Opportunities in the Mexican label market

Labels & Labeling’s recent webinar looking at the Mexican label market featured panelists Cristian Reyes, group director of Mexican label converter Mayapack; Martin Maldonado, president of FTA Mexico; and Francisco Jiménez, applications manager for Latin America for Esko. The panel was moderated by L&L’s Latin America correspondent James Quirk. Here are edited highlights of the discussion.

L&L: How is the Mexican label market performing? Are you seeing good levels of growth?

Francisco Jiménez: We have seen growth in the Mexican market be a little more contained since the end of last year, but it is picking up again at the moment. It is not that growth has stopped, but it’s not quite as strong as it was in the years immediately following the pandemic.

Cristian Reyes: As a converter, we are optimistic about our sales within Mexico. We had high expectations for exports thanks to the nearshoring trend, but there is some caution about the export market at the moment. But local consumption is still strong and is driving growth within our company. 

Martin Maldonado: The flexo market continues to grow, but I agree that there has been a slight deceleration recently due to political uncertainty. But it remains a very interesting market and one which has a lot of work. Narrow web and mid web flexo are performing strongly.

L&L: How have the recent elections in both Mexico and the United States affected the economy and consumer confidence in Mexico?

Francisco Jiménez: There has perhaps been some impact on consumer confidence, although it hasn’t stopped the companies themselves from continuing to invest. There is some caution due to uncertainty around tariffs on exports. So there has been some impact, but not to the extent that it has caused a significant slow-down.

Cristian Reyes: It’s an interesting question, but we also have to consider other variables that are impacting the market in the country – for example, there has been a raise in the minimum wage, and this generates increased consumer confidence. So I don’t think there has been an impact on consumer confidence at a national level. There is always a period of uncertainty for a couple of months before and after elections, but things have returned to normal pretty quickly. 

However, in terms of foreign investment into the country and the strength of our export markets – which had both been performing at record levels – sadly, there is some uncertainty because of what might be coming. So in this context there has been an impact, because our expectations as a converter were high. It is up to us as Mexicans to reinvent ourselves and to bet on national and local consumption. This is what we see our clients doing, and these months of transition have allowed us to strategize and increase sales in the local market.

Martin Maldonado: Local consumption doesn’t seem to be suffering, and indeed there is interesting growth in this area. Therefore there hasn’t been much of a slowdown for local converters serving the Mexican market. Companies in the industry – both suppliers and converters – are continuing to invest. 

L&L: Which end-user markets have performed particularly strongly?

Cristian Reyes: Sectors such as beverage, personal care and household cleaning products have been showing good growth for us. Nutraceuticals is also a market which has continued to perform strongly since the pandemic – there is a trend towards consumers wanting to take care of themselves with health supplements. Logistics is also an important sector, because manufacturing companies have had to take measures to safeguard their products through the supply chain. So we have seen growth in security labels. In terms of label formats, the biggest growth we saw last year – and it has continued this year too – was in shrink sleeves, which offer 360-degree coverage and are widely used across many different sectors. Demand has risen greatly. 

Francisco Jiménez: Our clients report strong growth in the food and beverage sector, as well as pharmaceutical and cosmetics. Nutraceuticals too, as Cristian mentioned. We have also seen our clients’ shrink sleeve production rise significantly in areas such as beverages and some food products, as well as the automotive market for products such as oils and lubricants.

Martin Maldonado: I agree with the markets mentioned by Cristian and Francisco that are showing strong growth. Personal care in particular is showing strong growth. I would add that there is an increasing trend towards personalization in consumer products in general.

L&L: During the pandemic, we saw many commercial printers shift toward label and packaging production, while their traditional sectors were affected. How has this increased competition affected the market?

Cristian Reyes: It is true that there is increased competition in the market. This forces us to think about how we can differentiate ourselves and how we can improve our customers’ experience. I think that service can be a competitive advantage. It has also put pressure on margins, but rather than focus on price, we believe the answer is to focus on the added value that we can offer. We have to focus on technical capabilities and the close relationships we have with our clients in order to maintain our position. As other companies enter the sector, bringing their own capabilities, it makes us improve.

Francisco Jiménez: We have seen lots of new companies enter the label market, for example from other areas of print such as flexible packaging. They can’t always print the same kind of products that a specialist label converter can print, such as a self-adhesive label, so often they will aim to leverage their existing equipment to print different kinds of labels which are not necessarily being produced by the traditional market.

