Greg Hrinya & Steve Katz09.02.20
The North American label market finds itself in one of the most unprecedented times in recent history. A growing and thriving industry has been besieged by the effects of the COVID-19 pandemic, much like every other industry.
Labels and packaging have quite literally proven to be an essential business during a chaotic few months. The value of the industry has been on full display, and many converters have seen a dramatic uptick in production. Even though demand has leveled off since the early rush of March and April, those levels are still higher for many. Of course, success has depended greatly on markets served.
The label industry has played a key role in the country’s handling of the pandemic. Labels and packaging proved vital as consumers rushed to the stores in an effort to stock up on critical foods, beverages, health and personal care items, and more.
AWA Alexander Watson Associates has run the numbers on the North American label market, and pressure sensitive has emerged as the dominant labeling technology. According to AWA, in 2019 the North American label market totaled 12,105 million square meters – or 18,761,238 million square inches – equivalent to approximately 18% of the global market for labels. Pressure sensitive labels account for 54% of the market.
Demand for pressure sensitive labels grew in 2019, with a growth rate of 2.3% over 2018. AWA anticipates slightly increasing growth for the period of 2019-2022 at an overall rate of approximately 2.5% CAGR. This growth is expected to yield an additional volume of approximately 506 million square meters by 2022.
Growth varies by segment, as well. Sleeves are expected to see 3.2% growth, while in-mold labels will see 3% growth. By comparison, AWA projects a 1.3% increase for glue-applied labels. While pressure sensitive labels are utilized in multiple end-use segments, beverages make up the largest sector for labels. Beverages include carbonated drinks, water, beer, wine and spirits, energy drinks, and ready-to-drink beverages such as tea and coffee. Sleeves are most commonly seen in beverage, food, and household chemical products.
“The state of the North American label industry is continuing to evolve with a lot of changing dynamics,” states Laura Noll, market research manager, Avery Dennison. “The megatrends of digitalization, e-commerce and sustainability are exciting opportunities for new and disruptive innovations within our industry. According to Euromonitor, online shopping, remote living, decreased discretionary spending and self-care are the new normal and will shape consumer behavior, and with that, the label market for the long term.”
According to Bruce Hanson, president, Labels & Forms at RR Donnelley, the North American label market tends to follow the Gross Domestic Product (GDP) trend line. If the GDP is growing, labels are growing and vice versa. “In the short term, I would say that is fairly true right now,” he says. “Long term, the pandemic will further springboard the growth of e-commerce transactions. While the adoption of e-commerce may not necessarily be new to the industry as a whole, companies are becoming savvier and finding new ways to reach their consumers during trying times. Another long-term impact is the desire for a touchless world as companies want to create solutions that are touch-free and convenient. That said, NFC and RFID will continue to pick up momentum in reaction to the pandemic.”
“The label market is very healthy and growing at over 5% year-over-year,” explains Gary Paulin, vice president of sales and client services at Lightning Labels. “Demand continues to increase as entrepreneurs in virtually every product segment look to establish a successful brand.”
“I’m a big believer in the resilience of our industry, in our flexibility and adaptability – from navigating the wellness of our employees and facilities to meeting changing customer demands,” says Lori Campbell, president of The Label Printers. “We’ve discovered new workflows and new ways of doing things that we probably wouldn’t have considered before, simply because we had to. That mentality needs to be practiced and reinforced. None of us have lived through a pandemic like this before, and there isn’t a rulebook or compass to guide us. All we know for sure is that if we just sit back and wait for a return to business as usual, we’re dead.”
Both converters and suppliers have gone to great lengths to protect all those throughout the supply chain, from their own employees to the consumer.
“Organizations are now distancing their employees and have canceled all in-person meetings and group activities,” says Michelle Garza, VP of operations, Dantex Group. “Most companies also now have at least some employees working from home and many are working flexible schedules. The wide availability of hand sanitizer and daily office cleanings are common. Eliminating all non-essential visitors, outfitting employees with PPE and identifying alternative suppliers have been adopted too.”
Like every other facet of society, the pandemic has left an indelible mark on the label industry. Per Noll, IRI data shows the beverage and home and personal care industries will continue to see high YoY growth, both in the short term and long term.
“We are also seeing a large focus on the pharmaceutical, healthcare and medical device markets,” adds Noll. “Specifically, it’s products related to the care and treatment of COVID-19 patients: mechanical ventilators, plus equipment such as respirators and face shields.”
It is important to note, too, that the essential status of this industry has been on full display during the pandemic. Despite the uncertainty, these critical items will always need labels and packaging – regardless if they were purchased on a store shelf or through Amazon.
“Short term, there is a nervous uncertainty and a shift in consumer buying habits,” notes Al Spendlow, sales director US at AB Graphic International. “I feel this will all work itself out as the virus is beaten, or we adjust to just living with it. I don’t see a great impact in the long term, at least as far as the label and packaging industries go. We all need to eat, look and smell good, and as the global population expands, so do consumables and the labels upon them.”
Much of the label industry’s success during the pandemic can be attributed to specific end-user segments. In North America, not all label printers made out successfully. Those that found success were servicing the right markets, which saw a surge associated with COVID-19.
“The large spike in demand that appeared in the second half of March and continued into April and May is now stabilizing, albeit at a higher level than before,” says Victor Gomez, director of Industrial Label Products at Epson America. “Within this surge, there have been clear winners and losers depending on the end-user vertical. Labels for consumer staples and household chemicals, for example, have clearly been in much greater demand. Products meant to be consumed or used in public have suffered. All in all, it’s a privilege to be working in an essential, dynamic and resilient industry like labels.”
Gomez states that the converters with a diversified portfolio of customers across verticals have been able to do very well redistributing capacity to meet the change in demand. “The shift in demand, the suddenness of the changes and the broad reach of the pandemic’s effects have caused imbalances in matching supply to demand,” he notes. “There is excess capacity in some sectors and shortages in others. Forecasting has become more difficult for label converters and end users at a time when getting it right is most important.
