FINAT congress welcomes recovery

The 2011 FINAT congress, held this year in Sicily under the shadow of Mount Etna, struck an optimistic note as the European labels industry continues its recovery from the worst days of the global economic recession.

Kurt Walker, CEO at leading Swiss converter tesa Bandfix, was appointed the new president of Finat and made it clear one of his key goals will be to embed Finat in an international network of organizations to meet the challenges of a globalized world. This was emphasized by a welcome speech from Mitsuo Komiyama, president of the Japan Federation of Label Printers and a strong TLMI delegation including board chairman Art Yerecic. In his farewell speech, outgoing president Andrea Vimercati warned that the European industry is failing to invest enough in training: ‘human capital is as important as investment in machinery.’ Continued Vimercati, ‘if label converters are to survive, they need to organize their operations in ways which encourage creativity and shorten the innovation lifecycle'. Vimercati’s presidency saw the launch of the Young Managers Club, and he stressed the challenges still facing family-run businesses. ‘The first generation was always the innovator. How to deal with continuing change is the challenge of their heirs, who need a new vision and resources. They need to embrace the complexity of change.’ The theme of successfully managing generational change was continued in the keynote address from Marcello Lunelli, vice-president of leading Italian sparkling wine producer Ferrari Spumanti, a 110-year old company now in its third generation (see full report on page 131). Opening the second day of the congress, John Hickey of Smyth Industries gave a presentation on the history of his family-owned company through three generations.

Europe recovers

Jules Lejeune, managing director of FINAT, gave his annual review of pressure sensitive labelstock demand in Europe. Lejeune noted that demand in 2010 finally returned to pre-crisis levels, showing an 11.4 percent increase over 2009 and three percent increase over the 2007, the year the crisis started. This ‘solid recovery’ affected both paper and film rolls. Paper demand grew by nine percent, but PS film continued to outstrip paper, growing by an impressive 15.3 percent over 2009. Since 2000, PS film consumption has grown by 50 percent and film now accounts over 20 percent of European PS label consumption. Southern Europe remains some way behind in its use of filmic PS labels, at some 30 percent of North and Central European levels. Paper labels represent 80 percent of the PS market in the South against 70 percent in North and Central Europe. Geographically, demand in 2010 was strongest in East and Southern Europe, with Turkey, Russia, and Bulgaria the star performers with over 20 percent growth. This compared with an average 4.5-8.5 percent growth in the developed North and Western markets, with Germany alone showing double digit growth. ‘Demand for PS labelstocks in Eastern Europe has more than doubled in 10 years, while regions in the North and West have remained stagnant over the same period,’ noted Lejeune. Last year Eastern Europe crossed the one billion sq m benchmark for the first time. But this represents a per capita consumption of only 3.3sq m against 15-18 percent in North and West Europe, so there remains huge growth potential.  ‘It seems clear that in North and West Europe demand has reached maturity, although German, Austria, Sweden and Benelux have increased per capita consumption,’ concluded Lejeune.

The outlook for 2011 is for continued, if slower growth compared to last year. Growth slowed to 3.3 percent in Q1 2011, with film labels growing at over twice the rate of paper (8.9 percent vs 3.9 percent). ‘We have seen a gradual tempering of business optimism in our quarterly market survey,’ said Lejeuene. ‘Less than 20 percent of our survey group remain optimistic amid concerns about the risks that remain in the European economy and the continued rise in supply chain costs.’ Lejeune pointed out that in the year January 2010 to 2011 pulp prices increased by 20-25 percent, and resins by 25-35 percent. The constituent chemicals for adhesives rose by a staggering 65 percent and for inks by up to 30 percent. At the same time increases in the price of oil increased transport costs. Another interesting result of the Finat quarterly survey is that converters are investing more in productivity improvements, and new sources of value added are being sought. ‘This includes clustering through strategic alliances, or making acquisitions to gain access to new technologies or global markets,’ explained Lejeune. ‘At the same time customers are outsourcing non-core operations, which presents new opportunities, as does customers’ search for sustainability. We have to embrace change to offer new value to our customers.’

Italy bounces back

Alfredo Pollici, president of Italian Label Federation Gipea, gave delegates an overview of the recovery in one of Europe’s most important label markets. The Italian labels industry suffered along with the rest of Europe from the global recession, said Pollici, with converters showing negative growth of 3.7 percent, and with smaller converters particularly hard hit. But the industry recovered quickly last year, with a growth rate of nine percent – over 12 percent for smaller converters. Italy has some 450 label converters, 80 percent of whom convert PS labels with a total sales value of 900m euros. Exports are worth around 73m euros. Gipea’s converter membership represents 20 percent of the Italian industry,
but 64 percent of Italian turnover. The Italian industry remains fragmented. Among Gipea’s 87 members, 56 have a turnover of less than five million euros, and just 12 a turnover over 10 million euros. However, the biggest 10 converters account for 20 percent of the Italian market, demonstrating consolidation at the top end. Gipea converter members have spent the last five years upgrading their print technology. In that period the share of letterpress has reduced from one half of all installations to just 15 percent, and its place has been taken by (UV) flexo. Most astonishing is the rise of digital printing from just one percent of installations in 2005 to 11 percent by 2010. Pollici finished with a message of appreciation for Andrea Vimercati’s term as Finat president: ‘He built strong international relationships and made the Italian label people very proud. He was a source of inspiration to us all.’

