Key Trends Driving the Digital Evolution of the Label Industry

Cory Francer, analyst at NAPCO Research, dove into some of the major trends in label converting and printing at PRINTING United Expo 2024. | Credit: Packaging Impressions

According to research from the Freedonia Group, the demand for labels in the United States is expected to grow to $20.6 billion by 2025. So, as the label industry continues to grow and change, it is essential for printers and converters to stay abreast of the latest technologies and trends.

To help label printers and converters keep up with these ongoing trends, the NAPCO Research team has conducted several surveys to identify the major trends in the label segment, expectations for the future, and strategies for staying at the forefront of the segment. One of the themes throughout has been the uptake of digital printing technologies.

“Flexographic print is by far the dominant technology in the label space — narrow-web flexo — But we really see everything in the label industry,” Cory Francer, analyst at NAPCO Research, said during a session at PRINTING United Expo 2024 in Las Vegas, Nevada. “... The label space really has been a leader when it comes to digital adoption in packaging.”

Here are some of the key trends impacting the label industry that Francer shared during the session.

Label Versioning and SKU Proliferation

One of the most significant drivers of change in the packaging and label industry is the growing variety of products brand owners are putting on shelves. Notably, responses from the “Trends and Expectations in Label Printing and Production,” a 2022 NAPCO Research report, indicated that 72% of label printers and converters produced at least 20% more label versions over the past two years.

When asked why they saw version growth, customer awareness and use of digital printing technologies was cited by 43% of respondents. Additionally, 38% of respondents said that SKU proliferation among existing customers was also driving version diversity.

To address this growth, 35% of respondents said they invested in digital printing equipment.

“With this increase in SKUs, the complexity that label printers have to contend with has really increased,” Francer said. “That's a lot of data to manage, that's a lot of changeovers to think about, that's a lot of different graphics and text to consider. So when you think about the impact that's having here, it's a great testament to what digital printing can do.”

Brand owners don’t expect SKU proliferation and versioning to slow down anytime soon. Per the “Digital Packaging: Opportunities to Thrive” report, a 2023 NAPCO Research endeavor, 60% of brand owners said they anticipate their number of SKUs to increase over the next 24 months. This is a 19-percentage-point increase from the 41% of brand owners who reported an increase in SKUs over the previous two years.

Shorter Runs and Quicker Turnarounds

Tying into the growth of label versioning, brand owners are more often seeking shorter runs and quicker turnarounds on label jobs. When asked why they anticipate SKU growth over the next 24 months, 39% of brand owners in the digital packaging report cited the availability of printing technology that enabled cost-effective short runs — i.e., digital printing.

This is being felt by label converters and printers: 38% of those who participated in the 2022 survey said versioning increased over the past 24 months due to an increase in short-run orders with faster turnaround times.

According to the digital packaging report, brand owners anticipated increased versioning because of an uptick in limited edition products (36%), shorter production development cycles and life cycles (36%), and the ability to produce packaging on-demand (27%).

This is especially true for brands that are smaller or in certain industries. Francer explained that consumers often want to support these brands, which range from craft breweries and boutique pet products to cannabis and CBD companies.

“These are the types of brands that need those short runs, those low-volume production runs [that digital technologies facilitate],” he said. “They want to change designs quickly. They want to do seasonal releases. They don't want to be tied down to a specific design or static text. Maybe they're facing changing regulations, like in the growing cannabis market, for example, and they need that quick turn of a label with new text or a new graphic to reflect that.”

Sustainability

Having become a high priority across the printing industry over the past several years, sustainability is certainly one of the key drivers of change in the label industry.

A third of brand owners placed sustainability and environmental goals within their top five packaging challenges, and 62% of printers and converters said customer demand for environmentally friendly packaging is on the rise, according to the digital packaging report.

Digital printing technologies support both brand owners and printers and converters looking for sustainable options. In fact, 24% percent of packaging printers and converters reported in the digital packaging survey that sustainability is one of digital’s top five benefits.

“I hate to even call [sustainability] a trend because it's not a trend. It's reality,” Francer said. “This is what's happening, and printers and converters and brands and retailers need to be focusing on sustainability as they continue to think about the labels that they're procuring and how they're producing it.”