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    Narrow Web Europe

    Talking Turkey

    ...

    Talking Turkey
    Constantia Flexibles CEO Pim Vervaat
    John Penhallow10.14.21
    Investing in Turkey can bring fat returns. It can also lose you your shirt. The Turkish economy has rallied reasonably well from the 2019-20 downturn, but its reserves are low. Its budget deficit, on the other hand, at under 3% of GDP, would make most of the world’s central bankers green with envy. Turkish inflation at nearly 20% looks horrendous, but over the years consumers and businesses have learned to live with it. Wages and benefits are low compared with Western Europe (though not with bargain-basement Asian countries). Above all, it is relatively close both to European and to Middle-Eastern markets.

    This was a decisive reason for Constantia Flexibles to invest by acquiring Propak, a packaging manufacturer based in Düzce, a port city on the Black Sea but close to Istanbul. Propak’s main product is its range of flexible packaging for snacks, though it is also strongly present in confectionery and dry food categories. This acquisition will enable Propak to develop Constantia’s EcoLam Mono-PE. According to Constantia, this recently developed material is compatible with existing recycling streams and therefore contributes to the transition toward a circular economy.

    Interviewed by your correspondent, Constantia CEO Pim Vervaat said the acquisition was “a good platform in the growing European snack market. It is highly complementary to our existing site in Turkey, Constantia ASAS, and will enhance the Group’s annual sales – currently €1.5 billion –  by circa EUR 70 to 80 million.”
    Uncharitable correspondents, like this one, have described Turkey as “beefy but broke.” But the regular devaluation of the Turkish Lira (it fell by over 11% against the dollar in the past 12 months) makes Turkish exports more competitive. It also, of course, makes Turkish companies more attractive for foreign investors. Maybe Constantia Flexibles is on to a good thing.

    The whine about wine – and the Kremlin-compliant label
    No one, least of all your correspondent, can fully explain why the bottom dropped out of European wine markets in 2020. Covid-related closures of hotels, bars and restaurants must be the number one culprit, but why did Europeans not just have the stuff delivered and get high in the comfort of their own homes? The hardest hit were the “Big Three,” Italy, France and Spain, which together account for three quarters of all the continent’s wine production (the US is the fourth biggest world-wide).

    In 2020, sales for European wines slumped by 11%. Year-on-year forecasts for 2021 predict a further drop of around 2%, after which sales should perk up, equaling 2019 sales by the following year. In the base year 2019, France alone produced 47 million hectoliters of the stuff, or around six billion bottles, each one with at least two labels, so a 10-15% drop in sales is hitting label converters hard – but not too hard as labels for foods and medicines have been holding up nicely.

    Now, as we enter the fall of 2021, another minor shock wave is hitting the French label sector: wine sales generally are recovering, but champagne corks are popping so fast that the industry can’t decorate the bottles fast enough.

    This is partly thanks to a buoyant US market, but even more due to recent developments in Russia. Back in July of this year, Russian President Vladimir Putin signed a law that effectively prohibits the French from using labels to tell Russian-language customers that French Champagne is the real McCoy.

    The popular newspaper Novaya Gazeta filled in the details of the new law: “Although Champagne wines have retained the exclusive right to use the name ‘Champagne’ in Latin letters on the main label in Russia, the new law means they must stop printing the same or similar word in Cyrillic characters, and instead write ‘sparkling wine’ on the back label. Under Mr. Putin’s new law, only Russian sparkling wines can be called ‘shampanskoe.’”

    Several French champagne houses declared an embargo on exports to Russia, and the French newspaper Le Figaro commented wryly: “To continue consuming their favorite Champagne, Russian oligarchs will probably have to come directly to France to buy it. This will not greatly change their daily routine; most of them spend their summers on the Côte d’Azur anyway.”

    For many commentators, this whole issue is nothing more than a storm in a teacup, or maybe wine glass. Russians consume a mere 50 million liters of sparkling wine annually, and only 13% of that is French champagne.

    Nonetheless, the Russian market is growing, and one major French champagne producer has decided, grudgingly, to fall into line with the new Russian law. Other French producers are following. Hence in part the upsurge in demand for the new style, Putin-compliant champagne labels. Specialist converters like Autajon Epernay are said to be having trouble keeping up with demand.

