Joseph Seymour Jr.10.16.14
Brazil is well known for its jaguars, indigenous to South America and recorded to run at speeds of over 40 miles per hour. Comparing Brazil’s economy to a jaguar; it was racing through the Amazon jungle, and suddenly, it’s stuck in a bed of quicksand.
The largest Latin American economy has indeed hit a rough patch.
Economists say Brazil’s GDP fell by 0.6% during the months of April, May and June. First quarter figures also showed negative growth with a 0.2% loss in GDP.
According to analysts, a recession is usually defined as two consecutive quarters of shrinking output. "With the sharp fall in investment, the potential GDP growth rate shows a significant and worrying slowdown in recent quarters," says Cristiano Oliveira, economist at Banco Fibra in Sao Paulo, Brazil.
“We are not in a recession,” insists Brazil’s finance minister Guido Mantega, after the GDP reports were made public.
Nonetheless, the numbers do show a technical recession. At this point, some analysts are worrying if it will grow at all this year, even though just a year ago they were predicting a 3% increase.
There are a number of reasons to explain as to why what had been a quickly developing economy is suddenly in a rut. The Brazilian government says the excess of public holidays during the month-long 2014 FIFA World Cup, hosted by the country, is responsible for the sloping GDP. During the soccer tournament, sporadic holidays were issued at federal, state and municipal levels to regulate the overflow of people using public transportation on game days. Government officials also blame the weak global recovery from the worldwide financial crisis of 2008 for slowing down the economy.
Data shows that civil construction, manufacturing and investment especially suffered during the second quarter. Consumer confidence has dropped as consumers are becoming more cautious, and retail sales are struggling as well.
On a positive note, the Brazilian central bank released a statement saying its Index of Economic Activity showed a 1.5% increase in economic growth for the month of July. This is the biggest monthly expansion to occur within the past six years.
What it means for the label industry
The inconsistent economy may create a difficult environment for investors. Then what does this mean for investors interested in the Brazilian label market? UPM Raflatac, a global supplier of pressure sensitive labeling materials, opened a manufacturing plant there just a few years ago. The sluggish economy hasn’t bogged down their optimism.
“Although recent economic growth has been difficult and exchange rate volatility is always a factor, the potential for continued strong label growth remains in the medium to long-term,” says Mark Pollard, senior vice president for UPM Raflatac Americas. “Brazilian label printers and converters are more sophisticated than most emerging markets, and they continue to invest in the latest technology to ensure they can supply the global and local end users with quality products and services.”
UPM Raflatac now has two operation facilities in the country, located in Rio de Janerio and Jaguariuna – you can guess where Jaguariuna got its name from. The positioning of these two facilities allows the company to provide a wide range of high quality film and paper products with fast local service, according to Pollard.
The total population of Brazil is over 200 million people, and Rio de Janerio is the second most populous city with a population over 12 million citizens. In 2011, UPM Raflatac acquired Gumtac, a Brazilian labelstock coating and slitting business located in Rio de Janerio, merging it with UPM Raflatac.
Jaguariuna is a municipality in the state of Sao Paulo, just 78 miles from the city of Sao Paulo, the world’s eleventh largest city by population and the largest in all of the Americas. UPM Raflatac owns an established distribution terminal in Jaguariuna.
When examining the numbers in past years, it’s no wonder why UPM Raflatac made the move to produce their self-adhesive materials, used for pharmaceuticals, security, and food and beverage applications, in Brazil; Brazilians are the leading consumers of labels in South America, accounting for the world’s third-largest beverage market and ninth-largest pharmaceutical market. The country is also responsible for 10% of global sales of beauty products. Brazil’s fast-moving consumer goods (FMCG) retail presence was rapidly growing a couple years ago, as the major retail chains that sell FMCG products, like Walmart and Costco, continued to move in.
UPM Raflatac quickly recognized these trends, which is why they decided to designate two facilities there.
Brazil is not only the largest country in South America, but it’s also the largest pressure sensitive market in the region at over 600 million square meters. According to label market research firm AWA Alexander Watson Associates, demand for all types of labels in the country totaled nearly 1.2 billion square meters in 2013, and that number is expected to jump to 1.5 billion square meters by 2018.
