Europe: Sustaining uncertain recovery

On the surface, 2024 looks to have been a good year for overall European label market growth.

In the first half of 2024, labelstock demand showed a healthy 26 percent year-on-year increase compared to the same period in 2023. The trend continued through Q3 2024, albeit at a markedly slower pace of just under 7 percent, bringing cumulative growth of 19.5 percent compared to 2023.

The cause of this growth is not a turbo-charged European economy. It is because European converters have used the stocks built up in 2022 in response to the ‘perfect storm’ of post-COVID dislocation, supply chain disruption, Finnish paper strikes and the advent of war in Ukraine.

With warehouses full of unused labelstock, demand for new materials in 2023 plummeted by a staggering 25.8 percent to levels not seen since Finat first started collecting figures in 2013. This represented over 2 billion sqm (6 billion sqft) of lost label production.

This situation was made worse by rising interest rates and high inflation, which impacted consumer confidence, meaning it took longer than expected for labelstock to make its way through the system. So, the 2024 label industry growth figures represent a return to ‘business as usual’ as converters finally used up their last buffer stocks.

European response

In reality, Europe continues to operate in a challenging economic environment marked by persistently high inflation, rising energy costs, slow economic growth and political uncertainty. These factors helped pull down label industry growth rates toward the second half of 2024. Of particular concern is the declining industrial output in Germany, traditionally the beating heart of the European economy.

European consumers have responded by cutting back on discretionary spending and prioritizing value for money. This has impacted label demand across a range of key end-use segments, from food and beverage to health and personal care and e-commerce, all of which experienced a slowdown through the latter part of 2024.

Finat’s Q3 2024 Radar report shows how this has impacted the different label material categories.

In the PS segment, we see the continued growth of filmic roll labelstocks, now accounting for almost one-third of the overall pressure-sensitive market. This growth is driven by the increasing use of polypropylene rolls in high-quality product decoration films for sectors like health, beauty and food, as brands seek to differentiate themselves in a fiercely competitive market.

“The cause of this growth is not a turbo-charged European economy. It is because European converters have used the stocks built up”

Particularly notable in the Radar survey is a 14.6 percent increase in the volume of wet glue labels used in Europe. This was mainly driven by the beer market, particularly in the premium and non-alcoholic categories.

Wraparound labels were hit by reduced consumer spending on bottled water and soft drinks, posting a modest 1.7 percent growth. Similarly, shrink sleeve volumes have been impacted by the decline in sales of single-serve beverages, particularly in the energy and soft drinks categories.

This gloomy FMCG outlook has been somewhat balanced by a more rapid recovery across some industrial segments. The Radar report shows significant growth in the volume of direct thermal labels shipped in 2024, particularly for applications requiring short-term variable data, such as online shopping logistics and inventory management. This reflects the broader shift towards e-commerce and process automation.

Likewise, in-mold label growth was bolstered by the more rapid recovery of the industrial chemicals sector compared to a slowdown in the IML food segment.

Regulatory uncertainty

A major source of uncertainty for the European label industry is the impact that regulatory pressures will have on brands and their packaging supply chains, particularly by the extension of the EU’s Green Deal and revisions to Europe’s Extended Producer Responsibility (EPR) schemes.

It is unclear what the impact will be on different label material categories.

For example, the move to mono materials could favor in-mold labels, while wet glue paper labels have a clear and direct sustainability message. At the same time, the PS and shrink sleeve industries are addressing their sustainability weaknesses in a burst of new technology development aimed at meeting the requirements of the EU’s circular economy directive.

Meanwhile, the EU’s Digital Product Passport (DPP) directive kick-started a new wave of investment in smart labeling technologies in 2024. Under DPP, every product will have a cloud-based ‘Digital Twin’ accessed either by QR code or RFID/NFC chip, so these capabilities are rapidly becoming central to European converters’ future investment strategies.

The 2024 Finat European Label Forum demonstrated how these same Smart technologies feed into wider digitization and process automation initiatives, aiming to improve efficiency and transparency across supply chains.

While the European label industry faces significant headwinds — economic uncertainty, inflation, regulatory pressures, and the war in Ukraine — there are also major opportunities for growth and innovation.

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