Action on liner waste?

A key area of concern for Gipea is the European Waste Directive and a possible crackdown by the EU on liner waste. ‘We are meeting with Channeled Resources on a scheme for collecting liner waste and are also in contact with the Italian government on liner waste issues,’ said Pollici. This reflected a new level of urgency on liner waste issues at the congress. When two years ago at the Finat congress in Turkey, a presentation was made on ‘cradle-to-cradle’ thinking, the speaker was widely dismissed as an idealist, or even a crank. Today, cradle to cradle is fast becoming the new orthodoxy, championed by the chair of FINAT's sustainability committee, Herma’s Dr Thomas Baumgartner. ‘If the EU re-categorizes liner waste as packaging waste this will have a negative impact on our industry. We must get rid of this negative image and use these high value materials again.’ Dr Baumgartner looked at how the Cycle4Green (C4G) glassine liner recovery system is working. C4G will collect paper liner waste for free if it is over 3t. ‘This amount requires only six to eight stacked Europallets, so requires only two to three Europallets space.’ The material is delivered to Lenzing in Austria, which carries out the de-siliconization and makes the recovered paper available for the manufacture of new label papers. ‘The glassine and Kraft liners must be sorted and clean. There is a five day notice period for collecting containers and Lenzing does all paperwork for cross border traffic,’ said Baumgartner. Current capacity at Lenzing is 50,000t, but this can be increased. ‘It is very important to support these systems,’ he concluded. ‘But we have to include the whole process chain, since the big quantities are at the label end users. It is the printer’s job to contact their customers and Lenzing directly.’

UPM Raflatac used the congress to announce a major paper liner recycling initiative with French company Vertaris. Vertaris already produces fine paper from mixed office waste and will now handle the de-siliconization of glassine waste and deliver it back to UPM as raw material for use in both label and liner manufacture. Vertaris has a capacity of 200,000 tonnes, ‘enough to absorb all the material we can collect,’ said Erkki Nyberg, UPM-Kymmene director, business development, Engineered Materials Business Group. The collection system will operate throughout Europe. ‘The technology is now tested and we can use our own logistics system for liner collection. Now we need to find enough companies to use the service, as they too will gain financial benefits,’ said Nyberg. UPM Raflatac already operates a filmic liner recovery system called Rafcycle, which pays up to 370 euros per tonne for clean PP filmic liner waste – providing a minimum tonnage can be collected. ‘Oil price rises and increased demand in the developing world mean that using recycled liner waste as a raw material will become more and more important,’ said Nyberg. For the last five years UPM has been converting its own film liner waste into ‘Profi’ wood composite, a building material with 40-70 percent label waste content. This year the project started to receive customer waste for the first time. ‘We also use labelstock waste as fuel in combined heat and power plants.’

Handling emerging markets

Speaking in a panel session, Geoff Martin, president and CEO of CCL Label, made some interesting observations about setting up successful operations in emerging markets. Martin said it is essential to use local management and the latest technology. ‘There needs to be a focus on customers, markets and products you already know and understand, and you need to be ready for rapidly developing local competition.’ A local operation needs a sound financial structure – preferably with owned land and buildings, and the parent company needs to be ready to expand rapidly if successful. ‘You need to understand taxes and the legal structure for investment and cash movements and be ready to spend time on the ground well beyond initial “business tourism.”

US outlook

Art Yerecic, chairman of the board of TLMI, gave delegates an overview of the situation in the US label sector. Yerecic said the US had recovered quite well from the recession, with overall sales growth of over 12 percent last year. Smaller converters showed particularly strong sales growth after three very bad years. 2011 is also off to a good start, noted Yercic. Sales are up compared to Q4 2010 and Q1 2009 and profits are up over one year ago. ‘A particularly encouraging and surprising sign is that over one third of converters reported increasing headcount – an indicator of confidence moving forward.’ Yerecic said the TLMI had learned from Finat’s Young Managers program and with their advice had set up their own Young Leaders Organization, which now has 28 members and its own events program. Yerecic said TLMI’s LIFE environmental accreditation program had been a great success. Twenty-five facilities in the US are currently LIFE certified and 10 more are in progress. ‘We are now promoting LIFE to retailers and brands. We presented to the Walmart expo in April and have a presentation to the Sustainable Packaging Coalition coming up,’
said Yerecic.

Source: Labels & Labeling online, posted in Features on October 11, 2011

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