“The North American label market will emerge from the current crisis stronger but not unaffected,” adds Gomez. “Nimbleness and sound financials will be rewarded. E-commerce will offer new opportunities for branding and promotion. End users and converters will be more attuned to, and make decisions based on, the reliability of their suppliers and the strength of their supply chain.”
Manufacturers have been affected in different ways, though. “The financial impact from COVID-19 is certainly challenging every company to the adoption of new standards,” says Garza. “Most organizations are experiencing some degree of negative impact to revenue and are naturally planning to make savings. In the long term, technology will play an even bigger part in terms of response time, as well as the way we conduct meetings.”
In addition to the increased demand for label runs, Paulin adds that the industry has also seen an influx of new business opportunities due to the pandemic. “I don’t see any adverse impacts due to COVID-19 in the near or long-term future, at least not based on what we have seen and experienced over the past several months,” he notes. “If anything, new growth from the PPE segment should continue, and as regional areas return to work and businesses reopen, demand for product labels in all product segments should increase. We continue to tool up to meet our increased demand and add appropriate staffing to run our production teams 24/7.”
Some of these increased opportunities can be seen in a range of sectors, from restaurants to supermarkets. Packaging has changed to accommodate the latest trends, especially with safety in mind.
“Stickers for pre-packaged, grab-and-go or delivered foods are doing extremely well,” adds Gomez. “These can even be produced in-house by dedicated label printers. We also see supermarkets replacing salad and deli areas with the same products in clamshell containers bearing weigh-scale pressure sensitive labels. But these are now in color to enhance the attractiveness of the packaging, not just the traditional monochrome thermal labels.”
‘Paradigm shift’
Digital printing has continued to proliferate in the North American label market. Suppliers have responded with enhanced press technologies, and many companies have joined forces for digital hybrid presses.
“Speaking to the advancement in digital converting, we at Lightning Labels have watched a true market paradigm shift while acting as the lead pioneer in digital label production,” says Paulin. “Over the past 5-10 years, digital converting has really grown into its own. Lightning Labels was the first to provide the public with an online ordering portal – to generate free quotes, request material samples and place production orders.”
While digital printing was once thought to be a competing technology to flexography – the dominant form of label printing – the industry has learned that the two printing technologies can exist symbiotically. Plus, bench-top, on-demand color label printers are opening up markets that were once the sole province of monochrome thermal transfer printers. There have been other advancements, as well.
“The single biggest evolution of the last decade has been the entrenchment of digital printing alongside flexography in label production. I very specifically say ‘alongside’ because there is no question of one replacing the other, any more than my microwave oven replaces my trusty oven range,” explains Epson’s Gomez. “Digital printing itself has evolved. There have never been more legitimate choices from reputable manufacturers like Epson. Digital presses can be found at all price points, with a variety of options for speed, print quality, web widths, embellishment and color gamut.
“Digital printers and presses began running inline with finishing equipment around 2012,” adds Gomez. “Today, inline pre-print and post-print processes are fairly common. Connectivity with a company’s ERP systems is also becoming commonplace, as is web-to-print capability. In the past decade, label printers or presses have gone from standalone units performing a discreet production step to integrated parts of a production and business environment.”
“Market research shows that digital press sales are outpacing that of other label print technologies,” notes RR Donnelley’s Hanson. “This can be attributed to the demand for faster turn times, more variety and the desire for shorter runs. All of these factors encourage companies to think more about the supply chain and how they’re able to effectively support their clients while maximizing working capital.”
The Label Printers has seen an increased demand for digitally-printed labels, as well, from brands of all sizes. Small brands, in particular, are requesting bigger and bolder labels that leverage the technology to stand out on crowded shelves.
“We continue to see new, challenging requests for small volume projects that go beyond simply digital as an answer,” says Campbell. “Digital has allowed smaller brands to mimic the large brands for responding to changing demographics through SKU proliferation and customization.
“But it isn’t stopping there,” adds Campbell. “The smaller brands see what is possible and they want to be able to take advantage of things like embellishments, unique materials or constructions, smart labeling – and they don’t want the high volumes and costs historically associated with them.”
Digital printing has proven to be an asset for markets like security. Digital suppliers have emphasized the ability to print variable data and other unique codes as a key driver to the trend toward security label printing.
The converters concur. “While digital label converting is the best fit for multi-version and serialized output, more of our customers today are concerned about product counterfeiting and validating authentic product all through the supply chain, so end users can be confident when they purchase at retail outlets or from online sellers,” states Paulin. “We have been active in the advancements in track-and-trace and authentication technology for nearly three years. We now offer a holistic solution that is in high demand in a variety of product segments, and we will see this demand grow for this adaptable technology in the years to come.”
Avery Dennison’s Noll cites three distinct industry trends that the substrates and adhesives supplier has identified: buying local, safety and security, and the rise of e-commerce.
“The rapid shift to e-commerce and click-and-collect options are having a huge impact on the food industry,” she says. “COVID-19 hasn’t slowed the grocery industry’s move toward greater convenience – it has accelerated it. Because more than ever, consumers are demanding grocery shopping that is fast, painless, and light on unnecessary interaction.”
A June 2020 article in Forbes, citing data from Adobe Digital Insights, states that the pandemic has “accelerated e-commerce growth 4-6 years,” with online spending this May up 77% over May 2019. Avery Dennison, for example, has responded to this trend with DT Eco, a product used for shipping labels, which offers reduced costs, increased productivity and greater sustainability.
“More than ever, consumers want increased transparency, as well as assured safety and security with the food they are buying,” explains Noll. “Anti-tampering labels are becoming increasingly important to consumers and brands, and Avery Dennison is working to showcase the range of security products based on application needs.”
Label converters will also turn to automation to help solve their workforce challenges and to make their operations run more efficiently. “The drive to automate will accelerate,” says Epson’s Gomez. “Wherever labor can be streamlined by automation, it will be. Converters had already experienced trouble replacing retiring pressmen, with new recruits harder to find. Social distancing requirements have also dictated fewer warm bodies in the shop floor at any given time. Automation, wherever it can be applied, maintains or raises productivity on the floor without adding bodies.”
