FINAT’s Findings: Sophisticated Substrates Lead Charge in Label Sector Growth

Sophisticated label substrates have experienced exponential growth due to demand for high-end applications, according to FINAT. Since 2010, demand for polypropylene- (PP) based materials has grown 78 percent, direct thermal papers are up 51 percent and white coated papers have enjoyed a 24 percent increase.

Figures indicate that while paper-based materials continue to dominate label demand, there has been a shift from basic primary and VIP labels toward more sophisticated, high-end applications. Specifically, film-based label stock demand bettered 2016 performance by 8.2 percent. FINAT’s conclusions are set amidst the backdrop of a 4.7 percent European growth rate in total consumption of self-adhesive label materials—7.45 million square meters of production in 2017.

Jules Lejeune, FINAT managing director, comments: “The continued growth in demand for packaged consumer goods, especially in emerging economies, has increased the need for white, coated materials as end-users are looking to differentiate their branded products on the shelf. Labels containing variable product data in sectors like retail, logistics, process automation and inventory management demand an ever growing volume of direct thermal papers.”

He continues, “Above all, the need for high-quality (transparent) product decoration in high-speed, high-volume sectors like food, health and beauty care, and premium beverages is driving the surge in the consumption of PP-based labels.” The trend is encouraging self-adhesive label producers to offer adjacent high-end packaging solutions like pouches, sleeves and other flexible packaging items.

Driving Growth

Today, the top 15 label market countries in Europe represent a massive 90 percent of total business.

Continued evolution of Eastern European markets remains a key growth driver, FINAT reports. Geographically, established markets—Germany, the U.K., Italy, France and Spain—still account for 58 percent of total European market size, with emerging Poland and Turkey catching up. Those two countries are expected to challenge the top five in the next few years. Statistics affirm that Turkey, Poland and Italy have enjoyed the largest increase in absolute volumes between 2010 and 2017.

There are, however, significant European disparities when comparing demand in terms of consumption per capita. While the European average of 104.41 sq. ft. is approaching the 107.63 sq. ft.—the equivalent of 10 square meters and a benchmark—Denmark, Lithuania and The Netherlands (all small, export-oriented countries) consumed almost 188.37 sq. ft. per capita. The bottom 10 countries recorded consumption less than 53.82 sq. ft. per capita. Among these are Romania, Russia and Turkey, between them representing almost 250 million inhabitants or 20 percent of Europe’s population.

FINAT maintains, “This indicates there is still a huge potential for future structural growth.” Opportunities abound given the continuously widening scope of the labels sector into flexible packaging.

Short-Term Outlook

There is a clear statistical correlation between roll label stock demand and the general economic climate according to FINAT’s statistical agency Panteia. Unsurprising is the fact that labels are an essential enabler in a wide variety of sectors of the business community.

Jules states: “Given the present uncertainties associated with Brexit, escalating trade wars between the E.U. and U.S., continued trade sanctions against Russia and, finally, re-emerging concerns about the Euro following the installation of the new Italian government, it should come as no surprise that the gap between annualized growth rates in the label industry and GDP has been shrinking in recent quarters after five years of continued, well-above-GPP growth rates.”

Buoyant Markets

FINAT market research partner LPC Inc recently completed technical surveys and one-on-one interviews with brands across Europe for the spring 2018 edition of FINAT RADAR. It confirms the buoyant state of the label industry. Average annual sales growth over the past five years was 7.1 percent. Interestingly, the highest growth rates were recorded in non-prime markets like automotive, consumer durables and industrial chemicals, while the largest labeling sectors of food and beverages continue to be among the top five growth markets.

FINAT members hold a unique perspective on the European labeling sector, and on the trends and forces that are driving brands to adopt and implement specific labeling technologies and decoration formats. Two trends dominate: prime labels are becoming increasingly complex and non-prime labels are becoming increasingly functional.

The Eurozone economy’s robust performance, thanks to a recovering labor market and healthy external demand, supports ongoing label sector growth. As a result, brands are persistently seeking ways to connect with their customers. One method is through package decoration. As brands strive to achieve a market-specific approach, late in the supply chain they require shorter runs and fast turnaround to accommodate late-stage design and label functionality requirements. This is driving digital press adoption and is shaping how marketing and R&D departments create consumer captivating campaigns.

