Self-adhesive labels have ‘bright future’ says FINAT president

Andrea Vimercati, president of FINAT, writes about the association’s latest climate index, which reports that confidence is returning to the label industry 

The first signs of recovery in the global self-adhesive label industry probably began late last spring, but, as with the start of all “green shoots”, only the merest tip of growth was showing. It is going to be some while until we begin to gather a harvest comparable in size to the “good old days” of self-adhesive label printing, but the signs are there. 

The latest FINAT climate index indicated that confidence is returning to the label industry, especially after the successful Labelexpo Europe. 

There were continued, but prudent, signs of recovery in the third quarter of 2009. The overall volume decrease on an annual basis, compared to Q3 2008, was limited to 1.7 percent, for the year to October. Our industry is back to the minus 5–10 percent range, after a disastrous double digit volume drop at the turn of the year.  

Investment is the key word on everyone’s lips at the moment as the industry takes advantage of the present lackluster situation to prepare for that return of growth. At the recent Labelexpo Europe 2009, in Brussels, the largest-ever number of equipment suppliers showcased their attractions and more than 40 percent of printers were expecting to invest in new equipment in 2010, which will result in increased growth over the next five years. 

The move to digital printing was a similarly hot topic. With a recent survey showing that 39 percent of European label printers see digital printing as their future, machine manufacturers are eager to meet the demand – 30 companies will be producing digital presses worldwide by 2010. 

So while present trade may still be difficult, at FINAT, the self-adhesive industry’s global trade association, we like to look to the future – and on this evidence we expect to see growth returning to self-adhesive labels within 18 months. They are already the dominant medium in the European product decoration market – accounting for 45 percent of labels used in the continental area in 2008. 

Indeed, in world terms, self-adhesives’ share of global label laminate production is around one-third – with 5,300 million square meters of label materials converted to labels in all shapes or forms in Europe alone. 

By comparison, wet glue labels now have 41 percent of the European market, with sleeving and in-mold labeling accounting for seven and three percent respectively. Other labeling technologies, such as gummed, heat transfer, applied ceramics etc make up the four percent balance. 

While the self-adhesive technology has been around since the 1930s – and FINAT has been in existence for 51 years – the big advance of this type of label has been made over the last 25 years or so.  The technologies involved made it attractive for smaller printers to enter and there are now many specialist label producers in Europe producing self-adhesives in the roll, many of them concentrating on local or national needs – but progress is catching up. 

The move towards consolidation and rationalization, leading to the evolution of larger groups, is taking place slowly and the current world economic difficulties will contribute to that progress: a survey late last year expected to see at least 100 companies would be subject to merger, acquisition or bankruptcy this year. It has already happened in the labelstock market where 90 percent of Europe’s output is now produced by ten companies, with the ‘big three’ accounting for 70 percent of the material used in self-adhesive label printing. 

The key dynamics of the industry show a flattening of the growth curve, a high penetration in key end-use markets, a slowing of innovation, declining margins and pressures on costs and this move to consolidation and rationalization. In short, self-adhesives have come of age. 

But, given the nature of Europe, the printing picture varies region by region. The ‘sophisticated’ areas like the UK and Ireland, Scandinavia and the Western continental land mass, where self-adhesives are a well-established part of the labeling scene, are expected to see little growth over the next five years. The big areas of opportunity are eastern Europe (including Russia), central Europe and, less so, southern Europe, which are still developing the sophistication of their retail markets. 

The banking crisis which enveloped the world in the second half of last year struck the self-adhesive industry in the third quarter of that year. Until then producers had seen the continuing growth pattern which it had enjoyed since its large-scale expansion began in the 1970s, but the sharp cut-backs in all areas produced a dramatic decline in demand, resulting in its first-ever loss of volume in 2008 compared with 2007 – albeit by only one percent (another indication of the strength of the sector). This slowdown is expected to show a further decline of two percent this year, followed by a static period next year and a return to modest growth from 2011. Even though annual growth rates over the next five years – forecast at 0.5 percent to one percent, closely following the growth in GDP – seem small, that expansion on last year’s output of 5.3 billion square meters is still a considerable amount of label materials used. 

The four key areas of use are: 

• Variable information printing (44 percent) for items that need individual aspects such as price and weight included
• Primary product labels identifying the brand, product, decorative effects as well as informing customers/users of the myriad of detail that legislation now insists they contain (40 percent) 
• Functional and security labels (eight percent)  
• Promotional labels which advertise price cuts, promotions – even charity fund raising stickers (eight percent). 

The greatest potential growth area is the primary product sector, which represents about 70 percent of European demand, but this is also the area of greatest competition from alternative packaging technologies. Food products, which account for 22 percent of all self-adhesive demand, represent the strongest of all segments and for obvious reasons will remain so.  

The retail sector, which represents 16 percent of use, has taken a knock because of the obvious reduction in consumer spending, but the beverage market and health and beauty products are gaining in importance to our industry and already each account for ten percent of use. 

Futuristic labels, such as those containing micro-chips that ‘talk’ to stock control computers etc, are still the coming thing, but they contain fascinating prospects for the future as the cost of their electronics come down to affordable levels. 

What all this means is that there are still great opportunities for printers – and their customers – who are prepared to explore new printing techniques, effects and materials. It is a challenge for our industry – and given the large proportion of small to medium sized firms, often under family control, there is a need for FINAT to help its members capture that future. 

This it is doing in the form of regular events spotlighting the coming advances and fostering a spirit of self-help between its members. Another important aspect of preparing the industry for the future is the recognition that its future leaders need to be groomed now. To this end it has created its Young Managers’ Club to be the forum for helping these up-and-coming people develop wide-ranging skills and experiences in preparation for them to take control of their companies – and the industry as a whole – to ensure future prosperity.  

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