AB Graphic has seen an increased interest in its products, especially as converters look to future-proof their facilities. “We have seen a huge demand for automation for logistical labels, turret rewinders, standalone rewinders, non-stop unwinders and converters with 17", 21" and 26" wide formats,” explains AB Graphic’s Spendlow. “Our new wide web converter in 26" is generating a lot of interest. In particular, integrations with our SGTR turret rewinders enabling straight-to-box production are gaining in popularity, as they are vital for keeping up efficiencies and maximizing productivity.
“Automation continues to be in high demand with real-time job tracking and workflow management gaining momentum,” he adds. “AB Graphic International has made huge strides in this arena with great success. If we can create technology that manufactures labels faster with higher quality, less material costs, less labor and handling, who wouldn’t buy into that?”
Dantex’s Garza notes that the flexibility of the label industry has included a willingness to embrace new technologies. “The great thing about our market is the quick appreciation and adoption of new technologies as they are developed,” she explains. “I believe that all these new technologies, such as automation and digital printing, will continue to grow in popularity. Offering ease of use, as well as quick response times, will pave the way to a greater number of technology-based installations.”
According to Campbell, the pandemic could affect how smaller companies operate, especially as it relates to investment in new technologies. Time will tell, however.
“I think it’s too soon to tell, but we won’t be immune to the long-term impact from the virus,” adds Campbell. “We’re likely to see some individual companies struggle to survive, depending on their pre-COVID financial strength, their customer base, and associated economic fallout from COVID-19. Adaptability is going to be key. Can a company’s resources meet the requirements of the new normal? And we’re not even certain what the new normal will ultimately be. As always, consumer behaviors will dictate brands, who will dictate the label market.”
Smart labeling, with technologies like RFID and augmented reality (AR), will continue to gain market share. AR, for example, has emerged as an affordable, highly adaptable technology that can help facilitate greater customer engagement and interaction. Effectively, this technology extends the content of the physical label into the digital and augmented realm.
“Our customers can incorporate videos, animation and so much more into their label creative,” adds Paulin. “Triggers embedded in the creative file launch the AR experience with the scan of your cell phone, and delivers it into the hands of anyone who has a smartphone (roughly 93% of all cell phone users). This is a powerful new medium, and we offer a proven and proprietary solution that can be custom developed for any business, for virtually any application imaginable.”
“We also believe that RFID and intelligent labels will play an even bigger role in the future,” says Noll. “RFID tagging delivers huge, easily demonstrable benefits for grocers. It can enable frictionless, touchless experiences like a cashier-less checkout for shoppers. It also provides atomic levels of visibility into your inventory and supply chain, so you know exactly what you have, what’s coming and where it all is – no more gaps, dark spots or question marks. RFID tagging also supplies the who, what and when of a product’s provenance with certainty so that every product can be digitally documented by blockchain or other means, enabling you and your customers to access a product’s whole, true life story with a simple tap.”
And unlike in past years, price is no longer a significant barrier. “RFID and NFC demand continues to climb, especially as the price point is becoming more attractive,” explains RR Donnelley’s Hanson. “In the past, one of the deterrents was the price point for RFID, which is now in a place where companies are more willing to make the initial investment to convert. As the pandemic continues, we anticipate more companies will adopt technology to support operational efficiencies and process improvements in an evolving, touchless world.”
A sustainable future
While sustainability seemingly took a back seat for a few years, the label industry is ramping up efforts to ensure their products leave a positive carbon footprint on the world. Companies at all levels of the supply chain, from suppliers to brands, are establishing environmental goals. Those range from 10 years down the line to improvements that can be made today.
According to Sarah Sanzo, Avery Dennison’s sustainability and compliance manager for North America, society is currently using 1.75 Earths worth of resources. One of the main culprits is single-use packaging. Globally, some 6.3 billion tons of plastic waste have been generated since the 1950s, with most of it occurring in the past two decades. When looking at disposal and waste practices, 25.2% of waste goes to landfills while open dumping accounts for 33%. Only 13.5% winds up being recycled.
“A growing focus on sustainability and carbon reduction is shifting the conversation in the labels and packaging industry,” states Avery Dennison’s Noll. “What started as an increased focus on responsible sourcing and reduction of materials has evolved to an increased focus on enabling recycling and increasing recycled content in our products. To create sustainable packaging, we must adopt label technologies that reflect a whole systems approach – from material design to end-use – and work in harmony with the existing recycling stream.”
Sustainability is being recognized throughout all levels of the supply chain, too. “One notable trend we’re seeing in the marketplace is an increased focus on sustainable and environmentally-friendly solutions,” states Hanson. “Whether it’s through material selection, recycling of waste materials or simply working to address the overall carbon footprint, it is an important issue RRD and our clients take seriously. Globally, companies are taking great measures to ensure sustainable solutions are at the forefront.”
This environmental evaluation has shifted to a lifecycle approach, where the materials are analyzed, not just for their use but for how they will affect the environment after use.
“If you understand how recycling is taking place globally, you realize the need for materials dedicated to each recycling stream, which means the product range today looks much different than it did years ago,” notes Noll.
“We’re actively engaged in diverting matrix and liner waste out of landfills and designing them to be used again,” says Sanzo. “This contributes to a circular economy.”
Association support
The North American label market has received significant support from some of its marquee associations such as TLMI and FLAG, to name a few.
TLMI, through its Engage portal, has been actively keeping members abreast of the latest industry happenings, with an eye on collaboration and best practices for handling the challenges associated with the COVID-19 pandemic. Regular communication also includes emails that inform TLMI members of the most pertinent information necessary to handle the pandemic.
Working in close conjunction with the association’s partners, human resources firm Affinity HR Group and government relations firm Pace LLP, TLMI bundled critical and timely resources on the association’s website and in the membership’s Engage online portal. North American label converters have been able to find timely COVID-related announcements and guidance on the TLMI website, including Department of Labor (DOL) Guidance, Paycheck Protection Program (PPP) applications and associated forms, and Economic Assistance Disaster Loan applications.
