Between raw material price hikes and stagnant European demand, not many labelstock manufacturers are making really good money at the moment. Meet the exception: Herma, based in Germany, which has just announced record 2011 sales of €237 million. Herma also reported “a slight fall” in profits, but overall, according to CEO Thomas Baumgartner, 2011 was “a record year.” The company did it, what’s more, by going against conventional wisdom on how to cope with an economic crisis. Cut investment? Herma just completed a €50 million investment program to make its plant the most modern in Europe. Reduce staff? The company in 2011 went from 800 to 830 employees. Relocate production to lower-cost countries (almost everywhere is lower-cost than Germany)? Herma advertises the fact that its production is 100% in Germany. Its secret, if it can be called a secret, is its highly efficient production lines with low operating costs (that’s what the €50 million investment was for), and a range of special products like laser-activated face materials.

On the plastics side, another German company has been in the news. Klöckner Pentaplast, which is controlled by US investor Blackstone, is building its first production plant in China: the new facility, in Suzhou, will initially make film for shrink labels. Klöckner, which has worldwide sales of over $1.3 billion and 3000 employees, is said to be financially overstretched, and recently asked its US parent for a fresh capital injection. At the time of writing this article, no definite reply had been received.

Eastern promise
The “other” half of Europe gets relatively little media coverage here in France, particularly during a run-up to a presidential election. But for anyone in the label or packaging business, Eastern and Central Europe is where the action is. Poland was the only country in Europe never to have been in recession over the past five years, and now that China is looking less like an El Dorado for brand owners seeking low-cost production sites, Poland could well be 2012’s flavor of the year. Major international label converters like CCL and Skanem bought or built plants there a decade ago, and UPM Raflatac chose Poland for its coating plant, opened in November 2008.

Trade exhibitions have had a bad couple of years, but label shows seem to be pretty good bet, to judge by the success of the Labelexpo series in Brussels, Chicago and elsewhere. It is all the more surprising that the Moscow label show Etiketka, launched to great acclaim in the mid-1990s, has breathed its last. The show was never quite the same since it was moved from the modest, bucolic exhibition halls in the Sokolniki Park to the brand new, gargantuan Crocus site. When your correspondent last visited the show three years ago, the Crocus Centre was not connected to the subway system, and took nearly two hours by car or bus from the center of town (Moscow’s traffic jams are horrendous). The show’s organizers’ other mistake, in retrospect, was to encourage label converters to take space. This increased the number of booths and boosted visitor attendance, but profoundly altered the nature of the show, making it less attractive for those label equipment manufacturers who form the backbone of the exhibitors at Labelexpo events. Finally, the Moscow label show was brought to its knees by the increasing popularity of the Brussels show, which meant that Russian label converters preferred to hop on a plane to Belgium and see all the label equipment providers rather that brave the Moscow traffic and see just some of them.

The Russian market, nonetheless, is now once again up and running (after a dizzy downswing in 2009). Pepsico Russia for example reported 2011 net revenue growth of 160% year-on-year to $4.95 billion. In 2011 retail sales in Russia increased 11% by value, with more SKUs and an emphasis on trading up to more luxurious packaging. This trend is feeding straight through to the label sector, with Gallus reporting ten presses sold in Russia, and Mark Andy nine. Geographically, growth in the Russian label business is spreading away from the Moscow and St Petersburg areas which are becoming saturated, and towards the farther flung provinces, and in particular the newer industrial centers like Rostov, Kazan and Volgograd (ex Stalingrad). Barring unexpected upheavals – and Russia’s once-and-future president Vladimir Putin is good at discouraging these – business prospects there look promising. With crude prices hitting $120 per barrel with worse to come, Russians, knowing their country exports 10 million barrels per day of the stuff, can laugh all the way to the bank. Another example of the old adage that it’s an ill wind that blows nobody any good.

Russia of course is only one part – admittedly a big part – of the former USSR, and the latest Brussels Labelexpo saw a big increase in visitors from Ukraine, Belarus, Kazakhstan and even the Moldavian Republic. L&NW readers with a taste for adventure might like to note that several label equipment makers intend to exhibit in October 2012 at PackTec in the Uzbek capital Tashkent, which also hosted the International Packaging and Printing show in April of this year.  The even more adventurous were probably attending the Digital Print Trade Fair in the Belarus capital Minsk in April, or planning to go to the Poligrafia show in Kiev in September, which will contain a separate label section.