Representing 40% of the overall market for Central and South America, it is by far the biggest national market in the region, thanks to the recent economic expansion and boosted investment in packaging-intensive industries such as food, beverages and beer. Factors such as increased personal income levels and rising consumer expenditures added to this.
Then, should the economic setback be a red flag to label company’s looking to invest? Probably not. Some of the biggest brand owners are present in Brazil. Companies like Unilever, P&G, and J&J demand a very high standard when it comes to print quality of their label materials. Many different cultures exist within this “continental country,” which stimulates the production of certain products unique to certain regions, even in regards to packaging and labels.
“Although the overall economic growth has been slow, the pressure sensitive market is growing and UPM Raflatac has qualified many materials in cooperation with its label converter customer/partners inside several brand owners,” says Mauricio Medici, general manager of UPM Raflatac’s Brazilian facilities. “UPM Raflatac has significant market share in Brazil, especially in films.”
Duties for imported paper and films are high enough to create a significant barrier to entry for importers. The global average import duty rate of flexible packaging film is 12.5%. In Brazil the duty rate is 25% so localized production is important. And with more than six pressure sensitive material producers in the region, competition can be quite high.
Press installations
UPM Raflatac has managed to find its groove, despite the shaky economy. It’s not the only company in the label industry to do business in Brazil either. Some big name press makers have made successful sales in the country.
Flexcoat Labels, founded in Louveira, Brazil in 2006, has been working closely with Gallus for almost four years. In 2011, the company purchased three Gallus machines at once – two Gallus EM 280 presses and a Gallus RCS 430. Flexcoat Labels works with several adhesive technologies, and develops special papers and films for the self-adhesive label converting industry.
Recently, Flexcoat Labels added a Gallus RCS 430 to their press family. These purchases by Flexcoat Labels demonstrate not only the company’s desire to lay down a foundation for further growth, but the fact that Brazil’s label market is steadily progressing.
“Selecting the machine system was ultimately an easy decision to make,” say the Jocionis family, owners of Flexcoat labels. “The Gallus RCS 430 meets all the requirements for the production of special applications with two-ply labels.”
Prakolar, one of the top suppliers of the self-adhesive label market in Brazil, has purchased three Mark Andy Performance Series P7 label presses. The company acquired their most recent Mark Andy P7 in 2013. They also have a variety of Rotoflex offline finishing machines to support their printing workflows.
“They visited a variety of press manufacturers and thoroughly vetted their decision before choosing the Performance Series,” says John Cavey, Mark Andy’s international sales manager for Latin America. “Mark Andy has been successful in installing presses for many decades in the Brazilian market. In recent years this has been enhanced by the advancements in our flexo technology as well as the partnership with an extremely supportive local distributor, PTC Graphic Systems.”
Prakolar needed the machines to meet the high label demands in the areas of pharmaceutical, cosmetics, food, beverages, and chemicals. The company is also involved with the promotional label industry, specifically with labels using data and diverse images, random numbering and bidirectional codes that interact with the customer.
In order to complete promotional label jobs, Prakolar invested in digital printing, giving them the flexibility to print smaller quantities of personalized labels and/or special labels for commemorative occasions. In fact, the company is the first printer in Brazil to acquire a digital printer. In 2009, they invested in the seven-color HP Indigo WS6000 digital label press.
Pressure sensitive promotional labels are huge in the Brazilian label market. They are frequently used for special events such as the upcoming 2016 Olympic Games, which is to take place in Rio de Janeiro, and the earlier cited 2014 FIFA World Cup. These types of events make self-adhesive label manufacturing companies a hot commodity in Brazil’s printing industry.
Concluding thoughts
A set of tax measures aimed at stimulating Brazil’s economy has been adopted as part of a stimulus program by Brazil’s president, Dilma Rousseff. She is seeking a second four-year term in the Oct. 5 balloting, and, if she wins the ballot, plans on appointing a new team within the government.