    That Brexit morning-after feeling
    One of the main arguments put forward by supporters of Britain’s exit from the European Union was that Brexit would cut the Gordian knot of EU trade regulations and free the country to do untrammeled business anywhere and everywhere. Since exit day on January 1 of this year that liberty feeling has been muted, to say the least.

    The Daily Mail, a pro-Brexit national newspaper, complained that 700 pages of customs clearance documentation is now needed to ship goods to and from Britain and the EU. This could be an exaggeration, since the threatened tailback of trucks waiting to cross the English Channel has not happened (or only occasionally), but the divorce has had two consequences that cannot be ignored.

    One is that British industry has, in most cases, continued to apply EU regulations both domestically and internationally (why have two sets of rules if one will do?). The other is less fortunate: many businesses, both in Britain and in Europe, succumb to the feeling that cross-Channel trade is not worth the hassle. Fortunately, there are exceptions, one of which is Britain’s Springfield Solutions, a digital label converter who has just acquired yet another Screen Trupress using inkjet technology.

    According to Springfield’s MD Dennis Ebeltoft, “The pandemic generated accelerated demand from a wide set of companies, such as producers of hand gels and other sanitation products, who needed more labels quickly. This led us to assess how we can continue to grow our output and increase the capacity of our digital print facility.”
    Screen, although a Japanese group, operated in Europe out of its office in the Netherlands.

    Happy hundredth! Vollherbst enters its second century
    In July 1921, Franz Anton Vollherbst printed his first label. The family business was not printing, but vineyards, so the Tiegel press (which still exists) was used to crank out wine labels. Four generations later, but minus the vineyards, Vollherbst is still independent and still making labels. With 120 employees it ranks as part of the Mittelstand, that network of medium-sized businesses that form the backbone of the German economy.

    “Sustainability and innovation are our watchwords,” says CEO Matthias Vollherbst. “Vollherbst won several awards in the past two years: The Top 100 Seal confirms our innovative strength. Vollherbst won the Printer of the Year 2020 competition in the Sustainability category, and in June 2021 a Management Innovation award. Last year, Vollherbst became the world’s first print shop in the wine and spirits segment to test the new, resource-saving Ecoleaf print finishing technology.”

    More acquisitions – when will it stop?
    FINAT is not alone amongst European label associations to lament the increasing concentration of this business sector: with every acquisition, a member or potential member disappears. This trend has been particularly visible in France, where the Brodart Group has been on a buying spree. This family-run business makes mainly flexible and semi-rigid packaging but has been buying up label converters as if there were no tomorrow. Its recent acquisition of label converter Galard brings to four the companies in its recently created label division, which includes Criaud Etiquettes, which was Brodart’s first venture into the western part of France.

    The four converters jointly have annual sales of only a modest €13 million but have bigger ambitions. VP Sébastien Brodart explains,  “Our strategy today is still the same: restructuring to integrate the new sites as quickly as possible, because even if we are not actively looking for new acquisitions, we keep an ear open and will study each opportunity that is proposed to us.”

    Lemorau looks to tomorrow
    Stuck out on the westernmost extremity of the European mainland, Portugal rarely gets into the headlines. Since joining the European Union in 1986 this formerly poor, agricultural country has benefited from generous development aid and now stands in the middle-income bracket with annual per capita GDP of $36,000.

    But in the label business, Portuguese businesses have never cut much ice except on the local scene. So welcome to Lemorau, a manufacturer of narrow web finishing equipment now beginning to be known on the wider international market.

    Sales and marketing manager Natália Lopes takes up the story: “Until 2004 we had produced only flat-bed machines before moving into rotary technology for diecutting, blank separation and slitter/rewinders. By 2009 we had extended production into auxiliary equipment for the label sector, including core cutters and roll lifters. But it was exhibiting at Labelexpo in 2012 that really kick-started our international business.”

    Another showing at Labelexpo, this time in the USA in 2016, saw a boom in demand from American label converters. For the past three years, Lemorau has recommended and fitted Vetaphone’s web cleaners and corona treating units to its presses. A credit to the Danish manufacturer’s quality, and perhaps also to the feeling that smaller European countries should stick together!

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