Mid-Year Economic Report  

Editor’s Take: Due to economic uncertainty and global challenges, North American label converters are operating with caution as they prepare for the future.

While technological advancements have never been greater in the label and package printing industry, global events are curbing growth across the board. Inflation, tariffs, and wars, to name a few factors, are impacting growth numbers in all areas of the world. 

AWA Alexander Watson Associates notices a slowdown in many markets because of these obstacles. “Due to economic headwinds, over-leveraged balance sheets, and a variety of global events, uncertainty prevails,” explains Corey Reardon, president and CEO, AWA. “This is driving further consolidation (M&A), rationalization, and financial instability with weaker enterprises.

“The market outlook for the label market remains modest overall, with growth expected to be tempered by subdued economic activity and protectionist measures,” adds Reardon. “It is anticipated that growth in RFID and other smart and intelligent technologies will be a growth driver moving forward.”

According to TLMI, there are numerous factors impacting the short- and long-term health of the industry. “Sustainability has moved from a talking point to a requirement, with brands and regulators pushing recyclable materials, linerless formats, and lower waste production,” states Dale Coates, president and CEO, TLMI. “At the same time, digital printing is fundamentally changing how work flows through converter plants with more short runs, faster turnarounds, and a lot more SKU complexity driven by e-commerce and personalization. Pressure sensitive still dominates, but the real shift is that labels are no longer just identifiers. Labels are becoming a core part of packaging strategy, tied to compliance, branding, and supply chain performance.”

There are other trends top-of-mind for brands and converters alike. For example, Sunrise 2027 calls for the transition from traditional UPC barcodes to 2D codes by the end of 2027. “Sunrise 2027 is going to impact a large majority of the labels in the market,” explains JC McKay, president, FLAG. “A lot of those codes are serialized and carry variable data, which might lead to more digital or hybrid adoption as the market changes. Between that and brands looking for shorter runs with more SKUs, digital keeps growing.”

Due to various challenges, the label and packaging printing industry is operating in what LPC, Inc. would define as a “major recalibration mode.” In its latest LPC Trendline research, 58% of converters told the firm they were proceeding cautiously with planned press and press auxiliary equipment purchases, while only 3% said they were actually pausing or canceling investments.

“Converters are still investing, they’re still buying presses and looking at new technology, but companies are applying a much more detailed diligence process to every investment decision,” says Jennifer Dochstader, founding principal, LPC, Inc. “We speak with label converters nearly every day, and we’ve seen the conversation shift from, ‘How much more capacity can we add?’ to, ‘How much more productive can we make the capacity we already have?’ Converters are looking for shorter payback periods on press investments than ever and when they buy a press, it’s either to support a clearly defined opportunity or deliver a measurable improvement in margins.”

Converters are operating in a much more complex environment than they were even five years ago, notes Duane Pekar, president and CEO, Mark Andy. “Margin pressure remains persistent, driven by fluctuations in raw materials, freight, energy, tariffs, and broader supply chain instability,” he states. “The geopolitical environment has become a more direct business factor, adding another layer of uncertainty to planning and investment decisions.

“Labor continues to be one of the most significant structural challenges facing the industry,” continues Pekar. “Skilled operators are difficult to find, and the expertise required to run modern equipment takes time to develop. This creates a gap between the increasing sophistication of press technology and the available workforce.”

“As compared to the last 5-10 years, I see the industry becoming more polarized between converters and suppliers that stay transactional and those that evolve into more integrated, higher-value partners,” adds Coates. “Growth in label is still there, but it’s not going to come as easily. Label producers are going to have to earn market share through efficiency, automation, and smarter use of technology.”

