The packaging industry is in the throes of transformation. The era of consolidation, led by M&A, is transforming the market landscape of the distributors. An increasing number of packaging distributors are becoming part of bigger corporations and private equity-sponsored firms. They are forming strategic alliances with other distributors to get more benefit from the packaging.
Now, if your business regularly purchases boxes, flexible packaging, labels, protective packaging products and other packaging materials, grasping this information would be beneficial as you move forward with your packaging-related expenditures.
In this blog, we will talk about what the Wave of Packaging Distributor M&A Means for Buyers
Why are packaging distributors acquiring or merging?
Packaging is a very fragmented distribution sector. Distributors and marketers want increased purchasing power and volume. Customers want a broader line of products; distributors want new markets, better distribution networks, and tighter supply chains; more specialized distributors and marketers want a better global supply chain or want to gain efficiency.
Buying another distributor might be a quicker way than creating your own operations in new territories. A larger company also may have better leverage and more suppliers to choose from.
A distributor with whom you have worked for many years can form an alliance or start working with big organizations after their merger. Although the company name and local representative may appear the same, the sourcing and ownership of the company could have a new face. Working operations and overall prices may differ in the case of the merger and acquisition.
What do mergers and acquisitions mean for the packaging buyers?
It will depend on many different factors. It will also depend on what each company’s purchasing agents require and there are a few significant shifts to watch out for:
1. Greater Product Selection.
Companies who acquire are large and have a high distribution network. So if a packaging company that only distributes corrugated boxes is acquired by a larger business, it might bring stretch film, poly mailers, protective packaging, labels and other packaging into the fold. This will be an easy win for packaging buyers as they may no longer have to coordinate packaging materials from multiple distributors.
2. Possible price alterations
Acquisitions result in economies of scale with more volume being purchased by a large distributor. This could enable lower prices with manufacturers. It does not guarantee a lower purchase price for the buyer. For example, the company has to take acquisition & operation costs into consideration. Buyers should still compare pricing particularly in terms of contract renewal and product updates.
3. Service levels could change
The customer service aspect of buying from a local distributor could be the main concern. A local distributor might have provided very hands-on personal customer service, fast responses, as well as flexible delivery arrangements. For bigger buyers it would simply be new account managers, new ordering methods and potentially changing delivery arrangements to reflect new systems.
4. Increased Supply Chain Security
Large distributors have strong relationships with their suppliers and will maintain multiple facilities and the widest possible network. Buyers will not have any shortage of packaging due to high scalability as per the demand from the clients.
The businesses that are not able to afford stockouts get the support provided by a supplier who possesses the inventory to cover their stock and can produce through a wider supply network.
Tying up with the larger distributor does not mean fully assured security. Make sure you understand each point of the merger and talk about the delivery timings and other formalities that are involved in the distribution of the packaging products.
Are there any concerns for the buyers about the merger with big organizations?
They should not be worried about the merger of the two companies. It is highly beneficial to merge with big companies. They must be well prepared in advance to go through this transition smoothly without affection there current operations. Buyers always remain proactive. When there are fewer distributors controlling a larger amount of the overall market share, you as a buyer, may find yourself with fewer competitive, independent sources to work with in a particular market segment or product category.
It is also true that a buyer’s favorite supplier, which is small and located locally, will institute different purchasing policies once it is acquired by another organization. The answer is not to not use large distributors but for purchasing organizations to continually evaluate their suppliers and obtain the best services for the price they are paying.
What are the things to ask your packaging distributor?
When my distributor is purchased or announces a merger, ask logical questions like:
- Will my contract and prices change?
- Will my account manager stay the same?
- Will there be changes in specifications or brands supplied?
- Will my minimums be affected?
- Will order delivery schedules be affected?
- Will product suppliers change?
- Will inventories improve?
- Whom can I speak with if I encounter problems with the supply of a specific product?
Knowing things up front can save hassles down the road.
When is Packaging Distribution M&A Right For Your Packaging Procurement Strategy?
Many people assume that mergers and acquisitions can cause consolidation and increased prices for the products. People feel that they will have less personalized attention and no choice. While there may be elements of consolidation in an M&A, it presents an ideal time to consider revising packaging procurement strategy altogether.
Examining packaging prices, supplier performance, reliable delivery, quality of products, and sustainable criteria among other factors will likely result in ways to consolidate purchasing volume, negotiate greater discounts, innovate packaging design, or replace inefficient materials.
Conclusion
The current trend in packaging distributor M&A is evolving how purchasing departments buy their packaging product. It is highly beneficial for the buyers, and they must keep an eye on changing prices and other formalities to make the most of the merger.
Basically the smart thing to do is to be proactive, ask questions, compare choices and continually review your overall packaging supply chain. Does not matter if the main distributor works on its own or ties up with a mega company. The main objective should be to provide safe and secure packaged goods and customer service.
Yiruixing Packaging is a top company that provides the best packaging solutions. Feel free to contact them to know more about the services provided by them.
Contact details
Company Name – Yiruixing Packaging
Address – No.1218 B Block, Yin Ye Hui Zhong Building, No. 3 Nan Guo East Road, Da Liang Street, Shunde District, Foshan, Guangdong, China, 528399
Contact (WhatsApp) – +86- 18824821039
E-mail – info@yiruixingpackaging.com
Website – https://yiruixingpackaging.com/
Frequently Asked Questions
Will there be no hindrance to the current ongoing operations due to consolidation?
Order is not after because of the mergers. There might be a slight change in price or other things related to the order.
Will there be a different price for the orders after the merger and acquisition?
Prices may vary due to the merger and acquisition. You can talk to the authorities about the terms and conditions of the merger and acquisition.
Is there a trusted company that is a top packaging distributor of packaging items and products?
Yiruixing Packaging is a top packaging distributor that provides the best packaging options at reasonable prices.
Should I look for a new packaging distributor after an M&A?
Do not look for the new distribution. Make sure to confirm the pricing and other terms of the merger.
How to keep the operations unaltered due to a merger with big organizations?
Always be available with the backup supplies to avoid any disruption to the supply chains.
Will I get a different quality of products after getting in touch with the main distributor?
Product quality should remain the same, but you will want to check for any differences in suppliers and product specifications.
What to ask the distributor after you have partnered with them for the distribution or merger?
Make sure to ask about the price and all the formalities that are needed to successfully do business with the client and the distributor.
