Business Indicators Demonstrate Impact of COVID-19 on Package Printers and Converters

As large portions of the U.S. economy remain shuttered as a result of COVID-19, businesses across every industry have been tested in unprecedented ways, in many cases resulting in depressed sales and profitability. Package printers and converters have certainly faced issues of their own, but they have not been hit as hard as other segments because many serve industries such as packaged food, pharmaceuticals, and healthcare, which have shown growth over the past few weeks. While this is good news for the segment, those who do not serve these particular industries are finding these times to be very difficult. According to a new research program initiated by NAPCO Research and the PRINTING United Alliance, sales fell 15.3%, on average, over a 30-day period (from mid-March through mid-April) for packaging printers and converters surveyed. Figure 1 shows the distribution of surveyed firms’ sales changes over the last 30 days.

Q. What has happened to your total sales (all sources) over the last 30 days? n=32 Packaging Printers

To help printing companies navigate through the current crisis to the recovery on the other side, NAPCO Research and the PRINTING United Alliance launched the “COVID-19 Print Business Indicators Research,” and will report the results of this ongoing survey on a continuing basis. This survey tracks key indicators across a cross section of printing companies, including commercial printers, graphic and sign producers, apparel decorators, functional printers, and package printers/converters. Click here to download the first full report including all printing industry segments surveyed.

This article focuses on key findings from package printers and converters participating in the first survey. Our second survey is now in the field and open for any package printers or converters to participate. Here is a link to take the 3-5 minute survey.

Index Reports Business Activity Falling, but Less Drastically Than Other Segments

The research tracks current and leading business indicators. For the current period, the index of current business indicators (including sales, production, employment, prices, and pre-tax profitability) for package printers and converters closed at 45. A reading below 50.0 means more printers report activity is falling than report activity is rising. This index measures the breadth of the contraction and determines when it has hit bottom.

The index of leading business indicators (including work-on-hand, quote activity, production payroll hours, and confidence) closed at 44. A reading below 50.0 means more printers report these forward-looking measures of activity are falling than report they are rising. This measure is used to identify the first signs of recovery and how recovery is likely to progress.

Results Not Surprising

The results of this first survey matched what was expected, given the sudden and swift shutdown of large sections of the U.S. economy. For package printers and converters, the results are less depressed than in other print segments, because some of the package printers and converters surveyed serve industries including pharmaceuticals, healthcare, and packaged food, which have grown throughout the COVID-19 crisis.

Food Continues to be an Anchor for Some

While many are struggling to maintain pre-COVID sales levels across the board, package printers and converters who serve certain industries have been more fortunate. In particular, respondents who signaled that food packaging and labeling are a major part of their business have actually seen an increase in sales in some cases, as one respondent mentions, “We have seen strong increases in certain sectors of our client base: food and nutraceuticals have been very strong.”

Another respondent added, “Our primary product is rice packaging, and rice sales have been higher than normal.”

Panic buying has led to an increase in demand for certain goods says one respondent. “It is a race to keep store shelves stocked with food, beverage, and household items.”

Others have reaped the rewards of this consumer reaction, but one respondent signaled that he believes this behavior may have tempered a bit more recently, “From mid-March there was a big peak in purchases, following the panic buying in grocery stores (our major market), followed by a softening of incoming orders.”

Of course, it is important to keep in mind that many firms rely on other sectors aside from food for a large portion of their sales. “Overall sales are up. The food sector of our business is up quite a lot, while the non-food sector (industrial) is dying,” reported one of the respondents.

When asked to predict business conditions over the next month, many respondents didn’t expect much to change. 41.4% believe that business will stay the same, while 17.2% believe that their situation will improve. A slightly larger amount of firms have a more pessimistic view as 20.7% think that business will decline, while an equal portion aren’t sure what the near future holds for them (figure 2). When considering the 41.4% that believe things will remain static, it is important to understand that a portion of these respondents saw positive growth over the survey period, while others faced a negative business environment.

Q. In relation to current conditions, do you expect business conditions for your company to improve, stay the same, or decline over the next month? n=32 Packaging Printers

When Will the Economy Bounce Back?

As the economy continues to reel with the effects of COVID-19, there are many more questions than answers when it comes to figuring out when the U.S. will begin to see its recovery period. According to The Wall Street Journal Economic Forecasting Survey, economists and analysts believe that second quarter GDP will reflect the worst of COVID-19 effects, with GDP declining at a 25.3% annual rate, followed by upticks in the third and fourth quarters of 6.2% and 6.6% respectively.

While this drop may seem steep, there is potential for a quick recovery. Although many Americans are familiar with the length of the Great Recession, it is important to note that not all recessions are the same. When many large financial institutions failed in 2008, firms were forced to close their doors for good and many jobs were lost. Now, many businesses were forced to close and furlough workers, but a majority of these jobs will be available again once virus concerns are eased. This is not to say that all jobs will return, but government aid intended to keep firms from shutting their doors for good will help speed up the recovery process as the economy begins its slow reopening process.

Participate in the COVID-19 Print Business Indicators Research

In today’s unprecedented business environment, making decisions based on facts has never been more important. In the weeks and months ahead, reliable industry business indicators will be essential for monitoring what’s happening in all printing industry segments. The COVID-19 Print Business Indicators Research is an essential resource for monitoring industry conditions and the NAPCO and PRINTING United Alliance research teams invite you to join our business panel and contribute to the research on an ongoing basis. Companies that join the panel will receive exclusive in-depth analysis reports (not made available publicly) of our COVID-19 research findings. The survey takes 3 to 5 minutes and can be accessed by clicking here.

About NAPCO Research

The combined NAPCO and SGIA research teams develop research and economic models that solve customer business problems. Market research is valuable for making strategic business decisions, solving challenges, and pursuing opportunities and the NAPCO Media research teams survey, analyze, and monitor critical trends related to marketing, printing, packaging, non-profit organizations, promotional products, and retailing. To learn more about how the team can leverage its research and industry subject matter experts to support your organizations needs contact NAPCO’s Vice President of Research, Nathan Safran, at nsafran@napco.com.