From an economic standpoint, M&A remains a hot topic in labels and packaging. Even with M&A activity slowing down recently, the impact has been felt. “One of the biggest trends is still consolidation,” remarks McKay. “Private equity has spent the last several years buying up independent converters, and every year the number of true independents gets a little bit smaller. Everything downstream feels it. How brands are buying their labels, how suppliers are selling, and how an independent converter ends up competing for the same work as a consolidator. This is an area where the independents have a substantial advantage, despite not being as large, because they can make quick decisions and personalize the customer experience, with that being the number one focus versus the bottom line.

“The roll-ups aren’t finished, even though they’ve slowed down a bit,” adds McKay. “But with those roll-ups comes opportunity, and we’re seeing this already in the market. Independent converters are winning more work and picking up customers because the ‘big guys’ are dropping the ball. Most of the time, an acquisition comes with a capital infusion and a promise that nothing will change. But things do change, and the customer feels it. We’re seeing it with our members every week. Another big company gets bigger and another layer is added between them and their customers. They feel that and the trickle down effect is happening right now and will continue to happen. So, what we’re anticipating, and betting on, is that the converter’s edge gets more valuable as the market consolidates, not less. When markets are so volatile, like they are in 2026, it’s hard to forecast longer term and being able to move quickly in the best interest of the customer is a real competitive advantage.”

Despite economic uncertainty, the label industry has entered a new era, states Pekar. “This era is being defined by productivity, not capacity,” says Pekar. “Converters are still investing, but the nature of those investments has fundamentally changed. Today, capital is being deployed with a direct focus on improving throughput, reducing waste, simplifying operations, expanding application range, and offsetting labor constraints.

“A press no longer earns its place on the floor simply because it can print well,” continues Pekar. “It has to make the entire operation better. It has to reduce make-ready time, eliminate bottlenecks, improve repeatability, and allow more jobs to move through the plant with fewer manual touchpoints. Productivity is no longer an outcome. It is the strategy.”

As evidenced by Labelexpo’s transition to LOUPE, label and package printing converters are increasingly expanding their book of business. Formats such as flexible packaging and folding cartons are making more of an impact than ever before. This trend will not slow down, either. “The definition of a label converter is expanding,” remarks Pekar. “Growth is increasingly coming from adjacent applications such as shrink sleeves, pouches, cartons, and other specialty formats. That shift is driving demand for flexible production platforms that can manage greater complexity without increasing operational burden.”

Global Factors

There are numerous factors impacting label and package printing across the globe. “Sustained geopolitical challenges, tariff uncertainty, and cautious capital investment continue to create a difficult backdrop,” states Danny Scales, technical support and sales manager, Heaford US. “Economic pressures are reinforcing a more cautious and pragmatic approach to investment. Converters are under pressure to protect margins while still increasing throughput.”

“It feels like we’ve moved from a pretty predictable environment with steady growth pre-Covid into one that’s a lot more dynamic and pressured from all sides,” adds TLMI’s Coates. “Cost structures are simply less stable now. Raw materials, labor, and financing have all gotten more expensive, and you can’t expect those inputs to behave the way they did even a few years ago. At the same time, demand hasn’t gone away, but it’s becoming more fragmented with shorter runs, less predictable ordering patterns, and more SKU complexity. Layer on top of that the lingering effects of supply chain disruption and tariffs, and you’ve got an operating environment where volatility is just part of day-to-day business.”

According to AWA, Asia is the fastest growing region. This growth has been fueled by expanding label markets in India, China, and Southeast Asia, although growth has slowed down in China in particular, impacting regional growth rates. 

“Growth in the region overall has moderated in recent years due to an economic slowdown in China and overcapacity across the region,” explains AWA’s Reardon. “The growth of e-commerce and parcel delivery in Asia, like Shopee in Southeast Asia and Blink-It in India, is a major driver for the growth of VIP labels used in shipping and distribution.”

