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Southeast Asia: opportunities and challenges

International suppliers are increasing their focus on Southeast Asia’s fast-growing label market. Aakriti Agarwal reports

According to ICAEW, Southeast Asia’s economy has grown at a moderate growth rate of 4.5 percent in 2019 and it is expected to stay stable in 2020. ‘A sluggish global economy impacts growth in ASEAN,’ says Piyapong Wongvorakul, managing director of Bangkok-based converter Trisan Printing. ‘However, our market is huge and there is enough room to grow.’

Brenton Barrett, president Asia-Pacific at Multi-Color Corporation, echoes that there is a wide room to grow with ASEAN’s per capita pressure-sensitive label consumption sitting at 1.6sqm.

2019 saw much activity in the region’s label industry, including multinational companies moving into the region. RotoMetrics expanded its manufacturing footprint in Thailand, and Cron established a brand office in Malaysia. Machinery manufacturer Windmöller & Hölscher (W&H) opened fully owned subsidiaries with local service and support teams in Jakarta, Indonesia and Kuala Lumpur, Malaysia, at the start of 2019. MPS appointed an agent in Malaysia, and Koenig & Bauer Flexotecnica expanded its sales capacities with new appointments in Thailand, Indonesia and the Philippines. Further, Konica Minolta was evaluating appointing distributors in the growing markets of Indonesia and the Philippines. Armor Asia celebrated two decades of operations in Southeast Asia with a modern factory in Singapore. Many of the region’s converters installed configured presses to cater to their customers’ demands.

The Southeast Asian label market continues to grow in light of rising consumer spending, urbanization, the emerging middle class and an aging population offering opportunities such as home delivery, convenience and in-home care, increasing access to digital platforms catalyzing the growth of e-commerce platforms, and data mining. Brands are trying to utilize data collected from various online platforms to formalize consumer strategies, thereby increasing transactions on digital media. ‘Online shoppers, however, do not bring an advantage to label printers because customers see labels online and not on shelves,’ opines Wongvorakul. ‘Therefore, for label printers to enjoy benefits of e-commerce, they will have to develop smart, functional and on-demand labels.’

Henky Wibawa, executive director at the Indonesian Packaging Federation, says single portion flexible packs and packaging that is functional during transport and at point of sale are gaining traction. Healthcare packaging is a fast-growing segment, as is transparent packaging in the food sector.

As in most other growing markets, sustainability is a buzz word. Oran Sokol, director and general manager, HP Indigo Asia Pacific and Japan, says: ‘Sustainability is an expectation that consumers today have of brands, and print service providers need to be able to provide them with sustainable options. Studies find that the green packaging market is poised to reach 237.8 billion USD by 2024, registering 5.7 percent CAGR during the forecast period. Brands like Unilever, P&G and Nestlé are making new environmental strides to reduce packaging waste through initiatives like Loop and Unilever’s commitment to reducing its weight of packaging by one third by 2020.’

According to Wibawa, some trends expected to be key in Indonesia are lightweighting, new materials, improved recyclability and smart packaging. ‘ASEAN countries are looking to collaborate in many environmental areas including the study of sustainable consumption and production,’ says Wongvorakul. ‘This will enable companies to manage and implement government regulations more efficiently. Recycling is yet another challenge. Companies won’t be able to use a combination of different layers on a pack for long, due to recycling challenges. They will have to shift to monolayer materials in packaging. This has also led to a shift from pressure-sensitive labels to films and shrink labels.’

The region is seeing strong growth in the flexible packaging segment. According to a Transparency Market Research, the Asian flexible packaging market is poised to reach a CAGR of 5.7 percent to 6.7 billion USD from 2016 to 2024. Wibawa agrees: ‘Flexible packaging represents the largest and fastest-growing packaging segment in Indonesia, with a share of 45 percent. Growing markets include food and specialty packaging, industrial and consumer packaging, hygiene and medical care, and rigid packaging.’

‘Sheet-fed converters diversifying into label and packaging production is increasing price competition in the market,’ says Wongvorakul. ‘Therefore, existing label converters will have to be more efficient by improving their processes, being focused and adopting latest technologies that can fulfill market’s expectations.’

Adds Wibawa: ‘Brand consciousness amongst consumers and demand for lower packaging cost by brand owners remain a challenge in the Indonesian market.’

Among the key industry challenges cited by Barrett 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.’