Beauty and the Beast

Beauty comes in the form of innovative, eye-catching labels at every turn; the beast is the trudging economy.

In an overall economic environment stuck somewhere between uncertainty and maybe even foreboding, the tag and label industry still has energy and a dynamic thread driven by innovation and opportunity. This is the good news for those companies involved in the tag and label printing industry—printers continue to help their customers compete effectively on the store-shelf battleground with creative, eye-catching product decoration techniques.

A good year

2010 was a turn-around year, recovering from "the pits" of 2009. The overall growth of the North American label market for 2010 was estimated at 3.0 percent versus 2009, according to AWA Alexander Watson Associates in its study, "Labeling & Product Decoration Markets: Global Review 2011," released in March. Coming out of the recession, this was a much-needed, positive development.

The growth in the different product decorating methods continued along recent trends. AWA reports that N.A. pressure-sensitive (p-s) labeling grew 5.5 percent and sleeve labeling at 7.0, while glue-applied labeling demand decreased about one percent. Overall, AWA says that in 2010, pressure-sensitive labeling in N.A. had about a 48 percent share of the labeling market, followed by glue-applied at 33 percent and sleeve labeling at 13 percent.

Challenges ahead

The primary challenges for label printers stem from two root issues: the overall sluggishness of the current post-recession recovery and the highly fragmented nature of the tag and label supply base (coupled with a sense of over capacity).

U.S. GDP growth is a highly watched economic indicator under normal circumstances, but has been under increased scrutiny throughout the 2008-2009 recession and this subsequent poor-excuse-for-a-recovery. It is important to the tag and label market because, as AWA points out in the study, "These economic growth figures are indicators for label demand. From historical patterns, label market growth in developed regions will broadly follow these economic growth patterns."

The forecasts are moving targets and, in themselves, can reflect the volatility and fragility of economic conditions. As an example, the Federal Reserve in its most recent forecast for U.S. economic growth released mid-June, predicts 2011 growth between 2.7 and 2.9 percent. This was a downward revision from April when the range was 3.1 to 3.3 percent.

One of the reasons given for the downward revision was a recent rapid rise in gasoline prices and the resulting impact on consumer spending. That petroleum-based product pricing is volatile (with gasoline right up there at the top of the volatility chart) will not be news to those in the labeling industry. Petroleum-based commodity pricing has been volatile for many months now, with the volatility mainly in an upward directly. A significant number of ink, coating, and adhesive suppliers have increased prices in the past year, along with many substrate suppliers, including both film and paper.

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