“Economic and global factors aren’t freezing the market, but they’re changing the pace and rigor of decision-making,” notes LPC’s Dochstader. “Converters are demanding stronger justification before committing capital or moving into a new application segment. The underlying demand for labels remains resilient, but forecasting has become more difficult and label buyers have become even more price sensitive. I think the important distinction is that economic uncertainty is certainly influencing investment but not stopping it entirely. Converters will continue to spend and invest where the operational case is strong. What we’re seeing less of is speculative investment based on the assumption that new job volumes will automatically materialize.”

Turning to Technology

To combat the current market slowdown, there are multiple technologies that are expected to drive future growth. Automation, AI, digital printing, and sustainability, among others, are hallmarks of the label industry of the future.

“Every converter in the market knows they need to bring automation and AI into their business, unless they operate under a rock,” states FLAG’s McKay. “There isn’t much argument anymore about whether automation and AI are optional, so most of the converters and suppliers are exploring it. 

“Margin pressure remains persistent, driven by fluctuations in raw materials, freight, energy, tariffs, and broader supply chain instability,” says Mark Andy’s Duane Pekar. “The geopolitical environment has become a more direct business factor, adding another layer of uncertainty to planning and investment decisions.”

“AI is where it gets interesting,” he continues. “More and more businesses are leaning on their people to do more with the same headcount, And used the right way, AI is what makes that realistic. The problem is knowing where to start. There are thousands of shiny objects out there and every one of them claims to be the answer, so a converter can get overwhelmed, or pushed into the wrong solution that sets them back even further.

“What actually works is picking one problem and solving it,” adds McKay. “Especially now with AI employees (or agentic AI). You can create an AI employee to solve a specific problem in the business, give your people a way to get more done in less time, be more profitable, all while keeping your company values and customer experiences intact. The focused approach is exactly why I built LabelConverter.ai. Plenty of general AI tools exist, but this industry has its own problems, its own workflows, and its own way of operating. LabelConverter.ai is built specifically for label converters, so instead of chasing another tool that was never made for them to begin with, a converter can start with something built for exactly what they do.”

Digital and hybrid printing are more advanced than ever, too, as are the newest flexo presses. These platforms have been optimized to meet the individual needs of the converter.

“This is why the traditional debate of flexo versus digital is largely outdated,” explains Mark Andy’s Pekar. “The real opportunity is in building a connected production ecosystem where flexo, digital, hybrid, finishing, and workflow tools work together seamlessly. The most successful converters will be those who can put the right job on the right asset at the right time, with the clearest economics.”

Even though all printing technologies remain relevant, Heaford has noticed several challenges with flexo, specifically. “Flexo printers are being squeezed from two sides: rising input costs and margin pressure, and growing competition from digital for shorter runs and customization,” remarks Scales. “Flexo remains the dominant technology in North America, and maintaining that position increasingly depends on how efficiently operations are run. The focus is shifting toward simplifying workflows, reducing touchpoints, and ensuring jobs are produced right the first time.”

Given press advancements, converters should analyze their fleet and see where they can make improvements – both internally and delivering for customers. “There is also a more subtle obstacle emerging in the market, and it is one that requires leadership honesty,” says Pekar. “Too many converters are holding onto older, fully depreciated equipment under the assumption that it represents a competitive advantage. In reality, that mindset can create a false sense of security in a market that is increasingly defined by speed, efficiency, and total cost of production. Just because a press can run for 20 years does not mean it should. Fleet strategy has become a strategic decision, not just a capital one. The converters that recognize this and act decisively will not just adapt to the future of this industry – they will define it.”

This technology will further shape the future of the industry. “Technology will play a central role in addressing the workforce challenge, but its purpose needs to be clearly understood,” states Pekar. “Automation is not about replacing people. It is about reducing variability, simplifying operation, and making the pressroom more consistent and efficient. In flexo environments, automation around registration, color control, job save and recall, setup, and waste reduction can significantly lower the burden on operators and reduce the dependency on highly specialized skill levels. In digital and hybrid environments, automation streamlines changeovers, versioning, and inline converting.”

