Narrow Web Europe

Narrow Web Europe

April 8, 2008

Return of the non-returnable bottle

Return of the non-returnable bottle

By John Penhallow

Once upon a time, Europeans threw their empty bottles in the trash can, and were happy. Then the Guardians of the Environment told them that was wasteful, so in came the returnable bottle, first a glass one then a nice lightweight PET number. The label business was quick to adapt, with new adhesives that ensured that the label washed off easily in a caustic bath (and not before) leaving the empty bottle clean, shiny and ready for refilling. This system has now become the most widely used in the UK, Germany, Austria and Scandinavia, traditionally the “greenest” parts of Europe.

Suddenly, new ideas are suffusing the world of beverage packing and labeling. In ecologically correct Sweden, returnable PET bottles for soft drinks and waters are right off the agenda. The main reasons are cost and hygiene. Collecting used bottles and returning them to the bottling plant costs money – and fuel. Washing out the bottles, then checking that they are really clean costs more money and fuel. Now Sweden’s last collecting station for returnables has closed and the challenge for label converters is to ensure that when the PET bottles go through the household garbage recycling system, the label and the adhesive are compatible with the PET. Oh, and the Swedish government still levies a charge on all non-returnable containers (i.e., now, on all containers) just to show the taxpayer how green it is.

Some surprising dos and don’ts in wine labeling

The Council of Ministers of the European Union (EU) has lifted restrictions on what may be printed on wine labels. From now on labels for all EU-produced wines may be printed with the variety of grape, the vintage and the vineyard. Hitherto, only quality wines with AOC pedigree could carry this information, although paradoxically no restrictions were imposed on labels of wines imported into the EU.

For reasons not altogether clear to your correspondent, this liberalizing measure was opposed, unsuccessfully, by the European Parliament. Worldwide, the human race manages to empty some 35 billion bottles of wine annually, and the world’s top three producers, accounting for nearly half of total production, are all in Europe. They are, in order: France, Italy and Spain. USA is number 4 (see chart). This means big business in particular for Southern Europe’s label converters, and also for labelstock manufacturers like Manter (Spain) and Ritrama (Italy), both specializing in materials for wine labeling.

No rush to Russian label show

With excitement mounting in the run-up to Labelexpo Americas, spare a thought for the Russian label show, last held in Moscow in the spring of 2006. From its beginnings in 1995, Etiketka-LabelShow grew rapidly, attracting over 100 exhibitors and tens of thousands of visitors in its heyday. After the rather limited success of the 2006 event the organizers announced that the show would henceforth be held in the spring of even-numbered years. Originally announced for March 2008, the show has now been rescheduled for October 7-10.

Visitors to the show’s web site ( will note that so far just 18 exhibitors are listed. Whatever the shortcomings of previous Moscow shows, it will be a pity if major Western equipment suppliers decide to boycott the Russian show this year. Russia’s industrial production was up nearly 5 percent in 2007 (compared with 2.3 percent for the US economy and just 1.3 percent for the Euro zone). With crude oil topping the $100 a barrel mark and Russia’s production now having risen to over nine million barrels a day, a lot of Russians are quite literally laughing all the way to the bank. Major Western brand owners continue to open new production plants in Russia (both Pepsico and Coca-Cola did so last year) and with massive investment continuing in supermarkets and other modern retail outlets, the demand for all kinds of labels remains strong.

So far only a handful of Western narrow web converters have set up business in Russia; their number was recently increased when Toronto-based CCL Label, one of the world’s biggest converters, announced a 50/50 joint venture with Ilgar Mamedov, a well known entrepreneur in the Russian label business. The Russian partner’s contribution will be in the form of two label converting plants, Kontur Plus in Moscow and Asterix in Saint Petersburg. The Asterix plant is equipped with three modern Gallus presses including a servo-driven TV410S; the two Russian companies, both of which specialize in PS label production, had total sales of $26 million in 2007.

Bucking the trend

While UPM, the Finnish papermaking giant, is closing some of its older European mills and shifting labelstock production to China, it is also continuing construction work on its new labelstock plant near Wroclaw in Poland. With Eastern European label markets growing at 10 to 15 percent every year, it was a toss-up over which of the world’s two leading labelstock manufacturers would be first to site a plant in the former communist bloc. UPM Raflatac’s Polish plant, due to come on stream by the end of 2008, will cost the tidy sum of $135 million.

Meanwhile, another smaller manufacturer has recently opened a new two meter wide coating line in Germany: Herma GmbH, based in Stuttgart, officially opened its $50 million plant in January 2008. It will more than double the firm’s annual production capacity – from 300 to 750 million square meters of adhesive material. Coating speeds on the new line are currently 1200m/m, 50 percent faster than Herma’s existing installations. Asked why his company had chosen to invest in Germany rather than in China or another emerging market, CEO Thomas Baumgärtner cited the need for a highly qualified workforce and easy access to raw materials. Herma employs 800 people, nearly all of them in Germany, and has sales of $300 million.

