Europe's converters tackle market issues. (In Madrid with Finat).
In any business, when the market leader announces a major takeover it is bound to hit the headlines. Barely two weeks before the FINAT congress opened, Avery Dennison had announced its definitive acquisition of Jackstadt. So when Avery's President Dean Scarborough got up to address the congress' opening session, there was an air of expectancy in the hall. Sensing the mood of his audience, Scarborough touched first on the Jackstadt acquisition. Both brands will be retained, he explained, and full integration will be completed over the coming two years. The European headquarters of the group will be switched to Jackstadt's home town of Wuppertal, Germany, and cost savings will come from the rationalization of the two companies' distribution networks.
Turning to the global pressure sensitive market, Scarborough hung his analysis on four words:
* Globalization: label end-users are increasingly global in their operations, and in their label purchasing
* Consolidation: the Jac/Avery merger is only part of a wider pattern as paper mills, laminators and converters strive to expand internationally and drive down costs.
* Stagnation: the crucial North American pressure sensitive market has declined for the last four quarters, and although Eastern Europe and many third world markets (particularly China) are growing at double-digit rates, the overall picture is one of flat demand and resulting overcapacity and erosion of margins.
* Innovation is the way out of the present doldrums.
Uneven market growth
Following the keynote speech, Noel Mitchell of the European Pressure Sensitive Materials Association (EPSMA) revealed the latest statistics for the year 2001.
Overall volume growth in Europe was 5.5 percent, bringing the total European market to 2,945 million square meters (31,700 million square feet). Exciting growth was restricted to Eastern and Central Europe, where the increase was over 20 percent. Britain and Ireland registered 6 percent increase over 2000, but other parts of Europe, notably France, Spain and Scandinavia, showed little change in volumes. The rapid growth of non-paper rolls in all countries continues, registering an overall increase of over 10 percent, and a staggering year-on-year increase of 26 percent for the Eastern European region. (Details can be found at www.epsma.com).
For the current year EPSMA is predicting a 5-6 percent volume growth in the European pressure sensitive paper rolls, and nearly double that rate for the non-paper roll category. Mitchell had little comfort to offer on the subject of prices and margins. Rising raw materials prices, especially for petrochemicals, will have a knock-on effect on prices to the converter, he believes, with risk of a continuing squeeze on margins.
Label waste, end users
Waste recycling is a hot topic in Europe, and delegates listened attentively as FINAT's special advisor on this topic, Jacques van Leeuwen, explained the latest national and EU regulations aimed at encouraging the recycling of waste packaging materials. Examining separately the problems of release liner waste and matrix waste, he explained the very comprehensive German recycling system, and made suggestions how other countries could emulate it. In particular he stressed that it was for the national label associations to take action, or see themselves forced by governmental decrees into schemes not of their own devising.
Corey Reardon of consultants AWA Associates presented his second "Label End User Survey", based on over 200 interviews with selected end users. Of particular significance is the trend away from pressure sensitives and towards shrink sleeve labeling, particularly in the beverage label sector. There is evidence that wraparound and in mold are also continuing to grow faster than pressure sensitives. (Details are available at FINAT's web site -- www.finat.com.)
The Family Way
Three speakers gave their views on the family-run business. Alberto Gimeno, professor from the ESADE business schoal in Barcelona, took a behavioral approach, looking at simple and complex structures in families and businesses, and how they interact to produce a stable or unstable environment for the family firm.
Jaume Puigbo, owner-manager of SINEL, one of Spain's leading label converters, is now the third generation at the head of the group founded in Barcelona by his grandfather before the Spanish Civil War. He laid particular stress on the importance of team-building, human relations skills, and the physical fitness and resilience as a necessary factor for his personal success.
The third speaker was Helmut Schreiner of Schreiner Etiketten. He gave his personal testimony of rags-to-riches in the context of post-war Germany. "My father set up shop in the garage -- no one had a car in those days -- and my mother mixed the glue in the bathtub." For the Schreiners there was no line between family life and business, and the same values -- hard work, quality, performance, innovation -- guided both. Today, at the head of a multi-million euro business employing 450 people, he still knows all his employees by name, and remembers every single birthday.