“For those of us that belong to industry associations, like TLMI, the unique fellowship gives us additional resources probably not found in other industries,” explains The Label Printers’ Campbell, who was also named the association’s 2019 Converter of the Year.
FLAG, meanwhile, proactively instituted multiple contingency plans for its members. In addition to blog posts and direct support, the association established a COVID-19 support group, which provided assistance in the case of unforeseen circumstances impacting a member’s business.
“We recognize the uncertainty that coronavirus is causing for our members and their businesses, their employees and their customers,” says JC McKay, VP of business development at FLAG. “To be proactive in supporting our membership, we’ve organized a member-to-member support group in North America, helping our members communicate a plan of action to their teams and customers.”
FLAG launched a Sales Training Series, which was designed to provide educational opportunities for label sales teams currently working from home. This endeavor has been intended to help members find success while dealing with the new normal in today’s society. Contributors to this series include experts from ACTEGA and UPM Raflatac.
“As most label sales teams are working from home at this point in the pandemic, we have launched this Sales Training Series to help them take advantage of a unique opportunity to increase their knowledge and skills online,” says John McKay, FLAG president and founder. “Because we are all in uncharted waters, we are very pleased to open up the recording of this important and timely topic as our way of thanking the label industry for their support of FLAG over the past 10 years.”
Paul Teachout, who currently holds the position of business development manager, narrow web, for Anderson & Vreeland, has been in the packaging industry for more than 35 years. He is also active on numerous industry committees and college advisory boards, a member of the FTA Board of Directors/FFTA Board of Trustees, and is an FTA Level 3 First Implementations Specialist. He was honored with the 2014 FTA Presidents Award, the 2017 TLMI Supplier of the Year and is the chair person for the TLMI Annual Awards Competition. He discusses the state of the industry with Label & Narrow Web.
Q: How would you characterize the state of the North American
label market?
A: These are certainly unprecedented times. The COVID-19 crisis has changed the landscape of the market and label converters have been deemed an essential part of our culture. The current market appears to be stabilizing after the initial surges in the spring. In the beginning, there was a natural tendency to gather and protect that drove consumers and converters to stockpile and prepare for the unknown. Then, there was a soft fall as things began to stabilize at the beginning of summer. Now, it appears that the market has leveled out somewhat as we enter the fall months. Overall, the narrow web market has proven how resilient it is and its ability to adapt during challenging times. Flexibility is ingrained in our industry’s culture, and our response to the recent crisis has shown this.
Q: How has the industry adapted to the challenges associated with COVID-19?
A: The ability to adapt to these challenging times demonstrates the strength of our industry. Converters and brand owners alike have been able to pivot from traditional products to essential products in order to support consumers and front-line workers. Converters have adjusted work schedules to accommodate social distancing and offered remote activities for non-production related tasks. And while commercial and industrial labeling has slowed, there has been an increase in the personal care and food and beverage industries. Converters are keeping the store shelves full, even to the extent of outsourcing or sharing overflow production with fellow converters.
A lot of credit needs to be given to the industry associations, as well. Associations like the FTA and TLMI have provided endless streams of information guiding our converters and suppliers through this crisis, from PPP loans and grants to health and wellness advice for our industry workers and facilities, through virtual forums and meetings. Although these are not new technologies, the COVID-19 crisis has exposed the strength of the virtual world and its place in the “New Normal.”
Q: How do you think COVID-19 will impact the North American label market in the future?
A: The short-term impact of COVID-19 may be a little longer than expected. It continues to drivefundamental changes within our companies, accelerating the need to streamline operations and resources.
I believe this will drive a new level of efficiency, available through a more systematic approach to production and supply chain management.
In the long term, we will see converter facilities having a more acute awareness of outside visitations and meetings. The health and well-being of their employees and visitors will be paramount. In addition, there will be a demand for doing more with less by utilizing IIOT (Industrial Internet of Things), virtual supply chain management, and working with partners that can offer innovative single source solutions. This approach will help drive overall efficiency and greatly reduce the foot traffic of multiple suppliers through converter facilities.
At Anderson & Vreeland, we are in a unique position to support our partners through these short-term and long-term changes. As a single source supplier of plate room, press room, consumables and IIOT inventory management systems, we can streamline complete operations from accounting and purchasing to workflow and production.
Q. How would you say the North American market has evolved in the last 5-10 years?
A: The last 10 years have brought tremendous change to our industry, both on the converter and supplier side. New innovations in technologies, recent mergers and acquisitions, and the digital revolution have all reshaped our industry going forward. We have seen both a generational shift in technologies and human resources. In today’s digital world, everything we do is managed by some sort of software and clean-hand operation. Our craft has evolved into a work by the numbers science performed by automation and IIOT management. This falls right into the hands of attracting a new workforce raised on disruptive technologies. Although workforce concerns are still apparent and will not get any better as the silver tsunami hits, investing in new technologies and streamlining the production and procurement process will lead to increased production and a stabilization of these workforce challenges.
The aggressive M&A activity has created multi-rooftop converter groups that are reshaping how we deliver our solutions and how they deliver to their brand owners. The strategic consolidation of facilities and equipment allows them to take advantage of their offerings nationwide, which is driving industry-wide production efficiencies to new heights. The digital revolution of both toner and UV inkjet presses continues to proliferate, allowing converters to be more efficient in production, reduce costs and provide quick turnaround offerings to their regional customers. Digital printing is a perfect complement to flexo printing and converting, and the two combined together offer full production runs of combination printing and embellishments that have created a very high-end value stream of label production.
Q: Are there any other challenges approaching as we deal with this “New Normal?”
A: Black swan events like COVID-19 usually occur once in a generation. They directly impact the geopolitical and geo-economic climates and as a result, there will be many who experience financial distress and find themselves in unrecoverable situations. But these events also create hidden opportunities to strengthen your organization through change and adaptation.
A big part of the “New Normal” will be a virtual IIOT management environment. Adapting to these changes will better support converter concerns of facility health and wellness, as well as outside visitations. At Anderson & Vreeland, we are positioned well to support our partners by utilizing solutions, such as a supply chain with IIOT management, that will reduce administrative and operational costs, improve efficiencies and drive profitability. As we adjust to the “New Normal,” these hidden opportunities will help us all drive the future of our industry.