What’s Greek for Nemesis?
If the Russian bear is feeling bullish, the same cannot be said for Greece. Against stiff competition from Portugal, Ireland, Spain and Italy, Greece continues to hold the title of Sickest Man of Europe. Our TV and newspapers are tired of reporting riot upon riot in Athens as public sector salaries are reduced yet again and rich yacht owners sail off for quieter climes. Strangely enough, some sectors of the Greek label and packaging industries are not doing too badly, according to Greek label industry expert George Sarantides. One of these sectors is the short-run digital label sector. This may be partly due to brand owners changing to smaller pack sizes, or to a gradual rise in Greek exports. A reason quoted by some in the Greek label sector, according to Sarantides, is that EU regulations are just beginning to be applied to food and pharmaceutical products, with corresponding need to renew and redesign labels. If this were true it would be ironic, if we remember that Greece’s financial and economic woes started in 1999-2000 when its statistical office doctored the country’s accounts to make it eligible to join the Euro zone (which it did on January 1, 2001).  Leaving aside the numerous accusations of high-level financial skullduggery, Greek label converters report that labels for export products like olive oil are almost unaffected by the crisis. Credit, however, is becoming unobtainable, so transactions tend to be in cash or even occasionally by barter, as bankruptcies cascade down from insolvent manufacturers to their suppliers. Currently there is no end in sight to the Greek crisis but Greek ingenuity is proverbial and manufacturers, suppliers and private citizens are constantly finding new ways, many of them legal, to make a living.

Why Belgium?
Even by European standards, Belgium is small, just 33,000 square kilometers, roughly the same size as Maryland, but flatter. For some reason this featureless piece of real estate is home to several world-ranking companies in the label sector. Best-known in Europe at least is Xeikon, the world’s number two manufacturer of digital narrow web presses. Then there’s Esko, arguably a world leader in workflow software for the printing industry. But Belgium can also count among its sons Basysprint, the inventor of UV-computer-to-plate prepress systems, and CERM (recently acquired by Heidelberg) which develops workflow systems specifically for the label industry. Not all the Belgian initiatives in the narrow web sector have blossomed: 15 short years ago Agfa was a household name in photographic films. Seeing which way the digital wind was blowing, Agfa diversified, acquiring amongst many other things the technology for a four-color inkjet label press, originally developed by another Belgian company, Barco. This press was originally called the.factory (“the dot factory”), a name which means little in English and even less in other languages. Relaunched as “Dotrix,” it was at one stage hailed as technically the most advanced of the digital UV-inkjet presses. What’s more, Agfa also made the inks which gave it a competitive edge over many of its competitors. Alas, the success was short-lived and last month Agfa announced that it was ceasing production of the Dotrix, with the loss of around 40 jobs at its Sint-Denijs-Westrem factory. Stefaan Vanhooren, president of Agfa Graphics, commented:  “Development of our third-generation Dotrix with Kyocera printheads ran into delays, and we became aware that this press would be too expensive for today’s market. We will continue to make inks for third party press manufacturers, and to develop wide-format digital presses.”

Release liners on the line
In March 2012, Netherlands-based research company AWA Alexander Watson Associates held a well-attended conference in Amsterdam on release liners. Industry experts including Carsten Lange of Mondi pointed to the 15% rise in release liner capacity in Europe over the period 2010-2013, which could lead to mergers and acquisitions as producers (who are mainly global players) jostle to maintain or increase market share. One of the surprises of the day came from AWA’s president Corey Reardon who predicted that, in the label sector, 40-60% of liner usage for primary product labeling would be filmic by 2017.

Recycling breakthrough thanks to PP labels
A UK consortium comprising a milk bottle manufacturer, a dairy products brand owner and a label converter has found that using polypropylene labels on HDPE bottles enables the labels to be cleanly peeled away from the used bottles before recycling. This prevents the contamination of the HDPE flakes which occurs when paper labels are used. The results so far are encouraging but not conclusive, and the consortium will encourage leading HDPE reprocessing plants and recycling equipment manufacturers throughout Europe to conduct a series of laboratory and medium-scale trials to develop workable solutions.The converter taking part in this research is Systems Labelling Ltd., and the full report is available on the website of recycling organization WRAP (www.wrap.org.uk).

Voting for food and drink
France, as already mentioned, is in the throes of a deficit crisis and a the results of a controversial presidential election (readers of L&NW may sympathize). This did not deter the French label association UNFEA from holding a one-day conference on the financial health of the label sector. Results of a poll of French label converters showed that three quarters of those responding said their 2011 sales were up on 2010, in most cases by over 5%. This puts French label sales on the right track, but still slightly below the peak year of 2008. Last year, labels for industrial and body care sectors were lackluster, while food and wine labels showed the best performance. This may be indicative of the French population’s answer to an economic crisis – or even to a presidential election.