Finat ELF 2023 addresses industry challenges

Standing in front of the Finat European Label Forum, AWA president Corey Reardon presented market statistics that showed such a sharp decline in Q4 of 2022 and Q1 of 2023, it appears as if the global self-adhesive label industry drove off a cliff.

His presentation on the state of the European label market showed all signs pointing downward.

What’s happening, Reardon explains, is a lingering hangover from the Finnish paper workers’ strike and a major correction to the paper supply chain and significant destocking in key label end-use segments.

A similar story can be told for label buyers across end uses, where there is significant destocking occurring as
companies are depleting their current inventories and postponing procuring new labels and packaging.

‘The current state of the industry is not very optimistic,’ says Finat president Jules Lejeune.

Philippe Voet, Finat president adds: ‘Our industry demonstrated its essential role in keeping the critical infrastructure alive during the lockdowns of 2020 and helping the economy back on its feet a year later. However, that year also revealed the first signs of the vulnerability of our globally consolidated supply chains, and economic recovery was held back by the lack of raw materials, consumables, components and labor.’

This industry-wide destocking is manifesting in declines in key market segments like food, beverage, health and
personal care and automotive. All this is amid fears of a looming global recession.

‘What seems like short-term declines may mean regression in the context of long-term growth,’ Reardon says. ‘Production data is showing that market demand has gone through the floor, but consumers are still buying food and beverage and personal care items. People still need to eat, drink and brush their teeth. Even in a recession, they don’t stop doing that.’ Though consumers may not be spending as much on premium products.

In a bit of good news, demand for food, beverage, health and personal care appears to be crawling upward in Q1 and Q2 of 2023 but still below late 2021 and 2022 levels, according to the AWA report for Finat. AWA expects this to turn around later this year, and there are already some promising signs pointing that way.

By the numbers

European self-adhesive label volumes fell by 21.4 percent in percent in Q4 2022, and 15.6 percent in the beginning of 2023. Other label formats also declined, albeit much slower than self-adhesive labels.

The overall lesson of this year’s Finat ELF is that the label and packaging industry market volatility will likely continue. And yet, the industry is poised to make investments where necessary, even in a time of high inflation.

AWA was recently contracted to conduct Finat’s Radar Report and presented the results at the association’s annual event in May. Finat increased the frequency of
the market reports from half yearly to quarterly.

According to the survey, there is some hesitation among converters when it comes to capital equipment investments, but that could be a reflection of a time of high inflation. The true test will be Labelexpo Europe when it returns to Brussels. After years of pent-up demand, all signs point to Labelexpo being a buying show.

‘The good thing about our industry is we’ve always done well in bad times,’ says Nilpeter’s Jakob Landberg in a panel discussion on investing in times of disruption. ‘In bad times the industry tends to replace old equipment and in good times, they invest in increasing capacity.’

Finat asked converters what and when they are likely to invest in capital equipment and found that investments in digital presses seem to be postponed
slightly, with 74 percent of respondents saying that they will purchase digital presses after 2023.

Meanwhile, conventional press investments are being planned for the more immediate or distant future: 57 percent of converter respondents have plans to
purchase conventional equipment in 2023 or 2024, while 30 percent are delaying it until after 2025. A similar outlook is ahead for finishing equipment.

The Finat ELF was hosted in Vienna from 31 May to 2 June, was attended by 300 members, and featured a host of in-depth educational sessions and panels. Amid
concerns that growth forecasts are sliding, other key topics included regulations, ß risks, technology infrastructure, further supply chain disruption and strained labor markets.

Sustainability undoubtedly took center stage. Finat attendees took lessons from the keynote speaker Thomas Rau, who discussed a storied architecture career in which he’s been at the forefront of designing environmentally conscious buildings. He continues to promote the use of renewable energy.

Next year’s Finat ELF will be in Athens, Greece, from 22-24 May.

Finat members can read more of the Radar report at www.finat.com