Regulars / M&A | 29Greatest risks facing label and packaging companies in 2023Infation, stafng challenges, material shortages and environmental considerations are a few of the challenges and opportunities facing label and packaging businesses in 2023, writes Bob Cronin of The Open Approachunning a proftable labels or packaging business “The greatest risks are those takes a lot of savvy. Over the past year, market dynamics did some of the work for us. Infation, Rthat we aren’t prepared for”staffng challenges and continued consolidation afforded us the luxury of raising prices, extending manufacturing times and balancing the industries you’re doing business and increasing customer tolerance for any encountered issues. with. If you’re heavy in retail or hospitality (which are Material shortages, while troublesome, created a magic storm typically hit hard by recession), focus prospecting efforts that produced volume and demand beyond any other growth in industries more resilient to rising costs and interest rates year. Indeed, 2022 was quite favorable and we have much to be (such as healthcare and pharma). grateful for. Customer demands — Widespread supply chain As we delve into 2023, we need to readjust. While risks issues and material shortages made customers more are a given, they change based on emerging trends, customer accommodating, and to some extent, more loyal. As capacity expectations, and other internal and external infuences. Every and material return, so will price, service and competitive leadership team needs to stop and evaluate current circumstances pressures. Additionally, customers’ own budgetary challenges will and how they may impact your business, strategic plan enter into demands.and trajectory. Expect to have some pushback on estimates as The greatest risks are those that we aren’t prepared for. companies tighten their belts. And don’t be surprised to see Let’s look at the top six risks of 2023 and how we can recession-unprepared competitors throwing in unrealistically address them: low bids.Skilled labor and staffng — Finding new, skilled (and We’ll need to get back to positioning ourselves as value-added hard-working) employees remain a challenge. In our post-Covid solutions partners and keep the emphasis off price. Get a jump start world, many employees still want — and expect — to work on this, show your customers why they need you specifcally, and remotely. In manufacturing, this simply isn’t possible. We need pursue contracts that shield you from these changing demands.people at our plants running equipment and making products. Sales — Expect also to see customers wanting more face time. The physical presence of customer service, product design and Zoom meetings were great when there was no other possibility. estimating is also integral. But our business is highly technical, requiring planning, design Manufacturing has never been considered a glamorous industry, and testing that delivers customer confdence. These activities are and perhaps the last time we saw a television character in a optimized by close communication. Find out customers’ current manufacturing job was ‘Laverne & Shirley’. But there is no reason health protocols and bolster your relationships through more to perpetuate the stereotype. Our industry is thriving, and our in-person visits and interactions. Be prepared with ideas technologies have delivered some of the most intriguing and and opportunities that help them avert current risks and build high-profle innovations in food and beverage, pharmaceuticals, their businesses.healthcare, automotive and other venues. We have enormous ESG considerations — ESG (Environmental, Social and growth opportunities and investment infux. Namely, great Governance) is a framework for organizational consciousness excitement and energy surround our business, and we must that businesses are increasingly looking for in their vendors. ESG showcase these on our websites, social media, and other platforms measures are also being called for by new government regulations to attract talented labor and new industry entrants. (both state and federal). Hiring pressures will continue to strain all label and packaging Label and packaging businesses will need to start adapting for companies, so competition for talent will be ferce. Your biggest ESG demands if they have not yet done so. As such investments risk will be losing existing staff. Beyond the fnancial costs, the can be costly, you’ll need time to evaluate which measures are impact on morale, productivity and customers can be signifcant most valuable to your business and customer territories and give — and spur ongoing exits. Make 2023 the year to implement strong you the greatest ROI.retention measures that resonate with your unique employees. With market dynamics changing, 2023 may also be a time to Infation — Infation has been a friend for many of us. It has consider an acquisition, a company sale, or a strategic partnership. given us dollar-sales-per-press-hour increases along with margin Regardless of your trajectory, preparing your business for these 6 expansion. But it’s slowing in the US and is expected to decline risks is critical. What you do now can avert these risks and best globally over 2023 and 2024. position your company for the future. Thus, we’ll need to upsell, cross-sell, increase volumes and customers, expand capabilities, etc., to increase revenues. Namely, Bob Cronin is Managing Partner of The Open we’ll have to go back to getting growth the hard way — earning it. Approach, an M&A consultancy focused This makes skilled labor and staffng that much more important.exclusively on the world of print. To learn Additionally, label and packaging companies need to brace more, visit www.theopenapproach.net, email themselves for the risk of a recession, which is predicted to set in bobrcronin@aol.com, or call (+1) 630-542-1758by mid-year. This means evaluating your customer concentrations Jan - Mar 2023