With the European label industry buffeted by geopolitical uncertainty and rapid technology change, Finat’s annual label forum was perfectly timed and well-executed
Finat’s annual European Label Forum, held this year in Dublin, tackled a range of subjects of critical interest to the label converting industry, from the impact of Brexit to succession planning for family businesses; and from new opportunities in flexible packaging to how to attract Gens Y and Z into the workforce.
And of course, held in Dublin, there were inspiring networking opportunities during evening excursions to the Guinness visitor center, and presentations from the world-famous brewer on how its branding and marketing ha ingle market.
His warnings were amplified by Gavin Killeen, managing director of Derry/Londonderry-based Nuprint.
Nuprint is a fast-growing label converter, printing with both UV flexo and digital on a range of materials including shrink sleeves and in markets as diverse as food, beverages, dairy and engineering.
The company has a strong commitment to training through its internal academy, and to research and development. It is part of an EU-funded research project into conductive inks, is a member of the Northwest Center for Advanced Manufacturing and is partnering with Avery Dennison’s smart sensor division to develop a range of smart labeling technologies.
The success of this strategy is clear. Nuprint doubled its turnover between 2015 and 2019, and 40 percent of sales came from new products.
The UK and Eire represent a significant chunk of the European PS label market, although growth is well below the EU average of 5 percent. Killeen noted increased acquisition activity over recent years on the island of Ireland, with CCL, MCC, MPS Westrock and Essentra moving into the food, pharma and beverage sectors.
The result has been a reduction in the numbers of independent label convertors and a search for opportunities outside labels.
Killeen identified a rapid increase in raw material prices as another major challenge, but devoted most attention to the potentially devastating impact of Brexit.
To assess just what a ‘hard’ Brexit could mean in practice, Killeen stressed the strong economic, social and cultural ties between the two parts of Ireland – which remained strong even at the height of the Troubles – and also pointed to Northern Ireland’s significant economic links with other EU countries apart from the UK mainland.
‘We saw that the trade between the Czech Republic and the Slovak Republic more than halved in the ten years following their separation in 1993,’ said Killeen. ‘And remember, both are EU members and the split was amicable.’
The northwest of Ireland, where Nuprint is located, is particularly vulnerable to shifts in border politics, economically, socially and politically. This helps account for the 80 percent ‘Remain’ vote in the Foyle region – the fourth highest ‘Remain’ vote after Gibraltar and parts of London.
During the Troubles, Derry/ Londonderry’s economic development was held back by being cut off from its hinterland in County Donegal in the Republic. Today, with the Good Friday agreement in place, both are fully integrated, with one third of a million traffic crossings of the border a week.
A hard Brexit and a hard border would kill off predicted healthy growth in the city.
European industry trends
Finat chairman Jules Lejeune also briefly referenced Brexit in his assessment of European labelstock trends, although overall these present an encouraging picture of continued growth.
Total consumption of PS label materials in Europe increased by a healthy 4.7 percent in 2017, representing an average growth of 5.4 percent since 2013.
Filmic rolls continued their growth at the expense of paper, now forming 26 percent of total demand, compared to just 15 percent in 2000. The growth rate of filmics in 2017 was 8.2 percent, double that of paper rolls, while sheet PS materials continued their longer term decline.
Eastern Europe continues to be the European PS powerhouse, accounting for 22 percent of PS volume – almost double the figure for 2003. South and southeastern Europe were the fastest-growing label markets in absolute volume between 2010 and 2017. During this period all European markets added 1.6 billion sqm of annual consumption, amounting to a growth rate of over 28 percent.
The potential for further growth is clear, since the top 15 label markets in Europe still accounted for 95 percent of total consumption in 2017.
‘We continue to see a strong recovery since 2012, since when labels growth has been above GDP growth,’ said Lejeune. He pointed to a slowdown since Q3 2017, which could suggest stormy times ahead for the European economy.
On the Radar
Consultancy LPC this year carried out Finat’s Radar report on trends among converters and end users. Brand owners remain positive towards PS labels, planning a 3-5 percent increase in spend, although there is a continued migration to shrink sleeve labels in the food, personal care and household chemicals sectors. Almost one quarter of the end user sample stated their intention to move to shrink.
