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Japan plots sustainable and smart paths

Yoshiaki Inoue, Seieido Printing president

Japan is an advanced economy which is facing a series of challenges: succession of natural disasters, an ageing population, shrinking workforce and high production costs compared to its Asia-Pacific neighbors. 

The Japan Label Forum, now in its 13th year, addressed these issues head on, and the potential answers which emerged, driven by artificial intelligence, connected devices (IoT) and environmental responsibility, demonstrate how the label and packaging industries might contribute to a more sustainable future for all advanced societies.

The tone of the conference was set right at the start. After delegates were welcomed by Japan Federation of Label Printing Industries (JFLP) president Yu Tanaka, Lintec Corporation CEO/COO Hiroyuki Nishio explained that the Japanese label industry is now fully committed to the circular economy. Last year the JFLP set up a special committee to examine reducing the burden of labels on the environment. 

Hayato Ueda, managing editor of Label Shimbun – which celebrated its 50th anniversary at the event – looked at trends in the wider Japanese market. 2019 has seen a 1.6 percent decline in label demand, while the label industry has seen a series of price increases, including major paper price increases in January driven by a shortage of raw material. 

Although the Japanese label industry’s output has recovered since the devastating earthquake and tsunami of 2011, this has only been by 0.6 percent, and last year’s typhoon Jebi further hit productivity. This run of natural disasters, with a consequent reduction in tourism and economic activity, hit the wider Japanese economy hard, and with it label industry profitability. 

Looking in more detail at Japanese label usage, Ueda said shrink sleeves and in-mold labels rather than pressure-sensitive are driving growth. Thermal label volumes have declined as more billing-type products move to smartphones, and label users are starting to consider other packaging and decoration methods, particularly flexible packaging.

The continued growth of flexible packaging reflects changes to Japanese lifestyles, with demands for increased shelf life and convenience to match consumers’ time-poor home/work life balance. Flexible packaging is growing fastest in the delicatessen sector, for eating on the go. In print technology, flexible packaging is moving from gravure to flexo, with water-based inkjet the next wave of technology, said Ueda. 

Another sign of the drive to sustainability is a 9 percent increase in folding carton volume as buyers return to paper/ board-based products in a continuing flight from single-use plastics. 

Turning to label printing technology, Ueda noted that Japan remains overwhelmingly a letterpress-driven market. More than 90 percent of Japanese label converters operate flatbed letterpress machines and 40 percent semi-rotary letterpress. Flexo accounts for just 3 percent of the press market. 

Interestingly, digital has seen a surge in adoption, with one third (150) of label converters surveyed by Label Shimbun having installed digital presses of some kind. 

Ueda’s advice to converters is to invest in automation of factory processes, noting a 40 percent increase in investment in automated inspection systems in the last five years. These are being hooked up to management information systems with smart tools revealing how much time is spent on makeready, so problem areas can be visualized. ‘To increase sales you need high margin work. So as not to make defective products, look at automated color and registration systems which match with the master data.’ 

Automation is critical to addressing Japan’s acute labor shortage with its ageing population – one in three will soon be over 55 – and to combat ‘the increased efficiency and lower costs’ of overseas competitors. 

Concluding, Ueda listed key packaging trends in Japan as flexible packs with reclosable labels, conformable labels and innovations in label functionality. Smart labels are another key development, linking to wider ‘Society 5.0’ trends. Ueda said that by 2025 all products at drug stores will have RFID labels and all smaller stores will be ‘smart’ (more details later in this article). ‘There are 20,000 smaller retail stores in Japan with an average of 30,000 items each, so by 2025 the number of RFID tags in all retail environments could be 428.5bn tags. All these things mean the label industry will keep growing.’

ASEAN trends 
Widening the discussion of market trends beyond Japan, Brenton Barrett, president Asia-Pacific at Multi-Color Corporation, looked at the forces driving development across the APAC countries, which form an increasingly important market for Japanese manufacturers. 

Barrett noted that a general global slowdown and the China-US trade war had impacted regional economies, though the five-year forecast is for a healthy 5 percent growth, driven both by increased domestic spending and exports. 

