Consolidation in the Self-Adhesive Laminating Industry

UPM's proposed acquisition of MACtac worldwide is the latest in a string of announcements of merger and acquisition activity in the self-adhesive laminate industry. It follows Avery Dennison's acquisition of Jackstädt worldwide and its European acquisition of Adespan in 2000. But that's not the full picture: Even outside these major industry players, consolidation is taking place among the smaller suppliers.

The combination of Avery Dennison with Jackstädt and of UPM with MACtac, in particular, has worldwide implications for the future — particularly in North America and Europe, because they significantly consolidate the supply base of self-adhesive laminates. Conversely, the increased R&D and production capabilities these newly expanded companies have at their disposal must mean an increase in innovation, in terms of both products and services.

Today, that's certainly a critical focus for suppliers in an industry where competition throughout the value chain is intense and margins continue to be under pressure. Across the supply-side of the value chain, raw material producers and self-adhesive laminators are facing profitability issues due to increased costs, overcapacity, and (as among the converters) demand-side pressure.

Global Suppliers
Now that the key self-adhesive laminators represent truly global concerns, they should be in a position to meet the needs of major multinational end-users to specify their label stock materials worldwide. Consistent esthetics and label quality are seen by the label buyers, particularly for consumer goods and food and beverages, as essential a part of brand identity and brand image protection as the product and the packaging itself.

As a result of consolidation, we can expect to see an increase in the development of self-adhesive products that will better match the expectations of the end-users and provide an increase in innovative ideas — both in terms of product and supply.

Security labeling and product authentication are two fields that offer real opportunities for “added value,” and other market niches are developing for specialized “label” products. The laminators are very aware of the developing alternative label/product decoration technologies — such as sleeving and in-mold — and the value-chain pressures they are experiencing make it possible for them to increase the overall market for self-adhesive labels, at this time, through specialized products for specialized niches.

There is an increase in the dialogue among suppliers in the value chain who, traditionally, have not had direct contact. Unfortunately for the entire value chain, converters continue to be a highly fragmented group of companies numbering in the tens of thousands worldwide. When AWA recently interviewed major end-users, that was often the comment from frustrated label buyers and specifiers across a number of market segments, including food, beverage, and personal care products. At AWA Conferences' last Labeling Technologies Conference, end-user speakers made it perfectly clear to the delegates they are looking for label suppliers willing to work with them (preferably exclusively) to develop innovative labeling solutions, faster application speeds, a better service platform (including JIT delivery, smaller order quantities, and worldwide supply). All of this, of course, has to be provided at a price that allows the end-user to compete — and that can only be achieved if the converter is working hand-in-hand with its suppliers.

A Challenging Environment
The development of more international label converter groups such as CCL Labels (North America) and Skanem in Europe (formerly SE Labels) will require “out-of-the-box” thinking and a real change in the model employed today by most label converting companies, which remain regionally (if not locally) focused, independent, privately held enterprises. Many are still “mom-and-pop” businesses set up in the boom years of the 1970s and '80s. But today, within the label converting part of the value chain, margins and profitability are under the same pressures as the rest of the supply side. Converters producing mainstream primary product labels and variable information printed labels have a challenging time ahead and face a highly competitive environment.

Now that self-adhesive laminators are becoming a more consolidated group, there is only one logical direction in which the label converters can go if they too are to remain profitable. I believe that some form of consolidation will take place. This may be achieved through more collaboration between converters, creating an opportunity to establish partnerships and joint marketing alliances across global boundaries. Such partnerships will involve suppliers higher up the value chain as well and a real change in the industry's thinking and its relationships. Ultimately, in this increasingly end-user driven market, it's inevitable global end-users will choose to order their labels from “global” label suppliers.

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