Talking Turkey

Long considered an economic backwater in the label business, Turkey is emerging as a major player with several world class converters, as well as BOPP film manufacturer Polinas, now in the top rank of European producers. The active Turkish Label Association is headed by the appropriately named Mr. Okay, who is also a member of the board of international label association FINAT.

Recognizing the importance of the Turkish label market, Avery Dennison has just opened a slitting and distribution center in Turkey’s main city, Istanbul. This center joins the Avery/Fasson centers in the Czech Republic, Austria and Poland (plus a further three in Russia) in providing service to converters in Central, Eastern and Southeastern Europe.

Price hikes

Finnish paper manufacturer Ahlstrom surprised no one in the industry when it announced, at the end of February, a raft of price increases for products (which include label and packaging papers) produced at its two French paper mills.

Europe’s two leading producers of silicones for PS labelstock, Blue Star and Wacker, also announced price increases of upwards of 5 percent for European customers as of January. Ink maker Sun Chemical, a major supplier to the narrow web sector, went public with price hikes of 6 to 12 percent. These price hikes are in all cases motivated by rising energy and raw materials costs.

Italian press manufacturers top the ratings

When Prime Minister Romano Prodi’s government was brought down by a no confidence vote in January, Italy was thrown into yet another political crisis. But for the Italian economy it was business as usual, and in the narrow web machinery sector several Italian manufacturers are continuing to chalk up record sales.

Omet, which recently supplied a second flexo/gravure press to US converter Multi-Color, has also had recent successes in China. GIDUE, based near Turin, recently acquired offset press specialist Castagnoli and added the Xpannd range of offset presses to its existing flexo machines. There is scarcely a country in Europe where GIDUE is not successfully installing its presses, but the case of Poland is exceptional: Of the 19 GIDUE presses installed in Poland since the company entered the Polish market in 2003, nine were installed last year.

Part of the secret of Italian companies’ success in the graphic machinery sector is the industry’s enterprising and export-oriented trade associations. For example, at Upakovka, the print and packaging show in Moscow in January 2008, no less than 90 Italian manufacturers presented their latest products and services, and at Labelexpo Europe in Brussels last year, 194 Italian exhibitors took part, compared with only 56 from Britain, a country with a significantly bigger economy.

Mergers and acquisitions

After several years of frenetic activity, the acquisition business in Europe has slowed to a crawl as first banks and now industrialists realize that the storm clouds stirred up by the US sub-prime meltdown are not going to stop in the mid-Atlantic. Investment funds are taking a back seat, but acquisitions within the narrow web industry are continuing as leading industrial players consolidate their positions by buying out competitors.

An example is the publicity-shy Schreiner group, based in Bavaria, which in 2007 acquired the Austrian-owned X-Ident. This move will reinforce Schreiner Group’s position as a leading developer of a wide range of label and other identification solutions for pharmaceuticals, transport, libraries and document authentication. X-Ident produces some 160 million high tech tickets and labels per year, including some 30 million tickets annually for the Moscow subway system.

In the narrow web curing equipment sector, European market leader Hönle acquired fellow German competitor Print Concept. One of Europe’s leading flexible die manufacturers, Kocher + Beck, which has long been seeking ways of consolidating its position in North America, has acquired Suwanee, GA based American Die, with a view to supplying all its North American customers from US-based production. With the Euro now at $1.54 (against $1.32 a year ago) Kocher + Beck joins a long list of European manufacturers forced by the exchange rate to manufacture in the US or abandon their North American market.

Back in Europe, this time in France, consolidation continues within the narrow web converting sector as leading label converter JPL Group (annual sales $53 million) acquires the three label converters making up the Etika group.

Also in France, Patrick Bouchet and the Barat Group joined forces to acquire label converters Clos Carillon and Clos-du-Moulin. These converters make self-adhesive and wet glue labels for cosmetics, pharmaceuticals and spirits sectors and had 2007 sales of $5.3 million.

Davos here we come

If a healthy label sector can be predicted from studying the latest statistics for GDP growth and for the rise in industrial production, then Russia, the Netherlands and Poland are the European countries to concentrate on. But on that basis, the best place of all for label suppliers to do business today is – Switzerland. The scenery is nice, too.

John Penhallow is L&NW’s new Europe correspondent. He welcomes news releases from converters and suppliers. His contact information is as follows:
4 Av. Villeneuve l’Etang
F-78000 Versailles France
Tel: 33-01-39-55-7051