food small manufacturers and do not have the manufacturers are expected to account necessary packaging capabilities. for 38.0% of revenue for the Packaging Therefore, this generates significant value and Labeling Services industry. Snack to cosmetics manufacturers due to supply foods represent the majority of this chain efficiency gains. market portion, and food producers have increased their demand for industry Pharmaceutical and medical services in response to consumer manufacturers demands for increased product Pharmaceutical and other medical information on food packaging. In products must be packaged according to addition, packaging has long been used strict sterilization and regulatory by food product manufacturers to convey standards; accordingly, the Packaging food quality and achieve product and Labeling Services industry labels differentiation amid high competition. these products with a variety of

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Products & Markets

Major Markets mandatory information, including price competition from domestic and continued precautions, dosages and ingredients. foreign producers, making supply chain Pharmaceutical manufacturers also rely efficiency and cost minimization critical on packaging services to contain, protect, to success. As a result, hardware preserve and transport their products. producers demand industry services These factors, combined with the scale of because of the efficiency gains and cost the market, results in many companies savings associated with outsourcing the outsourcing packaging and labeling packaging and labeling process. activities to industry operators. In 2019, this segment is expected to account for Apparel and textile manufacturers 8.6% of industry revenue. Apparel and textile manufacturers are This segment has increased as a share expected to account for 1.3% of industry of revenue as generic pharmaceutical revenue in 2019. The US market for manufacturing has grown during the apparel manufacturers has diminished five-year period, requiring more over the long-term by competition from packaging and labeling services. foreign companies. As a result, these Additionally, generic pharmaceuticals companies make up a smaller revenue have expanded during the period as more source for industry companies. Much of drugs reached the end of their patent the revenue from this market is derived period attributing to segment growth. As from folding and display preparation for the population aged 65 and older packed materials. Many smaller increases over the next five years, and operations require industry services to more people have access to medical fulfill orders as they grow their brand. insurance due to recent healthcare legislation, this segment is expected to Other drive growth for industry operators. There are many other various markets that act as key sources of demand for Hardware manufacturers industry companies. Other clients include In 2019, hardware manufacturers are manufacturers of electronics, pet estimated to account for 2.9% of industry supplies, toys and games, office products, revenue. Hardware products often hard goods and other soft goods. In 2019, require a variety of packaging due to the all other clients are expected to constitute wide variety consumer channels, such as an estimated 33.9% of total industry standalone products in retail stores or as revenue. Individually, however, these part of a larger product kit. Further, client markets make up less than 5.0% of hardware manufacturers endure strong industry revenue.

International Trade This industry’s services are not traded packaging and labeling operations. internationally. The Packaging and Thus, because participants do not Labeling Services industry does not directly sell any products, there is no manufacture or produce package and international trade. For more labeling materials. Instead, the industry information on international operations, provides a service to manufacturers and refer to the Industry Globalization other producers looking to outsource section of this report.

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Products & Markets

Business Locations 2019

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ME reat Md 0.1 akes tatc 1 2 NY 3 WA ND 6.0 4 MT 0.4 5 1.4 0.1 MN 2.3 WI ock 2.9 MI PA 6 SDPas 3.6 4.0 OR 0.2 7 0.8 Moutas ID IA OH 9 8 0.4 WY 0.7 5.5 0.1 IN VA NE IL 2.1 WV 0.2 7.2 0.1 1.4 KY est NV 1.3 0.8 NC UT MO 4.7 1.1 CO KS 2.1 0.7 0.5 TN 3.0 SC CA 0.8 14.0 OK AR outeast 0.3 0.7 GA AL 3.0 AZ MS 0.5 1.3 NM 0.2 0.1 outest LA TX 0.7 FL 5.5 6.9

est Establishments (%) HI Less than 3% 0.0 Additional States (as marked on map) 3% to less than 10% 1 VT 2 NH 3 MA 4 RI 10% to less than 20% 0.2 0.2 2.1 0.7 20% or more 5 CT 6 NJ 7 DE 8 MD 9 DC 1.0 7.1 0.2 1.4 0.0

SOURCE: WWW.IBISWORLD.COM

Provided to: Autobahn Consultants (2134210691) | 27 October 2019 WWW.IBISWORLD.COM Packaging & Labeling Services in the US May 2019 19

Products & Markets

The geographic distribution of the Business Locations Distribution of establishments vs. population Packaging and Labeling Services industry closely mirrors that of the US 30 manufacturing sector because participants often set up operations near

product manufacturers to reduce 20 distribution and transportation costs.