While Brazil could see some major changes to fix a stagnant economy, the long-term potential for its label market still holds value. Printers are making major purchases to keep up with high demands. This is a sign that Brazil’s label market is thriving, and it remains a viable option for label and packaging investors.
The largest Latin American economy has indeed hit a rough patch.
Economists say Brazil’s GDP fell by 0.6% during the months of April, May and June. First quarter figures also showed negative growth with a 0.2% loss in GDP.
According to analysts, a recession is usually defined as two consecutive quarters of shrinking output. "With the sharp fall in investment, the potential GDP growth rate shows a significant and worrying slowdown in recent quarters," says Cristiano Oliveira, economist at Banco Fibra in Sao Paulo, Brazil.
“We are not in a recession,” insists Brazil’s finance minister Guido Mantega, after the GDP reports were made public.
Nonetheless, the numbers do show a technical recession. At this point, some analysts are worrying if it will grow at all this year, even though just a year ago they were predicting a 3% increase.
There are a number of reasons to explain as to why what had been a quickly developing economy is suddenly in a rut. The Brazilian government says the excess of public holidays during the month-long 2014 FIFA World Cup, hosted by the country, is responsible for the sloping GDP. During the soccer tournament, sporadic holidays were issued at federal, state and municipal levels to regulate the overflow of people using public transportation on game days. Government officials also blame the weak global recovery from the worldwide financial crisis of 2008 for slowing down the economy.
Data shows that civil construction, manufacturing and investment especially suffered during the second quarter. Consumer confidence has dropped as consumers are becoming more cautious, and retail sales are struggling as well.
On a positive note, the Brazilian central bank released a statement saying its Index of Economic Activity showed a 1.5% increase in economic growth for the month of July. This is the biggest monthly expansion to occur within the past six years.
What it means for the label industry
The inconsistent economy may create a difficult environment for investors. Then what does this mean for investors interested in the Brazilian label market? UPM Raflatac, a global supplier of pressure sensitive labeling materials, opened a manufacturing plant there just a few years ago. The sluggish economy hasn’t bogged down their optimism.
“Although recent economic growth has been difficult and exchange rate volatility is always a factor, the potential for continued strong label growth remains in the medium to long-term,” says Mark Pollard, senior vice president for UPM Raflatac Americas. “Brazilian label printers and converters are more sophisticated than most emerging markets, and they continue to invest in the latest technology to ensure they can supply the global and local end users with quality products and services.”
UPM Raflatac now has two operation facilities in the country, located in Rio de Janerio and Jaguariuna – you can guess where Jaguariuna got its name from. The positioning of these two facilities allows the company to provide a wide range of high quality film and paper products with fast local service, according to Pollard.
The total population of Brazil is over 200 million people, and Rio de Janerio is the second most populous city with a population over 12 million citizens. In 2011, UPM Raflatac acquired Gumtac, a Brazilian labelstock coating and slitting business located in Rio de Janerio, merging it with UPM Raflatac.
Jaguariuna is a municipality in the state of Sao Paulo, just 78 miles from the city of Sao Paulo, the world’s eleventh largest city by population and the largest in all of the Americas. UPM Raflatac owns an established distribution terminal in Jaguariuna.
When examining the numbers in past years, it’s no wonder why UPM Raflatac made the move to produce their self-adhesive materials, used for pharmaceuticals, security, and food and beverage applications, in Brazil; Brazilians are the leading consumers of labels in South America, accounting for the world’s third-largest beverage market and ninth-largest pharmaceutical market. The country is also responsible for 10% of global sales of beauty products. Brazil’s fast-moving consumer goods (FMCG) retail presence was rapidly growing a couple years ago, as the major retail chains that sell FMCG products, like Walmart and Costco, continued to move in.
UPM Raflatac quickly recognized these trends, which is why they decided to designate two facilities there.
Brazil is not only the largest country in South America, but it’s also the largest pressure sensitive market in the region at over 600 million square meters. According to label market research firm AWA Alexander Watson Associates, demand for all types of labels in the country totaled nearly 1.2 billion square meters in 2013, and that number is expected to jump to 1.5 billion square meters by 2018.
