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Unpacking 2018

By AICC Staff

February 6, 2018

No one can predict what 2018 might bring to individual converters, printers, and their partners in the box industry. Yet, despite the fact that the industry is currently experiencing a time of relative stability, there are challenges and changes ahead that will likely affect every AICC member in one way or another, including the growth of new markets, shifts in technology, the potential for rising costs, and the ongoing need to hire and retain a quality workforce.

Overall Optimism

Tim Harris, partner and CEO at Michigan-based digital printer ColorHub, sums up the general feeling of optimism regarding the current state of the industry: “The market is very strong right now,” he says.

“Companies have to find other channels to entice the customer. There’s a big surge away from brown boxes to ‘feel-good’ boxes.”

— Tim Harris, partner and CEO, ColorHub

Chris Castleberry, president of Tennessee-based Knox Box, seconds that, adding, “It’s a stable industry, and I’m cautiously optimistic for the near future.”

Part of that optimism is due to the growing maturity of a market segment that did not even exist 20 years ago.

“One of the biggest things that we’re seeing for 2018 is the emergence of e-commerce, with the retailers getting more sophisticated,” says John Van Allen, vice president of Oregon’s Northwest Paper Box. “Some are national and multinational, like Amazon, but there are smaller ones offering lots of opportunities, too. And then there’s the subscription-box business, which is growing significantly. We’re getting two or three inquiries a day from people who think they’ve got the next great home-delivery idea.”

Harris agrees. “I think the biggest thing I see in 2018 is growth in e-commerce packaging and graphics-based e-commerce packaging.” He also sees opportunities that extend beyond the sheer increase in corrugated volume driven by the Amazons and subscription-box services of the world. These are opportunities for doing more than simply providing the box that delivers the product to a customer’s home.

“There’s speculation—some anecdotal information—that we’ll see additional price increases coming from the bigger mills in 2018.”

— Chris Castleberry, president, Knox Box

“With e-commerce becoming such a big part of our lives—and with TV dying in the traditional sense, as is most of the printed media we used to look at—advertising is significantly changing,” Harris points out. “Companies have to find other channels to entice the customer. There’s a big surge away from brown boxes to ‘feel-good’ boxes”—that is, corrugated products that include features more typically produced by folding carton and rigid box manufacturers. “It’s become a lot more about the experience of opening the package that you purchased online.” Part of what will make that experience more delightful is a greater reliance on printing.

Digital Rising

Harris believes that the reliance on digital printing will only increase. “Graphics production as we know it is changing,” he says, “and analog technologies are going to be used less for our high-end graphics. Today, digital is definitely higher-quality than flexo printing. Oftentimes it’s comparable to offset printing. Digital is not quite there yet for corrugated in terms of finishes, but I believe that’s coming.”

width=300“Specifically,” he continues, “I think the next few years are going to be very good for digital single-pass printing. As far as I know, there’s only one manufacturer that has a commercially viable single-pass machine, but in 2018 more will be hitting the market. At ColorHub we have a single-​pass digital press that has a fixed array of heads all the way across the transport system and prints 180 feet a minute. It’s completely revolutionary in terms of what we’ve been doing.”

Castleberry also sees continued growth in digital printing. “I think we’re getting closer and closer to digital printing being a production reality,” he notes. “Everyone’s waiting for that to manifest itself in day-to-day production, and I don’t think we’re quite there yet. But digital is something I think everyone agrees is going to be the norm as we evolve away from flexo.” Still, “I don’t have any near-term prediction for that happening in 2018.”

“We are reading and seeing more about the digital world,” Van Allen adds, “and we’re getting requests for shorter and shorter runs with more color, and it’s not just in displays.” As a result, digital is seen at this point as “the impact player.” That shows no signs of slowing down. “Every three months we hear about something more exciting than there was three months before.” While recognizing the value and increasing popularity of digital printing, Van Allen is not convinced that the days of traditional printing are numbered. “Flexo is alive and well,” he says. “It’s not going away.”

Castleberry believes digital is only one part of the conversation when discussing technology’s future impact on the industry. “We’re seeing an evolution toward more intelligent equipment overall. As equipment ages out and becomes less justifiably maintainable, it’ll be replaced by machines that are more intelligent. We expect equipment in general within the industry to get smarter.”

Challenges Ahead

Castleberry, Harris, and Van Allen all believe that the opportunities in 2018 far outweigh any of the anticipated challenges. That doesn’t mean there is no room for improvement over the next year.

