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New Year, New Opportunities

By AICC Staff

January 30, 2019

“There is no crystal ball showing the way ahead for converters and their suppliers in 2019. Yet, industry leaders feel confidently optimistic that the new year will deliver fresh opportunities and innovations, along with some familiar challenges. “It’s a good time to be in corrugated packaging,” says L.J. Hudson, vice president of sales and marketing for Jamestown Container Cos. “It ebbs and flows like everything else, but it’s a great time to be part of the industry, all the way through the supply chain.”

The Box Boon

Not surprisingly, Amazon and the overall rise of e-commerce has been a boon to box companies. And it is only expected to grow and expand over the coming year.

“I believe, like everybody else, that e-commerce will continue to play a major role in dictating packaging trends and requirements for 2019,” Hudson says. “In addition to Amazon, there is a whole new sector of online businesses in need of packaging. These customers need to be provided a solution at a reasonable cost while they build their business. It’s bringing a meaningful change to our industry.”

With that change comes a challenge, Hudson notes. He believes that meeting the needs of online businesses—from Amazon to the smallest Etsy shop—will necessarily change the way box companies do business, “slightly for some companies and more significantly for others,” he says.

“You’ve got to be able to satisfy the packaging requirements for a small-to-medium up-and-coming company building e-commerce business while also serving the medium-to-large traditional corrugated users,” he points out. “The economics to provide the required solutions can be complicated.”

Those economics can be especially tricky due to the inherently volatile nature of online businesses. Without the commitment of storefront or lease, online sellers can come and go without warning. “There are industries out there that are changing and even going away,” notes Martha Haddon, owner and secretary-treasurer for Packaging-Atlanta. “They may even disappear altogether in 2019. The trick is to identify the ones that won’t be here long and find the ones that are going to really thrive in the coming years. For every business or industry going away, there’s at least one—if not many more—emerging. The balance is to take care of the customers you’ve had for years while always acquiring new ones.”

Doubt About Digital

One question that continues to arise with each new year is, “Is this the year that digital printing finally breaks through and replaces mechanical presses?” For those we spoke to, the answer for 2019 is a clear “no.”

Greg Jones, vice president of global sales and aftermarket for SUN Automation Group, says, “People have wondered what’s going on with digital technology and where it’s going to take us. Our stance is, no, digital is not going to replace flexo in 2019—or even in our lifetime. It’ll replace some flexo, but not all. I know some people felt like digital was going to be the end-all solution for every problem. It’s not. But it will continue to evolve. In what ways and how fast? I don’t think anyone clearly has their head around that yet.”

“I think digital printing on corrugated has been overhyped,” adds Bernie Lacy, vice president of Litho Press Inc. “It may not be [in] 2019, but digital printing is going to be found to be not effective in the corrugated display industry. People are going to realize that the best value is in the way they’ve been doing it for the last 50 to 60 years.”

Lacy stresses, however, that he is no digital curmudgeon. For him, the debate comes down to a simple question of what is practical and affordable. “Don’t get me wrong: We offer digital printing in addition to offset printing. We don’t care whichever way the industry goes. But the manufacturers of digital presses have been saying their technology eliminates the need for offset printing. That just doesn’t make financial sense. The corrugated market is so competitive; I really don’t think their clients will pay a dollar for a digital display if they can get an offset display for a quarter, even if the digital looks better.

“The digital-only guys are big in other industries, and they’re trying to figure out how to break into corrugated because it’s such a large industry. We keep investigating, but I don’t think 2019 will be the year they break through.”

“People are going to realize that the best value is in the way they’ve been doing it for the last 50 to 60 years.”

— Bernie Lacy, vice president, Litho Press Inc.

Challenges and Changes

Just as the digital debate seems destined to remain for the foreseeable future, so do some of the industry challenges that have come to the fore in recent years.

“Probably the biggest pressing issue for our business and the industry is the labor situation,” Haddon admits. “Finding people with a good work ethic in the next generation was challenging even before the economy got swinging again. But now, unemployment rates are so low that good people are next to impossible to find—especially people with press or machine experience. Trying to find qualified people who will work for a wage that equates to their skill set is extremely challenging.”