Other key end user trends include a preference for more complex labels – mirroring the fact that most new flexo presses are now built to order. Non-prime labels are increasingly functional or ‘smart’.
Specific sourcing of digital labels is still not a priority for brands operating in the food and beverage sectors, though there are indications this could change this year, with digital label procurement forecast to grow by over 7 percent.
Eastern Europe remains the preferred region for label sourcing, but Africa has now appeared on the radar for the first time.
Encouragingly, 971 converters took part in the 2017 Radar converter trends survey. A key finding is that the highest growth sectors – at over 5 percent – include automotive, consumer durables and industrial chemicals, while pharma, HABA, food and household chemicals slowed compared to 2016.
Turning to productivity, the report concludes that European label industry employees generate an average of 173,000 euros turnover per person, and total sales of between 110 and 210,000 euros.
A new category in the Radar report is the amount of running waste produced during a job, excluding matrix waste. The average wastage figure across Europe is 5-10 percent, with the highest figures in southern and eastern Europe (8-9 percent).
Flexible packaging opportunity
Previous editions of the Finat Radar report have picked up on a growing trend for label converters to diversify into flexible packaging, and this formed a major focus for ELF attendees. The 2017 Radar report showed almost one fifth of the converters surveyed were already producing flexible packaging, a 3 percent year-on-year increase. Around one third of the sample were also printing shrink sleeves. In the category of flexible packaging, not including sleeves and stand-up pouches, there was an astonishing 14 percent YOY increase to 27 percent, with a further 8 percent ‘very interested’ in entering the flexpack market.
These figures were confirmed in a presentation by this writer using Labelexpo visitor figures for the last five US and European shows. For Labelexpo Americas, 36 percent of visitors to the 2014 show had responsibility for buying flexible packaging-related products, and this increased to 42 percent for the 2016 show. For Labelexpo Europe, the figure climbed from 37 percent in 2013 to 43 percent in 2017.
End user trends all point towards increasing opportunities for label converters: smaller pack sizes for smaller households; single serve and eat-on-themove products; more varieties and pack customization. HP Indigo has been seeing trends towards personalization similar to those impacting the label industry.
There are significant technical hurdles facing label converters moving into flexible packaging: understanding the complexity of multi-layer materials; implementing food packaging compliant workflows across the plant; a materials supply chain with few just-in-time delivery options. Narrow web width (up to 26in) is a challenge for bigger pack sizes, while specific performance requirements need to be taken into account, such as correct slip coefficient and inks resistant to heat sealing processes. But these barriers to entry also mean this market has not yet been commoditized.
The key issue for label converters moving to flexible packaging is the use of UV curing, still viewed by many end users with suspicion because of historic migration concerns.
A new industry-wide group has been formed – UVFoodSafe – to help address these concerns by promoting best practice in UV curing of indirect food contact labels and flexible packaging. This group met at the ELF to decide on its next practical steps forward.
A workshop run by Niklas Olsson of Flint Group Narrow Web and Robert Rae of GEW looked in more detail at the food safety implications of UV curing in indirect food contact labels and flexible packaging. They spoke alongside Jakob Abilgaard from Dan Labels, a label converter which has gone through the complex process of diversifying into flexible packaging.
The workshop examined the flexible packaging ‘sweet spot’ for label converters in terms of run length, materials type and job format, then dived more deeply into the complex issue of food packaging compliance. The characteristics of a low migration ink were considered, including the difference in performance with standard UV inks: these include higher viscosity, higher price and slower curing rate.
It was also emphasized that low migration inks are just one part of a food packaging compliant workflow taking in pre-press, all aspects of printing including press-side additives and cleaning fluids, along with dedicated ink mixing equipment and exhaustive documentation.
Robert Rae explained how in-line UV dose measurement works, with the potential to attain 100 percent UV inspection for every batch of material produced, thus improving compliance with EU food contact packaging regulations.
The rise of production-class digital printing over the last 15 years continues, with inkjet taking an increasing market share. Now Finat has launched, through the LPC consultancy, its Digital Press Index to track these trends in Europe. Information will be collected in the broad categories of toner and inkjet/hybrid.
