Labels are essential across consumer, healthcare, and industrial categories, delivering brand imagery and messaging as well as critical information. Due to this broad and enduring mission, the sector reliably captures attention from investors seeking diversified and stable growth opportunities.

While the labels space has seen some headwinds in recent years amid broader macroeconomic challenges, several long-term growth drivers are propelling the segment—from SKU proliferation to the rise of smaller, more complex packaging formats. In fact, this fragmented $45 billion market is expected to grow at a steady 4.6% CAGR through 2029.¹

The local and regional nature of demand for labels is another favorable factor, driving fragmentation and inorganic growth potential. It’s also a space in which established companies with proven quality, reliability, and timely delivery enjoy strong customer loyalty and defensible market positions.

An Evolving Opportunity

Tim Webb, a group head and managing director, notes that product proliferation and the emergence of smaller brands across markets drive ongoing demand for new and differentiated label solutions. “Labels are low-cost products with high-impact value proposition,” he says. “They are crucial to product differentiation and competitive positioning with end customers.”

Expanded functionality

Today’s labels can perform a wider range of critical functions such as security and tamper prevention, data generation, product traceability, and more. Chuck Walter, a director, says label technology is driving innovation in supply chain transparency, customer engagement, and sustainability through innovations such as RFID-enabled labels for real-time tracking, augmented realty integration, and eco-friendly materials.

Smart labels are another key innovation with benefits for consumers and packagers. “Consumers have access to much more information at their fingertips,” says Ty Denoncourt, a managing director. “For companies, smart labels improve label functionality, from supply chain visibility to counterfeit protection, better marketing efforts, and enhanced customer retention.”

Sustainable benefits

Label companies pursuing sustainability efforts are also gaining momentum as many consumers seek eco-friendly options. Walter sees multiple benefits propelling the creation of more sustainable labels: “Enhancing labels to meet sustainability goals can also unlock cost efficiencies, innovation, and stronger customer loyalty.” Examples of ongoing sustainability initiatives in packaging labels include inks and dyes that are becoming more recyclable, bio-based films for shrink sleeves from renewable and alternative feedstocks, and an effort to reduce the overall volume of material being used.   

Relatedly, leading label providers are also moving aggressively toward adoption of automation to improve efficiency and reduce waste. As the cost of automation declines, these capabilities are increasingly in reach for small and medium-sized label manufacturing businesses serving targeted industry and geographic segments. 

Increasing flexibility

The fast-growing digital printing and online label subsectors provide quick and flexible solutions for clients seeking optionality related to SKUs, short runs, branding, and customization. With a growing number of small and medium-sized businesses and an expanding e-commerce market needing these services, both areas are poised for success.

Online label suppliers fill a niche for small businesses and DIYers as they offer short runs at high quality without the need for established relationships. “Many SMBs and entrepreneurs have short-run needs, which is driving demand for both digital printing and e-commerce sourcing,” says Denoncourt. “These businesses and individuals are increasingly willing to source and purchase labels at a premium from online channels for high-quality label offerings.”

A Segment Ready to Scale

Overall, the highly fragmented, diversified, and innovative packaging labels sector creates significant opportunities for investors to scale platforms. “Many segments throughout the labels landscape are well positioned for M&A,” says Webb. “We’re excited to see providers aligned with these themes gaining strong investor interest.”

For more information on opportunities within the packaging labels segment, contact one of our senior bankers, and reference our recently published Packaging Labels Report.

1. Smithers