As Scales notes, though, automation must come with a purpose. “The priority is not automation for automation’s sake, but automation that simplifies processes, reduces waste, and improves consistency without disrupting existing workflows,” he says. “In this environment, solutions that support gradual improvement, rather than large, complex overhauls, are resonating more strongly.”

Smart and intelligent labeling solutions are also gaining traction. Tied in with automation and AI, the possibilities of a connected ecosystem could influence label manufacturing for years to come. 

“Smart labels (RFID, NFC, QR) are turning packaging into a data layer that enables real-time tracking, authentication, and consumer engagement,” says TLMI’s Coates. “Converters are investing in automation, hybrid print platforms, and workflow software to keep up, while consolidation continues to increase scale and capability for some. When you add in stricter global regulations and more complex content requirements, you’ve got a market that’s moving from traditional print manufacturing to a more connected, tech-driven packaging ecosystem.”

According to AWA, sustainability continues to be an overriding trend. Sustainability pressures, of course, are reshaping the global label market, driven by stricter regulations, brand commitments to ESG goals, and waste concerns.  

“Europe is spearheading the transition to a more sustainable future, with regulations like the Packaging and Packaging Waste Regulation (PPWR) and the European Union Deforestation Regulation (EUDR),” notes AWA’s Reardon. “Both require manufacturers to be transparent about their sourcing and design practices, ensuring sustainability in the upstream value chain. In response to this, manufacturers are investing in recyclable, bio-based, and lower-carbon liner solutions, although technical challenges persist. At the same time, these directives are encouraging alternative solutions, especially linerless labels.”

Looking to the Future

While uncertainty abounds, suppliers and converters are preparing for the technologies and trends that will dictate their future success.

“Looking ahead, the direction is clear,” states Mark Andy’s Pekar. “The most successful converters will be those who build flexible, data-driven production environments that allow them to move work intelligently across flexo, digital, hybrid, and finishing assets. Real-time performance visibility will become central to how these businesses operate. Pressroom performance can no longer be evaluated after the fact. Converters need immediate insight into downtime, waste, energy usage, and overall efficiency so they can respond faster and continuously improve.”

Plus, several of the key trends will only intensify in the coming years. Sustainability, for example, will impact labels and packaging more than it ever has. “Brands are focused on their environmental impact with their products, and that pressure lands right on the suppliers and converters who have to sell, produce, and engineer the labels to match,” notes FLAG’s McKay.

LPC, meanwhile, anticipates continued growth in the label market, but the firm expects it to be moderate, uneven, and increasingly concentrated among converters that can demonstrate superior execution. “We don’t foresee a return to the broad, capacity-led expansion we witnessed during the pandemic years,” says Dochstader. “Press investment will continue, but replacement, automation, and productivity will drive more purchases than the need for incremental capacity alone. Flexo will remain fundamental to the North American label market, while digital and hybrid adoption will continue to expand where the application mix and production economics justify it.

“We don’t see one print format completely displacing the others across the market,” she continues. “Converters have become extremely disciplined about assigning work to the press format that produces it most profitably.”

As time goes on, the role of the label will continue to expand, as well. “Between sustainability mandates, regulatory requirements, and the rise of connected packaging, labels are becoming a much more strategic part of the product and supply chain,” states TLMI’s Coates. “That opens the door for companies to move up the value chain into material innovation, traceability, and even data services. The next decade isn’t just about surviving tougher economics. It’s about deciding whether you stay in a commodity position or evolve into something more differentiated.” 

Converters will also need to remain opportunistic, especially as trends change. Markets that were booming five years ago could see a downturn, while new and emerging segments thrive. For example, alcohol has seen less consumption, while the cannabis market has seen increased growth.