PS labels are achieving the highest growth of all label technologies, with 7 percent volume increase predicted between 2018-21. Sleeving and glue-applied are both set to average 6 percent growth, while in-mold is not far behind at 4.4 percent. PS and wet-glue each have roughly a one third share of APAC production volume, with sleeving at 27 percent. IML accounts for just 1 percent. 

Turning to per capita PS consumption, one can see why there is so much growth potential in the wider Asia-Pacific region. While Japan’s per capita consumption is 10.7sqm – still low by northern European standards – ASEAN sits at 1.6sqm. China is at 3.3sqm per capita and India less than 0.5sqm. 

The surging growth of PS is driven by increasing urbanization and the continued emergence of a middle class in the region with increasing disposable income, encouraging global retailers to invest in modern stores and infrastructure. PS is also finding new applications – on cans for example.

Among the key industry challenges cited by Barrett – most of which matched those cited by Label Shimbun’s Ueda – are rising costs throughout the supply chain; ‘the overriding need for speed’; shorter run lengths and lead times and more SKUs; and environmental compliance requirements from brand owners, such as score cards and audits (‘everybody wants sustainability but nobody wants to pay for it’). At the same time, global brand owners are coordinating decisions on a global basis and expect the same levels of service in developing markets as developed markets. They are also demanding innovation from suppliers, such as late stage differentiation, and solutions to protect their brands through the supply chain. 

Barrett’s list of packaging innovation trends was particularly interesting, including not only a continued migration to shrink sleeves, but also track and trace, flexible packaging, laminate tubes, e-commerce and data mining.

Sustainability focus 
A series of presentations demonstrated how embedded sustainability and the circular economy now are in the Japanese label economy. In many cases Japanese brands and industry suppliers are far ahead of their US and European counterparts. 

Takashi Yamamato, market development manager at Lintec, announced the development of a biomass-based adhesive sourced from plant-derived rice husks which has now been certified by Japan’s Organic Recycling Corporation. Biomass accounts for 10 percent of the adhesive formulation and Lintec is looking to increase this to 20 percent.

‘We did have recyclable facestocks before, but the adhesive was the issue. We have now managed to keep the same performance as the original adhesive.’ 

The biomass adhesive is being rolled out in six new products – 50 micron metallized and clear PET, a white 50 micron PET with up to 25 percent recycled content, white PP and white and gloss coated paper. 

Lintec is currently looking at how the same biomass technology can be incorporated into its face material stocks.

Another new product announcement was non-transferrable void security labels, where the void mark is not transferred to the product. ‘This means that if you had a nice-looking package, you can reuse it. So a cosmetics box can be reused as a jewelry box and so on. 

Japanese supermarket chain Aeon, which claims 3.6bn customer visits a year to its stores, has focused heavily on sustainability issues, explained the company’s Mr Yasuyuchi. Procurement is now actively driven by metrics including human rights, sustainably sourced paper (FSC), sustainable palm oil sourcing, animal welfare and sustainable fish stocks.

‘We focus on single use plastics a lot. Can we use fewer PET bottles? We have looked at replacing plastic containers with wooden boxes, but plastics are better to contain food, so there are key performance and cost issues we need to discuss more before we switch to recyclable materials.’ 

UPM Raflatac’s Jari Haavisto said the focus of the label industry has to move from recycling to designing for de-carbonization and reduction of fossil fuels. ‘Recycled materials cost more than virgin materials, and a wider range of renewable materials such as clear and white RafBio PE and bio-based adhesives are now available. We can also reduce the amount of raw materials used by incorporating more recycled content, as with our Vanish PCR recycled content face and liner combination.’ 

Haavisto worried that many industry people ‘still do not know what “sustainable” means.’

Making a sustainable package 
A presentation from Tsuyoshi Suganuma, team leader at Asahi Soft Drinks, described the brand’s ambitious sustainable packaging initiative. The aim by 2050 is packaging with zero CO2 emissions through its lifecycle; 100 percent use of sustainable resources; and to actively create environmental value – in other words a fully circular packaging system.

