Narrow Web Europe

‘Man’ the lifeboats

By John Penhallow | January 18, 2012

“Too big to fail” was what they said about Heidelberg, when Europe’s biggest print machinery manufacturer ran out of cash in 2009. The German government, and the banks, duly dipped into their pockets and the patient recovered (and probably ended 2011 with a modest profit). But then on this past November 25, Manroland, Europe’s other leading press manufacturer, declared bankruptcy, putting 6,500 jobs on the line. Several potential buyers have shown interest in the stricken company, but according to the receiver appointed to administer the company, this flagship of German industry will probably be broken up. Its main strength is in wide web rotary presses and sheet-fed offset machines for the packaging industry, and neither sector is exactly booming in world markets. Bernhard Schreier, Heidelberg’s CEO, while insisting that nobody could welcome this bad news, added that, “Nonetheless, a reduction in press manufacturing capacity is no doubt desirable in the current economic situation.” No Schadenfreude intended, of course.

With vodka advertising forbidden in Russia,
labeling is crucial to marketing.

Unlike Manroland, Heidelberg is becoming increasingly involved in the narrow web sector. It is now over ten years since it acquired a 30 percent holding in Gallus, and this year made further significant acquisitions. In July, Heidelberg acquired CSAT, a German-based maker of roll-fed digital presses. With just 70 employees (Heidelberg has 16,000), CSAT could be the spearhead of Heidelberg’s advance into the narrow web digital print machinery business. Significantly, Heidelberg also recently acquired CERM, a Belgian company specialized in MIS solutions for the label industry. And where does all this digital development leave Gallus? Questioned on how soon we can expect the company to launch a hybrid digital/conventional label press, Gallus’ CEO Klaus Bachstein replied, “In our view the time is not yet ripe, we are not at present convinced that the speed, reliability and print quality of such a hybrid press would make commercial sense. The immediate future lies with full digital integration of all prepress and finishing operations.”

What is a Digital Label Press?

This past Labelexpo Europe brought a barrage of speeches and conferences on the future of digital printing, and label gurus of all stripes quoted statistics on the exponential growth of digital label press sales. One senior and highly accredited guru puts sales at 1,400 presses in 2010, and likely to be 20 percent of all label press sales by next year. But what is a digital label press? At the last count there were 35 manufacturers worldwide, and not all of them selling machines priced at  $1 million. Some suppliers offer full color roll-to-roll label presses at a fraction of that price. Come to think of it, you can probably print some very nice color labels on that desktop printer of yours, which could have cost a mere $100. As for the quantity of digitally printed labels, the statistics must necessarily be even dodgier. Press vendors who use pay-per-click can have a good idea of how much their customers are printing, and for the others, sales of proprietary inks can give an indication, but all in all the volume statistics must allow for a very wide margin of error. Conclusion: the penetration of digital printing is probably happening even faster than the experts predict, and the smaller presses, in the $50-250,000 bracket, could be the answer to many a label converter’s prayers.

A Label Association for Britain?

As the old joke has it, if you put three Englishmen together they either form an orderly lineup, or a club. Why then does the most clubbable country in Europe have no label association? The answer is that now it does. After several false starts over the years, an association called BPIF Labels held its inaugural seminar in November 2011, under its newly elected chairman John Bambery. “The BPIF has agreed to a change of membership criteria, with membership of the group now being open to both member and non-member BPIF companies, as well as suppliers to the industry,” he announced. “The model on which these changes are based is that of the highly successful VskE, the German self-adhesive federation.”

At a time when Prime Minister Cameron and Chancellor Merkel are so often at loggerheads, it is comforting to know that some Britons are planning to follow the German model.

Welcome to Podolsk!

If Podolsk is not yet on the map as a hot spot for the pressure-sensitive label business, then it certainly should be. Situated some 30 miles south of Moscow, this otherwise unprepossessing town is home to distribution centers for Avery Dennison and Kocher + Beck, and also to a CCL label production plant. All three are associated with Artmark, a major Russian distribution company. Avery Dennison recently rebuilt and expanded its Podolsk distribution center, an $8 million project opened with great pomp and circumstance in November. With two brand new, 2-meter-wide slitters plus a third in 1-meter width, Avery says it can now offer 24-hour service to all customers within a 200-mile radius of Moscow. The plant currently operates in two shifts but has a three shift annual capacity of an impressive 1.7 billion square feet per year.