Labels and packaging have quite literally proven to be an essential business during a chaotic few months. The value of the industry has been on full display, and many converters have seen a dramatic uptick in production. Even though demand has leveled off since the early rush of March and April, those levels are still higher for many. Of course, success has depended greatly on markets served.
The label industry has played a key role in the country’s handling of the pandemic. Labels and packaging proved vital as consumers rushed to the stores in an effort to stock up on critical foods, beverages, health and personal care items, and more.
AWA Alexander Watson Associates has run the numbers on the North American label market, and pressure sensitive has emerged as the dominant labeling technology. According to AWA, in 2019 the North American label market totaled 12,105 million square meters – or 18,761,238 million square inches – equivalent to approximately 18% of the global market for labels. Pressure sensitive labels account for 54% of the market.
Demand for pressure sensitive labels grew in 2019, with a growth rate of 2.3% over 2018. AWA anticipates slightly increasing growth for the period of 2019-2022 at an overall rate of approximately 2.5% CAGR. This growth is expected to yield an additional volume of approximately 506 million square meters by 2022.
Growth varies by segment, as well. Sleeves are expected to see 3.2% growth, while in-mold labels will see 3% growth. By comparison, AWA projects a 1.3% increase for glue-applied labels. While pressure sensitive labels are utilized in multiple end-use segments, beverages make up the largest sector for labels. Beverages include carbonated drinks, water, beer, wine and spirits, energy drinks, and ready-to-drink beverages such as tea and coffee. Sleeves are most commonly seen in beverage, food, and household chemical products.
“The state of the North American label industry is continuing to evolve with a lot of changing dynamics,” states Laura Noll, market research manager, Avery Dennison. “The megatrends of digitalization, e-commerce and sustainability are exciting opportunities for new and disruptive innovations within our industry. According to Euromonitor, online shopping, remote living, decreased discretionary spending and self-care are the new normal and will shape consumer behavior, and with that, the label market for the long term.”
According to Bruce Hanson, president, Labels & Forms at RR Donnelley, the North American label market tends to follow the Gross Domestic Product (GDP) trend line. If the GDP is growing, labels are growing and vice versa. “In the short term, I would say that is fairly true right now,” he says. “Long term, the pandemic will further springboard the growth of e-commerce transactions. While the adoption of e-commerce may not necessarily be new to the industry as a whole, companies are becoming savvier and finding new ways to reach their consumers during trying times. Another long-term impact is the desire for a touchless world as companies want to create solutions that are touch-free and convenient. That said, NFC and RFID will continue to pick up momentum in reaction to the pandemic.”
“The label market is very healthy and growing at over 5% year-over-year,” explains Gary Paulin, vice president of sales and client services at Lightning Labels. “Demand continues to increase as entrepreneurs in virtually every product segment look to establish a successful brand.”
“I’m a big believer in the resilience of our industry, in our flexibility and adaptability – from navigating the wellness of our employees and facilities to meeting changing customer demands,” says Lori Campbell, president of The Label Printers. “We’ve discovered new workflows and new ways of doing things that we probably wouldn’t have considered before, simply because we had to. That mentality needs to be practiced and reinforced. None of us have lived through a pandemic like this before, and there isn’t a rulebook or compass to guide us. All we know for sure is that if we just sit back and wait for a return to business as usual, we’re dead.”
Both converters and suppliers have gone to great lengths to protect all those throughout the supply chain, from their own employees to the consumer.
“Organizations are now distancing their employees and have canceled all in-person meetings and group activities,” says Michelle Garza, VP of operations, Dantex Group. “Most companies also now have at least some employees working from home and many are working flexible schedules. The wide availability of hand sanitizer and daily office cleanings are common. Eliminating all non-essential visitors, outfitting employees with PPE and identifying alternative suppliers have been adopted too.”
Like every other facet of society, the pandemic has left an indelible mark on the label industry. Per Noll, IRI data shows the beverage and home and personal care industries will continue to see high YoY growth, both in the short term and long term.
“We are also seeing a large focus on the pharmaceutical, healthcare and medical device markets,” adds Noll. “Specifically, it’s products related to the care and treatment of COVID-19 patients: mechanical ventilators, plus equipment such as respirators and face shields.”
It is important to note, too, that the essential status of this industry has been on full display during the pandemic. Despite the uncertainty, these critical items will always need labels and packaging – regardless if they were purchased on a store shelf or through Amazon.
“Short term, there is a nervous uncertainty and a shift in consumer buying habits,” notes Al Spendlow, sales director US at AB Graphic International. “I feel this will all work itself out as the virus is beaten, or we adjust to just living with it. I don’t see a great impact in the long term, at least as far as the label and packaging industries go. We all need to eat, look and smell good, and as the global population expands, so do consumables and the labels upon them.”
Much of the label industry’s success during the pandemic can be attributed to specific end-user segments. In North America, not all label printers made out successfully. Those that found success were servicing the right markets, which saw a surge associated with COVID-19.
“The large spike in demand that appeared in the second half of March and continued into April and May is now stabilizing, albeit at a higher level than before,” says Victor Gomez, director of Industrial Label Products at Epson America. “Within this surge, there have been clear winners and losers depending on the end-user vertical. Labels for consumer staples and household chemicals, for example, have clearly been in much greater demand. Products meant to be consumed or used in public have suffered. All in all, it’s a privilege to be working in an essential, dynamic and resilient industry like labels.”
Gomez states that the converters with a diversified portfolio of customers across verticals have been able to do very well redistributing capacity to meet the change in demand. “The shift in demand, the suddenness of the changes and the broad reach of the pandemic’s effects have caused imbalances in matching supply to demand,” he notes. “There is excess capacity in some sectors and shortages in others. Forecasting has become more difficult for label converters and end users at a time when getting it right is most important.
“The North American label market will emerge from the current crisis stronger but not unaffected,” adds Gomez. “Nimbleness and sound financials will be rewarded. E-commerce will offer new opportunities for branding and promotion. End users and converters will be more attuned to, and make decisions based on, the reliability of their suppliers and the strength of their supply chain.”