Representing 40% of the overall market for Central and South America, it is by far the biggest national market in the region, thanks to the recent economic expansion and boosted investment in packaging-intensive industries such as food, beverages and beer. Factors such as increased personal income levels and rising consumer expenditures added to this.
Then, should the economic setback be a red flag to label company’s looking to invest? Probably not. Some of the biggest brand owners are present in Brazil. Companies like Unilever, P&G, and J&J demand a very high standard when it comes to print quality of their label materials. Many different cultures exist within this “continental country,” which stimulates the production of certain products unique to certain regions, even in regards to packaging and labels.
“Although the overall economic growth has been slow, the pressure sensitive market is growing and UPM Raflatac has qualified many materials in cooperation with its label converter customer/partners inside several brand owners,” says Mauricio Medici, general manager of UPM Raflatac’s Brazilian facilities. “UPM Raflatac has significant market share in Brazil, especially in films.”
Duties for imported paper and films are high enough to create a significant barrier to entry for importers. The global average import duty rate of flexible packaging film is 12.5%. In Brazil the duty rate is 25% so localized production is important. And with more than six pressure sensitive material producers in the region, competition can be quite high.
Press installations
UPM Raflatac has managed to find its groove, despite the shaky economy. It’s not the only company in the label industry to do business in Brazil either. Some big name press makers have made successful sales in the country.
Flexcoat Labels, founded in Louveira, Brazil in 2006, has been working closely with Gallus for almost four years. In 2011, the company purchased three Gallus machines at once – two Gallus EM 280 presses and a Gallus RCS 430. Flexcoat Labels works with several adhesive technologies, and develops special papers and films for the self-adhesive label converting industry.
Recently, Flexcoat Labels added a Gallus RCS 430 to their press family. These purchases by Flexcoat Labels demonstrate not only the company’s desire to lay down a foundation for further growth, but the fact that Brazil’s label market is steadily progressing.
“Selecting the machine system was ultimately an easy decision to make,” say the Jocionis family, owners of Flexcoat labels. “The Gallus RCS 430 meets all the requirements for the production of special applications with two-ply labels.”
Prakolar, one of the top suppliers of the self-adhesive label market in Brazil, has purchased three Mark Andy Performance Series P7 label presses. The company acquired their most recent Mark Andy P7 in 2013. They also have a variety of Rotoflex offline finishing machines to support their printing workflows.
“They visited a variety of press manufacturers and thoroughly vetted their decision before choosing the Performance Series,” says John Cavey, Mark Andy’s international sales manager for Latin America. “Mark Andy has been successful in installing presses for many decades in the Brazilian market. In recent years this has been enhanced by the advancements in our flexo technology as well as the partnership with an extremely supportive local distributor, PTC Graphic Systems.”
Prakolar needed the machines to meet the high label demands in the areas of pharmaceutical, cosmetics, food, beverages, and chemicals. The company is also involved with the promotional label industry, specifically with labels using data and diverse images, random numbering and bidirectional codes that interact with the customer.
In order to complete promotional label jobs, Prakolar invested in digital printing, giving them the flexibility to print smaller quantities of personalized labels and/or special labels for commemorative occasions. In fact, the company is the first printer in Brazil to acquire a digital printer. In 2009, they invested in the seven-color HP Indigo WS6000 digital label press.
Pressure sensitive promotional labels are huge in the Brazilian label market. They are frequently used for special events such as the upcoming 2016 Olympic Games, which is to take place in Rio de Janeiro, and the earlier cited 2014 FIFA World Cup. These types of events make self-adhesive label manufacturing companies a hot commodity in Brazil’s printing industry.
Concluding thoughts
A set of tax measures aimed at stimulating Brazil’s economy has been adopted as part of a stimulus program by Brazil’s president, Dilma Rousseff. She is seeking a second four-year term in the Oct. 5 balloting, and, if she wins the ballot, plans on appointing a new team within the government.
While Brazil could see some major changes to fix a stagnant economy, the long-term potential for its label market still holds value. Printers are making major purchases to keep up with high demands. This is a sign that Brazil’s label market is thriving, and it remains a viable option for label and packaging investors.