‘We had made good progress with Reduce and Recycle and now wanted to add another R – renewable,’ said Suganuma. Since 2016 the company has been using 30 percent biomass-based plastics in its PET bottles, and has replaced PE bottle caps with a sugarcane by-products-based plastic. 

Currently all of the brand’s labels use some percentage of biomass materials, and this includes shrink sleeves manufactured from corn starch PLA. ‘We are at 20 percent at the moment because of printability issues if you increase the percentage further.’ 

Now Asahi has turned its attention to label inks. ‘We wanted to be the first to use rice-based inks. This is more environment friendly than soy because it uses discarded rice husks.’

The first trials were with 10 percent biomass. ‘How would they adhere? In fact there is no difference from rice to conventional inks on most lots. So now using rice inks and bio label materials we are reaching 80 percent biomass on a label.’ 

Water-based flexo 
It seems strange that in a country so far down the sustainability path, solvent gravure remains such a dominant print technology in the label market, primarily for sleeves and wraparound labels. As we have seen, the installed base of flexo in Japan is the lowest in any developed economy.

So it was fascinating to hear Ken Asano, chairman of Kinyosha Printing, explain why his company has taken the path of water-based flexo as a sustainable initiative.

Kinyosha already had a significant offset installation base before Asano introduced central impression flexo technology, installing machines from Soma, Bobst and W&H to produce wraparound labels.

The first problem to be overcome was an acute shortage of skilled flexo operators. ‘We found we did not have enough operators for two shifts. Not many young people are interested in learning. So we tried to convince offset operators to swap to flexo.’ 

Why is flexo not popular in Japan? ‘Gravure has the greatest presence and I’m not trying to say it’s bad – solvents can be handled safely. But we were latecomers and had to do something differently. So we looked into water-based.’ 

Asano explained the challenges: water-based (WB) inks not drying as quickly as solvents, and a lack of development in WB inks compared to gravure. ‘But the density of WB inks has become better and now flat-top dots have solved the gradation issue.’ 

Compared to offset, where 4-6 colors is the norm, in flexo Asano was now handling up to nine colors. ‘So you have to carry a lot of inventory of inks and have to wash down the press when you change inks, which is more waste. There must be more room to reduce these costs.’

One significant move by Asano has been to reduce the number of colors used. ‘We wanted to start with 4 colors, so we created a profile chart. We can always add another color or two if needed. This reduces the price for the customer and our total costs.’

Asano’s supermarket customers only knew gravure and refused to pay more for water-based, ‘even though we tell them WB is so much more eco-friendly and odorless. This means we have to talk to product planning teams and not procurement. And eventually they will listen. Once you say it’s green and eco-friendly then they say “great, can you do everything!”’

Asano helped create a consortium of WB printers who all had the same experience. The group meets every two months and has now become an official body recognized by the industry. ‘We will now go into all negotiations as a consortium with an installed total of 20 machines.’

The consortium’s members are already benefiting from brand owners turning away from fossil fuel-based substrates and asking for paper-based materials, said Asano. ‘Gravure cannot work with papers the same way they can with films – they can’t print that nicely, and this is where flexo has an advantage.’

Asano said buyers still insist on going through a more extensive audits for printers using WB inks. ‘Nonetheless I am very confident I made the right selection. I’m gritting my teeth!’

Artificial intelligence and the smart factory 
A key theme of the Japan Label Forum was the increasing use of artificial intelligence, or machine learning, to replace an increasingly scarce skilled labor force. 

Yushige Miyazato, general manager of the sales engineering division of DAC Engineering, said the application of AI to inspection systems enables a move from finding defects to preventing them.

‘It is harder to find operators who can set up complex inspection equipment, so it needs to be able to self-set,’ said Miyazato. ‘In the future, using artificial intelligence we will automatically collect, analyze and classify defect data on the cloud. We will analyze what kind of defects occurred and when, and feed back the results so ultimately we can aim at the unmanned plant. This smart factory is the future of the label industry.’

