Suppressed consumer spending and rising operating expenditures hindered demand
Los Angeles, CA (PRWEB) May 20, 2013
Recent environmental concerns have helped shed light on the importance of using green and sustainable inputs in packaging products. As such, the Canadian federal government has implemented regulations to promote the use of sustainable materials, thereby driving growth for the Packaging and Labelling Services industry. “Tax subsidies and operating cost savings have also supported this trend,” says IBISWorld industry analyst Deonta Smith. “For example, many packaging product manufacturers have received tax incentives for purchasing more environmentally friendly technology and machinery.” Additionally, the promotion of informative labelling practices has further benefited service providers. For example, “best before” labels on food are required for packages and must indicate product expiration dates regarding the freshness, taste and other manufacturer claims but do not guarantee safety.
Over the past five years, suppressed levels of consumer spending and rising operating expenditures hindered demand from the manufacturing market, Smith says. “The recession negatively impacted this segment, leading to a significant reduction in packaging and labelling services.” As a result, Packaging and Labelling Services industry revenue has fallen at an annualized rate of 0.3% to $2.2 billion over the five years to 2013, including a 0.6% decrease in 2013 alone. In 2013, demand from manufacturing is anticipated to decline due to a contraction in federal government spending and product demand uncertainty abroad. Previously, government expenditures and investments helped offset increased input cost incurred by industry participants, so as these benefits decline, increases in operating cost will be absorbed by manufacturers, thus, hindering profit.
The Packaging and Labelling Services industry has a low level of market share concentration. Most of the industry is comprised of a large number of small and medium-size firms that serve local or regional clients. One explanation for the industry's highly fragmented nature is that its clientele often requires packaging and labelling products and services unique to their respective industry or product. As a result, it is more cost effective for packaging and labelling companies to invest and specialize in machinery and skills suited to serve a specific industry or company, rather than many different industries or companies. While acquisition activity by some of the industry's larger companies resulted in a slight uptick in concentration over the past five years, IBISWorld expects this industry to remain small-business oriented.
As demand for packaging and labelling services rises over the five years to 2018, so will the number of facilities. The industry is forecast to expand, particularly regarding export activity, spurred in part by new trade agreements and recovering economies abroad. Additionally, stronger sentiment toward green and sustainable packaging products will further push up demand. For more information, visit IBISWorld’s Packaging and Labelling Services in Canada industry report page.
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IBISWorld industry Report Key Topics
Establishments in this industry primarily package client-owned materials on a contract or outsource basis. The industry also provides labelling and imprinting package services. This industry excludes warehouse services, packing and crating incidental to transportation and retail of packaging or labelling products.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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