Q. What are some of the major trends in the industry?
A: The most significant trend that I have seen over the last year is one that has been exacerbated by the recession, and by the shift in lower consumer spending. This trend has impacted every industry, and virtually every company in every industry: Our customers and end-users are doing business with little or no inventory.
As a result of the recession and lower consumer spending, packaging buyers across every end-use segment are the same: these companies do not want to hold inventory. Inventories are at historic lows, and this is driving important trends for the narrow-web tag and label industry.
What this means for narrow web converters is that, more than ever before, companies have to respond instantaneously to irregular demand patterns. Instead of shorter lead times, there are no lead times. This puts an incredible amount of pressure on the manufacturing process of tag and label companies. To accommodate this, companies have had to come up with a more flexible operating footprint. That includes technology and equipment that are more flexible, in addition to a more flexible workforce. We have gone through decades of increasing specialization in terms of our workforce, and now we're needing our personnel to become more cross-functional and to exhibit broader ranges of talents. This is the dominant trend in our industry, whether a company is bringing in $5 million in annual sales or $500 million.
These forces are having a tremendous impact and will shape the way we do business moving forward. This will additionally influence the types of technologies and equipment attendees will be taking a close look at during this year's Labelexpo. Companies will be looking at, and wanting to learn more about, equipment that makes them more flexible and more agile.
Q: To what degree has sustainability affected the label and tag markets? How have label manufacturers responded?
A: Over the last two years, as president and CEO of Multi-Color Corporation, I experienced more and more inquiries from customers wanting documentation relative to sustainable processes and sustainable manufacturing practices. The way Multi-Color responded and the way other companies in the industry are currently responding, is to become certified in Project L.I.F.E., TLMI's certification process for sustainability (see sidebar).
TLMI's goal in introducing the program is to provide and assist the association's members in implementing a cost-effective means to reduce their companies' environmental footprints and to offer an audited certification process tailored specifically to the narrow-web printing and converting industry.
Sustainability and Project L.I.F.E. has helped tag and label manufacturers by not only providing a compass that allows companies to address an environmental and moral imperative, but also by implementing programs through the experience of becoming certified that help companies become more efficient businesses and reduce their costs.
Q: What are examples of technologies that are advancing the market?
A: There's a very broad spectrum of technologies that are driving our industry forward. These range from nanotechnology, which can address some of the customization and security requirements of customers, to ink technology where thermochromic inks change color due to temperature variations, to film technology creating more functionality for the package, to digital technology becoming more mainstream. All of these advances and innovations have assisted and aided our industry by helping narrow web converters meet the increased demands of their customers and of the marketplace.
Q: What has been the effect of off-shore suppliers?
A: There has been a minimal effect regarding off-shore competition or off-shore supply channels. As a matter of fact, what I have experienced over the last 18 months to two years has been more dialog, greater cooperation and the formation of partnerships between North American converters and their off-shore counterparts. I believe we've witnessed less of a competitive environment, and more of a collaborative one in our industry, as companies increasingly open up to share knowledge and meet globalization demands through the formation of partnerships, rather than experiencing the potential threat of off-shore competition.
Q: What is the state-of-the-industry and what are the best opportunities going forward?
A: There is no question that the economic downturn has reduced the growth prospects of our industry. Due to lower GNP growth, we're all experiencing this impact. Companies have had to adjust their business plans and growth strategies as a result of fundamental economic activity that is out of their control.
In terms of what I view as the most promising markets moving forward, from purely a demographic standpoint health care, pharmaceuticals and nutraceuticals will offer higher-than-average growth opportunities to North American narrow-web converters.
I believe in the short term, one of the biggest challenges for our industry will be excess capacity resulting from the current economic landscape. This is challenging for any industry because excess capacity has a direct impact on pricing and profit margins. Lower margins will be a major challenge our industry faces moving forward.
We will also see increased globalization and continued consolidation, both in North America and globally. I also believe we'll see an increase in activity from private equity firms making investments in our industry.
I still remain extremely optimistic about the North American narrow web industry. Companies across the supply chain have weathered the recession very well. Our industry remains healthy and resilient, and will only become increasingly so.
For more information on the Tag & Label Manufacturers Institute, visit www.tlmi.com or phone 978-282-1400.
Flexible Packaging appreciates the assistance of Jennifer Dochstader, Editor, TLMI, for her help in developing this article.
TLMI's L.I.F.E. programIn 2009, TLMI introduced its Label Initiative for the Environment (L.I.F.E.) program to its converter and supplier members. L.I.F.E. was developed by TLMI to assist the association's members with finding cost effective ways to reduce their company's environmental footprint.
TLMI's goal in creating the L.I.F.E. Program was to offer an audited certification process tailored specifically to the narrow web printing and converting industry.
Examples of elements that companies address in undergoing the L.I.F.E. certification process include the recycle-compatibility of adhesives; the source and destination of liner materials and how narrow web companies are driving recycling programs for these materials; and material construction light-weighting (adopting thinner constructions that generate less waste). Front office issues are also addressed such as total energy utilization, where that energy is coming from and what a business is doing to actively reduce its overall carbon footprint.
Jason Pearson, president and CEO of GreenBlue, a nonprofit sustainability institute whose projects include the Sustainable Packaging Coalition (SPC), says, "I am very impressed with the intelligent and balanced approach which TLMI has developed. This program provides a flexible, robust framework for encouraging continuous improvement."
Smyth Companies, Minneapolis, reports that the TLMI L.I.F.E. certification program has helped it to focus on areas within its business that begin to yield considerable environmental benefits with continuous improvement efforts. According to the company, “Through the LIFE Scorecard, we have established benchmarks to measure the improvements that these projects are yielding. The program also helps us in demonstrating to our customers, that we are representing their best interest in working with a supplier that supports their environmental initiatives."
Labelexpo Americas: Labels and moreAn overview and highlights from industry expert Mike Fairley.
After the past few years of a global financial crisis, difficult trading conditions and an uncertain recovery, it is even more important for label converters to look at newer opportunities–both within labels and beyond. They should consider entering new niche markets, become more flexible in their production, driving costs down, and increasing profitability.
Ideas for converters abound at the Labelexpo Americas show in Chicago. Among others, these include unsupported film, flexible packaging and sleeve label applications, digital sheet-fed printing of wet-glue labels, radio-frequency identification insertion, and medical applications. Some examples:
Delta Industrial Services (www.deltaind.com) will be showing two converting systems for multiple processes. One application is a medical process converting line – which comes complete with in-line, heat-seal packaging.
Durst Photechnik (www.durstus.com) presents a digital varnishing module (DIVA) for the Rotoworx modular finishing system. It has the unique ability to produce different gloss levels in a single pass.
Mark Andy (www.markandy.com) offers converters opportunities outside of self-adhesive labels using advanced label and nonlabel applications, such as the latest in RFID insertion, or machines for the printing of unsupported label and packaging films.
Nilpeter’s (www.nilpeter.com) 8-color, 22-inch wide FA-6 press is aimed at the growing number of converters that wish to offer a comprehensive “one-stop” label and packaging service to brand owners and packaging contractors. It has both UV-curing units and hot air dryers for producing a variety of film packaging and labels.
Labelexpo Americas now offers converters solutions that extend beyond self-adhesive labels into sleeve labels, heat transfer decoration, flexible packaging, and much more. Each one a solution and opportunity that can add value and enhance the profitability for any operation.