European Label Industry Passes Covid-19 Stress Test

European Label Industry Passes Covid-19 Stress Test

Jul 25, 2020

According to preliminary results of the latest Radar report by Finat, after two years of modest, 1.5 percent annual demand growth in 2018 and 2019, the Covid-19 pandemic has considerably boosted European demand for self-adhesive label materials in the first half of 2020.

Consumption of labelstock materials in the wider European economic area was more than 8 percent above the level recorded in the same period last year. In the second quarter alone, demand for filmic roll label materials exceeded the second quarter of 2019 by almost 25 percent.

The incremental demand increase for label materials in the first half of 2020 reached almost 320 million m2. More than a half (53 percent) was composed of filmic label materials. The most severely affected regions, such as the UK and Ireland and Southern Europe were behind the other regions, but still recorded sizeable increases.

The excessive overall demand growth in the first month was attributed to the crucial role of self-adhesive labels as enablers of the critical infrastructure in times of crisis: food, healthcare, personal care, sanitary products and supply chain logistics. This effect was compounded by stockpiling at retailers and brand owners, and the fact that households in lockdown decided to spend their spare time on home maintenance and home delivery of goods and services. Finally, with lockdown measures being released, self-adhesive products play an important part as social distancing markers.

On the other hand, label demand in non-essential sectors like automotive, electronics, travel and catering were suffering in the first half of 2020. The first two sectors also happened to be recording negative growth rates in 2019 compared to the year before.

‘Up till now, 2020 has been a tale of fame and famine for the industry,’ commented Chris Ellison, president of Finat. ‘Certain parts of the industry could hardly cope with the excessive demand pressures, others had to rapidly adjust to a steep drop in demand in their sector.’

According to the report, label converters have tended to delay investment in heavy equipment until 2021 and recorded tensions at the operational level that on the one hand had to cope with an excessive demand for labels and delayed payments from customers, while at the same time coping with disruptions in raw materials supply and shortage of staff due to Covid-19 restrictions.

Since the outbreak of the pandemic Finat has been liaising with its members online via regular briefings with updates on the latest status of the local and European lockdown measures, reports on actions undertaken by packaging industry bodies, but also to provide the platform for members to stay connected, exchange experiences and provide support in handling the crisis.

Ralf Drache, Finat’s board member and sales and marketing director at Herma commented during the latest briefing held on 21 July: ‘Our industry has passed the stress test. In the overheated essential markets of the past few months, label companies have demonstrated their flexibility, resilience and agility. Our industry’s innate ability to respond rapidly to the disruptive circumstances has confirmed its role as a reliable partner, and this will open up new opportunities for more open, collaborative relationships along the supply chain.’

‘The surname of this crisis is Fear,’ added Francesc Egea, vice president of Finat and CEO of IPE Labels and Sleeves. ‘We therefore have to analyze where the opportunities are and manage them against the risk. These are not so much in the embellishments as they are in innovative functionality. Innovation can also relate to the service we are providing, or the way we are organized. The future demands that as an organization, we are more flexible in our engagement with customers as well as our supply chain in terms of planning and forecasting. This crisis has confirmed the importance of solidarity in solving things together and has demonstrated the power of associations as a source of networking.’

David Ellen, TLMI board member and president of Domino Digital Printing added: ‘Innovation is the lifeblood of this industry. As terrible as this pandemic has been, it is also driving further innovation and change. Firstly, the tracking and tracing of contamination of people during the health care crisis will create an immense push for tracking and tracing at product level, not only for food safety but also for medical drugs. It will further accelerate the trend towards greater flexibility, shorter run lengths and rapid changeability. And like we see now with this virtual town hall meeting, the crisis will also radically change the way we interact with our customers, for instance with online demos.’

‘Perhaps the change will not be as drastic as we now assume. Our KPIs as a business will remain the same and we still need to balance opportunity with risk, and the short term with the long term,’ added Chris Ellis. ‘Where I do foresee a huge change is in the people side of our business. First of all, it now all starts with the health and safety. If we are talking about a reset of our industry, it should be about embedding the change culture in the way we educate our people, our customers and suppliers. In the end, the success of businesses depends to a large degree on the way we interact internally and externally. If this crisis has taught us anything, it is about the mutuality of our shared interests.’