Eastern Europe has a rich and complicated history. As a result, defining the region has been the subject of some debate. In fact, it has been said that there are “almost as many definitions of Eastern Europe as there are scholars of the region.” Some have defined Eastern Europe as a concept, identified by shared cultural norms and geo-political similarities. Others have said that any country that was behind the Iron Curtain before its fall is considered a part of Eastern Europe.
The United Nations, in an effort to pinpoint the countries that belong in this region, has defined Eastern European countries as: Belarus, Bulgaria, Czech Republic, Hungary, Moldova, Poland, Romania, Russia, Slovenia and Ukraine. The European Union adds Albania, Armenia, Azerbaijan, Bosnia and Herzegovina, Croatia, Georgia, Kosovo, Macedonia, Montenegro, Serbia, and Slovenia to its definition.
Happily, the label industry is not nearly as specific. Suppliers and converters are moving into the eastern portion of Europe and contributing to its modest, but significant, growth. Though Eastern Europe may not have historically had the economic advantages of its Western counterpart, one thing seems clear: Eastern European countries are ready to become more competitive.
According to AWA Alexander Watson Associates’ 2013 European Label Market Study, significant growth in the European label market as a whole has been driven by both the sharp rise in online purchases and the overall increase in retail sales in Eastern Europe. Of the aforementioned countries considered Eastern European, Turkey is responsible for the most significant growth in the region.
The increase in retail sales is driven, in part, by the relocation of many manufacturing enterprises from Western to Eastern Europe. The report states: “Poland is now a major European producer of white goods (household appliances); automotive production has continued to rise in Eastern Europe and Turkey compared to declines in France and Italy.”
In the pressure sensitive market, there is noted investment in support of the Eastern European market in terms of local manufacturing and increased distribution services. However, available pressure sensitive label laminating capacity remains higher than the market demands, which result in the closure of older, narrow width capacities. When there is investment, it has been focused on providing manufacturing capacity local to the Eastern European (including Russian) label markets.
Through 2017, AWA predicts that the forecast growth of the primary product application segment for pressure sensitive labels in Europe will prove more demanding as traditional end users demonstrate a level of saturation and maturity for the product. “The introduction of the format into new end users is forecast to be slow in the face of high levels of competition from other label formats and from direct printed technologies – most notably flexible packaging,” reads the report.
Despite the expected slowdown, the Eastern European region is still expected to grow approximately 12% in the pressure sensitive market through 2017.
Though there had been some consolidation over the last few years as a result of the economy, there is still a strong focus on local converters throughout the region. In fact, in several countries, 70% of label production is centered on 20% of the printers.
A focus for international suppliers
Global suppliers have taken note of not only the growth potential in the region, but the focus on local economies.
Pressure sensitive labelstock supplier Avery Dennison opened a distribution site in Timisoara, Romania in 2009. The site was opened in order to serve customers in Hungary, Bulgaria, Croatia, Serbia and Romania. The 3,750 square meter facility was equipped with slitting, core-cutting, rewinding and automated packaging equipment.
At the time of the center’s opening, Georges Gravanis, vice president of sales and customer service, says: “In a region where, even in today’s economic environment, there is real and growing demand for labeled goods, it is a logical focus for us to intensify our ability to be closer to our customers, understand their local needs, and enhance the speed of service we are able to give them.”
Rene Kubu, sales director of Eastern Europe and Russia at Avery Dennison Label and Packaging Materials, says that the distribution site was opened largely because of the growth potential for customers in the region. “The consumption of PSA products per capita is quite low compared to more mature markets in Western Europe,” he says.
The distribution center has also served as a base for establishing a local sales team, sales managers and technical consultants.
“The distribution center was designed with the possibility to extend current capacities to meet future growth and demand over the next 5-10 years,” Kubu says. “The fact that we made the investment during the ‘crisis’ enables us to capture growth in Southeastern Europe we have seen over the last few years, and to rationalize production in order to make sure we finish our products closer to final use.”
Kubu says that Avery Dennison plans on further expanding its footprint in Eastern Europe “in order to provide Avery Dennison service standards” in emerging markets. The company will soon open a distribution center in Ukraine.
UPM Raflatac, an international manufacturer of pressure sensitive label materials, has had a presence in the Eastern European label market for more than 20 years. In fact, last year, the company celebrated the anniversary of its operations in Russia.
“We have operated in the core of developing the Russian labeling industry, all the way from the beginning of the 1990s when self-adhesive materials first appeared in the Russian market,” says Dmitrij Strechin, area sales director for the Eastern European market for UPM Raflatac. “Since then, the market has expanded rapidly, and the presence of large multinational brands has raised the standards. We have been able to take advantage of our global presence and have been leading the way with our versatile range of self-adhesive products. UPM Raflatac was the first international manufacturer of self-adhesive label materials to open its own slitting and distribution terminal in Moscow, Russia in 2009.”
In addition to the company’s presence in Russia, UPM Raflatac has opened a labelstock factory and a converting center in Poland and slitting and distribution terminals in St Petersburg, Russia; Istanbul, Turkey and Kiev, Ukraine.
“Today, we offer comprehensive service and logistical support for deliveries direct from local sales offices and slitting and distribution facilities on most EE markets,” Strechin says.
Though the Eastern European market of today is (comparatively) stable and promising, Strechin points out that that was not always the case. Suppliers who ventured into the region had to overcome many political and economic challenges, including unstable local currencies, import duties, the need for custom clearance, and stark cultural differences throughout the region. These challenges, Strechin says, have prepared the company for a future in the region.
“Our target is to overcome the challenges on the Eastern European market and to continue our strong growth together with our customers by maintaining the highest standards of quality and service,” he says.
