There can be little doubt that the label industry of today is a totally global business and that label converting operations can be found in almost every country and market of the world, whether wet-glue, sleeving, self-adhesive - or any other kind of labels. Currently, the worldwide label industry converts around 36 billion square meters of labelstock a year and is growing at somewhere between 7 per cent to 8 per cent per annum.
That equates to something like another 2.8bn sq m of new worldwide labelstock growth every single year. How many new pressure-sensitive coaters and label printing presses does that equate to just to meet the growing demand? Even if the new annual volume growth slowed by an overall 10 per cent, we are still talking in excess of 2.5bn sq m of growth in 2008.
Look also at world GDP growth forecasts for the past year. Even without the EU, which in its enlarged state is now the largest economy in the world, world GDP growth is currently between 5.5 and 6 per cent. Historically the label industry has grown at around 2 per cent faster than GDP, while pressures-sensitives have grown at anything up to 3 or 4 per cent – sometimes more – above GDP for many years. Indeed, in Europe, which had a GDP growth in 2006 of 2.8 per cent, pressure-sensitive growth for the same year was some 7.7 per cent.
If you look at Eastern Europe alone, or some of the other emerging markets, pressure-sensitive growth in recent years has averaged around 17 to 22 per cent per annum. For Europe as a whole some 22 per cent of converters over the past year achieved a sales growth above 20 per cent. For non-paper substrates the volume growth figure in Eastern Europe is nearer 30 per cent per annum.
Similarly impressive growth figures can be found in China and India – two of the world’s biggest growth markets for the future – where per annum label growth continues to average between 14 per cent and 20 per cent.
Latin America and South East Asia are not quite so high, but are still achieving impressive label growth ranging between 8 and 15 per cent per annum.
Not every region unfortunately is achieving such impressive label growth. It would be remarkable if they were. For example, the Japanese label market is currently at a near standstill and achieving little or no growth, while North America is experiencing a slowdown due, particularly, to the home loan market issues, and may end up as the market slows still further with label growth of perhaps 2 to 3 per cent per annum over the next year or two. This is still likely to be above GDP growth. Excluding these two particular regions, label growth around the world is pretty impressive. But will this impressive global growth continue?
Quite impressive at the top end are Indian label converters. Yet such figures are perhaps not too difficult to understand when some of the underlying growth drivers in different regions are examined in more detail.
Impressive regional growth
IN India for example, the country is now one of the world’s largest free-market economies and facing a boom in demand for consumer products and luxury goods – leading in turn to a revolution in retailing. Certainly, if all the economic, investment and business trends forecasts for India prove to be anywhere near accurate over the next few years, then Indian label converters will soon be needing to make major investments in label printing, application and overprinting technology so as to meet an unprecedented level of demand for higher quality labels and newer distribution and promotional solutions.
Over the past year alone a number of market studies have put India at the forefront of the most attractive global retail investment destinations (considerably ahead of China) in an Indian retail market currently valued at US$300bn and expected to grow by up to 13-15 per cent per annum. Currently fragmented and dominated by around 11 million ‘unorganised’ small family-owned outlets, large-scale ‘organised’ retailers presently make up no more than 3 per cent of this market. Yet this 3 per cent is growing at up to 30 per cent annually.
Little wonder then that companies such as Wal-Mart, Carrefour, Metro and Tesco have been lobbying the Indian Government to open up the retail sector. At the same time, the Indian Government has decided to allow foreign direct investment of up to 51 per cent by single brand retailers, such as shops selling Nike sportswear, Levi jeans or Nokia handsets, or – if they want to –- chains like McDonalds, Body Shop and Ikea, to open and control their own operations in India, which in turn is expected to stimulate further global brand and retailer investment in the country.
Not to be outdone, domestic Indian investment groups are racing to set up retail chains ahead of the eventual opening up to the global retail groups. Indian corporate giant, Reliance (India’s second most valuable listed company) is setting out to become a ‘Wal-Mart in India’ by announcing that it intends to open 4000 retail stores in 1500 towns and cities in India by 2011, and so revolutionise the way Indians shop.
However, it is not only the retail sector that is expected to boom over the next few years. It is a whole consumer spending boom coming from rapidly rising disposable incomes, in turn bringing millions of new consumers each year into the more affluent middle class and fuelling a multi-decade investment and spending boom which is not just based on buying for necessity.
Put all this together and it now makes India the world’s fastest growing free-market economy. This in turn is stimulating, and will continue to stimulate, quite rapid growth in the Indian label converting sector, where major investment programmes for new label presses, prepress, finishing, application and overprinting technology are expected to be put forward over the next few years.
Latin America, although not quite achieving the high levels of growth as India or China, is nevertheless achieving an impressive growth performance.
And what about South East Asia? Here, the use of self-adhesive materials grew steadily above 10 per cent per annum for much of the 1990s and the region saw both Avery Dennison and Raflatac investing in labelstock production during that period. Today, self-adhesive labelstock usage throughout Malaysia, Singapore, Thailand, the Philippines and Indonesia is estimated to be in excess of 3.2bn sq m and still growing at close to 10 per cent per annum. Currently, per capita usage of self-adhesives is still less than one square metre, so still major potential for further impressive growth.
