Innovation key to PS label future

Innovation key to PS label future

The PS labels industry needs to innovate while reducing costs and waste to meet the challenges of a sluggish global economy, writes Jussi Vanhanen, president UPM Raflatac

Another period of uncertainty – and not for the first time in recent years. We in the labeling business aren’t immune to a sluggish global economy, particularly those of us in Europe. Following a strong 2010 and beginning of 2011, most printers in the western world have been reporting a slowdown in their business. With the stock market crashing one day and rising the next, it is easy to get carried away by the feeling of the day. But success in business requires us to look through the haze created by these rapid turns of event.

What has become clear is that there are three overarching tendencies in our industry that need to be taken into consideration. Paradoxically, we can be sure that uncertainty will persist – we’ll be seeing continued volatility in the overall market situation. Secondly, global economic power will continue shifting to emerging markets, while mature markets struggle with high debt and an aging population. Which brings us to the third point, that we can be equally certain of sustained raw material inflation driven by growing demand from emerging markets.

Pinpointing growth in regions and segments

Being aware of these tendencies reveals not only the areas of challenge, but also where growth is to be found. The growth of our industry in any region is defined by growth in packaged goods and how much market share we win or lose to other labeling methods. According to a study we commissioned at UPM Raflatac during 2011, packaged product growth in the developed markets is expected to be about one percent per year – as it has been for a long time.

As a technology, self-adhesive labeling has the potential to continue growing faster than this in segments where it isn’t as yet so widely employed – specifically in food and beverage applications. In many other segments including personal care, home care, retail and logistics, self-adhesive labeling has achieved such a high market share that growth can be expected only at the pace of overall packaged product growth. Also taking into account challenges to the self-adhesive label from other technologies, in the developed world this leads to growth rates lower than we have experienced in the previous decade.

Let us look to other regions as global economic power shift during the years ahead. By the end of our present decade, emerging markets will account for about 40 percent of global GDP. A growing consuming middle class will continue to drive the growth of both packaged goods and the market share of self-adhesive labeling. Depending on the region, annual growth forecast by our study will likely be between six and 12 percent. On the global scale this means our industry can continue to grow at four to four and a half percent which is close to the four to six percent range that we have enjoyed over the past 20 years. The key difference is that 80 percent of this growth will be from emerging markets.

Change, challenge and opportunity

Growth, then, can be counted on at least globally, shifting regionally with the balance of economic power.  With economic cycles getting shorter, however, economic volatility will persist. One particular implication is that companies in our industry will find it increasingly important to secure financing for leaner times as well as the good.

Also presenting a challenge in the decade ahead will be sustained raw material inflation, with growth in emerging markets driving demand for resources on an unprecedented scale. There are viable ways to circumvent spiralling costs in our industry, by exploiting fit-for-purpose products, in other words products that aren’t over-engineered, and thinner raw materials.

Furthermore, the versatility of self-adhesive labeling technology continually offers new opportunities for developing specialized solutions – answering needs that other labeling technologies cannot. So label printers will continue to have an increasing number of competitive options available to them in terms of new cost-efficiencies and novel solutions. Those who are first to introduce them to brand owners will have an advantage in the competition. Seeing through the haze, it’s almost reassuring to observe that some things never change. What we have before us is a decade of challenge and opportunity.

Pictured: Jussi Vanhanen, president , UPM Raflatac

This article was published in the L&L Yearbook 2012