“Another future trend to watch for is demand shifting under categories that used to be foundational markets,” remarks McKay. “Look at alcohol, for example. Younger generations aren’t drinking the way past ones did, so consumption is way down, and if a big piece of your business is beer, wine, or spirits, that shows up in your numbers whether you did something wrong or not. Finding new markets of demand and moving into new categories is a big part of what converters will have to do to keep growing. If you’re a converter in the market, you must be proactive about this market to keep growing. We’re at a point where a converter has to see where demand is moving and get there first.”

Converters will need to make these decisions with a much smaller margin for error. Even in recent years, there was more forgiveness in the market. However, the drive for quality and efficiency will continue – with every decision proving pivotal.

“The industry has been resetting from those conditions since 2023,” notes Dochstader. “Demand hasn’t disappeared, but it has normalized and become more uneven. Printed packaging buyers are scrutinizing price more than ever. Raw materials and operating costs remain elevated, and skilled labor remains extremely difficult to find. 

“At the same time, delivery expectations haven’t let up,” she adds. “Converters today are expected to provide faster turnaround times, more extensive application capabilities, greater transparency, and higher job-to-job repeatability levels, often with fewer people and less room to pass through costs. The differences between highly efficient and less efficient converters are becoming much more consequential.”

From the supplier’s point of view, Mark Andy is trying to provide customers with confidence and support to deal with their future challenges. 

“At Mark Andy, our focus is on helping converters grow with confidence by delivering the technology, service, training, and support required to operate in this new environment,” states Pekar. “The expectation is no longer simply reliable equipment. It is complete solutions that enable better performance across the entire production ecosystem. 

“And as the industry moves further into this productivity era, there is one reality that will separate leaders from followers. Being satisfied with older, fully paid-off equipment is not a strategy. It is a risk,” he continues. “If a converter is relying on a 20-plus-year-old flexo asset and feeling confident because it carries no debt, they should also be asking a more critical question: Are they still the lowest cost producer? If the answer is no, then that asset may be quietly eroding competitiveness every day through longer setup times, higher waste, lower throughput, and increased labor dependency.”

Durst Tau G3 Technology: The Flexibility to Do More

For many label converters, growth isn’t limited by demand, it’s limited by flexibility. New applications, changing run lengths, and evolving customer expectations require equipment that can adapt without forcing another capital investment. That’s where a scalable digital platform changes the equation.

The Durst Tau G3 Platform is designed around a simple idea: invest in the capabilities you need today, with a clear path to expand tomorrow. Whether entering digital production for the first time or increasing existing capacity, converters can choose the configuration that best fits their business, then scale print width, productivity, automation, and application capabilities as demand grows. Rather than replacing equipment to keep pace with new opportunities, the platform grows alongside the business.

Beyond scalability, the Tau G3 Platform is engineered to simplify production while maintaining consistent quality. Intelligent automation, including Automatic Register Control (ARC), Material Edge Protection (MEP), automatic nozzle compensation, and optional HAWK AI, reduces manual intervention, minimizes waste, and helps maximize uptime. The result is a press that spends more time producing exceptional labels and less time on setup, adjustments, and maintenance.

The platform also delivers the application versatility converters increasingly need. With native 1200 dpi resolution, variable drop sizes, support for a variety of substrates, variable data printing at full production speed, and configurable color options including white and expanded gamut colors, the Tau G3 platform enables producers to confidently create everything from premium consumer labels to industrial, chemical, and flexible packaging applications, all from a single press platform.

In a market where customer requirements evolve faster than equipment replacement cycles, flexibility isn’t simply a competitive advantage. It’s a necessary long-term growth strategy.

SPONSORED CONTENT

TLMI Explores Geopolitical Impact on Label Economy

For North American label converters large and small, the daily occurrences across the globe will play a large role in impacting their businesses. According to Alex Chausovsky, president, 3DM Consulting, and his brother, Eugene Chausovsky, senior director for Analytical Development & Training, New Lines Institute, the international upheaval we’re experiencing now is the new reality – and it’s here to stay.

