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Europe: looking to bounce back

Andy Thomas-Emans reports on a slowing market beset by economic and political worries – but looking to bounce back in 2019-20

Through 2018 the European label market continued its slow climb back to the growth levels seen before the crash of 2010-12. But a slowdown in the German economic powerhouse and uncertainties around the UK’s Brexit drama contributed to an uncertain market outlook and a pressure-sensitive growth rate of just 1.4 percent compared to 3.7 in 2017.

This slowdown was also reflected in Finat’s Radar converter and end user trends report, which saw converter sales growth fall dramatically from 8.3 percent in 2018 to 4.9 percent in Q1 2019.

Finat’s survey does reveal a remarkable shift from growth in non-prime labels in 2017 to higher value prime labeling in 2018. This is supported by a reported 4.7 percent growth in polypropylene film volume in 2018, primarily used in Europe for high quality product decoration such as no-label look applications.

The finding also ties in with anecdotal evidence from flexo press manufacturers that converters are ordering more bespoke machines configured with a range of value added features including in-line booklet label makers, in-line digital units, gravure units and multiple foiling/screen heads.

The increase in installation of digital and digital-hybrid presses feeds into this new world of rapid product change and dramatically reduced product life-cycles.

Investment
Another interesting finding is on converters’ investment plans. More European converters are planning to invest in conventional presses than digital through 2019-20. This demonstrates the advances made by the flexo press industry in automation and fast makeready, which have to some extent eroded many of the short-medium run advantages of digital technology.

Despite the overall slowdown in the PS label market through 2018, it should not be forgotten that Europe is a market which consumes 7.5 billion sqm of pressure-sensitive materials, or one quarter of global label consumption.

It is also important to analyze the strong regional variations in growth patterns.

Denmark, for exampleenjoys Europe’s highest consumption of PS labels – 17.5sqm per person compared to a European average of 9.8sqm – but registered fairly low growth in 2018. By contrast, areas of Europe with far lower per capita consumption are growing much faster.

Eastern European demand for pressure-sensitive labels, for example, now accounts for 23 percent of total European consumption, almost double what it was in 2003.

Europe’s converters are meanwhile facing other challenges apart from economic uncertainty: high labor costs driven by a shortage of skilled operators, increasing raw material prices, and the need to comply with increasingly strict environmental demands from regulators and brands.

Consolidation also continues to impact the European industry. The big news of 2018 was the expansion of All4Labels – resulting from the alliance between X-Label, Rako and Baumgarten – to include Italy’s powerful  Nuceria Group. This addition brought All4Labels to a total of 29 production  acilities across the globe and a turnover exceeding 500m EUR.

In Scandinavia, private equity investors stepped in to acquire Emballage Gruppen and the FlexoPrint group, meaning the number of converters in Denmark alone has fallen from 27 in 2009 to 21 ten years later.

Up to here we have focused mainly on pressure-sensitive labels, but it is important to note that overall, shrink sleeve labels are the fastest-growing label category at over 5 percent, albeit from a smaller base, and now account for around one quarter of all labels by volume.

Are alternative decoration technologies a threat to labels in Europe? Flexible packaging is certainly a major competitor to pressure-sensitive and shrink sleeve labels. But European label converters – equipped with presses which can effectively handle filmic substrates – have turned this to their advantage by increasingly integrating flexible packaging production into their product offering.

This was well demonstrated during the Flexible Packaging Arena demonstrations at Labelexpo Europe 2019, and a continued increase in the number of show visitors registering an interested in flexible packaging. For the European label industry then, flexible packaging is turning into a complementary rather than competitive technology.

There were signs of a bounce in Q1 2019, and it will be interesting to see how this develops when we come to the next set of Finat statistics due in June 2020.

ABOUT THE AUTHOR

Andy Thomas is strategic director of Labels & Labeling.

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