Going flexo and added value
The consensus among global label industry suppliers is that flexo has become the preferred method of printing in Latin America. Its cost effective characteristics appear to be the main driver, but today's flexo technology has the capability to provide added value – and differentiation in this market is also a key to a converter's success.
John Cavey, manager, Latin America Sales for Mark Andy Inc., says there's been a distinct move from sheetfed offset to flexo, and the reasons for this include increasing volumes, the need for process optimization and additional processes, and competition. He notes that while striving for lower costs is driving the region's flexo boom, it also fuels competition. "In Latin America, there's a competitive nature that is fierce among printing houses with everyone trying to cut costs and operate more efficiently; hence, customers are moving to flexo due to it being less labor intensive and less expensive to produce the final product," he says.
Rubens Wilmers, managing director for Nilpeter Brazil, says that while flexo is dominant, the type of flexo process used varies depending on the application. "When we talk about flexo presses, we have to consider that there are two different markets in Latin America. One is for prime labels, which sometimes demands process combinations such as add-on screen and/or hot stamping. When this is the case, the majority of the labels are produced by inline flexo presses. The other market is the labels that don't have pictures or even so many colors, like logistic labels. These are normally produced by narrow web central drum flexo presses. But we're seeing a change here as more label converters are looking for increased productivity while reducing their operational costs. So converters are looking at inline flexo presses even for these low added value labels," Wilmers says.
Nilpeter began manufacturing presses in Brazil in 2007 in partnership with a Brazilian company. Manufacturing has since stopped, but Nilpeter plans to start again in the near future without a partner.
While flexo is increasing in popularity, suppliers report that combination printing – flexo with other processes – is also gaining ground. "The predominant printing process is clearly flexo. But we are starting to see more and more combination with screen and offset," says Frank Hasselberg, executive VP for Kocher + Beck USA.
Mike Jelinsky, sales engineer for Martin Automatic, says Latin American converters' desire for high quality is driving the move to flexo. "There is a trend throughout Mexico, Central and South America towards flexo and offset printing. The technology of these processes allows high quality, quick job changeover and flexibility. The label manufacturers throughout the region are focused on higher quality, multi-process label construction, developing new domestic markets and exporting to other countries. A major issue is how to offer a higher quality label, shipped within 24 to 48 hours at a low price level. The products on the shelves of the supermarkets, 'big box' retailers and convenience stores have high quality decorative labels that one would see in the US or Europe," Jelinsky says.
Fueling the need for premium labels is the growing volume of export outside of Latin America. Jelinsky says that the US is an important export market for all countries in Central and South America, though especially for Mexico. He adds that Chile and Peru export to Japan, Taiwan and Korea; Colombia and Venezuela export to the Caribbean; and Brazil exports to the US and Europe.
Nilpeter's Ruben Wilmers also remarks on the desire to produce premium labels, and discusses the optimal converting processes. "We have the premium labels market which is basically attended by presses which combine offset with flexo, hot stamping or cold stamping and, sometimes, gravure," he says, pointing out that in Latin America the premium market is somewhat of a niche serviced by the few converters with access to the technology.
"This is a market which is attended by no more than 10-20 companies, the ones that have such printing technology, but again, this is also a growing market. More and more companies want to be part of this scope of suppliers as well as more and more companies are designing their labels just like the big players in order to add value to their brands and products," adds Wilmers.
Felix Eggers, director of sales and marketing for Gallus, also recognizes the desire for more value added products. "Generally we see a trend towards more added value on all applications. Even on the rather simpler labels being produced, there is the trend for differentiation, which can be achieved in many ways. In some cases, water-based inks are replaced with UV, other cases use metallic papers, cold foil or also screen effects. For all applications, print quality is gaining importance."
Aside from the continued growth of self-adhesive stock usage, Eggers says, shrink film decoration remains very attractive. "However, the growth is somewhat smaller compared to previous years but still remains high," he says.
While Latin America essentially has the same markets as anywhere else in the world, there are a few where label industry suppliers are reporting significant growth in particular. The growth can be attributed to the globalization of the region as a whole, with greater numbers of people gaining more wealth, thus becoming consumers with spending power.
Mark Andy's John Cavey sees growth in the specialty markets. He says, "We are seeing more converters who find opportunities in specialty applications such as pharmaceuticals, promotional cards, and lottery tickets, for example, and are interested in investing with the potential of a large profit."
Ruben Wilmers focuses on the massive Brazilian market for Nilpeter, and he talks about how the economic growth of the country is affecting the marketplace. "Brazil's population is about 200 million, and around half the people are just starting to become part of those who can spend 'superfluous' money. This trend has been experiencing double digit growth year after year. And most of these new consumers are not exactly looking to buy a luxury car – they are buying things that their budget before didn't allow them to buy, things like chocolate, cookies, cosmetics, shampoos, gadgets, etc. Most of these products do have a self-adhesive label combined with plastic bottles as their main packaging. Self-adhesive labels are also taking, little by little, the room previously serviced by other decoration technologies such as wet glue labels, with shelf appeal being the justification," he says.
Worldwide, the market for sparkling wines is recognized as a great potential of growth for pressure sensitive labels. Heloisa Cassone, marketing communications manager in Brazil for Avery Dennison, notes that in Brazil, from January to April of 2009, the internal sparkling wines market grew by 12.7 percent over the same period the previous year, and imports presented sales growth of only 3 percent. "According to a new study in the Brazilian market about sparkling wines ordered by the Brazilian Institute of Wine and conducted by the Santa Catarina Market Analysis Institute, supported by the government, innovations in packaging and labeling and the increase in the supply of the product at retail are two other factors that reinforce the strength of Brazilian wines to consumers," she says.
