- June 01, 2008, By Corey M. Reardon, AWA Alexander Watson Assoc.
America is the longest-established pressure-sensitive label market in the world, as well as the historical “home” of the industry, but it is undergoing change across the value chain — as is the rest of the world — as retail competition intensifies, globalization becomes a reality, new economies emerge, and margin and cost pressures drive consolidation and rationalization.
At a macro level, the weakened US economy also is having its effect. GDP growth for the US in 2007 was 2.2%, with a slowdown of 0.8% during the last quarter and with the housing and financial markets — and consumer confidence — in decline.
New labeling technologies also tempt the end-user. Wet glue and p-s labels now face competition from direct print, sleeving, in-mold labeling, and glue-applied wrap-around labels. Nevertheless, traditional global label demand continues to grow annually at 4.7% with the mature markets of North America and Europe growing overall at around 2.5% each.
While glue-applied labels still dominate the world, p-s labels today have the competitive edge in North America with 45% of the market. In 2007 North American demand for p-s labels totaled 8,060 million MSI (thousand square inches) with an estimated value of $6 billion and a compound annual growth rate (CAGR) of 1.4% to 2012.
Glue-applied labels accounted for 43% of the market in 2007. Sleeving and in-mold labels accounted for 8.6% and 2% respectively; other labeling technologies make up the balance.
In terms of substrate, paper remains the leading global choice for all label facestocks, particularly for prime labels. In the p-s sector, security papers are enjoying good growth, as brand authentication continues to attract attention. For RFID, paper grades that will cushion and protect the chip are a developing market.
Paper facestock accounts for about 75% of the North American market, with films taking the majority of the remaining share in North America as a whole and also in each of its regional markets — US, Mexico, and Canada. A regional NAFTA breakdown demonstrates the dominance of US demand — which will certainly continue — over Mexican and Canadian usage levels, although the latter two regions' growth rates are considerably higher (see chart).
The Mexican label market is the most rapidly growing geographical NAFTA market, enjoying growth rates at multiples of those within the US, albeit from a much lower base. A conservative estimate of p-s label growth in Mexico is 5%. This compares with the US rate of 1.5%. The Canadian market is estimated to be growing at around 2%.
Growth in North American demand for p-s labels has slowed significantly from the double-digit levels recorded throughout the 1990s, but market demand remains modestly positive. The forecast CAGR for the period 2007-2012 is a low 1.2%, predicting a label demand of around 8,500 million MSI in 2010 — a growth of around 500 million MSI compared to 2007 levels. Underlining this slowdown are the increasing maturity of p-s labeling, high levels of penetration in key market segments, and high per capita consumption.
Environmental responsibility and waste management issues are impacting the growth of p-s labels negatively, with state and federal government legislation now beginning to control the use and disposal of packaging materials (see page 54 “Serving the Environment” and page 56 “Environmental Leadership Award”). Campaigns, such as those at Wal-Mart, call for the reduction of packaging overall.
Other factors, such as the aging population, influence North American demand for labels. By 2009 14% of the Canadian population will be over age 65, as will the US population by 2013. The relevance of such statistics to label use lies in their positive effect on market sectors, such as health and beauty care and pharmaceuticals as well as single-serving convenience food and beverage packs.
Continuing economic expansion in regions such as Asia Pacific is benefiting North American label producers. They are well positioned to exploit export opportunities for labels and packaging: North American importers of goods manufactured in China and throughout Asia generally specify experienced sources for their labels. However, quality local supply is developing fast and, in the longer term, will present a threat to North American converters.
Label converters are finding new market niches in printing other types of “labels” — unsupported films for sachets and pouches, sleeves, tags, and tickets, etc. — on their combination narrow web presses. Digital print is coming into its own, both in modular presses and as a stand-alone process.
Government regulations can and do positively affect opportunities for greater use of p-s labels. Examples include the effect on the size and number of labels on wine bottles to meet statutory requirements on health warnings, contents, etc., and the numbers of high-value labels used in information and safety applications on automobile components and consumer durables.
For the future, we see the p-s label market continuing to be at the mercy of high raw material costs and reducing margins and also driven by changes in the domestic economy and increasing globalization. However, opportunities at all levels of the attenuated label industry supply chain are still there to be grasped. The rise of competitive label technologies, such as sleeving and pouches, are just new markets for converters with today's leading-edge combination narrow web presses.
Corey M. Reardon is president/CEO of AWA Alexander Watson Assoc., Amsterdam, Netherlands, a market research firm specializing in packaging. AWA was commissioned to conduct the research for TLMI's 2007 North American Label Study on the p-s label and product decoration market. This assessment is a summary of that research, with all data updated to the end of 2007. For more information visit www.awa-bv.com.
|Region||Estimated Label Demand (million MSI)||Percent|
|Source: AWA Alexander Watson Assoc.|