Consequently, these companies are % generally located in traditional 10 manufacturing regions or states to efficiently take advantage of demand for industry services. 0 The industry’s clientele includes West manufacturers that operate in a variety of Plains Southeast industries, including retail, Southwest Great Lakes Mid-Atlantic pharmaceuticals, food and automotive New England

parts. Similarly, regions and states that Establishments Rocky Mountains specialize in the manufacturing of these Population products also have higher portions of SOURCE: WWW.IBISWORLD.COM industry establishments. For example, there is a significant amount of companies to increase supply chain manufacturing based in the Southeast efficiencies. In addition, California is one region, which is home to 23.2% of of the nation’s largest producers of establishments in the Packaging and automobile electronics. Labeling Services industry. Additionally, Following California, the largest states the Great Lakes region contains an by number of industry establishments estimated 21.3% of total industry are Florida (6.9%), New Jersey (7.1%), establishments. This region also Illinois (7.2%) and New York (6.0%). traditionally has a high concentration of For the most part, the distribution of US manufacturers and factories. The industry establishments among these Mid-Atlantic region (18.7%) and the West states is largely due to the distribution of region (16.9%) also contain a significant the population. New Jersey is, however, portion of industry establishments. a notable exception, holding only 2.8% California is by far the largest state by of the country’s population. Like number of industry establishments, with California, New Jersey is home to an estimated 14.0% in 2019. This is several large food and pharmaceutical because California holds the nation’s manufacturers. Its proximity to large largest share of pharmaceuticals east coast markets has made it an manufacturers and also ranks highly in important player in the manufacturing all facets of food production. Since food of consumer goods. Thus, a and beverage producers make up the disproportionate number of industry industry’s single largest market many operators have positioned themselves in operators are located near these the state to take advantage of demand.

Provided to: Autobahn Consultants (2134210691) | 27 October 2019 WWW.IBISWORLD.COM Packaging & Labeling Services in the US May 2019 20 Competitive Landscape Market Share Concentration | Key Success Factors | Cost Structure Benchmarks Basis of Competition | Barriers to Entry | Industry Globalization

Market Share The Packaging and Labeling Services highly specialized packaging and labeling Concentration industry has a low level of market share services. As a result, operators make concentration. IBISWorld estimates that capital and labor investments into the four largest companies in the industry packaging and labeling functions specific Level account for less than 10.0% of industry to one industry or manufacturing sector. Concentration in revenue in 2019. Small, regional In 2019, small operators with one to this industry is Low  companies that specialize in specific four employees account for an expected packaging and labeling functions 45.2% of industry establishments, and dominate the industry. Small and these companies tend to serve small medium-sized operators focus on manufacturers. Nonetheless, industry maintaining service contracts with local companies will continue to pursue producers, while large operators rely on mergers and acquisitions over the next close relationships with a few major five years, which will continue to clients as the main source of revenue. consolidate the industry. As a result, the One reason the industry is so highly industry is expected to become fragmented is that clients often need increasingly concentrated.

Key Success Factors Ability to manage external Access to multiskilled and (outsourcing) contracts flexible workforce Operators in the Packaging and Labeling Companies in the industry need to have a IBISWorld identifies Services industry must be able to multiskilled labor force capable of highly 250 Key Success manage outsourced packaging contracts. specialized tasks. Factors for a business. The most Effective cost controls Access to niche markets important for this Successful industry operators must It is beneficial for companies in the manage costs to maximize their generally industry to operate in niche markets that industry are: small profit margins. may be less price sensitive.

Cost Structure Similar to other service industries, a large from 6.3% in 2014, due to decreases in Benchmarks portion of this industry’s costs are allocated the price of plastic materials that were to wages. However, purchases are high as a passed on to industry operators in the proportion of costs due to the input prices form of lower purchase costs. The cost of of packaging materials. Labor costs include input materials strongly influences wages for packaging employees as well as industry profit, as profit often fluctuates employees engaged in administrative and with the price of commodities or raw other back-office functions. Industry materials such as steel, aluminum, purchases include packaging and labeling recovered paper, paperboard and plastic raw materials, as well as any necessary resins. These materials represent machinery and technology. upstream costs that affect the price of packaging inputs. Further, since Profit operators often enter into long-term In 2019, average industry profit, defined contracts with clients, in the event of as earnings before interest and taxes, is input cost increases, they have little room expected to account for 7.8% of revenue. to modify service fees which thus affects Profit has increased during the period, up profit margins.

Provided to: Autobahn Consultants (2134210691) | 27 October 2019 WWW.IBISWORLD.COM Packaging & Labeling Services in the US May 2019 21

Competitive Landscape

Cost Structure Wages revenue in 2019. This cost component Benchmarks Wage expenses for industry companies has decreased slightly as a share of continued include payroll as well as employee revenue during the period, down from benefits such as workers’ compensation, 2.7% in 2014. health insurance and other similar costs. Although many packaging and labeling Utilities processes require human labor, the Utility costs are estimated to account for industry is also reliant on machinery for an estimated 0.7% of total industry processing. Over the past five years, as revenue in 2019. As a share of total automation has become more revenue, utility costs have not changed widespread, industry employment has significantly over the past five years. grown less rapidly than revenue, and wages’ share of revenue is expected to Other costs decrease from 24.1% in 2014 to 22.3% in Marketing expenses account for an 2019. However, as the trend toward estimated 0.6% of industry revenue in automation continues, IBISWorld 2019, and depreciation is estimated to expects the average employee wage to account for another 2.2%. Depreciable increase, even though wages as a share of assets primarily consist of specialized total revenue declines. equipment used during the packaging and labeling process as well as Rent operating facilities. Examples of Rent and lease payments are estimated to equipment may include conveyors, account for 2.6% of total industry sealers and filling machines.

