A Long and Winding Road
The tag and label printing industry is full of twists and turns; you’ll have to buckle up if you want to stay on the right course.
June 2008 by Tom Polischuk
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Times are tough; there’s no doubt about it. Costs are rising, competition is fierce, and the economy is in a tail spin (or nose dive, depending on your perspective) but heading down just the same.
“This was a difficult year for the [tag and label] business due not only to macro economic issues including high energy costs and continuing high raw material inflation, but also because of growing competition to labels and tags in the packaging industry itself,” notes Corey Reardon, president and CEO of AWA Alexander Watson Associates.
The rising costs of materials—across the board—are at the top of most printers’ lists of issues. A majority of tag and label printers are relatively small businesses that can get caught in the supply chain pricing squeeze between large suppliers and, sometimes, even larger customers. It’s a tough place to be.
Reardon sees little relief in sight. “There is no sign of a softening in oil and raw materials inflation, so margins will be squeezed at all levels of the value chain,” he says. This is true in the prime label market particularly, where brand owners (themselves suffering from spiraling oil-associated costs, etc.) are aware of supply-side pressures, but need to mitigate necessary increases. Suppliers are doing their best to find cost-cutting solutions.”
It’s all relative
Even with the tough economic times, the tag and label printing and converting industry is in a better position to weather the storm than many other industries. As a matter of fact, Reardon reports that the overall global market for labels grew 4 to 4.5 percent in 2007.
“In the medium-term, there are real opportunities for growing the overall market for tags and labels as the developing geographical economies around the globe stabilize, and western-style consumerism becomes established,” he predicts. In this assessment, Reardon singles out what are referred to as the BRIC countries—Brazil, Russia, India, and China.
At the same time, he offers a word of caution. “We must not think that growth in these geographies will impact North American and European printers,” he says. “Local capability—in both label and tag raw materials and printing—is growing fast.”
For the U.S. market, The Freedonia Group predicts relatively healthy growth in label shipments over the next few years. In its recent study, “Labels to 2011,” Freedonia forecasts the market to increase 5.1 percent annually, reaching $18.3 billion in 2011. Although pressure-sensitive labels will still account for the majority of label shipments, this category is seeing some erosion from other label application methods such as stretch and shrink sleeves. According to the study, the stretch/heat-shrink sleeve category will grow at a 7.7 percent annual clip through 2011 and will be driven, in part, by its inroads into the large beverage market.
“This was a difficult year for the [tag and label] business due not only to macro economic issues including high energy costs and continuing high raw material inflation, but also because of growing competition to labels and tags in the packaging industry itself,” notes Corey Reardon, president and CEO of AWA Alexander Watson Associates.
The rising costs of materials—across the board—are at the top of most printers’ lists of issues. A majority of tag and label printers are relatively small businesses that can get caught in the supply chain pricing squeeze between large suppliers and, sometimes, even larger customers. It’s a tough place to be.
Reardon sees little relief in sight. “There is no sign of a softening in oil and raw materials inflation, so margins will be squeezed at all levels of the value chain,” he says. This is true in the prime label market particularly, where brand owners (themselves suffering from spiraling oil-associated costs, etc.) are aware of supply-side pressures, but need to mitigate necessary increases. Suppliers are doing their best to find cost-cutting solutions.”
It’s all relative
Even with the tough economic times, the tag and label printing and converting industry is in a better position to weather the storm than many other industries. As a matter of fact, Reardon reports that the overall global market for labels grew 4 to 4.5 percent in 2007.
“In the medium-term, there are real opportunities for growing the overall market for tags and labels as the developing geographical economies around the globe stabilize, and western-style consumerism becomes established,” he predicts. In this assessment, Reardon singles out what are referred to as the BRIC countries—Brazil, Russia, India, and China.
At the same time, he offers a word of caution. “We must not think that growth in these geographies will impact North American and European printers,” he says. “Local capability—in both label and tag raw materials and printing—is growing fast.”
For the U.S. market, The Freedonia Group predicts relatively healthy growth in label shipments over the next few years. In its recent study, “Labels to 2011,” Freedonia forecasts the market to increase 5.1 percent annually, reaching $18.3 billion in 2011. Although pressure-sensitive labels will still account for the majority of label shipments, this category is seeing some erosion from other label application methods such as stretch and shrink sleeves. According to the study, the stretch/heat-shrink sleeve category will grow at a 7.7 percent annual clip through 2011 and will be driven, in part, by its inroads into the large beverage market.
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