Martin Maldonado: It’s a very interesting question. There was a ‘before’ and an ‘after’ for the industry when it comes to the pandemic. For many label converters in Mexico, 2021 was their best-ever year. It showed what this industry is about, showed its strength, and showed how fortunate we are to be operating in this market. It prompted many companies from different print markets to look at the label sector. Flexo is such a flexible printing process that companies who were dedicated to wider-format package printing were able to pivot towards label production.

L&L: What impact has the nearshoring trend had on the Mexican label market in recent years, and has it increased the need for transparency in the supply chain?

Francisco Jiménez: It has prompted a shift in culture. Demand for technologies that facilitate collaboration and traceability – which were perhaps not being fully taken advantage of by some converters before the pandemic – has risen. These include software systems, automation, and RFID among others. And it’s a shift that has not only happened in the label market, but in the wider packaging market as well. 

Cristian Reyes: It has had an interesting impact on the evolution of technology being used. Nowadays, there are many options for platforms that allow traceability for products as they move through the supply chain, collecting accessible data along every step of the journey. A simple QR code, for example, allows the tracking of a product not just in terms of where it is in the supply chain but also all sorts of other interesting data points. I think this has happened not only due to the nearshoring trend, but certainly there is greater demand than ever for this kind of traceability in the supply chain. Nearshoring has increased the demands on us as converters to keep improving, because we are not just competing with our fellow converters on a national level, but also internationally too.

Martin Maldonado: Nearshoring is helping to drive the professionalization of the industry in Mexico. It has increased the need for not only traceability in the supply chain, but also for certifications. The global brands who have set up manufacturing facilities in Mexico to serve the US market require converters to meet certain quality and operational standards in order to guarantee the quality of their products. The US is a big export market, and this increases quality demands on Mexican converters, which in turn raises the quality standards in Mexico itself. This is part of the reason why we founded FTA Mexico – to help to develop and train the local industry.

L&L: How is environmental sustainability impacting the Mexican market? Is there growing pressure from brands and consumers?

Cristian Reyes: There is certainly growing pressure from brands for environmental sustainability, above all from international brands but also increasingly from national brands as well. Beyond there being pressure, for some brands it is simply a requirement. When it comes to consumers, there is a growing awareness and culture of environmental sustainability. But in order to strengthen this culture even more, we need the involvement of the authorities too. There is increasing interest in recyclable or compostable substrates and wash-off adhesives – products which can make label printing more sustainable. But thereis still a certain taboo around the pricing of more environmentally sustainable products.

Francisco Jiménez: There is increasing pressure on a national level. I think the market is also affected by norms in other parts of the world – for example the shift away from conventional curing towards LED curing. I think industry suppliers are united in their desire to lower their carbon emissions, and there has been much progress in different areas such as inks, substrates and more energy-efficient machinery, for example. 

Martin Maldonado: It not so much a trend nowadays as simply part of the public consciousness. It has become a normal way of thinking for both the consumer and the industry itself. It should be a question of common sense. It’s a topic that has risen on the agenda in recent years. In other countries it has been a focus for more than a decade – it has become the norm. In Mexico it is a little more recent, but in the last six or seven years it has become an important focus.

L&L: More and more label converters are moving into flexible packaging production. What are the challenges and opportunities of entering this type of production?

Cristian Reyes: Diversification in general is a great opportunity to offer a more comprehensive range of products to our clients. Flexible packaging is one area of possibility for a label converter, if you are using presses with sufficient width. There are technical challenges and financial challenges – for example the investment in equipment. There are challenges in acquiring the kind of specialized knowledge that you need. While there are certain similarities between the processes of printing labels and flexible packaging, it is not as simple as swapping the substrates and suddenly being able to print different products. You need to learn about different laminate constructions. The adhesive requirements are different. There are some basic similarities in the converting process but also huge differences. Label converters who move into flexible packaging production can offer certain advantages which are appreciated by brands, such as shorter runs and quicker time-to-market. 

Francisco Jiménez: As Cristian says, while there are some similarities in the production of labels and different kinds of packaging, they are all distinct areas of expertise. You need different areas of knowledge. The technical requirements for printing labels are different to those for printing flexible packaging. If the packaging is coming into direct contact with food, then that brings additional standards and requirements. We do see some of our label converter clients making this transition into flexible packaging production, but it is not an easy journey.