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FLEXO Magazine : September 2012
2.4 percent GDP growth forecasted globally 34 percent the size of growth in the Asia Pacific region --- the world's label market with greatest demand 4 - 4.5 percent estimate of global growth in the use of label products for 2011 varying by region and label format 12 percent growth in South America, making it a star performer In 2011, glue-applied and pressure-sensitive labels exhibited matching shares of the world market -- 39 percent each --- but, in the developed markets, adoption of sleeve label formats is growing significantly faster. Heat shrink sleeves are the most- favored choice, evidencing high growth, even in the emerging economies. In-mold labels are maintaining a positive growth profile but, by format, IML-EB (in-mold labels with electron beam curing) is coming under pressure from the alternatives. RAW MATERIALS $ Raw material cost inflation has been a feature of the label- ling market since 2010. Although it continues to pressurize prof- it margins, the upward trend is slowing; despite the price of oil remaining high. This is good news for label converters, though they are exposed to price pressures on many levels -- polymers used in film manufacture, resins in adhesives, inks, paper coat- ing, and varnishes, as well as in energy and transport costs. Manufacturers of labeling materials such as pressure- sensitive labelstock are working to reduce or "downgauge'" the calipers of their materials to deliver cost savings, reduce on-press downtime for reel changes, and deliver more labels per reel. Lighter weight/higher yield materials also contribute positively to the sustainability agenda. Trends in material usage in the label market are in evi- dence today, with film substrates growing in multiples greater than paper substrates, in the pressure-sensitive, wraparound sleeving, heat shrink sleeves, and in-mold technologies, with BOPP films the leading choice. In papers, cold glue labels continue to favor medium gloss coated one-side (C1S) pa- pers, particularly in alkali-resistant grades. Flexo, and UV flexo, print together represent the largest installed base of narrow and mid-web presses today, and have proved themselves more than capable of meeting the wide de- mands of purchasers for quality labels of all kinds. The digital label printing technologies represent their only real competi- tion, as their quality and technical features continue to improve. M&A As key contributors to the core packaging market, the companies involved in any way in labeling and product deco- ration remain the subject of ongoing consolidation. Accord- ing to specialist investment bankers Blaige & Co., specialty printing/converting merger and acquisition activities were well above average in 2011. With the broad field of packaging print representing one of the most buoyant facets of today's printing industry, growth and profitability across its supply chain are proving particu- larly attractive. Much of this consolidation involved the most fragmented level of the value chain, the printer/converter, but deals further up the supply chain were also strongly in evidence -- the vast majority representing strategic purchases made to support companies' growth. A good U.S. example is the three acquisitions made by Multi- Color Corp. in 2011 to enable it to tap into the European (La Cromografica) and South American (Collotype Labels) markets, and to further increase its domestic U.S. presence (York Label). Further up the supply chain, there continues to be plenty of M&A action: Mondi Akrosil's acquisition of Nitto Americas, and UPM Raflatac's acquisition of BIC Group's Gumtac. Expect to see this activity increase in 2012. FUTURE FORECAST All in all, the economic frailties of developed markets make this a good time for the participants in the label and product decoration market to evaluate their current status and decide where they want to be in the future. For small and medium enterprise (SME) label printers, that might mean succession planning, selling out, or consolidating, and perhaps embracing other technologies than those currently employed. For supply chain participants, companies' strategic needs to reach their future customers certainly make investment in emerging regions essential, whatever the discipline. Clearly, 2011 was a year when a degree of optimism and stability began to assert itself in the market for consumer goods in particular -- a factor that has, in parallel, created strengthening echoes in the label sector, and a stepping- stone to future success in the industry. About the Author: Corey M. Reardon is president and CEO, Alexander Watson Associates. The firm specializes in interna- tional market research and consultancy in the key specialty packaging, coating, and converting industries. As part of that core activity, it annually reviews the global labelling and product decoration markets to provide an accurate assess- ment of up-to-the-minute status. Labelling & Product Decora- tion Market: Global Review 2012 delivers a concise sum- mary of the research findings for the year 2011, and provides useful pointers to the opportunities and challenges companies involved in the labelling and product decoration value chain can expect to see as we move through 2012. A detailed pro- spectus is available on the company's website, www.awa-bv. com, where it is also possible to order the publication online. 30 FLEXO SEPTEMBER 2012 www.flexography.org