Sector vs. Industry Costs

Average Costs of all Industries in Industry Costs sector (2019) (2019) 100 n 5.9 7.8 P r o fi t n Wages n Purchases n 80 22.3 Depreciation n Marketing n Rent & Utilities 53.4 n Other 60 39.4

40

Percentage of revenue Percentage 13.3 2.2 0.6 1.6 1.3 3.3 20 2.5 22.0 24.4

0 SOURCE: WWW.IBISWORLD.COM

Provided to: Autobahn Consultants (2134210691) | 27 October 2019 WWW.IBISWORLD.COM Packaging & Labeling Services in the US May 2019 22

Competitive Landscape

Basis of Competition Internal competition therefore enables companies to be more Since the majority of industry operators price competitive. Level & Trend are small businesses, competition within the industry is relatively strong. Price External competition Competition in this competition is one of the primary The capabilities of large package industry is High and methods by which industry operators manufacturing companies pose a threat the trend is Steady  compete. Since the services provided by to the industry. Larger manufacturers industry operators is relatively uniform, can operate smaller divisions that companies are primarily differentiated account for packaging design and based on the price of their services. In an optimization. This factor positions these attempt to compete, industry operators will companies in relationships with larger lower prices with negative effects to producers, however those producers tend revenue. However, to mitigate this, some to have in-house fulfillment. Moreover, companies have found other ways to the existing supplier networks that these differentiate themselves by, for example, packaging manufacturing companies specializing in packaging services for have will enable them to better compete clients in specific industries or by using the on a price basis through access to lower most sophisticated technology. Operators input cost. Their existing relationships that cater to pharmaceutical manufacturers with clientele and the scale efficiencies will generally require different facility challenge packaging and labeling service infrastructure than a company that caters industry operators. to natural food producers. Nonpackaging manufacturers may also Secondly, operators also compete opt to undertake internal packaging and based on their reputation for high quality labeling operations instead of contracting service and on location. Since one of the out to industry operators. As companies primary benefits of industry services is develop internal facilities, they may offer gains in supply chain efficiency, a their services to other companies that competitive industry operator must be manufacture similar products, which known for being reliable and fast. would create even more external Location facilitates a company’s ability competition for the Packaging and to deliver their service on time to Labeling Services industry. Small ensure quality and reliability. In manufacturers will continue to outsource addition, being located close to clients packaging, but as companies grow, also helps decrease operating costs and internalizing of services may increase.

Barriers to Entry The Packaging and Labeling Services industry has low barriers to entry due to Barriers to Entry checklist Level & Trend the relatively low capital investment Competition High required to enter. Likewise, the industry Barriers to Entry Concentration Low has a low level of concentration, with the in this industry are Life Cycle Stage Mature top four companies expected to account Capital Intensity Low Low and Steady  for less than 10.0% of industry revenue in Technology Change Medium 2019. Most operators are small Regulation and Policy Medium businesses that service a group of local or Industry Assistance Low

regional clients across a select group of industries. As a result, new companies SOURCE: WWW.IBISWORLD.COM

Provided to: Autobahn Consultants (2134210691) | 27 October 2019 WWW.IBISWORLD.COM Packaging & Labeling Services in the US May 2019 23

Competitive Landscape

Barriers to Entry can compete in local markets and provide Current relationships are based on continued services to small operators in the industry expertise and effective service, manufacturing sector. Initial capital which is difficult to establish for a new investments are limited to the purchase of entrant. Additionally, federal regulation a facility and of initial packaging materials. may also represent a barrier to industry Depending on the type of services provided entry depending on the type of or the scale of operations, investment in manufacturers being served. Industry specialty machinery and equipment may operators that serve food and also be necessary. pharmaceutical manufacturers are Although entry is not capital intensive, subject to higher federal and state contracts between existing companies regulations concerning consumer safety. and their clients do present a deterrent to Some food and drug packaging operators entry. Developing contracts and business must register with the US Food and Drug relationships can take time and often Administration and pass a series of depends on the two parties’ needs. quality-control checks.

Industry Globalization in the Packaging and UDG is headquartered in Ireland and its Globalization Labeling Services industry is low. The Sharp division has operations in Ireland, industry is primarily made up of small the Netherlands, Belgium, the United Level & Trend businesses that only service domestic Kingdom and the United States. In clients and markets. However, several addition, Sonoco Products Company  Globalization in this larger industry participants operate provides services internationally, industry is Low and international companies that operate operating out of facilities located in the the trend is Steady  packaging and labeling facilities in United States, Poland, Mexico and Brazil. multiple countries. For example, Sharp, a While some large companies compete on division of UDG Healthcare PLC (UDG), a global basis, for the most part provides commercial contract packaging competition is regionally based and most services and clinical trial services to the companies operate solely within the pharmaceutical and medical markets. United States.