Manufacturers have been affected in different ways, though. “The financial impact from COVID-19 is certainly challenging every company to the adoption of new standards,” says Garza. “Most organizations are experiencing some degree of negative impact to revenue and are naturally planning to make savings. In the long term, technology will play an even bigger part in terms of response time, as well as the way we conduct meetings.”
In addition to the increased demand for label runs, Paulin adds that the industry has also seen an influx of new business opportunities due to the pandemic. “I don’t see any adverse impacts due to COVID-19 in the near or long-term future, at least not based on what we have seen and experienced over the past several months,” he notes. “If anything, new growth from the PPE segment should continue, and as regional areas return to work and businesses reopen, demand for product labels in all product segments should increase. We continue to tool up to meet our increased demand and add appropriate staffing to run our production teams 24/7.”
Some of these increased opportunities can be seen in a range of sectors, from restaurants to supermarkets. Packaging has changed to accommodate the latest trends, especially with safety in mind.
“Stickers for pre-packaged, grab-and-go or delivered foods are doing extremely well,” adds Gomez. “These can even be produced in-house by dedicated label printers. We also see supermarkets replacing salad and deli areas with the same products in clamshell containers bearing weigh-scale pressure sensitive labels. But these are now in color to enhance the attractiveness of the packaging, not just the traditional monochrome thermal labels.”
‘Paradigm shift’
Digital printing has continued to proliferate in the North American label market. Suppliers have responded with enhanced press technologies, and many companies have joined forces for digital hybrid presses.
“Speaking to the advancement in digital converting, we at Lightning Labels have watched a true market paradigm shift while acting as the lead pioneer in digital label production,” says Paulin. “Over the past 5-10 years, digital converting has really grown into its own. Lightning Labels was the first to provide the public with an online ordering portal – to generate free quotes, request material samples and place production orders.”
While digital printing was once thought to be a competing technology to flexography – the dominant form of label printing – the industry has learned that the two printing technologies can exist symbiotically. Plus, bench-top, on-demand color label printers are opening up markets that were once the sole province of monochrome thermal transfer printers. There have been other advancements, as well.
“The single biggest evolution of the last decade has been the entrenchment of digital printing alongside flexography in label production. I very specifically say ‘alongside’ because there is no question of one replacing the other, any more than my microwave oven replaces my trusty oven range,” explains Epson’s Gomez. “Digital printing itself has evolved. There have never been more legitimate choices from reputable manufacturers like Epson. Digital presses can be found at all price points, with a variety of options for speed, print quality, web widths, embellishment and color gamut.
“Digital printers and presses began running inline with finishing equipment around 2012,” adds Gomez. “Today, inline pre-print and post-print processes are fairly common. Connectivity with a company’s ERP systems is also becoming commonplace, as is web-to-print capability. In the past decade, label printers or presses have gone from standalone units performing a discreet production step to integrated parts of a production and business environment.”
“Market research shows that digital press sales are outpacing that of other label print technologies,” notes RR Donnelley’s Hanson. “This can be attributed to the demand for faster turn times, more variety and the desire for shorter runs. All of these factors encourage companies to think more about the supply chain and how they’re able to effectively support their clients while maximizing working capital.”
The Label Printers has seen an increased demand for digitally-printed labels, as well, from brands of all sizes. Small brands, in particular, are requesting bigger and bolder labels that leverage the technology to stand out on crowded shelves.
“We continue to see new, challenging requests for small volume projects that go beyond simply digital as an answer,” says Campbell. “Digital has allowed smaller brands to mimic the large brands for responding to changing demographics through SKU proliferation and customization.
“But it isn’t stopping there,” adds Campbell. “The smaller brands see what is possible and they want to be able to take advantage of things like embellishments, unique materials or constructions, smart labeling – and they don’t want the high volumes and costs historically associated with them.”
Digital printing has proven to be an asset for markets like security. Digital suppliers have emphasized the ability to print variable data and other unique codes as a key driver to the trend toward security label printing.
The converters concur. “While digital label converting is the best fit for multi-version and serialized output, more of our customers today are concerned about product counterfeiting and validating authentic product all through the supply chain, so end users can be confident when they purchase at retail outlets or from online sellers,” states Paulin. “We have been active in the advancements in track-and-trace and authentication technology for nearly three years. We now offer a holistic solution that is in high demand in a variety of product segments, and we will see this demand grow for this adaptable technology in the years to come.”
Avery Dennison’s Noll cites three distinct industry trends that the substrates and adhesives supplier has identified: buying local, safety and security, and the rise of e-commerce.
“The rapid shift to e-commerce and click-and-collect options are having a huge impact on the food industry,” she says. “COVID-19 hasn’t slowed the grocery industry’s move toward greater convenience – it has accelerated it. Because more than ever, consumers are demanding grocery shopping that is fast, painless, and light on unnecessary interaction.”
A June 2020 article in Forbes, citing data from Adobe Digital Insights, states that the pandemic has “accelerated e-commerce growth 4-6 years,” with online spending this May up 77% over May 2019. Avery Dennison, for example, has responded to this trend with DT Eco, a product used for shipping labels, which offers reduced costs, increased productivity and greater sustainability.
“More than ever, consumers want increased transparency, as well as assured safety and security with the food they are buying,” explains Noll. “Anti-tampering labels are becoming increasingly important to consumers and brands, and Avery Dennison is working to showcase the range of security products based on application needs.”
Label converters will also turn to automation to help solve their workforce challenges and to make their operations run more efficiently. “The drive to automate will accelerate,” says Epson’s Gomez. “Wherever labor can be streamlined by automation, it will be. Converters had already experienced trouble replacing retiring pressmen, with new recruits harder to find. Social distancing requirements have also dictated fewer warm bodies in the shop floor at any given time. Automation, wherever it can be applied, maintains or raises productivity on the floor without adding bodies.”