The wine market has always been strong in Chile and Argentina, and Ruben Wilmers says that it's now a major growth market in Brazil. "Brazil is not exactly a Chile or Argentina when we talk about the wine industry but it's an industry that's growing a lot here as the Brazilian people are becoming wine consumers and the Brazilian brands are very cost effective. We also have a huge potential for spirits and premium beers which are just starting to use all the self-adhesive potential to add value to their brands and products," he says.
North America and Europe continue to reel and recover slowly from the global economic recession. Emerging markets like Latin America also feel the effects, in some places more than others.
Francisco Soto, Latin American account executive for Rotoflex International, talks about the global economic downturn's effect on the region's label market. "Growth is definitely there, but it is minimal, following the general economic feeling around the world. However, finishing inquiries have been steady and there doesn't seem to be a slow down," he says.
Soto says the most stable and growing countries in Latin America appear to be Brazil, Argentina and Chile, with the latter arguably being first on the list. "Finishing solutions have seen significant growth in Peru as well. Mexico, seems to have been following the US economic trends but still remains a strong player in the Latin America label market," he says.
Mike Jelinsky of Martin Automatic notes a slowdown in the region's overall growth. "The market in the region is growing, but more slowly than in the years 2004 to mid-2008. October 2008 through November 2009 was a period of consolidation, yet there is an optimistic outlook for 2010. The countries experiencing the most growth are Mexico, Brazil, Chile and Colombia," he says.
Gallus' Felix Eggers says that compared with other parts of the world, Latin America has gotten on well in spite of rough global economy. "We see continued strong growth in all of Latin America, though Brazil, Mexico, Chile, and Argentina are the growth drivers. Growth can be seen in almost all segments as it's being driven by the increased amount of money spent for consumer goods in the individual countries. The current economic crisis has affected the Latin American label market far less than other regions of the world where there are of course differences between the individual countries. However, confidence and therewith spending has returned much quicker in Latin America than in other parts of the world," Eggers says.
Frank Hasselberg says the growth has definitely slowed significantly for some because of the recession. He says, "Overall we still see quite substantial growth but some areas feel the pain. Mainly printers that are exporting labels to the US and some niche printers that service the car industry, for example, are hurting."
Mike Jelinsky says the global recession has forced a period of consolidation and low growth. "The label manufacturers depending on large consumer products companies for the bulk of their business, have experienced the most significant downturns," he says.
Francisco Soto points out that Mexico, due to its shadowing of the US economy, seems to be most affected by the downturn, but says the South American markets were still able to grow. "Many of the Latin American markets were in a good position to cope with the economic storm due to the fact that much of their products are consumed in-country," he says, adding that global concerns and issues with financing seem to have restricted converters in some countries from being able to make the purchases they are interested in making. "But overall, the world economy didn't seem to affect the Latin American market as hard as it may have affected other areas of the world."
Like all label markets around the world, Latin America is faced with the challenge of meeting the rising demand for short runs. Converters here are taking a look at digital printing as a solution, but adoption is not easy.
"The main problem for this technology to become more popular in Brazil is not so much about the level of investment behind the purchase of a digital press, but the operational costs behind it," says Wilmers. "Normally you need an operator for a digital press with a much different skills set compared to a conventional press, and this is the kind of professional that you do not find in our market. Therefore, if you buy a digital press here, either you invest time and money by educating an operator or you try to hire someone from the competition – something that normally inflates the market with salaries completely out of the norm. And by doing this, you're then in a situation where someone could 'steal' this same professional from you within a matter of months.
"Another challenge that we see here are the importation taxes on top of the consumables used for digital printing. This is very expensive, and it's what makes the famous 'break-even' for digital in Brazil to be very, very different compared to other countries where you don't face such draconian taxes. Even comparing the same technology and the same type of labels, the break-even would always be much, much less in Brazil compared to other countries," adds Wilmers.
John Cavey of Mark Andy also notices the inherent financial challenges associated with going digital. "Digital applications are growing, but are not taking the region by storm. Due to the investment and volume of business required to turn a profit, digital seems to be limited to only the high-end converters," he says, adding that there are some that are able to succeed with digital, but it's not the norm.
"Digital definitely has its place for short runs, new product development and variable printing, but is limited to specialized applications and doesn't meet volume needs. We see new flexo presses, such as the Mark Andy Performance Series press, challenging the need for digital. And new in-line flexo presses are making a case for short runs with fast changeovers and minimal waste. In-line flexo also retains an advantage with the product going through a single process versus the multiple processes required in digital printing.
"Converters are looking for the most inexpensive way to produce the highest quality product, and the investment in digital doesn't always support that," says Cavey.
Globalization and digital printing are thematic of the label industry worldwide, as is the topic of environmental sustainability. And being an emerging market, Latin America, as would be expected, is not on par with Europe and North America. It is, however, on the radar.
"We see some isolated cases of companies that are already deploying sustainable activities, but I guess we can say that it is not representative yet. We see a lot of people talking about the environment, but very few label converters really know what to do," Wilmers adds.
Cavey says that while environmental consciousness is certainly a consideration for converters around the world, it has not yet affected the Latin American market as significantly as it has others. "However, as you travel further into South America, sustainability requirements are slightly more popular with more requirements coming into place. And this may be a result of European influence on those countries. But in general, environmental sustainability does not seem to be a key factor in purchase and production decisions at this time," he says.