Provided to: Autobahn Consultants (2134210691) | 27 October 2019 WWW.IBISWORLD.COM Packaging & Labeling Services in the US May 2019 24 Major Companies There are no Major Players in this industry | Other Companies

Other Company Sonoco Products Company (Sonoco) was is relevant to this industry. This segment Performance founded as the Southern Novelty provides packaging services to a wide Company in 1899. Today, the company is variety of markets including, but not Sonoco Products a global provider of consumer and limited to, electronics, personal care, industrial packaging products and baby care, food, cosmetics, fragrances, Company services, with headquarters in home and garden, medical and over-the- Market Share: 2.9% Hartsville, SC and 312 locations in 36 counter drugs. The segment currently countries. In 2018, Sonoco had an operates 23 facilities located in the estimated 23,000 employees worldwide. United States, Poland, Mexico and Brazil. The company’s operations consist of Revenue for this segment is dependent four segments: Consumer Packaging, on a few customers. According to the Display and Packaging, Paper and company, 64.0% of revenue for this Industrial Converted Products and segment is attributable to sales from its Protective Solutions. five largest customers. In 2019, industry- Of the four main operating segments, relevant revenue for Sonoco is estimated only the Display and Packaging segment to be $302.3 million.

Other Company UDG Healthcare PLC (UDG) is an operates locations in the United States, Performance international company providing the United Kingdom, the Republic of advisory, communication, commercial, Ireland, Belgium and the Netherlands. clinical and packaging services to the Sharp’s commercial contract packaging UDG Healthcare healthcare industry. Currently, the services include but are not limited to PLC company employs approximately 8,700 multiple formats such as biotech, Market Share: 2.6% people with operations in 26 countries. It bottling, blistering, pouch, stick pack, vial Industry Brand Names  is a public company headquartered in labeling, prefilled-syringe labeling and Sharp Dublin, Ireland. The company is knitting. In addition, the company also organized into two operating divisions: provides package design, labeling and Ashfield and Sharp. printing services and is a leader in The company operates in the pharmaceutical serialization programs. Packaging and Labeling Services industry Currently, the division employs 1,800 through Sharp, providing contract employees and is estimated to generate packaging services to pharmaceutical industry-relevant revenue of $265.2 clients around the world. The division million in 2019.

Other Company Verst Group Logistics Inc. (Verst), Verst is estimated to employ over 1,547 Performance currently based in Walton, KY, is a large people. Business operations are logistics and packaging company. The separated into fulfillment, packaging, company was started in 1966 when its transportation and warehousing Verst Logistics Inc. late founder, William Verst, purchased a services. Of these segments, the Market Share: 0.5% warehouse company and pivoted the packaging segment is the business unit business to provide a full line of that generates industry-relevant logistics services. The company now has revenue. In 2019, IBISWorld estimates locations in Indiana, Kentucky, that Verst will generate $51.0 million in Alabama, Ohio and Arizona. Currently, industry-relevant revenue.

Provided to: Autobahn Consultants (2134210691) | 27 October 2019 WWW.IBISWORLD.COM Packaging & Labeling Services in the US May 2019 25 Operating Conditions Capital Intensity | Technology & Systems | Revenue Volatility Regulation & Policy | Industry Assistance

Capital Intensity The Packaging and Labeling Services industry has a low level of capital intensity. Capital Intensity In 2019, the average industry operator is Capital units per labor unit Level expected to invest $0.10 in capital 0.5 The level of capital expenditures for every $1.00 they spend on intensity is Low  labor. Although machinery and technology 0.4 are integral to many packaging and labeling 0.3 processes, the industry still requires labor to supervise the packaging and labeling of 0.2 products. Further, many companies still 0.1 package products manually. Labor input is 0.0 also required at every stage of the quality Economy Administration, Packaging & control process. Nonetheless, capital Business Support and Labeling Waste Management Services intensity is expected to increase over the Dotted line shows a high Services next five years as more industry operators level of capital intensity SOURCE: WWW.IBISWORLD.COM invest in automation technologies.

Provided to: Autobahn Consultants (2134210691) | 27 October 2019 WWW.IBISWORLD.COM Packaging & Labeling Services in the US May 2019 26

Operating Conditions

Technology and The Packaging and Labeling Services identification labels for these purposes is Systems industry has experienced moderate also increasing. Although operators in technological change in recent years. this industry do not manufacture labels Level Operators are increasingly relying on and packaging, technological trends in automation to reduce labor costs. Industry these materials can affect industry The level of companies have an interest in keeping processes. When goods require specific technology change wage costs low because profit margins high-tech labeling (such as pressure- is Medium  have narrowed due to significant price- sensitive bar codes) or packaging (such as based competition. IBISWorld expects the temperature-controlled containers), trend toward automation to continue in industry companies must have the this industry. This trend in automation technological machinery and skilled labor has focused on generating fast, efficient to apply these labels and packages to the and cost-effective solutions for customers. goods. Industry operators are largely Many types of packaging use embracing new packaging and labeling identification codes, bar codes and processes in an effort to bolster profit electronic data interchange to provide margins by offering services with higher and convey product information or other margins and differentiating themselves data relevant to product shipping and from the competition by offering the storage. Usage of radio frequency latest packaging technologies.