The best advice for label converters – have a plan in place. The industry has adapted quite well to numerous challenges over the better part of the last decade. However, uncertainty necessitates having more plans in place. The brothers discussed this strategy at the 2026 TLMI Converter Leadership Meeting.

“From a strategic decision-making perspective, the game has changed in a very meaningful way,” remarked Alex. “In this complex landscape, you have to have a variety of plans ready to go to depending on what’s happening in the world around you.”

Alex said that statistics show corporate attention to geopolitics has waned somewhat since peaking in early 2022. However, the global political risk remains elevated.

Eugene Chausovsky described increasing competitiveness with China, although the United States boasts several key advantages. “The US is most focused on China as a geopolitical adversary, looking to overtake the US as a leading global power,” said Eugene. “But China doesn’t have beneficial geography – it borders over a dozen countries – and its competing countries have been India and Russia, historically. China does have a large population, but from a GDP per capita standpoint, China is far behind US. China has to import a lot of its energy resources. It’s one of the most vulnerable to geopolitical disruptions.”

Meanwhile, Russia is far below both the US and China as a world power, the brothers noted. Russia contends with open land borders with many countries that have historically been their adversaries.

From a European perspective, it collectively boasts the largest economy with 27 members. The EU has a lot of influence over regulatory process because of large size of market. However, there are no individual leaders like there are in the US, China, and Russia. Europe is less active in key geopolitical issues because there is no central force. Plus, 27 member companies have to agree on a given issue.

War in the Middle East and a continued emphasis on tariffs will drive major price increases in the future, Alex remarked. When comparing the US and China, the former boasts a $31.8 trillion GDP. On the contrary, China sits at $20.71 trillion. 

“We are the dominant economic force. Even after decades of double-digit growth, China is nowhere near surpassing the US,” stated Alex. “Those are the two leading economic players, comprising close to 50% of global GDP. Europe, combined, has a similar sized economy to the US. These are the countries that matter and set policy for the global economy. For example, Russia, at $2.5 trillion, is smaller than the economy of the greater NYC area.”

The US has maintained market share of the economy over the last 50 years – 26% of global economy. Japan, for example, peaked at 18% in the mid-1990s and now sits at 4%. “President Trump is looking for concessions from trade partners and to take advantage of the fact the US is the dominant market share player,” said Alex. “Future growth of US market share is top-of-mind for Trump’s agenda right now.”

From a military perspective, the US remains dominant in this area. US military spending grew by 5.7% annually in 2024, while China’s grew an estimated 7%. US military spending sits at $997 billion compared to China’s $314 billion. Russia ranks behind them at $149 billion.

In the future, other countries will continue to look to the US. “While it is true the dollar’s dominance has been somewhat eroded over the last 20-30 years, the other currencies are not benefiting,” stated Alex. “Other countries are benefiting because they want to trade in their own currency. Countries rush to the dollar and we are still the safe haven in the world in terms of geopolitical risk. I do believe the devaluation of the dollar vs. other foreign currencies will continue in the future, simply because of the change in currency valuation over time.”

The US is still dealing with unpredictability due to tariffs, which take time to make an impact. “Tariffs are still not fully baked into the system,” said Alex. “Increasingly, companies will look to pass on the impact of tariffs to end customers. On average, tariffs take 9-18 months to work their way through the system. Tariffs are not going away. They will evolve and even accelerate over the course of 2026. You need to look at the cost of goods sold and see what levers are available to you and how you can deal with that. The profit line is being eroded over several pressure points, with tariffs being in the lead.”

Inflation is expected to trend higher, too – likely in the 3-4% range. This is likely not the last price increase you’re going to see, either. 

“Even if the war were to end today, we’d still have two years of impact that would still be felt from that,” explained Alex. “There will be upside pressure from inflation into 2027. But there is upside potential driven by tariffs and the war. If the war ends soon, the impact will be limited. Inflation could rise to the 5-6% range if they can’t agree at the negotiating table.”