Jones agrees. “I think the biggest industry challenge is staffing and figuring out how to leverage the skill sets of Gen X and Gen Y in the corrugated industry,” he says. “That’s going to be an interesting ride.”

For Jones, the labor situation is starting to create additional challenges for box plants and the OEMs that supply them. “[Plants are] looking for products to be more maintenance-friendly, even to the point of doing preventive maintenance while the machine is running,” Jones explains.

“This ties into the ongoing challenge of staffing. Plants want a simplified approach to maintenance because they are losing experienced staff to retirement and have no experienced staff to replace them. For suppliers and the box plants alike, staff is at a premium.

“We’re meeting with OEMs across the globe, and a lot of them have been successful at placing their equipment in the States. The problem is that the plants here are finding they don’t have the infrastructure to support that equipment. So the converters are looking to the supplier to help support the equipment. That’s going to continue to be an issue. I think OEMs in general will have to provide equipment solutions that are more intuitive and operate more like an iPhone than traditional corrugated machinery.”

Hudson also notes that “it’s getting harder to find qualified individuals” and that it is “challenging to bring younger people into the industry,” yet he remains optimistic about 2019. “I’m hopeful [the labor situation] will change in the near future,” he says. “There are more packaging programs specifically about corrugated at the college and university level, and the work of AICC and ICPF and others is helping.”

While staffing issues seem to be an ongoing and universal challenge, there is less consensus regarding some of the other critical elements of the box business.

“I think we’ll continue to see consolidation,” says Hudson. “That is always going on behind the scenes, and I think it will continue at a fairly rapid pace.

“I also think we’ll continue to see partnerships—either formal acquisitions or informal arrangements—that allow corrugated manufacturers to get into other sectors of the market, maybe shipping supplies, assembly, or fulfillment services. They’ll partner to provide a more comprehensive solution. The goal is to provide for your customers and deliver to your customers. It doesn’t all have to happen under one roof.”

Haddon adds, “As the economy continues to improve, we’re probably going to see raw material price increases. I’m an old supply-and-demand die-hard; I can appreciate when the limited supply of materials drives a price increase. But if supply is cut back to drive a price increase in response to the improving economy, that’s something else. Whatever increases may come, they should be warranted rather than demanded.

“For 2019, I’m also concerned about employee retention and everything that ties into that,” she continues, noting the challenge of offering benefits that encourage employee retention. “That includes trying to keep health care costs down and keeping other benefit costs manageable so you can offer competitive—or even generous—benefits.”

“I think the biggest industry challenge is staffing and figuring out how to leverage the skill sets of Gen X and Gen Y in the corrugated industry.”

— Greg Jones, vice president of global sales and aftermarket, SUN Automation Group

Creative Converters

Every new year offers the chance to start fresh, work smarter, and think more creatively. Haddon believes that kind of approach will typify 2019. “I think we’re going to see the industry continuing to innovate in terms of creative packaging—but also in terms of service, going above and beyond for customers,” she says.

“I think everyone’s going to keep looking at ways to be more efficient, whether by reducing paperwork, processing orders faster, or use of technology,” she continues. “The time spent on repetitive or inefficient tasks can really add up. At Packaging-Atlanta, we’re always looking at ways to improve our technology for the sake of productivity as well as for increase in employee morale. After all, most people would rather spend less time on mundane tasks. Trying to keep up with the speed of technology or even getting ahead of it is getting more and more difficult, but it’s also a fun challenge and exciting as well.”

To work toward that, Packaging-Atlanta is committed to training in 2019. “We continue to train, train, train,” Haddon says, noting that well-trained employees are better equipped to innovate and approach challenges creatively. “Training keeps our employees engaged, so they’re active participants. Having a knowledgeable workforce creates a positive environment and provides more options for everyone.”

Future Promise

Despite the challenges and the unknowns, 2019 is looking like a very promising year to these industry veterans.

“The only real challenge I’m expecting at this point is in keeping up with a growing industry,” Lacy says. “I’m optimistic.”

Haddon shares that perspective. “As a small-business owner, I’m very optimistic for 2019 and beyond,” she says. “I appreciate an economy that is allowing companies to succeed and experience growth, and I think the industry is on a good track. Hopefully, that will continue.”

Robert BittnerRobert Bittner is a Michigan-based freelance journalist and a frequent BoxScore contributor.