The West looks East
Labelstock suppliers are not the only ones moving into the Eastern European market. In fact, many key pressmakers from Western Europe have begun to expand east in an effort to capitalize on the growth potential there.
MPS Systems B.V., a Netherlands-based supplier of UV flexo and offset printing presses, has zeroed in on the Central Eastern European region. According to Edith Irausquin, marketing assistant at MPS Systems, the company expects significant growth here in the coming years. In order to capitalize on the progress in this region, Irausquin says the company is focused on local markets.
“For MPS it is very important that we are able to advise our customers in improving their printing process,” she says. “To be able to do this we are convinced that we need local people close to our customers who have an excellent understanding of the local market and the situation of each individual customer. Therefore, we have selected the distributors Manroland and ISM, who have offices in every Central Eastern European country and who have a deep understanding of the local market.”
In response to local needs, MPS has designed a new machine platform, the MPS EB-series, with a lower entry investment than its other product ranges. “One of the reasons for developing this mid-range machine is the demand of the Eastern European region,” she says.
Manroland represents MPS in Poland, the Czech Republic and Slovakia. ISM represents the country in Albania, Austria, Bosnia and Herzegovina, Bulgaria, Croatia, Hungary, Kosovo, Macedonia, Moldavia, Montenegro, Romania, Serbia and Slovenia.
Irausquin says that the European crisis did effect the Central Eastern European region, but there seems to be a turnaround in recent months. “We have seen an increase in investments,” she says. “This is a region where we are expecting healthy growth rates in the coming years.”
In addition to the Central Eastern countries, Russia has been a strong area of focus for many suppliers. Edale, a UK-based manufacturer of flexo printing presses and converting machines, announced EdaleRus as its distributor there in 2012. According to Bernhard Grob, Edale’s export sales director, Edale is an export-led company with 90% of its machines being exported worldwide. “Distributors and agents are critical to our export strategy,” Grob says.
The biggest challenge Edale has faced, Grob says, has been changing its brand image and perception. “Today’s product range is very different to let’s say 10 – 15 years ago,” he says. “Huge investments in R&D, product development, new technologies, and OEM partnership with internationally leading companies have changed Edale into a global brand which takes time to bring across and to change people’s mind.”
One benefit of being a European company itself, Grob says, is that communication is rather easy. “Eastern Europe is a part of Europe geographically and economically, they are technology-minded and have a similar mentality, so its easy to reach, promote and support our customers there,” Grob says.
Domino Printing Sciences, a manufacturer and distributor of inkjet, laser and thermal printers headquartered in Cambridge, UK, distributes label machinery in many countries in the region including Poland, Bulgaria, Czech Republic, Slovenia, Slovakia, Lithuania, Latvia, Estonia and Romania. According to Vlad Sljapic, sales director for Europe, the change in the region over recent years has been significant.
“For many years the Eastern European market has been lagging behind Western Europe, with the latter sourcing the majority of its manufacturing needs from China,” he says. “However this has changed dramatically in recent years because of the complexities of doing business with the Chinese market, the consequent challenges in logistics that accompany it, and the emergence of the Eastern European market.”
Sljapic says that this growth stems from Eastern Europe’s integration into the European Union (EU), with the availability of lower overhead costs and enhanced developments in engineering.
“Eastern European manufacturing plants are capable of delivering the same levels of flexibility and quality as in Western Europe, with the advantage of lower labor costs, enabling them to gain market share. This has seen the region develop into an attractive proposition for business investment and collaboration in terms of manufacturing and supply. This has had a positive effect on the label printing market, with a growing demand for labels throughout the manufacturing and production industries.”
Because of these changes, Sljapic says that he expects the market will continue to grow at an even greater pace then in previous years since market requirements will remain the same. “Advancements in technology mean that suppliers can now tailor and tweak their products to the exact demands of their customers. Domino’s N610i digital inkjet label press is an example of the type of digital printing technology driving the label market in Eastern Europe. It is designed to take the productivity of flexo and precision engineering of digital to its most advanced levels, maximizing production efficiencies and providing extended color capabilities while delivering the highest quality print resolution,” he says.
Sljapic notes that Domino will continue to keep a meticulous eye on Eastern Europe to develop more technologies and services that reflect the demands of their customers.
Nuova Gidue, an Italian manufacturer of printing and converting machines, has also opened an office in Russia in order to capitalize on growth there. In October 2010, the company opened Gidue Rus, a dedicated branch for the sales and service of Gidue equipment for Russian territories.
“Gidue Rus is a joint venture between Nuova Gidue and VMG, a leading supplier of graphic equipment and consumables in the Russian and former USSR countries,” says Cristina Toffolo, vice president of marketing at Nuova Gidue. “VMG takes direct responsibility for sales and service, while Nuova Gidue provides continuous up-to-date training and close technical support on standard and special projects.”
According to Toffolo, because of the expansive scope of the Russian market, both VMG and Nuova Gidue felt the need for a closer cooperation than the “standard” supplier-distributor relation.
“The Russian technical culture makes converters look for a deeper information flow, and the enormous distances make an extended sales and service organization - as well as thorough training for local engineers – an absolute must to meet the demands of Russian converters,” she says. “A local Nuova Gidue partnership provides converters with better service and a long-lasting presence. VMG has a solid organization, a history of true success, and an intimate relationship with converters.”
The partnerships have been successful. As of today, Nuova Gidue has more than 50 installations in the area, including many outside of Russia, including in Poland, Belarus, Estonia, Kazakhstan, Ukraine and Hungary.
Toffolo says that the relationships forged throughout Eastern Europe have been enormously important for Gidue. “There are many regular customers that have grown with Gidue over the years, buying several machines,” she says. “This trust will allow Nuova Gidue, GidueRus and other local distributors to quickly and effectively introduce our new technologies and products to the market there.”