Revenue Volatility Over the five years to 2019, IBISWorld exhibited a low level of volatility during estimates that revenue in the Packaging the period. This has worked to moderate and Labeling Services industry has industry revenue volatility by driving Level exhibited a medium level of volatility. consistent growth in revenue during the The level of volatility The industry’s level of volatility is largely period. However, the small size of the is Medium  the result of its dependence on the retail average company in the industry can and consumer industries, which fluctuate contribute to revenue volatility. In due to changes in economic conditions addition, since many companies rely on a and consumer demand. Consumer few clients for the majority of revenue, spending has grown consistently and the loss of a major customer causes

Provided to: Autobahn Consultants (2134210691) | 27 October 2019 WWW.IBISWORLD.COM Packaging & Labeling Services in the US May 2019 27

Operating Conditions

Revenue Volatility significant loss in revenue. Such drastic that end a contract often opt to package continued losses (and potential gains) can add to and label internally as opposed to the overall level of revenue volatility in funneling that potential revenue to other the industry, particularly because clients industry operators.

Regulation and Policy The Packaging and Labeling Services This regulation went into effect for non- industry is not heavily regulated. While small human and pet food producers in regulation of this industry is light, the 2016 and in 2017 for small producers. Very Level & Trend federal government regulates all small producers (defined as making less The level of packaging and labeling requirements. The than $250,000) were required to be Regulation is Fair Packaging and Labeling Act (FPLA) compliant at the end of 2018. Medium and the and other federal laws and regulations The Drug Quality and Security Act trend is Steady  govern the labeling requirements for most (DQSA), signed in 2013, has also had a consumer products; state laws may also material effect on the industry. Relevant apply to packaging and labeling standards to this industry, is Title II of DQSA, the for many products. However, the burden Drug Supply Chain Security Act (DSCSA), of ensuring that all FPLA requirements which outlines the creation of an electronic, are complied with largely falls on the interoperable system to identify and trace product’s manufacturer, not the third- certain prescription drugs as they are party labeler. distributed in the United States. As part of The Food and Drug Administration the act, manufacturers, wholesale (FDA) is a key regulating agency because distributors, dispensers and third-party it administers all food and packagers will be required to pass, capture pharmaceutical regulations, as well as the and maintain certain information regarding ensuing packaging and labeling each transaction. The implementation of requirements. Operators involved in food product serialization is a specific example of and drug packaging need to register with one of the many components of this the FDA, and any package components collaborative system. As a result of this that may contact the food must comply legislation, the process of packaging and with safety regulations. The completed labeling pharmaceutical products is package must also be checked to ensure anticipated to become more complex. that the product is safe for its intended This will continue to motivate more shelf life. The key regulation that is companies to outsource packaging and affecting contract packagers currently is the labeling operations to industry operators Food Safety Modernization Act (FSMA). to focus on their core competencies.

Industry Assistance The industry receives no direct assistance Additionally, the industry receives some from the federal or the local government. assistance through industry associations. However, the government supported For example, the Contract Packaging Level & Trend Small Business Association provides Association, a national trade association The level of financing and loan assistance to certified for contract packaging companies, Industry Assistance small companies. As most operators in promotes the growth and welfare of is Low and the this industry are small, there is a certain member companies. The association also trend is Steady  degree of indirect government support works to set up ethical standards between for small players in the industry. contract packagers and their customers

Provided to: Autobahn Consultants (2134210691) | 27 October 2019 WWW.IBISWORLD.COM Packaging & Labeling Services in the US May 2019 28

Operating Conditions

Industry Assistance and provides relevant financial and Packaging and Contract Packaging, continued political information to member which serve to provide interested companies. Chicago’s Summit Media companies and individuals with the Group also publishes several magazines, most up-to-date industry- and sector- including Packaging World, Healthcare relevant news and information.

Provided to: Autobahn Consultants (2134210691) | 27 October 2019 WWW.IBISWORLD.COM Packaging & Labeling Services in the US May 2019 29 Key Statistics