“Most corrugated manufacturers here in the Northwest are pretty well-equipped and similarly equipped,” Van Allen says. With most operations not looking for major changes in equipment or market needs, he adds, “I think the main challenge is going to be figuring out how to do more just-in-time programs, with shorter runs.”

“There’s speculation—some anecdotal information—that we’ll see additional price increases coming from the bigger mills in 2018,” notes Castleberry. “We do have some anxiety over that. If that does happen, it’s something we’re going to need to communicate effectively to our customers, which can create some flux.”

“My biggest concern is that we don’t know what’s going to happen with the economy in 2018,” says Harris. “Obviously, we never know what’s coming. But right now things are very good in the packaging industry. Consumer sales are doing well, and that really helps drive our industry. So ColorHub doesn’t have any major concerns at the moment. That could change as the economy changes.”

Speaking of Changes

Economic changes remain a future unknown. But one other significant change has been growing over the last 15–20 years, and its impact—to varying degrees—already is being felt throughout the industry.

“I think our industry as a whole has an image problem, which leads us all to have a problem with hiring and retaining employees,” says Van Allen. “It’s not always the easiest or cleanest work, and there are lots of businesses vying for people to work an eight-hour day who can pass drug tests. It is a challenge to hire and retain employees in a business that’s not all that sexy.”

“I think our industry as a whole has an image problem, which leads us all to have a problem with hiring and retaining employees.”

— John Van Allen, vice president, Northwest Paper Box

ColorHub, which, unlike many other printers, began as a digital-only shop, is in a more positive position. “I believe we’re fortunate, in that a lot of traditional print shops are closing or shrinking because demand for traditional print is getting lower,” Harris says. While that may initially sound harsh, that decreased reliance on traditional printing companies has meant that their now laid-off employees—who are equipped with industry knowledge and experience—are suddenly available for hire. “There’s a lot of people out there in the print trade who are looking for opportunities. Us being completely new technology is exciting and captivating to people, so we’ve been fortunate in being able to attract people. It puts us in a unique situation.”

While admittedly being part of the “nonsexy” side of the industry, Castleberry is not overly concerned about the industry’s appeal—or lack thereof—for younger workers.

“I’ve heard that some young people aren’t interested in our industry in a general sense. But I feel that will be self-correcting over time. I mean, there’s only so much bouncing around someone can do when looking for employment that has ‘the right vibe’ to it. There will always be a need for blue-collar-type work.” He believes that, eventually, young people will gravitate to blue-collar jobs once they accept the reality that they simply need a good job, even if it may not be their dream job. “In time, someone with a different skill set will have to come to terms with working in a less-than-sexy industry,” he says.

Nevertheless, Van Allen remains concerned.

“The image among potential employees is that it’s hard work, it’s not upwardly mobile, it’s not very sophisticated. I think millennials want flexibility in work, time, their hours, those types of things. They’re asking how much personal growth is possible as opposed to just working an eight-hour-a-day job. They read about the Googles and Amazons that have pingpong tables and a campus where people can just come and go and work when they want to. In manufacturing, though, your machines can’t sit around waiting. Those machines need to work during an eight-to-10-hour day.”

In addition, his company is competing with larger, better-known companies for staff. “We do have some large distribution centers here in the greater Portland marketplace that are sucking up a lot of employees, even if they’re temporary.” It also has been challenging to find people who are able to file an I-9 Employment Verification form.

And then there’s the new wrinkle that seems likely to affect more and more operations in 2018 and the years ahead: the increased community acceptance of—and local legalization of—marijuana.

“The Northwest is right in the throes of the marijuana world,” Van Allen says. Regardless of pot’s legality, he is committed to enforcing entry drug tests and random screenings to keep his shop safe, even if that negatively impacts Northwest Box’s ability to attract and retain some workers.

Marijuana use remains evident in drug tests for up to 30 days, even though its effects will have long since passed. Van Allen cannot help but wonder if this lengthy waiting period for the drug’s traces to leave the body is keeping some potential, conscientious employees from even applying for a position.

“Unfortunately, our equipment doesn’t care if you’re stoned or sober. Either way, it still has the potential to cut your arm off. Forklifts can tip over. We believe safety is pretty important in our world. [Marijuana] may be legal by state statutes, but that doesn’t mean it’s legal or acceptable in our work environment. We have had lots of conversations with our management group about this topic. We haven’t got a perfect solution yet.”

No matter what surprises 2018 may deliver, it is clear that AICC members have the skills necessary to successfully adapt their business and their products to explore every available opportunity and meet whatever challenges the future holds.

PortraitRobert Bittner is a Michigan-based freelance writer and a frequent contributor to BoxScore.