Challenges and Opportunities
Economic pressures and high-potential technologies are two facets in a spectrum of positive and negative factors confronting the tag and label industry.
March 2006 by Kate Sharon
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The tag and label industry is facing issues with dynamically differing effects.
On one hand, the industry is brimming with opportunity. Radio Frequency Identification (RFID), security packaging, and shrink sleeves have grown and continue to grow in popularity, providing a burgeoning source of revenue across the industry.
At the opposite end of the spectrum, tag and label suppliers and converters are facing shrinking margins. Economic pressures from industry consolidation and higher costs in energy and raw materials have squeezed the industry on all sides.
Something has to give in the near future, and market predictions are leaning toward a positive result. Scott Pillsbury, president, Rose City Labels, already feels the optimism. “The conditions appear to be positive for most sectors—much better than in years past,” he said.
Growth under pressure
According to a study by The Freedonia Group, called “Labels,” U.S. label shipments are expected to increase 5.7 percent per year to $15.2 billion in 2008. RFID, two-dimensional bar coding, and plateless digital printing will open new labeling applications, propelling industry growth.
However, Corey Reardon, president and CEO, AWA Alexander Watson Associates, expects the industry to grow at a slower pace due to market pressures. “The business environment continues to be very challenging,” he said. “In North America, as in Western Europe, margin pressures are being experienced across the value chain, along with greater demands on service levels—such as smaller order volumes coupled with just-in-time delivery. Growth continues to be soft throughout the entire sector, at about 2-3 percent.”
The tag and label industry in other parts of the world will continue to experience much more expansion, adding more pressure to the well-established companies in North America and Europe. Reardon looks for the economic and market conditions to stay challenging for end users/brand owners and label converters as globalization proceeds.
“Worldwide, the Asia Pacific region is growing fast, and now commands 23 percent of the world’s total demand for labels—the third largest market for labels today, behind Europe (36.5 percent) and North America (29.9 percent),” he said. “While much of that consumption has been met until now by imported label substrates from America and Europe, an indigenous label substrate market is now developing in the region which is likely, long term, to threaten the traditional suppliers and further erode their growth levels.
“Developing markets across the globe—including South America and India, as well as Asia Pacific (and particularly China), and the emerging economies in Eastern Europe—represent an opportunity for North American and European material suppliers, but the low costs of labor also represent a threat to label converters as cross-border and even cross-continent trading increases,” he continued.
On one hand, the industry is brimming with opportunity. Radio Frequency Identification (RFID), security packaging, and shrink sleeves have grown and continue to grow in popularity, providing a burgeoning source of revenue across the industry.
At the opposite end of the spectrum, tag and label suppliers and converters are facing shrinking margins. Economic pressures from industry consolidation and higher costs in energy and raw materials have squeezed the industry on all sides.
Something has to give in the near future, and market predictions are leaning toward a positive result. Scott Pillsbury, president, Rose City Labels, already feels the optimism. “The conditions appear to be positive for most sectors—much better than in years past,” he said.
Growth under pressure
According to a study by The Freedonia Group, called “Labels,” U.S. label shipments are expected to increase 5.7 percent per year to $15.2 billion in 2008. RFID, two-dimensional bar coding, and plateless digital printing will open new labeling applications, propelling industry growth.
However, Corey Reardon, president and CEO, AWA Alexander Watson Associates, expects the industry to grow at a slower pace due to market pressures. “The business environment continues to be very challenging,” he said. “In North America, as in Western Europe, margin pressures are being experienced across the value chain, along with greater demands on service levels—such as smaller order volumes coupled with just-in-time delivery. Growth continues to be soft throughout the entire sector, at about 2-3 percent.”
The tag and label industry in other parts of the world will continue to experience much more expansion, adding more pressure to the well-established companies in North America and Europe. Reardon looks for the economic and market conditions to stay challenging for end users/brand owners and label converters as globalization proceeds.
“Worldwide, the Asia Pacific region is growing fast, and now commands 23 percent of the world’s total demand for labels—the third largest market for labels today, behind Europe (36.5 percent) and North America (29.9 percent),” he said. “While much of that consumption has been met until now by imported label substrates from America and Europe, an indigenous label substrate market is now developing in the region which is likely, long term, to threaten the traditional suppliers and further erode their growth levels.
“Developing markets across the globe—including South America and India, as well as Asia Pacific (and particularly China), and the emerging economies in Eastern Europe—represent an opportunity for North American and European material suppliers, but the low costs of labor also represent a threat to label converters as cross-border and even cross-continent trading increases,” he continued.
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