Industry Data Industry Consumer Revenue Value Added Establish- Wages Domestic spending ($m) ($m) ments Enterprises Employment Exports Imports ($m) Demand ($b) 2010 6,828.3 2,162.4 10,416 10,229 47,048 -- -- 1,582.2 N/A 10,643.0 2011 7,033.3 2,876.9 11,066 10,858 52,990 -- -- 1,976.7 N/A 10,843.8 2012 7,250.7 2,432.4 10,418 10,247 48,883 -- -- 1,859.5 N/A 11,006.8 2013 7,773.8 2,759.3 10,437 10,277 53,244 -- -- 1,966.4 N/A 11,166.9 2014 8,068.7 2,645.4 10,375 10,182 51,373 -- -- 1,943.5 N/A 11,494.3 2015 8,659.2 2,796.5 10,325 10,119 52,669 -- -- 2,017.2 N/A 11,921.9 2016 8,880.9 2,981.6 10,250 10,043 53,420 -- -- 2,129.1 N/A 12,248.2 2017 9,543.9 3,137.7 10,250 10,038 55,022 -- -- 2,202.4 N/A 12,558.7 2018 9,956.5 3,218.8 10,259 10,045 55,932 -- -- 2,244.8 N/A 12,893.6 2019 10,290.6 3,327.4 10,288 10,068 57,131 -- -- 2,295.6 N/A 13,233.1 2020 10,538.9 3,402.5 10,304 10,073 57,784 -- -- 2,324.7 N/A 13,474.0 2021 10,778.6 3,485.2 10,255 10,028 58,742 -- -- 2,364.7 N/A 13,716.5 2022 11,012.0 3,550.7 10,261 10,030 59,446 -- -- 2,395.3 N/A 13,956.5 2023 11,274.6 3,631.0 10,269 10,035 60,395 -- -- 2,435.5 N/A 14,186.8 2024 11,580.5 3,717.5 10,286 10,049 61,369 -- -- 2,477.4 N/A 14,428.0 Sector Rank 18/26 19/26 15/26 14/26 20/26 N/A N/A 20/26 N/A N/A Economy Rank 507/694 483/694 308/694 280/694 418/694 N/A N/A 452/694 N/A N/A

Annual Change Industry Establish- Domestic Consumer Revenue Value Added ments Enterprises Employment Exports Imports Wages Demand spending (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) 2011 3.0 33.0 6.2 6.1 12.6 N/A N/A 24.9 N/A 1.9 2012 3.1 -15.5 -5.9 -5.6 -7.8 N/A N/A -5.9 N/A 1.5 2013 7.2 13.4 0.2 0.3 8.9 N/A N/A 5.7 N/A 1.5 2014 3.8 -4.1 -0.6 -0.9 -3.5 N/A N/A -1.2 N/A 2.9 2015 7.3 5.7 -0.5 -0.6 2.5 N/A N/A 3.8 N/A 3.7 2016 2.6 6.6 -0.7 -0.8 1.4 N/A N/A 5.5 N/A 2.7 2017 7.5 5.2 0.0 0.0 3.0 N/A N/A 3.4 N/A 2.5 2018 4.3 2.6 0.1 0.1 1.7 N/A N/A 1.9 N/A 2.7 2019 3.4 3.4 0.3 0.2 2.1 N/A N/A 2.3 N/A 2.6 2020 2.4 2.3 0.2 0.0 1.1 N/A N/A 1.3 N/A 1.8 2021 2.3 2.4 -0.5 -0.4 1.7 N/A N/A 1.7 N/A 1.8 2022 2.2 1.9 0.1 0.0 1.2 N/A N/A 1.3 N/A 1.7 2023 2.4 2.3 0.1 0.0 1.6 N/A N/A 1.7 N/A 1.7 2024 2.7 2.4 0.2 0.1 1.6 N/A N/A 1.7 N/A 1.7 Sector Rank 3/26 3/26 22/26 22/26 11/26 N/A N/A 11/26 N/A N/A Economy Rank 108/694 135/694 458/694 447/694 221/694 N/A N/A 231/694 N/A N/A

Key Ratios Imports/ Exports/ Revenue per Share of the IVA/Revenue Demand Revenue Employee Wages/Revenue Employees Average Wage Economy (%) (%) (%) ($’000) (%) per Est. ($) (%) 2010 31.67 N/A N/A 145.13 23.17 4.52 33,629.48 0.01 2011 40.90 N/A N/A 132.73 28.10 4.79 37,303.26 0.02 2012 33.55 N/A N/A 148.33 25.65 4.69 38,039.81 0.02 2013 35.49 N/A N/A 146.00 25.30 5.10 36,931.86 0.02 2014 32.79 N/A N/A 157.06 24.09 4.95 37,831.16 0.02 2015 32.30 N/A N/A 164.41 23.30 5.10 38,299.57 0.02 2016 33.57 N/A N/A 166.25 23.97 5.21 39,855.86 0.02 2017 32.88 N/A N/A 173.46 23.08 5.37 40,027.63 0.02 2018 32.33 N/A N/A 178.01 22.55 5.45 40,134.45 0.02 2019 32.33 N/A N/A 180.12 22.31 5.55 40,181.34 0.02 2020 32.29 N/A N/A 182.38 22.06 5.61 40,230.86 0.02 2021 32.33 N/A N/A 183.49 21.94 5.73 40,255.69 0.02 2022 32.24 N/A N/A 185.24 21.75 5.79 40,293.71 0.02 2023 32.21 N/A N/A 186.68 21.60 5.88 40,326.19 0.02 2024 32.10 N/A N/A 188.70 21.39 5.97 40,368.92 0.02 Sector Rank 23/26 N/A N/A 8/26 23/26 14/26 16/26 19/26 Economy Rank 312/694 N/A N/A 450/694 263/694 457/694 466/694 483/694