AB Graphic has seen an increased interest in its products, especially as converters look to future-proof their facilities. “We have seen a huge demand for automation for logistical labels, turret rewinders, standalone rewinders, non-stop unwinders and converters with 17", 21" and 26" wide formats,” explains AB Graphic’s Spendlow. “Our new wide web converter in 26" is generating a lot of interest. In particular, integrations with our SGTR turret rewinders enabling straight-to-box production are gaining in popularity, as they are vital for keeping up efficiencies and maximizing productivity.
“Automation continues to be in high demand with real-time job tracking and workflow management gaining momentum,” he adds. “AB Graphic International has made huge strides in this arena with great success. If we can create technology that manufactures labels faster with higher quality, less material costs, less labor and handling, who wouldn’t buy into that?”
Dantex’s Garza notes that the flexibility of the label industry has included a willingness to embrace new technologies. “The great thing about our market is the quick appreciation and adoption of new technologies as they are developed,” she explains. “I believe that all these new technologies, such as automation and digital printing, will continue to grow in popularity. Offering ease of use, as well as quick response times, will pave the way to a greater number of technology-based installations.”
According to Campbell, the pandemic could affect how smaller companies operate, especially as it relates to investment in new technologies. Time will tell, however.
“I think it’s too soon to tell, but we won’t be immune to the long-term impact from the virus,” adds Campbell. “We’re likely to see some individual companies struggle to survive, depending on their pre-COVID financial strength, their customer base, and associated economic fallout from COVID-19. Adaptability is going to be key. Can a company’s resources meet the requirements of the new normal? And we’re not even certain what the new normal will ultimately be. As always, consumer behaviors will dictate brands, who will dictate the label market.”
Smart labeling, with technologies like RFID and augmented reality (AR), will continue to gain market share. AR, for example, has emerged as an affordable, highly adaptable technology that can help facilitate greater customer engagement and interaction. Effectively, this technology extends the content of the physical label into the digital and augmented realm.
“Our customers can incorporate videos, animation and so much more into their label creative,” adds Paulin. “Triggers embedded in the creative file launch the AR experience with the scan of your cell phone, and delivers it into the hands of anyone who has a smartphone (roughly 93% of all cell phone users). This is a powerful new medium, and we offer a proven and proprietary solution that can be custom developed for any business, for virtually any application imaginable.”
“We also believe that RFID and intelligent labels will play an even bigger role in the future,” says Noll. “RFID tagging delivers huge, easily demonstrable benefits for grocers. It can enable frictionless, touchless experiences like a cashier-less checkout for shoppers. It also provides atomic levels of visibility into your inventory and supply chain, so you know exactly what you have, what’s coming and where it all is – no more gaps, dark spots or question marks. RFID tagging also supplies the who, what and when of a product’s provenance with certainty so that every product can be digitally documented by blockchain or other means, enabling you and your customers to access a product’s whole, true life story with a simple tap.”
And unlike in past years, price is no longer a significant barrier. “RFID and NFC demand continues to climb, especially as the price point is becoming more attractive,” explains RR Donnelley’s Hanson. “In the past, one of the deterrents was the price point for RFID, which is now in a place where companies are more willing to make the initial investment to convert. As the pandemic continues, we anticipate more companies will adopt technology to support operational efficiencies and process improvements in an evolving, touchless world.”
A sustainable future
While sustainability seemingly took a back seat for a few years, the label industry is ramping up efforts to ensure their products leave a positive carbon footprint on the world. Companies at all levels of the supply chain, from suppliers to brands, are establishing environmental goals. Those range from 10 years down the line to improvements that can be made today.
According to Sarah Sanzo, Avery Dennison’s sustainability and compliance manager for North America, society is currently using 1.75 Earths worth of resources. One of the main culprits is single-use packaging. Globally, some 6.3 billion tons of plastic waste have been generated since the 1950s, with most of it occurring in the past two decades. When looking at disposal and waste practices, 25.2% of waste goes to landfills while open dumping accounts for 33%. Only 13.5% winds up being recycled.
“A growing focus on sustainability and carbon reduction is shifting the conversation in the labels and packaging industry,” states Avery Dennison’s Noll. “What started as an increased focus on responsible sourcing and reduction of materials has evolved to an increased focus on enabling recycling and increasing recycled content in our products. To create sustainable packaging, we must adopt label technologies that reflect a whole systems approach – from material design to end-use – and work in harmony with the existing recycling stream.”
Sustainability is being recognized throughout all levels of the supply chain, too. “One notable trend we’re seeing in the marketplace is an increased focus on sustainable and environmentally-friendly solutions,” states Hanson. “Whether it’s through material selection, recycling of waste materials or simply working to address the overall carbon footprint, it is an important issue RRD and our clients take seriously. Globally, companies are taking great measures to ensure sustainable solutions are at the forefront.”
This environmental evaluation has shifted to a lifecycle approach, where the materials are analyzed, not just for their use but for how they will affect the environment after use.
“If you understand how recycling is taking place globally, you realize the need for materials dedicated to each recycling stream, which means the product range today looks much different than it did years ago,” notes Noll.
“We’re actively engaged in diverting matrix and liner waste out of landfills and designing them to be used again,” says Sanzo. “This contributes to a circular economy.”
Association support
The North American label market has received significant support from some of its marquee associations such as TLMI and FLAG, to name a few.
TLMI, through its Engage portal, has been actively keeping members abreast of the latest industry happenings, with an eye on collaboration and best practices for handling the challenges associated with the COVID-19 pandemic. Regular communication also includes emails that inform TLMI members of the most pertinent information necessary to handle the pandemic.
Working in close conjunction with the association’s partners, human resources firm Affinity HR Group and government relations firm Pace LLP, TLMI bundled critical and timely resources on the association’s website and in the membership’s Engage online portal. North American label converters have been able to find timely COVID-related announcements and guidance on the TLMI website, including Department of Labor (DOL) Guidance, Paycheck Protection Program (PPP) applications and associated forms, and Economic Assistance Disaster Loan applications.
“For those of us that belong to industry associations, like TLMI, the unique fellowship gives us additional resources probably not found in other industries,” explains The Label Printers’ Campbell, who was also named the association’s 2019 Converter of the Year.