According to LPC’s figures, digital printing now represents 7.9 percent of the global market, breaking down into 10.5 percent in Europe and North America, and 6 percent in Asia-Pacific. Out of the 2,300 digital presses installed in Europe, LPC says 71 percent are currently toner-based and 29 percent inkjet/hybrid. Figures collected by LPC for press installs in 2017 show that 59 percent of the 300 digital presses sold in Europe were inkjet/hybrid.
When Finat surveyed converters’ buying intentions for its Radar report, an equal number were aiming to invest in conventional flexo and digital presses. Of those investing in digital, one third intended to buy toner presses and 58 percent inkjet, of which 21 percent chose hybrid.
Looking into what converters intend paying for these digital presses, almost one quarter of the sample will be investing 1-1.5m euros – firmly into more advanced flexo press territory.
Turning to the brands’ attitudes to digital print, LPC finds that almost one third of its sample are ‘true believers’ in digital – they have fully integrated digital print into their marketing and logistics operations. Another 20 percent are ‘unconvinced users’, who have had some success with digital but are held back by higher costs from migrating more products from flexo.
Brands not yet using digital LPC breaks into ‘optimistic’ and ‘pessimistic’. The former represent 35 percent of the sample, and are convinced that at some point digital will work for their organizations; the pessimistic 15 percent simply believe that digital is too disruptive to their working methods and supply chains, despite understanding the technology.
Attracting a new generation to print
A key focus of the Dublin ELF was on attracting, retaining and training the next generation of managers and operators. This is very much at the heart of new Finat president Chris Ellison’s goals for the two years of his incumbency. A frank, informal and open discussion took place on succession planning and making the successful transition between generations at label converting operations, and it was refreshing to hear from young managers who had already made the move, as well as next generation managers in the process of taking over family businesses. Participants included Chris Ellison and daughter Charlotte, Chris Jones, Josh Yericic, Bart Reynders, Philippe Voet, Francesc Egea, Andrea Vimercati, Isidore Leiser, Thomas Hagmaier and Jules Lejeune.
Finat used the occasion to launch its ‘Future Workforce, New Talent’ initiative to celebrate the association’s 60th anniversary. This will involve consultation with the national label associations as well as educational institutes and the Finat Young Managers Club. The second stage will be the launch of the ‘Labelicious’ program of competitions and events to attract future talents to the label industry.
Gen X, Y, Z
Sarah Sladek at the XYZ University consultancy looked in more detail at the challenges in attracting the Y and Z generations to ‘traditional’ businesses run by the Baby Boomer generation – which is most label businesses today.
She contended that industry is not doing enough to change itself to meet the different expectations of the X and Y-ers. And the need to address the issue is serious: by 2020 Gen Y (millennials) will dominate the workforce, outnumbering the combined ranks of Xers and Boomers, while Gen Z starts to really make its impact felt.
Sladek looked at the causes of the generational rift to which businesses have to adapt. Communication preference is typical: while Baby Boomers prefer to communicate face to face, Generation X-ers prefer email, Ys prefer text – and interestingly, Generation Z goes back to favoring face to face.
Where Boomers and Xers are results-and hierarchy driven; Y and Z gen use words like ‘realizing potential’, ‘collaboration’ and ‘acceptance’. where Boomers fear change, Y and Z show openness to change and a willingness to ask for help.
A key takeaway for businesses is to explicitly move towards collaboration and away from top-down leadership, and towards a ‘people first’, future-focused culture.
These skills and cultural shifts will be critical if companies are to adapt to the wrenching shifts taking place in the technological and geopolitical arenas, as consultant Noreena Hertz explained. Sources of global stress just in Europe include Brexit (of course), the reordering of global geopolitics by presidents Trump and Putin; the growth of global indebtedness and rapid, disruptive technological change, with AI next to make an impact on all aspects of work.
‘The keywords will be Agility, Innovation and Relevance. Companies will need a ‘challenger in chief’ and people will need time to think.’ She suggested making space for thinking by radically restricting email immersion with a ‘digital sabbath’ and email audit.