Figures are in inflation-adjusted 2019 dollars. Rank refers to 2019 data. SOURCE: WWW.IBISWORLD.COM Provided to: Autobahn Consultants (2134210691) | 27 October 2019 WWW.IBISWORLD.COM Packaging & Labeling Services in the US May 2019 30

Industry Financial Ratios Apr 2017 - Mar 2018 by company revenue Apr 2014 - Apr 2015 - Apr 2016 - Apr 2017 - Small Medium Large Mar 2015 Mar 2016 Mar 2017 Mar 2018 (<$10m) ($10-50m) (>$50m)

Liquidity Ratios Current Ratio 1.4 1.4 1.5 1.4 1.6 1.3 1.7 Quick Ratio 0.8 0.9 0.9 0.8 1.2 0.7 1.0 Sales / Receivables (Trade Receivables Turnover) 9.1 9.4 10.0 8.8 10.7 8.9 7.5 Days’ Receivables 40.1 38.8 36.5 41.5 34.1 41.0 48.7 Cost of Sales / Inventory (Inventory Turnover) 10.4 11.8 9.4 9.0 12.2 7.8 9.0 Days’ Inventory 35.1 30.9 38.8 40.6 29.9 46.8 40.6 Cost of Sales / Payables (Payables Turnover) 10.9 10.7 11.3 13.1 14.7 13.0 11.7 Days’ Payables 33.5 34.1 32.3 27.9 24.8 28.1 31.2 Sales / Working Capital 17.1 18.3 15.1 16.1 13.9 16.8 12.4

Coverage Ratios Earnings Before Interest & Taxes (EBIT) / Interest 5.8 4.5 5.8 7.8 13.0 6.9 7.2 Net Profit + Dep., Depletion, Amort. / Current Maturities LT Debt 2.6 2.7 2.6 5.2 n/a 8.7 n/a

Leverage Ratios Fixed Assets / Net Worth 0.9 0.6 0.7 0.9 0.6 0.9 1.1 Debt / Net Worth 2.6 2.0 1.9 1.9 1.2 1.8 2.9 Tangible Net Worth 24.7 32.3 14.5 28.9 28.1 33.1 22.3

Operating Ratios Profit before Taxes / Net Worth, % 26.5 27.5 33.0 26.0 30.7 25.0 22.5 Profit before Taxes / Total Assets, % 7.1 9.6 10.6 9.5 15.9 9.5 7.3 Sales / Net Fixed Assets 12.6 16.5 14.7 15.8 24.1 11.8 13.2 Sales / Total Assets (Asset Turnover) 2.6 2.9 2.7 2.4 3.0 2.4 2.2

Cash Flow & Debt Service Ratios (% of sales) Cash from Trading 30.2 28.8 34.1 28.9 37.6 28.7 19.2 Cash after Operations 5.0 5.1 8.1 7.5 8.2 8.2 6.5 Net Cash after Operations 4.7 5.1 7.6 6.2 7.9 8.3 5.6 Cash after Debt Amortization 1.5 1.9 2.6 2.0 2.3 1.8 2.0 Debt Service P&I Coverage 2.8 3.1 3.0 2.9 5.9 2.3 4.2 Interest Coverage (Operating Cash) 6.8 8.7 7.9 10.3 13.4 7.2 15.4

Assets, % Cash & Equivalents 8.8 12.7 12.7 10.0 15.0 9.0 4.8 Trade Receivables (net) 28.1 29.4 29.0 28.6 30.5 27.0 28.8 Inventory 21.2 19.3 18.4 18.8 15.1 22.2 17.7 All Other Current Assets 1.9 1.5 2.1 2.2 0.6 3.3 2.4 Total Current Assets 60.0 62.9 62.2 59.6 61.2 61.5 53.7 Fixed Assets (net) 26.5 26.0 24.6 24.7 24.7 25.0 24.2 Intangibles (net) 7.3 5.2 8.0 11.6 10.7 9.2 17.3 All Other Non-Current Assets 6.1 5.9 5.2 4.1 3.3 4.3 4.9 Total Assets 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Total Assets ($m) 2,408.6 2,117.8 2,508.1 2,425.3 66.0 606.3 1,753.1

Liabilities, % Notes Payable-Short Term 12.7 11.9 9.8 9.1 7.9 12.2 5.3 Current Maturities L/T/D 3.0 3.3 8.5 3.9 3.2 4.4 3.9 Trade Payables 20.4 20.0 19.8 17.7 17.6 17.5 18.2 Income Taxes Payable 0.2 0.2 0.2 0.2 0.3 n/a 0.1 All Other Current Liabilities 9.7 8.4 8.8 9.2 12.0 7.6 8.4 Total Current Liabilities 46.0 43.7 47.1 40.1 41.1 41.7 35.8 Long Term Debt 15.4 12.7 26.4 16.0 16.2 13.0 21.2 Deferred Taxes 0.4 0.2 0.4 0.1 n/a 0.1 0.4 All Other Non-Current Liabilities 6.1 5.9 3.6 3.3 4.0 2.8 3.0 Net Worth 32.0 37.5 22.5 40.5 38.8 42.3 39.6 Total Liabilities & Net Worth ($m) 2,408.6 2,117.8 2,508.1 2,425.3 66.0 606.3 1,753.1

Maximum Number of Statements Used 122 126 120 111 37 48 26

Source: RMA Annual Statement Studies, rmahq.org. RMA data for all industries is derived directly from more than 260,000 statements of member financial institutions’ borrowers and prospects. Note: For a full description of the ratios refer to the Key Statistics chapter online.

