2020 in review: Europe

We are fortunate to have an excellent and detailed snapshot in the Finat Radar report of the first period of the European lockdown in Q1 2020 – trends that will no doubt be reinforced as the continent enters its latest lockdown as this article was written in Q4. 

The survey shows starkly that Q1 2020 converter sales growth plummeted from an average 4.7 percent at the end of 2019 (itself down from 2018 figures) to 3.6 percent.

At the same time label stock growth in Q2 2020 was at the highest point for both papers and films since Radar reports started tracking trends seven years ago. These numbers reflect the surges resulting from the coronavirus pandemic – both consumer stockpiling and label converters amassing materials in an attempt to avoid supply chain disruptions in surging and critical markets. 

PS materials have surged particularly in the food, medical, personal care and hygiene sectors, as well as VIP labelstock used in the e-commerce sector. Self-adhesive signage has also grown rapidly under the impact of new social distancing regulations.

More than half of the Finat converter survey group reported that materials delivery times were a major issue during the Q1 lockdown, with companies unable to get the products they needed when they required them. Only 16 percent reported that delivery times remained the same between January and May. 

Converters in the UK and Ireland reported the fewest problems with delivery disruptions, possibly driven by shored-up inventories due to Brexit. The highest numbers of converters reporting delivery time delays were in central Europe.

Turning to the employment effects of the pandemic, the report found that only a small number of participating Finat converters had to make employees redundant. More ominously, 38 percent of companies were concerned they would have to do so ‘in the near future’. Nearly half of participating converters had not seen any redundancies during the first two quarters of this year and do not foresee having to do so in the near future.

Looking at pre-Covid growth trends, we see from the Radar report that 2019 delivered slightly lower sales growth for converters compared to 2018 as uncertainty gripped financial markets and the potential effects of Brexit were factored in.

The sales average for all survey participants was 4.7 percent in 2019 compared to 4.9 percent for 2018. Once again eastern Europe delivered the highest converter growth rates – an average of 7.8 percent – while central Europe showed the sharpest decline with 2019 sales growth averaging 2.4 percent compared to 2018.

Profitability 
While overall year-on-year profitability rates were up for the participant group as a whole, this was primarily driven by strong profit growth in central and southern Europe. UK and Ireland converters reported robust sales growth at 7.6 percent, but profitability levels were down compared to 2018. Converters in Scandinavia reported the sharpest contraction in year-on-year profitability with an average of -3.8 percent for participating converters in the region. 

This could well be reflected in 2020 capital equipment purchasing intentions, which contrast sharply from what converters were projecting in last year’s Radar survey. While 25 percent of Finat converter respondents projected they would purchase a conventional or digital press in the 2019 Radar report, that figure falls to 20 percent in this year’s report.

Looking at what press types converters plan to buy between 2020-2022, 32 percent indicated they will purchase a conventional press, 32 percent a digital press and 5 percent a hybrid press.

The ‘digital’ category breaks down into 24 percent for a toner-based press and 8 percent for inkjet. These purchasing indications were pretty much uniform across all European regions.

One striking result of the 2020 Radar survey is a collapse in converters showing an interest in diversifying into flexible packaging – very different from last year’s survey, which showed pouches as the sector with the highest converter interest. This could well reflect converters refocusing on core PS labels business during the pandemic.

Linerless labels remain one of the top markets label converters are interested in entering, coming in as number one in this year’s survey. 

As many as 20 percent of survey respondents expressed an interest in entering lineless production, led by converters in the UK and Ireland and central Europe.