Chips with everything
Scarcely a day goes by without some new packaging application involving microchips, and Helen Duce of Auto-ID in Cambridge, England, did not disappoint. The Auto-ID Research Center draws on experts from MIT and other world leading institutes to "connect things to computers." Current projects include EPC, a new universal electronic code which may soon replace bar codes. The Center is also working to develop new production methods for microchips that could bring the unit cost down from its current 40 US cents to something nearer 5 cents. Plans are well advanced for a single plant capable of producing 10 billion (yes, billion) chips per year at costs as low as 10 cents. "This," says Duce modestly, "will put smart labels on every product on every shelf of every supermarket in the whole universe."
In trade associations, most of the real arguing is done in smoke-filled back rooms. But some of the smoke drifted out into FINAT's general meeting, and it smelt of cordite.
The issue was seemingly innocuous: a proposal to change the constitution to allow the category of members called "indirect suppliers" (suppliers of paper, adhesives, silicones, etc.) to vote and to be elected to office. Reasonable enough, one would say, especially as these members pay higher annual dues than anyone else. However, as was pointed out, such a move would tip the balance of power in the federation firmly in favor of the suppliers and against the label converters.
In public session, suppliers voiced the view that converters were just not active enough in the federation's work, and could not expect to enjoy privileges out of proportion to the money, time and effort contributed. Representatives of the French and German label associations both expressed their "disappointment" at this attitude, saying that FINAT as an international federation should be the umbrella organization for the national label associations, and not be beholden to mostly "big business" suppliers.
The argument (which was held over for decision until the next FINAT meeting in the fall) revolves to some extent around who calls the shots -- the national label associations or the international federation -- a scaled down version of a problem which would be as familiar to a present-day European politician as to any of the gentlemen who met in Philadelphia just 215 years ago.
The market for PS labels in Spain
Spain did not join the European Economic Community until 1986, and until the early 1980s continued to shelter behind tariff walls and import quotas. Before then, high tariffs and shortages of materials were a permanent problem, and it was not unknown for roll label converters to drive over the Pyrenees to France, load a couple of rolls of self-adhesive laminate, and sneak back home at night.
Happily, such problems belong to the past, and total production of roll labels in Spain today is of the order of 300 million square meters (3.2 billion square feet) per year. This is less than one third of the corresponding figure for Britain, but nonetheless represents a rapid advance from the low baseline of the early 1980s. However, a recent study by the market research publication Puntomarket, covering 55 Spanish label converters (both wet label and self-adhesive) found that their average increase in sales (by value) was just 2 percent in 2001, and many of the companies polled reported a fall in sales. One thing is certain: investment programs are being cut back and total investment by label printers in 2002 is likely to be less than half the 2001 figure. This will affect sales of new label presses, for which Spain has hitherto been a lucrative market.
With its wage costs lower than those of its northern neighbors and its cultural closeness to Latin America, one would expect Spain's label converters to be vigorous exporters. In general however, export business and international expansion do not figure prominently in the minds of Spanish label converters. Companies like Madrid-based Ovelar SA are an exception. Ovelar's subsidiaries are mostly in Latin America (Argentina, Mexico, Brazil...) but the company has also recently opened offices in Taiwan and Paris, and the group ranks among the top three label producers in Spain.
Even so, it exported only 17 percent of sales in 2001, and a significant part of this derived from exports other than adhesive labels. Santiago Valverde, SINEL, and Germark also have substantial exports (though nowhere more than 10 percent of total sales, and mostly consisting of labeling machinery or specialty items.)
Spain today boasts five producers of self-adhesive laminates. The four most significant ones -- Torraspapel, Raflatac, Ritrama and Manter -- are all in the Barcelona area. Last year the Gerona-based self-adhesive laminate producer FAD Fabriano invested just under [euro]3 million to upgrade its capacity, especially for thermal and filmic laminates. Specialty thermal laminates are produced by Fabregas (Barcelona). Avery/Fasson and Jackstadt supply the Spanish market from plants located in other parts of Europe.
And what of the future? Jose Luis Merce, a leading label converter and founder member of the Spanish pressure sensitive label association maintains that total sales of pressure sensitive labels in Spain in 2001 were certainly up on 2000 in volume terms, and points out that the Spanish economy grew by a (relatively) healthy 2.3 percent. The main problem, according to Merce, is one of profitability. Many Spanish label printers decided to expand during the years 1999-2000, and a lot of new high performance label presses came on stream in 2001. At the same time, a number of "refugee" printers from the continuous forms and sheet-fed sectors moved into the roll label business. The result, Merce says, is chronic over-capacity, and converters are forcing prices down just to stay in business.
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|Title Annotation:||label industry conference|
|Publication:||Label & Narrow Web|
|Date:||Jul 1, 2002|
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