Jules concludes: “The future remains bright for labels. When asked which printed packaging sector delivers the most innovation, again and again brands claim their label suppliers offer more innovation and agility over their flexible packaging, carton and corrugated suppliers.”

FINAT President Chris Ellison, managing director, OPM Group, agrees. Speaking at this past June’s FINAT European Label Forum in Dublin, Ireland, he commented, “We are an industry that has such a bright future, and we don’t always realize it. We’re also a very, very, very passionate industry!” Seizing the opportunity to herald a significant milestone, Chris called on attendees to recognize FINAT’s 60th anniversary, then pledged the association will continue to focus on developing ways to harness the skills of tomorrow’s label converter leaders, driving industry efficacy and understanding the major changes across the print technology base.

European Label Forum Highlights

Chris’ promise spoke to most highlights from the 2018 meeting agenda. Here is a brief summary:

• Andy Thomas-Emans, strategic director, Tarsus Labels & Packaging Group, mapped out the evolving current industry landscape and the next five years, examining in particular the growing crossover for label converters between label print and other packaging print options. FINAT RADAR research referenced indicates the production of flexible packaging pouches is already an additional capability for 19 percent of label converters, sleeves for 31 percent of survey respondents and other flexible packaging items for 27 percent of them
• He also highlighted issues and opportunities in converting, health and safety problems associated with solvents, energy-efficient UV flexo print and, of course, digital print. He introduced the industry’s groundbreaking UVFoodSafe group, embracing major suppliers and related professional associations across the converting value chain, who are committed to making UV and UV-LED curing fully appropriate for food packaging print
• Jennifer Dochstader and David Walsh, LPC Inc, looked at how going digital has impacted both converters and brand owners, updating the findings of their FINAT-commissioned report on digital label printing
• James Bevan, founder and director of specialist product authentication and security consulting house Vandagraf, examined the latest trends and developments, focusing on taggants and forensic solutions
• Food safety and migration issues in the wider world of labels and flexible packaging were addressed by a multi-disciplinary panel of industry experts—Jakob Abilgaard of Dan Labels Flexible Packaging Division, Robert Rae of GEW and Niklas Olsson of Flint Group Narrow Web—chairman of the ELF’s program committee
• Sean Smyth, print consultant at Smithers Pira, discussed the total cost of ownership of alternative label printing technologies
• Business marketing strategist Bert van Loon guided his audience through modern ROI methods for marketing to deliver improved results in online B2B marketing
• Dieter Moessner, project engineer, pharma, Edelmann, examined compliance with the new E.U. Falsified Medicines Directive, which comes into effect in February 2019, in terms of serialization and tamper-evidence

Next-Generation Needs

For an audience composed of leaders across the packaging print value chain, the second day’s program was strongly and appropriately focused on management issues. It opened with best-selling author and CEO of XYZ University Sarah Sladek, who deliberated on driving stronger engagement with the younger generations in the quest for new, young business talent.

“Between 2010 and 2020, 78 percent of baby boomers will turn 65, and 25 percent of millennials will move into leadership roles, so the needs of their younger-generation successors must be met,” she decreed. “There has been more in change in lifestyle and attitudes in the last few decades than ever before in history. This state of affairs has created, and continues to create, many workforce issues—not the least of which are the availability of skilled labor, retiring company founders and leadership change.”

Bert, in his second speaking engagement of the conference, carried the topic further, leading a lively debate on the next-generation challenges for label converters in Europe. He said, “The label industry has a vast interest in successful generation handover of family-owned converter companies,” then pondered: “Would the alternative to successful generation change be more consolidation, with resultant reductions in innovation?”

In the final keynote, business guru, writer and broadcaster Professor Noreena Herz delivered an eye-opening seminar on making smart decisions in a complex world. In this age of disruption, which includes the potential effects of Brexit, she shared insights into the upcoming new generation of potential employees—Generation K—15- to 24-year-olds. Noreeza profiled what they care about, how they behave, what they want and just how different they are from millennials.

The discussion will continue at the next FINAT European Label Forum in Copenhagen, June 5-7, 2019.

FINAT, founded in Paris in 1958 and based in The Hague, Netherlands, is the worldwide association for manufacturers of self-adhesive labels and related products and services. Membership rolls list 550 members in more than 50 countries around the world. It submitted this recap outlining its initiatives, studies and events.