Anybody with experience in the custom packaging industry?

September 27, 2021

by a searcher in Austin, TX, USA

I'm looking at a small packaging company that produces custom display packaging for retail products. I've been on the buying end of these types of packaging solutions with some of my other businesses but don't have much insight into the industry. Anyone have advice on what specifically to look at in valuing the company? Any broad industry insights? Anyone love or hate this space in general?

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Reply by a searcher
from University of Toronto in Toronto, ON, Canada

I have looked closely at packaging, but for a different space. Our market was niche and high-end electronics or automotive, where packaging was proportionally a much smaller %age of the overall value of the product being sold. There is also no (or little) incentive to in-house the pacakaging, so margins were actually quite strong. The target does in-house design, prototyping and production for small runs but leverages the supply chain (ie competitors) for larger runs. So as a value chain integrator it has good upside potential because it’s able to embed itself in clients business processes. You should take a look at “Packaging and labeling” ibisworld report, which has a great commentary. I read the one specific to Canada - so if they don’t have one for the States just read that one as market dynamics are likely similar. The space is quite fragmented and suppliers can be sticky given the nuances of end customer requirements. When products change packaging will change as well, so repeat business is likely. Happy to carry the conversation further over DM.

Reply by an investor
from Boston College in Boston, MA, USA

I've acquired three distinct consumer packaging businesses ultimately placed under common ownership. I'd generally agree with what's been said + add that it's highly dependent on the end market the business is supplying and the competitive dynamics in the sector. Much of the industry has been consolidated among a few large suppliers. Our companies provided sophisticated printing on paperboard and plastic for high end cosmetics, media and other consumer products. Capital intensive and highly competitive so considerable pressure on margins. Can be challenging for a smaller industry participant to build sustainable growth. Important to understand the proportion of sales that are recurring and how long they've been customers. Feel free to reach out: redacted

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