The Label Forum concluded with a presentation from a top official at Japan’s Economy, Trade and Industry ministry (METI). Michio Kubota, assistant director of METI’s consumer affairs, distribution and retail industries division, explained why the Japanese government is encouraging retailers to adopt RFID and the Internet of Things (IoT) technology to increase efficiencies and reduce waste in the supply chain. 

The factors driving the government’s initiative include the shortage of labor caused by an ageing and declining population, a more diversified consumer base, and a high degree of inefficiency in retail supply chains. It is estimated that food waste is equivalent to a bowl of rice per person per day. 

At the same time the global digital retailers are coming into the bricks and mortar world, for example Amazon’s Go stores. ‘Buying and selling is not what they do. They are creating a contact point with the customer and collecting data, then using that to generate new business.’

What is required, Kubota stated, is for Japanese retailers to capture this data themselves and use it to develop a smart supply chain servicing a more diversified consumer base. ‘We need everyone to share information from in-store cameras and RFID electronic price tags, for example. With camera data you can see how people select goods and why they return it to shelf. And from wholesaler data you know when to supply more of that product and what products are not moving. Here you can change the price digitally – lower the price to shift otherwise dead stock. This all comes from data sharing.’ 

The first trial of smart supply chain technology was carried out at the Lawson corner store retail chain in 2017. Electronic tags were attached to all products, so there are no shop assistants – the consumer simply bags the product, leaves and is billed automatically. ‘Workers are happy because now they can concentrate on getting products onto the shelf, so it is already more efficient even without the wider data links,’ said Kubota.

By 2017 all elements of the Lawson supply chain had been RFID linked, from factory and wholesalers to retail, with all information shared to a common cloud server. ‘So now we keep track of what products have gone where. RFID allows you to keep track of specific SKUs – unlike generic barcodes.’ 

Last year all Japan’s convenience stores, including 7/11, Family Mart, Lawson, Mini Stop and New Days, formed a consortium under the METI umbrella and issued a joint declaration to adapt to smart store technology by 2025. 

Kubota conceded there are still major roadblocks. ‘A problem is that the tag price is still too high – it must be less than one yen and not 4-5 yen. Also the electronic tag will need to be attached before shipment. Who will apply the RFID labels and who will pay? Manufacturers, wholesalers or retailers?’

To help address the ROI issue, METI examined the value brought by data sharing across the supply chain. ‘Knowing the value of aggregated data means the supply chain may be prepared to pay for the cost of RFID.’

The next phase of the METI-led consortium is to understand the customer journey, including what happens at home. ‘IoT should allow us to do this by creating linkage with the consumer. For example, if we want to reduce food loss, we need to be able to discount out-of-date products, but equally importantly we need to let the consumer know immediately. For example, consumers could use their shopping loyalty points via smartphone, or receive shelf signage that pops up on their smart phones or screens.’

All kinds of new services can be created if all items are tagged,’ said Kubota. ‘So for example if you have RFID tags on products in the consumer’s IoT-enabled fridge and freezer, when you go out of the house and wonder if you had cabbage in the fridge you can now check. Or think of tags on children’s toys, which help teach kids where to put their toys back. A smart garbage tag can tell you if a product is recyclable, greatly assisting wider sorting and recycling systems. These kinds of things can be done.’

Kubota emphasized the key benefits of sharing data and costs, rather than competing in those areas. ‘This information platform should be created for Japan. We don’t have much time, because Amazon wants to keep everything for itself – from Alexa to the Amazon washing machine is a closed loop where they keep all data and information. So that’s why I am creating this world in my head already. I think companies are at the stage where they want to cooperate and as a government we would like to lead this process.’

Kubota concluded with a plea to the label converters in the room. ‘I have a request for label converters: please support us – utilize smart label printing technology which can be built into the package at the time of printing. At this point we do not have the technology to put on a tag at the time of printing – this has to be developed by your industry.’

In an interesting Q&A session, delegates questioned whether RFID tags could reach the 1 yen level, while another asked who would create the information platform and what standards would be used. Kubota said these are exactly the kind of subjects the METI-led consortium and the packaging and label industry have to tackle together.

ABOUT THE AUTHOR

Andy Thomas is strategic director of Labels & Labeling.

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