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Jargon & Glossary

Industry Jargon ANTISTATIC BAGS A bag used for shipping ON-DEMAND PACKAGING Packaging services that components that can be damaged by static electricity. tailor package design on a per-contract basis. BLISTER PACKAGING Packaging consisting of a solid SHRINK BANDING Packaging consisting of plastic backing with clear plastic formed around the mold of a bands which are heated to shrink and fit tightly around product. an item or items. CLAMSHELL PACKAGING Packaging consisting of SHRINK WRAPPING Packaging consisting of plastic transparent plastic packages with one or more hinges. film that binds loose or packaged goods together for CONTRACT PACKAGING The packaging and labeling transport and display. of goods supplied by manufacturers or importers. Also known as copacking. FIELD RATIONS A prepackaged meal that is easily prepared and eaten by military troops on the battlefield.

IBISWorld Glossary BARRIERS TO ENTRY High barriers to entry mean that IMPORTS Total value of industry goods and services new companies struggle to enter an industry, while low brought in from foreign countries to be sold in the barriers mean it is easy for new companies to enter an United States. industry. INDUSTRY CONCENTRATION An indicator of the CAPITAL INTENSITY Compares the amount of money dominance of the top four players in an industry. spent on capital (plant, machinery and equipment) with Concentration is considered high if the top players that spent on labor. IBISWorld uses the ratio of account for more than 70% of industry revenue. depreciation to wages as a proxy for capital intensity. Medium is 40% to 70% of industry revenue. Low is less High capital intensity is more than $0.333 of capital to than 40%. $1 of labor; medium is $0.125 to $0.333 of capital to $1 INDUSTRY REVENUE The total sales of industry goods of labor; low is less than $0.125 of capital for every $1 of and services (exclusive of excise and sales tax); subsidies labor. on production; all other operating income from outside CONSTANT PRICES The dollar figures in the Key the firm (such as commission income, repair and service Statistics table, including forecasts, are adjusted for income, and rent, leasing and hiring income); and inflation using the current year (i.e. year published) as capital work done by rental or lease. Receipts from the base year. This removes the impact of changes in interest royalties, dividends and the sale of fixed the purchasing power of the dollar, leaving only the tangible assets are excluded. “real” growth or decline in industry metrics. The inflation INDUSTRY VALUE ADDED (IVA) The market value of adjustments in IBISWorld’s reports are made using the goods and services produced by the industry minus the US Bureau of Economic Analysis’ implicit GDP price cost of goods and services used in production. IVA is deflator. also described as the industry’s contribution to GDP, or DOMESTIC DEMAND Spending on industry goods and profit plus wages and depreciation. services within the United States, regardless of their INTERNATIONAL TRADE The level of international country of origin. It is derived by adding imports to trade is determined by ratios of exports to revenue and industry revenue, and then subtracting exports. imports to domestic demand. For exports/revenue: low is EMPLOYMENT The number of permanent, part-time, less than 5%, medium is 5% to 20%, and high is more temporary and seasonal employees, working proprietors, than 20%. Imports/domestic demand: low is less than partners, managers and executives within the industry. 5%, medium is 5% to 35%, and high is more than ENTERPRISE A division that is separately managed and 35%. keeps management accounts. Each enterprise consists LIFE CYCLE All industries go through periods of growth, of one or more establishments that are under common maturity and decline. IBISWorld determines an ownership or control. industry’s life cycle by considering its growth rate ESTABLISHMENT The smallest type of accounting unit (measured by IVA) compared with GDP; the growth rate within an enterprise, an establishment is a single of the number of establishments; the amount of change physical location where business is conducted or where the industry’s products are undergoing; the rate of services or industrial operations are performed. Multiple technological change; and the level of customer establishments under common control make up an acceptance of industry products and services. enterprise. EXPORTS Total value of industry goods and services sold by US companies to customers abroad.

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Jargon & Glossary

IBISWorld Glossary NONEMPLOYING ESTABLISHMENT Businesses with WAGES The gross total wages and salaries of all no paid employment or payroll, also known as employees in the industry. The cost of benefits is also continued nonemployers. These are mostly set up by self-employed included in this figure. individuals. PROFIT IBISWorld uses earnings before interest and tax (EBIT) as an indicator of a company’s profitability. It is calculated as revenue minus expenses, excluding interest and tax. VOLATILITY The level of volatility is determined by averaging the absolute change in revenue in each of the past five years. Volatility levels: very high is more than ±20%; high volatility is ±10% to ±20%; moderate volatility is ±3% to ±10%; and low volatility is less than ±3%.

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