LABELSTOCK FOCUS : THE FACTS BEHIND THE FICTION
Much that is happening in the self adhesive label industry is revealed by examining the data on how this material is used.
By the end of this year European label printers would have run about 3,700 million sq/metres of pressure-sensitive labelstocks through their presses (about 18-19 per cent of it by UK and Irish printers). That is what all the paper, filmic and synthetic substrates in rolls and sheets will add up to, give or take a few hundred square metres. Although meaningless on their own, when broken down and analysed such figures give us a fairly accurate picture of where the industry is going.
The European Pressure Sensitive Manufacturers Association (EPSMA) does a particularly good job in acting as the main conduit. Its figures and commentary are eagerly awaited at the annual FINAT conferences. This article appears too early for the 1998 results, but extrapolating the 1997 figures still gives a valid guide.
In this year volume usage was put at 3,171 million sq/metres, showing a growth of 217 million sq/metres or 7.3 per cent over 1996 totals. This accorded with a benchmark annual growth of 200-300 million sq/metres. Rolls accounted for 88 per cent of usage, another constant. The remainder was printed and converted in sheet form, but not necessarily by label printers. Excluded are imports, mainly of roll films for coating and laminating for specialised industrial, medical, solar control and security applications. They generally tend to influence market values, rather than volume because of the higher prices they command. Multi-ply, paper-based synthetics are another anomaly. They probably account for just over three million sq/metres.
Interestingly, Bill Voss – the sage of the stickies and marketing director of Madico Graphic Films in Maidenhead – has worked out that every increase of 300 million sq/metres makes room for an extra 130 new rotary presses in Europe, just to keep pace with the growth. He bases his calculation on presses running webs with an average width of 250mm at upwards of 100 metres/minute on six-hour production shifts for a 200 working day/year. However, he acknowledges that different shift working patterns, lower press speeds and various moves to wring every last drop of productivity from presses would reduce this total.
Long-term trends over a seven-year period from 1991 to 1997 are interesting, EPSMA’s figures show compound growth rising by 39 per cent for paper rolls, or 6.5 per cent annually. Growth was strongest between 1993 and 1994 and between 1996 and 1997 with other years being more measured.
During the same period, non-paper rolls – mostly filmics – continued to show dramatic growth trends. The seven-year analysis shows compound growth of almost 130 per cent, or an annual average of 21.6 per cent. This segment saw massive growth between 1991 and 1992 and has continued to show double figure growth in most years.
Paper sheets resumed modest growth in 1997 after a fall in the previous year. Overall compound growth was 14 per cent. As in earlier years, there were large national discrepancies. Scandinavian sales (except for Denmark) and those in Austria, Ireland and Eastern Europe showed strong growth. Good growth levels were also achieved in the UK, Belgium and the Netherlands. Growth in most other territories was modest. A fall in sales in France, combined with a larger drop in Italy, reduced the overall average growth rate to 2.5 per cent.
Non-paper sheets showed the lowest level of compound growth over the seven-year period, with alternating years showing growth and reductions in market size. As expected, the market again shrank during 1997, albeit only marginally. Compound growth in the segment has been around ten per cent, or an average of around 1.7 per cent. The near-static growth was due to major falls in demand in France, Italy, Greece, Portugal and Finland which were not offset by stronger results elsewhere.
The UK scene
The Pressure Sensitive Manufacturers Association (PSMA), which has eleven active members, regularly comments on the UK scene. Figures for the second quarter of 1998 show that volume growth for paper rolls increased by five per cent compared with the same period for 1997.
Over a longer period, the PSMA Member’s Survey shows an erratic picture from quarter to quarter. In overall terms Thermal Papers (particularly coated grades) and Uncoated White Papers appear to be most resilient, while Coated Papers and Colours have performed less strongly.
While not divulging exact usage figures, the PSMA estimates a current UK consumption of between 650 and 700 million sq/metres. Sheet sales take some six to seven per cent of this total. An independent estimate for volume usage in 1998 is of around 678 million sq/metres (based on PSMA sales and imports using Board of Trade, reliable industry estimates and other trade association figures). This comprises 638 million sq/metres for rolls and the remainder for sheets, the respective split is 94 per cent and six per cent.
UK sheet sales are around half the European average and exclude fleet markings, road signs, solar control (3M) and double-sided tapes. Machine-coated papers represent almost one half of roll paper products with Uncoateds at just over 30 per cent. Thermal papers continue their strong growth pattern and currently represent around 15 per cent of demand.
The second quarter of 1998 showed an unexpected decline for non-paper rolls, with apparent reductions in demand for polyethylene and soft vinyl. Filmics and paper-based synthetics now account for around 12-14 per cent of the UK’s total requirements for roll label laminates. Polyethylene products meet around 40 per cent of this demand, whereas in 1995 it took a 35 per cent share. Vinyl grades have declined heavily from 46 per cent share of the filmic market. Other requirements are largely met with polypropylene, polycarbonate, ‘engineered’ grades and polyester materials.