FLAG, meanwhile, proactively instituted multiple contingency plans for its members. In addition to blog posts and direct support, the association established a COVID-19 support group, which provided assistance in the case of unforeseen circumstances impacting a member’s business.
“We recognize the uncertainty that coronavirus is causing for our members and their businesses, their employees and their customers,” says JC McKay, VP of business development at FLAG. “To be proactive in supporting our membership, we’ve organized a member-to-member support group in North America, helping our members communicate a plan of action to their teams and customers.”
FLAG launched a Sales Training Series, which was designed to provide educational opportunities for label sales teams currently working from home. This endeavor has been intended to help members find success while dealing with the new normal in today’s society. Contributors to this series include experts from ACTEGA and UPM Raflatac.
“As most label sales teams are working from home at this point in the pandemic, we have launched this Sales Training Series to help them take advantage of a unique opportunity to increase their knowledge and skills online,” says John McKay, FLAG president and founder. “Because we are all in uncharted waters, we are very pleased to open up the recording of this important and timely topic as our way of thanking the label industry for their support of FLAG over the past 10 years.”
Paul Teachout, who currently holds the position of business development manager, narrow web, for Anderson & Vreeland, has been in the packaging industry for more than 35 years. He is also active on numerous industry committees and college advisory boards, a member of the FTA Board of Directors/FFTA Board of Trustees, and is an FTA Level 3 First Implementations Specialist. He was honored with the 2014 FTA Presidents Award, the 2017 TLMI Supplier of the Year and is the chair person for the TLMI Annual Awards Competition. He discusses the state of the industry with Label & Narrow Web.
Q: How would you characterize the state of the North American
label market?
A: These are certainly unprecedented times. The COVID-19 crisis has changed the landscape of the market and label converters have been deemed an essential part of our culture. The current market appears to be stabilizing after the initial surges in the spring. In the beginning, there was a natural tendency to gather and protect that drove consumers and converters to stockpile and prepare for the unknown. Then, there was a soft fall as things began to stabilize at the beginning of summer. Now, it appears that the market has leveled out somewhat as we enter the fall months. Overall, the narrow web market has proven how resilient it is and its ability to adapt during challenging times. Flexibility is ingrained in our industry’s culture, and our response to the recent crisis has shown this.
Q: How has the industry adapted to the challenges associated with COVID-19?
A: The ability to adapt to these challenging times demonstrates the strength of our industry. Converters and brand owners alike have been able to pivot from traditional products to essential products in order to support consumers and front-line workers. Converters have adjusted work schedules to accommodate social distancing and offered remote activities for non-production related tasks. And while commercial and industrial labeling has slowed, there has been an increase in the personal care and food and beverage industries. Converters are keeping the store shelves full, even to the extent of outsourcing or sharing overflow production with fellow converters.
A lot of credit needs to be given to the industry associations, as well. Associations like the FTA and TLMI have provided endless streams of information guiding our converters and suppliers through this crisis, from PPP loans and grants to health and wellness advice for our industry workers and facilities, through virtual forums and meetings. Although these are not new technologies, the COVID-19 crisis has exposed the strength of the virtual world and its place in the “New Normal.”
Q: How do you think COVID-19 will impact the North American label market in the future?
A: The short-term impact of COVID-19 may be a little longer than expected. It continues to drivefundamental changes within our companies, accelerating the need to streamline operations and resources.
I believe this will drive a new level of efficiency, available through a more systematic approach to production and supply chain management.
In the long term, we will see converter facilities having a more acute awareness of outside visitations and meetings. The health and well-being of their employees and visitors will be paramount. In addition, there will be a demand for doing more with less by utilizing IIOT (Industrial Internet of Things), virtual supply chain management, and working with partners that can offer innovative single source solutions. This approach will help drive overall efficiency and greatly reduce the foot traffic of multiple suppliers through converter facilities.
At Anderson & Vreeland, we are in a unique position to support our partners through these short-term and long-term changes. As a single source supplier of plate room, press room, consumables and IIOT inventory management systems, we can streamline complete operations from accounting and purchasing to workflow and production.
Q. How would you say the North American market has evolved in the last 5-10 years?
A: The last 10 years have brought tremendous change to our industry, both on the converter and supplier side. New innovations in technologies, recent mergers and acquisitions, and the digital revolution have all reshaped our industry going forward. We have seen both a generational shift in technologies and human resources. In today’s digital world, everything we do is managed by some sort of software and clean-hand operation. Our craft has evolved into a work by the numbers science performed by automation and IIOT management. This falls right into the hands of attracting a new workforce raised on disruptive technologies. Although workforce concerns are still apparent and will not get any better as the silver tsunami hits, investing in new technologies and streamlining the production and procurement process will lead to increased production and a stabilization of these workforce challenges.
The aggressive M&A activity has created multi-rooftop converter groups that are reshaping how we deliver our solutions and how they deliver to their brand owners. The strategic consolidation of facilities and equipment allows them to take advantage of their offerings nationwide, which is driving industry-wide production efficiencies to new heights. The digital revolution of both toner and UV inkjet presses continues to proliferate, allowing converters to be more efficient in production, reduce costs and provide quick turnaround offerings to their regional customers. Digital printing is a perfect complement to flexo printing and converting, and the two combined together offer full production runs of combination printing and embellishments that have created a very high-end value stream of label production.
Q: Are there any other challenges approaching as we deal with this “New Normal?”
A: Black swan events like COVID-19 usually occur once in a generation. They directly impact the geopolitical and geo-economic climates and as a result, there will be many who experience financial distress and find themselves in unrecoverable situations. But these events also create hidden opportunities to strengthen your organization through change and adaptation.
A big part of the “New Normal” will be a virtual IIOT management environment. Adapting to these changes will better support converter concerns of facility health and wellness, as well as outside visitations. At Anderson & Vreeland, we are positioned well to support our partners by utilizing solutions, such as a supply chain with IIOT management, that will reduce administrative and operational costs, improve efficiencies and drive profitability. As we adjust to the “New Normal,” these hidden opportunities will help us all drive the future of our industry.