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A break in the (economic) clouds



By John Penhallow



Published September 3, 2009
Related Searches: Beer labels Label converter Label printing Label press
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In France, and to some extent in the rest of Europe, nothing much happens in July and August because the journalists are all sunning themselves on a beach. Some, however, soldier on, and those that do sometimes find that the economic and business life of the continent has not gone entirely comatose.

Take the economy, for a start. The Economist, not a magazine given to excessive optimism, reminds us in its latest issue that both France and Germany notched up small increases in economic growth for the second quarter of 2009, thus officially coming out of recession. Even in Britain, a revival of the swooning economy may be in sight, says The Economist, while noting that the Cassandras over at the Bank of England are warning that “Recovery could be slow and protracted.” Industrial production in the Euro area in June was still 17 percent down from a year ago (for comparison, the US on the same basis was 14 percent down, and Britain’s production suffered “only” a fall of 11 percent). Europe’s politicians are everywhere encouraging banks to lend more, but somehow this high-altitude optimism does not yet seem to be penetrating through to the ground-level concerns of label converters, their suppliers or their customers.

With the pound sterling’s decline in value (20 percent down in trade-weighted terms over the past year), UK exporters should have the edge over their continental European competitors. David Lee, director of narrow web press manufacturer Focus, acknowledges that he and other British exporters derived some benefit from the exchange rate in the early months of the year, but that today “European label converters are still waiting for the recovery, and although it’s definitely starting there will be a time lag while they bring their production up to somewhere near capacity. The same is true of the Far East. Chinese and Indian economies are picking up fast, but there will still be a time lag before they start ordering new equipment.” This has not stopped Focus from recently selling label presses to two UK converters, says Lee, and orders continue to come in although not at the levels previously experienced.

No hire, no fire – yet


For Americans (and Britons) one of the surprising things about continental European firms is their reluctance to fire staff when times are hard. This is partly because firing is expensive, and partly because many small companies employ 10 to 20 percent of their workers on short (six- or 12-month) fixed term contracts which are simply not being renewed: Europe’s label converters are typical in this respect. Few have so far gone out of business, and only in France and Spain has there been consolidation of the fragmented label converting sector. In Germany, Europe’s biggest economy, the structure of the label business does not seem to be changing much. German label converters who concentrated too much on certain sectors like the automotive industry have in several cases gone to the wall, and non-specialized converters are facing ferocious price competition, which may drive more into liquidation or acquisition. Most, however, are cutting costs, streamlining work flows, but keeping staff.

Helmut Schreiner, head of one of Germany’s biggest and most successful label companies, for example, replied to questions about job-cutting: “Schreiner Group particularly values its employees. Therefore, our main focus cannot be on downsizing our pool of knowledge… We’ve been filling vacancies with existing employees, and this has made us more efficient.” Sound advice which all Europe’s label converters would do well to follow – up to a point.

An enclave opens up


The downturn has enlivened interest in some of the lesser known corners of Europe. One of the least known, to most outsiders, is the Kaliningrad enclave. Bordering Poland, Lithuania and the Baltic Sea, this province, which became Russian in 1945, has been isolated from the rest of Russia since the collapse of the Soviet Union. Now a “Special Economic Zone,” it benefits from numerous subsidies and tax incentives aimed at encouraging businesses to invest there. Your correspondent was in the provincial capital a short while ago and can testify that the enclave boasts some gung-ho businessmen; it also has a dodgy bureaucracy, a lot of underemployed youths and a serious alcohol problem.

That has not stopped leading German baby food producer Hipp from building a plant, due to open in September, in Mamonovo, 50 kilometers from the provincial capital. At capacity the plant will produce 200 million jars of baby food, and it is understood that all labels will have to imported. Could be an opportunity for an intrepid converter to set up there?

Walzing down the Dniepr


Further east the Ukrainian brewer, Obolon, has started brewing beer under license from German brewer Bitburger. Prior to the deal Bitburger was imported into Ukraine; this move follows many similar incursions of Western brewers who have either set up breweries, or concluded licensing agreements, in Ukraine.

In this case it is not known whether the beer labels will now be locally produced by Ukrainian converters. If they are, Michael Wareka, the short but ebullient CEO of Austria’s Marzek Etiketten, will be well placed to get the business. His company recently acquired Drukarsky Dvir, now renamed Marzek Pechatny Dvor, a label and flexible packaging converter with 150 employees in Dnepropetrovsk, some 600 miles southeast of the Ukrainian capital, Kiev. Along with Marzek’s plant in Hungary, the group will have annual sales of over $60 million and a strong position throughout Central and Eastern Europe.

Dies in the doldrums


Rotary cutting dies are universally used throughout the European narrow web sector, and die manufacturers are as anxious about the future as anyone in the label business, but for slightly different reasons. Die manufacture must surely be down this year, one assumes.

Not a bit, a leading European die manufacturer told your correspondent. Production is slightly up from 2008, because when converters have shorter run lengths they use more dies. So everything in the garden is lovely? Well, not quite. Price competition has heated up, he admits, so despite rising production, die makers’ sales and profits are down. Join the club.

Pago sallies forth in Thailand


Following on its cooperation agreements with label converters in Romania and Russia, Pago is now looking even further east. The leading Swiss manufacturer of self-adhesive labels and labeling systems is to acquire a minority interest in Thailand’s Salee Label Printing Company. Cooperation already began in the spring of this year and is now to be further strengthened and placed on a long term foundation by a financial participation acquired by the Pago Group in the now renamed Pago Salee Printing Group. Pago thus joins Germany’s Rako, Canada’s CCL and Norway’s Skanem (amongst others) in setting themselves the goal of delivering quality decorative labels to multinational brand owners worldwide, and most particularly in the soon-to-be-dynamic Asian markets.

Slow growth for RFID in Central Europe


Polish based research company PMR has been looking at the retail business in Central/Eastern Europe and has concluded that all IT-related activities, including bar code labels and RFID, are scheduled to grow rapidly throughout the region. As of today, however, only a handful of pilot projects involving RFID exist in the retail goods sector, according to PMR’s research, and no serious take-off of RFID can be expected before 2015.

…but from Finland: Supercooled RFID


UPM Raflatac, the Finnish paper and labelstock manufacturer, has launched an RFID tag specially designed for controlling and managing frozen food supply chains. Called the Dogbone Freeze Tag (where do they find these names?), it is aimed at applications where -40° operating temperature is required, and is already being used by major retailer Metro in Germany to automate data and track inventory. It is a clear case where bar codes can’t do the job, says UPM’s Mikko Nikkanen. “The cold chain integrity needs to be guaranteed and monitored since that is the only way to secure the quality of the goods sold,” he says. “And RFID is the only technology that can provide robustness and user-friendliness in this tough working environment.”

Heard any good wines lately?


After scratch and sniff, after color-change labels, it had to happen. Now it has. At the Vinitaly show the graphic design agency Modulgraf presented its latest idea, the talking wine label. For the connoisseur it seems that nothing can beat the soothing tones of the old sommelier telling them what they are about to drink, how they should drink it and with maybe a few anecdotes thrown in.

Now, thanks to Modulgraf you can have all this in the privacy of your own home thanks to the talking label. Just place the patented “Ecocoder” alongside the label on the bottle, turn up the volume, sit back, and enjoy (corkscrews not included).


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