Traditionally, the biennial Labelexpo Europe tradeshow is the place for technology innovations to be unveiled to the world. But as we saw at Labelexpo Americas 2018, that’s not entirely the case anymore.
TLMI president Dan Muenzer hit it home with his comments about the Americas show in September: ‘You can’t wait two years to innovate. Innovation happens between Labelexpos.’
Indeed, that was the case at Labelexpo Americas 2018, an event where 487 exhibitors showed their latest developments across the largest show floor space ever. Early indication was that visitors were not just window shopping, but making deals, and they likely would continue to make capital equipment purchases heading into 2019. A Labelexpo attendee survey found that 53 percent of visitors planned to buy equipment seen on the show floor within the next six to 12 months.
What visitors saw at the trade show was booth after booth of technology developments that are moving the industry toward greater automation, hybrid printing and flexible packaging production.
Growth of hybrid, automation
Industry 4.0 technologies are driving the entire label converting supply chain towards greater efficiencies, and that will continue in the coming year.
While digital packaging production continues to grab headlines, the conventional machine manufacturers have upped the ante, building machines that are getting more efficient and smarter.
Michael Lane, CEO of Meyers Printing Company, told L&L: ‘Necessity is the mother of invention. A few years ago, we were looking at digital solutions, and today the flexo manufacturers have really upped their game and engaged with digital. Every one of these press manufacturers that I’ve seen at the show are offering simpler solutions from an operation standpoint.’
Some conventional press manufacturers have embraced digital, either by adding their own digital engines, as Mark Andy and Nilpeter, or partnering with a digital press manufacturer to add a digital unit to their flexo press line. Omet and Durst, and MPS and Domino were examples seen at Labelexpo. Bobst has opted to focus more on automation and IoT integration, which the company told L&L can compete with short run digital jobs.
The further development of hybrid presses and interest from the North American market is likely to continue. Some industry experts predict hybrid label production to grow by 13 to 14 percent in the coming years.
A TLMI members survey found that 22 percent planned to buy a hybrid machine between by 2020. By comparison, 69 percent said they would buy a flexo machine, and another 69 percent said they would buy digital.
The rise of flexible packaging
North American label converters are moving into flexible packaging production at a rapid pace. As flexible packaging run lengths decrease, this creates problems for wide web converters who are traditionally manufacturing these packages. That disruption is creating opportunities for label converters, particularly in short run, small size pouch market.
Demographic and lifestyle factors in North America, including shrinking household sizes, rise of dual-income families and the trend of snacking instead of traditional meals, all promote demand for pouches in small, or single-use size packaging. This favors smaller format presses rather than wide web CI flexo and gravure. Those who have already started producing flexible packaging are seeing the benefits of this healthy market.
Compared to other print segments, the North American label market is an incredibly fragmented landscape. The $13.6bn USD market hosts some 2,350 label companies. By comparison, the folding carton market is valued at $12.9bn USD with about 510 companies; and the flexible packaging industry has about 460 players and is worth $26.7bn USD.
Muenzer, the TLMI president, reported that over the past few years the make-up of TLMI members has shifted to represent this market change. Previously, 100 percent of converter member profits were from labels or tags. Today, about 85 percent of revenue is from labels and 15 percent of member revenue is from flexible packaging or folding carton.
Another yearbook edition and the same challenges plague the label industry in North America. Though this industry is not alone in struggling to hire and retain employees, it seems we’re short on solutions.
A key talking point for furthering automation is not only increasing efficiencies on press lines, but also the limited human intervention needed. As fewer workers are available to run these presses, the industry is no doubt looking at automation as a bright spot in an otherwise dim job outlook.
Consider the challenges here: 40 percent of North American flexo converters have difficulty filling jobs, and more than half say it’s impacting the ability to meeting client needs.
Further, the workforce is aging. Eighteen percent of press operators are at or approaching retirement age and only 7 percent of the press operator workforce in the US is under 25 years old, according to the US Bureau of Labor Statistics.
More than 50 percent of the global population is under 30 years old, and by the year 2020, 46 percent of the workforce will be made up millennials. The unfortunate truth is that millennials aren’t looking at jobs in manufacturing.
Technology is changing the way companies and employees think and operate, and it’s forcing label and packaging converters to get creative with their recruitment strategies. Culture and workforce development is a topic at nearly every industry event, including Labelexpo, and that looks likely to continue.
Tax cuts that have benefited many US label companies have an uncertain future. Passed in late 2017, and taking effect in January 2018, were permanent tax cuts for corporations, and a temporary reduction on taxes for sole proprietorship businesses, better known as s-corporations or pass through entities. Many label companies fall into the latter category of businesses benefitting from a reduction on business income taxes.
However, mid-term elections loomed in the US at the time this issue went to press, so the future of those tax breaks is uncertain. Expect more articles on the government regulation in future issues of L&L.
The permanent tax breaks awarded to major corporations were more controversial at the time they were passed. What this next Congress will do with that measure remains to be seen. The next Congress could also seek to make permanent the tax benefits afforded to small and medium-sized companies.
Bryan Vickers, TLMI’s government affairs liaison, says: ‘While there’s an appetite to do that, there’s a cost associated, and how they’re going to pay to extend the tax benefits provided remains a challenge. Everything saved in terms of tax cuts has to be offset somewhere else.’
Tariffs on Chinese goods are another uncertainty facing many label industry suppliers and converters. The Trump administration used a broad brush to apply tariffs to products. It’s creating the environment for a trade war with China, and uncertainty in the label industry. Products from China subject to tariffs include leuco dye (used in the manufacture of thermal papers), uncoated testliner and paper and paperboard for used by the graphic arts sector, Vickers said. ‘Unfortunately there’s no indication that the administration is going to back down from that,’ he said.