Eastern European Influence
EVEN Europe, regarded as quite a mature market, has been achieving impressive growth. Within the total global label market of 36bn sq m, Western Europe currently has over 27 per cent of the total global labelstock consumption, while Eastern Europe already has a near 8 per cent of global consumption and is still growing rapidly.
This is for all kinds of labels, including wet-glue and self-adhesive labels, inmould, wrap-around film and sleeve labels, cut-and-stack film labels, fabric garment labels and a number of proprietary label products. Of these label technologies, pressure-sensitive, shrink, wrap-around film and in-mould are the fastest growing.
Put together, the total European label market consumed some 12.5bn sq mof labelstock during 2006, of which pressure-sensitive labels at 5.28bn sq m made up around 42 per cent, growing at some 7.7 per cent over 2005.
This is for both Western and Eastern Europe combined. Pressure-sensitive usage in Western Europe alone is in excess of 55 per cent and is expected to further benefit from ongoing and expected higher growth of RFID and other smart label technologies.
Within Europe the pressure-sensitive market has already grown by some 86 per cent over the past 10 years, fuelled by a growth rate in Eastern Europe over that period of an average of 17-22 per cent per annum. For non-paper labelstocks the level of growth in Eastern Europe has frequently been nearer 30 per cent per annum. Outside of Eastern Europe, the central European market for pressure-sensitive labelstock increased by 9 per cent in 2006, Southern Europe by 6.3 per cent and the UK just 1.3 per cent
Even with these high levels of growth in Eastern Europe over the past ten years the per capita consumption in the region is still less than 2.5sq m, compared to Scandinavia at over 12sq m, the UK at nearly 15sq m and Denmark at 20sq m.
However, there are still major opportunities throughout Eastern Europe for ongoing growth. Overall in Europe, non-paper pressure-sensitive labelstock in rolls continues to grow at some two to three times faster than paper in rolls.
Longer term, the European pressure-sensitive labelstock market (still driven by Eastern Europe) looked set to outpace North America within the coming year. Certainly until the August 2007 economic turmoil, the Europe labelstock market was seeing very positive order books, an optimistic business outlook and an increase in employees. Even a slight slowdown as a knock-on from the American home loans problems, is unlikely to have much effect on Eastern European growth in the coming years.
North America is not in such a favourable situation at the moment. House prices are dropping, the mortgage market is in chaos and consumer confidence is verging on rock bottom. Clothing sales are slowing down and even the momentum at supermarket powerhouse, Wal-Mart is starting to slow, together with other major supermarkets. However, there is a clear trend emerging in this market: cost-conscious consumers are not stopping to shop, they are rather trading down to the discounters, such as Target, where sales actually grew by 4.1 per cent in October. It is more the luxury, discretionary spending that is suffering, not the volume day-to-day consumer products that are the large users of labels.
Opportunities for the future
LOOK at the survey results conducted by Labelexpo Global Series over the past years and it is clear that every region of the world sees RFID label as a major opportunity for the future. Key markets for RFID smart labels include pallet, case and items labels for retail supply chain management, easy automated check-in/check-out in media management (books, CDs, Videos, etc), the identification of garments at the item level in the fashion and apparel sector, in asset tracking, in improved security and efficiency in airline baggage handling, and in the tracking and tracing of every package in the pharmaceutical wholesale and retail supply chain.
It should also be noted that RFID labels do not replace bar coding. They are a complementary technology to bar coding which provides enhanced performance and functionality on the label, increase the added-value of the label for the converter, and provides efficiencies for the end-user.
Perhaps equally important, label converters worldwide highlight a major requirement and growth potential for all forms of brand protection and anti-counterfeiting technology.
Security label solutions that label converters can offer their customers now include holograms, security materials, security designs and images, security inks, biologically and DNA encoded products, security cuts, laser etching, and much more. Indeed there are literally several hundred brand protection solutions that the converter could use if looked for.
Close behind RFID and brand protection comes tamper-evident and tamper-resistant labels. These have applications in many markets form drugs and cosmetics to baby foods, electrical and electronics goods to industrial and hospital applications.
The other key area of growth identified by converters worldwide is digital printing. No longer just a niche or short run label printing technology, digital printing has become a mainstream printing process that offers customers' significant benefits in terms of personalisation, marketing, promotion, security and speciality printing.
All in all, there can be little doubt that the world label industry still looks pretty healthy, is still growing rapidly on a global basis, and still has long-term global growth drivers which will see world volume label growth continue in excess of 6 or 7 per cent for a good few years to come. Some markets may wobble a little, but overall the world prognosis for labels is undoubtedly pretty good.
About the Author
Mike Fairley is director Strategic Development, Labelexpo Global Series and was the original founder and managing editor of Labels & Labeling magazine (UK). He has been writing and giving speeches about labels for almost 30 years and has undertaken or worked on many market and technology research studies for label industry suppliers and converters, as well as for Frost & Sullivan, the Economist Intelligence Unit, PIRA and Info Trends. Fairley is the author of the “Encyclopedia of Labels and Label Technology” and “RFID Smart Labels – A How to Guide”.