In most countries of the world, Avery Dennison sells directly to label converters, but not in Russia, where it has for many years worked in partnership with Artmark Label Systems. During the opening ceremony of the new distribution center, your correspondent questioned Don Nolan, Avery’s VP for Label & Packaging materials about the reasons for this choice. “We understand labels, and Artmark understands Russia,” he said, “It’s as simple as that. We had the good fortune to find the right partner fifteen years ago when we first came into this market, and we have expanded and deepened the relationship ever since.” Nolan was also able to throw some light on the reasons why no labelstock manufacturer has so far set up a coating plant in the former Soviet Union, despite the rapid growth of label markets there in recent years.
“So long as Russian import duties for labelstock remain at their present low level of around 5 percent,” said Nolan, “There is little incentive to produce labelstock locally. Anyone doing so would need to import most of the papers and other raw materials, so there would be little or no cost savings.”

The Spirit of Russia

Among the fascinating snippets of information to be gleaned at the Avery opening, was that Russia has around 3,500 different brands of vodka, (not counting the under-the-counter home brewed varieties). For all spirits including vodka, advertising in all its forms is forbidden, so the label becomes a vital ingredient in the marketing mix. The other salient fact is that in Russia, counterfeit vodka is a widespread and highly profitable business: both the distillers and the government are keen to see better and better security labels to ensure that the distiller gets his due and the taxman his duty.

Who wants to be a Paper Producer?

The short answer at the moment is – almost no one. The slightly longer answer is that although labelstock manufacturers and label converters complain bitterly of skyrocketing paper prices, the extra money is not apparently finding its way into paper producers’ profits. Sweden’s Stora Enso, which makes a wide range of papers including release liners, announced heavy losses and staff redundancies for the third quarter 2011, partly due to the bankruptcy of New Page Corporation, a US group which was in the process of acquiring Stora’s US activities.

Finnish-based UPM, of which labelstock producer Raflatac is a part, also announced rising costs and falling volumes for the third quarter 2011. Label papers were a bright-ish spot on an otherwise bleak horizon, said the company in its quarterly report: delivery volumes and prices year-on-year for label papers were both up, but only slightly. However, UPM predicted that label materials deliveries in the fourth quarter of 2011 will be slightly lower than in the  year’s third quarter, and that sales prices – you guessed it – will continue to rise. 

Swedish paper group SCA also announced disappointing third quarter results and plans to cut 2,000 staff.

M-Real is a producer of label face papers, with mills in Finland, Germany and France. After months of cliffhanging suspense, the group’s French mill has finally closed as a planned sale to a Thai company fell through. This being France, the employees have been occupying the site since mid-October, and 200 of them demonstrated noisily but alas ineffectually in front of the Ministry of Agriculture in Paris.

Sequana, parent company of ArjoWiggins and one of the world’s biggest paper merchants, lost a cool €30 million in the third quarter, against a small profit in the third quarter of 2010. The group blamed “the uncertain economic climate and absence of short-term visibility, both likely to depress demand during the fourth quarter.”

Switzerland’s Cham Paper Group has been hit twice: once by the economic downturn, and then again by the strength of the Swiss Franc. The bulk of the production will be shifted from Switzerland to the group’s other plants in the Euro zone, and 200 Swiss workers will lose their jobs.

An optimistic note is hard to find at the moment, but Mondi, the South Africa-based big league paper producer with 30,000 employees worldwide, can probably provide it: the group showed very healthy half-year results with year-over-year sales up by 7 percent and pre-tax profits almost doubled. Among Mondi’s recent investments, completed earlier this year, is a new plant for producing siliconized release liner, in Jülich, Germany. Mondi’s main business is in making Kraft and other packaging papers, and the group only moved into the siliconized release liner business ten years ago. Now with the extra capacity provided by the Jülich plant, with its 90" wide coater running at 2,600 fpm, Mondi plans to become a world heavyweight producer.

Wanted: Silver Lining

As Europe’s politicians and central bankers fail to get their act together and growth rates come to a juddering halt, a happy or even tolerable New Year looks doubtful. A few raw materials suppliers, and rather more label converters, will probably disappear before Europe emerges onto those “broad and sunny uplands” that a British statesman promised 70 years ago.
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