The PSMA noted that prices of self-adhesive products are at their lowest ever in real terms. A dramatic fall in world oil prices, reduced pulp prices and the strength of the pound were contributory causes. In late 1998 the market showed signs of an increase in the cost of raw materials. Coupled with a fall back for sterling, this led the PSMA to forecast rising production costs for this year.
Paper and film markets
As mentioned earlier, European roll label products now take 88 per cent of the total, or 2,798 million sq/metres.
Coated gloss or matt papers will long continue to dominate the prime/product sectors, especially in food labelling. The price gap between coated and uncoated has narrowed in recent years, so encouraging many European converters to upgrade to the former. However, as in previous years, the steady move towards non-paper alternatives has reduced the overall market for coated rolls. This is particularly evident in the cosmetics/toiletries and household product section.
While uncoated papers lose market share for prime/product labels, a mini-boom is taking place for products converted from rolls into die-cut sheets for copiers, laser and ink jet printers for the office and SoHo markets. Also growing well are blank or part-printed computer/EDP labels and related products for variable information printing, either on-line or as a post-press operation.
In the UK the A4-sheeted brands include those from Avery Dennison Office Products, Fisher Clark and Stampiton, as well as the own-label brands produced for direct-sales operations. Comparing the retail cost with cost of material is instructive. A typical box of 100 A4 sheets of matt laser labels uses 6.2 sq/metres. Neat Ideas sells Avery-branded boxes at 18.99. Divide this total by 6.2 and you get a materials cost of £3.06 a sq/metre. Viking sells the same product for £26.99 (for single-box orders) giving a comparable material cost of £4.35 per sq/metre. With uncoateds coating around 20p a sq/metre, that leaves a huge margin to cover production, packaging and retailer’s mark-up. No wonder Avery’s worldwide label plants now tend to concentrate on office products (it has just bought 60 per cent of Zweckforms’ office products division in Germany), that is until the competition heats up.
Sheer volume demand in key markets will ensure the dominance of paper label stocks – at least in volume terms – although an annual growth of around two per cent contrasts starkly with the 15-20 per cent ascribed to filmics. Although more expensive, the trend towards thinner constructions has closed the gap between the two substrates.
The benefits that filmics offer in respect of durability, functionality and promotional value are now widely known. Their usage in hundreds of different applications typifies much of the dynamism of the labelling industry during the past decade. Dominant issues include the ‘no-label look’ using PE, PP or PET laminates with clear or opaque finishes, also mirror-like metallised polyester grades. There is also the association of filmics with plastics in packaging (although the substrate-identical and recyclability issue now appears over-hyped).
A significant trend is the increasing emphasis on multi-layer polyolefin constructions using co-extruded PE, PP or co-polymer films. By applying various coatings or treatments, laminators produce so-called ‘engineered’ films. Varying levels of stiffness, printability and other characteristics can be tailored to suit individual applications. The trends towards thinner, or downguaged, films – especially with PP – means multi-layer facestocks of only 25-30 microns thick are possible. Thinner means cheaper films that also accord with the EU Packaging Waste Levy and its emphasis on reducing the weight of packaging. Arguably, more care would be needed to hold register on the press.
Release liners remain overwhelmingly paper-based products, but even here PET or PP filmic liners are being preferred to fibrous-based paper alternatives where clear-on-clear facestocks are concerned. Filmic liners also ensure instant wet-out on clear stocks and mirror-like metallised grades. Other benefits include fewer die cutting problems and smoother face materials, especially with metallics. They also give trouble-free running and label dispensing with no risk of web breaks at optimum speeds. Recent shifts in pricing structures have allowed converters to specify the more superior PET liner grades, whereas PP liner volumes have stagnated.
Cost and profits
The fact that factory-gate prices of PET are about half what they were a year ago reflects the general pricing situation. Paper and filmic labelstock prices have remained fairly stable for some time. Over-capacity and high inventories of pulp affect the former, while the huge drop in global petroleum prices ultimately affect raw material costs for film manufacturers. Similarly, stable bulk chemical prices keep the cost of silicones and adhesives in check.
Raw material costs are, of course, just one element among many in the complex manufacturing and supply chain. It starts with the converters’ customers, the end-users, whose powerful influence indirectly affects the converted cost of self-adhesive labels. This pushes back to the laminator, paper-maker and film manufacturer. Everybody is examining their respective work practices in the drive to improve greater efficiency and using more productive modern equipment to remain competitive.
For laminators this means reorganising facilities, perhaps closing outdated plants and upgrading existing ones. Cory Reardon, director of marketing for Fasson Roll Europe, agrees his industry has seen big changes in recent years: ‘Like the other major players, we have had to invest in state-of-the-art equipment and improve our manufacturing and order-handling efficiencies. Previously, coating lines were 1.5 metres wide, now two metres is commonplace. Line speeds have practically doubled to 1,000 metres a minute, with items like flying splicers on unwinds helping to increase output. Again, most newly-installed slitters are 2-metre wide automated models.’