You have only to open a newspaper to know that money is slopping around the European economy like water in an overfilled bathtub. Insecurity about the continent’s future breeds caution, and caution means putting off non-essential investment. Despite interest rates down at bargain basement levels, businesses are not queuing up outside their bank, and those that are get subjected to rigorous grilling as to their solvability. As one banker put it recently, “We used to be accused of only lending to people who didn’t need the money; now we’re not even doing that.” We all feel sorry for bewildered bankers (don’t we?), but we also see that European economies are not doing too badly. In the first half of 2016, GDP growth rates in the Euro zone, Britain and US were all in the +1.5-1.7 % range, and some European countries, most notably Belgium, the Netherlands and the Czech Republic, all showed very respectable rises in industrial production.

More encouraging news for the label sector comes from FINAT, whose latest survey of European converters concludes that the “traditional” ratio of the label industry to GDP (for each 1% change in GDP the value of the label industry changes by between 1.5 and 2% by value) seems to be holding true. The FINAT survey indicated “buoyant annualized value growth at around 5% for the European label industry in the first half of this year.”

Predators – coming soon to a place near you
Put these two together – on the one hand, too much liquidity in the banks, and on the other hand, good growth in the European label industry. And what do you get? Well, a favorable climate for M&A, that’s what you get. To back up this assumption, a leading European financial group specializing in medium-sized “targets,” has analyzed the growth and profitability of the luxury end of the European label and packaging sector. Based on the financials of several hundred European producers, the study calculates that the top hundred have an average EBITDA profitability of 10%. Most of the producers in the study had annual sales of under $60 million, but the trend line clearly shows that when it comes to profitability, bigger is better. The predators who have shown their hand so far are mostly already well-established packaging or label converters, although in the future we may see a revival of interest from private equity groups. There are producers of luxury labels and packaging all over Europe, but France is the epicenter, with twice as many producers as any of the other major European countries. This is not surprising since France has, rightly or wrongly, a reputation for luxury, elegance and refinement in many end user markets, including food, wine, apparel and leather goods, to name but a few. Throughout Europe, narrow web converters who specialize in high-end products are also turning to digital to cater to the shorter runs that are typical of luxury products. One very short run took place in 2013, when Dom Pérignon collaborated with the famous American artist Jeff Koons to package Rose Vintage champagne inside a replica frame of his well-known “Balloon Venus.” Despite a high price tag of $20,000, champagne connoisseurs and art collectors alike scrambled to get hold of bottles, and it very quickly sold out. In case any readers of L&NW failed to secure their bottle, the good news is that Dom Pérignon plans to repeat the exercise soon, with a high-profile artist designing the label.

Something new out of Africa
Here in Europe, North Africa gets bad press. In the USA, we’re told it gets no press at all. But Morocco, Algeria and Tunisia, known collectively as the Maghreb, have all developed an industrial base of mostly small and medium private businesses making everything from foods to fashion goods. Despite its lack of natural resources, Morocco is economically in the best shape of the three, with a stable government, a thriving tourist industry and several hundred thousand expatriate retirees, who every winter migrate from the cold of Europe to their second homes in the warm sunshine of Marrakesh, Rabat or any one of the resorts that have sprung up along the coast.

The country is a monarchy, but the king of the Moroccan label industry is undoubtedly Graphiform, a family-owned business based in Casablanca. The company reckons it has 50% of the local market for pressure sensitive labels, and four years ago set up a sister company Sleevetiq specializing in sleeve labels. The Moroccan market is waking up to the promotional value of the label, according to Graphiform’s CEO Yacine Boutaleb, and in particular the pressure sensitive and sleeve sectors are growing fast, supplying mainly the local food, beverage, cosmetic and lubricant sectors. Colgate-Palmolive, which supplies several African countries from its plants in Moroco, is a key customer. Graphiform’s main competitors are Spanish (there are just nine miles of salt water separating the two countries), but this has not stopped the Moroccan producer from building up its export business, and today exports, mostly to West Africa, account for 20% of  sales. Graphiform produces mainly on three Bobst presses (formerly Gidue), backed up by a Stork screen press and prepress equipment from Esko.

Algeria is next door to Morocco, but going there involves a dog-leg via Europe, since the two countries have not been on speaking terms for many years.  The capital, Algiers, which used to be famous for its white buildings and romantic Casbah, is now notorious for its traffic jams (your correspondent spent twice as much time in slow-moving traffic as in business meetings). Measured by population and by GDP, Algeria is by far the most important of the three Maghreb states and is a big importer of all kinds of equipment. At the recent Plast & Printpack exhibition in Algiers, 166 exhibitors, mostly foreign, included narrow web pressmaker Lombardi. Claudio Lombardi himself was on hand to comment on the potential of the Algerian market, which is, “Dynamic, despite the fall in revenues from petrol and the labyrinthine complexity of the administration.” Label converter Mustapha Bennabi can tell you all about this complexity, which makes customs clearing a major and costly headache. For the past two years, he and his team have been converting labels on a seven-color Lombardi flexo press. “Flexo is not yet a well-established technology in Algeria,” he explains, “So we had to develop our platemaking and prepress competence, as well as explaining to customers what flexo labels could do for their business.”

Tunisia is the smallest of the trio of countries, with its economy based on olive oil, dates and tourism. The last-mentioned has been severely jolted by recent terrorist attacks, but the country can rightly claim to be among the most democratic of all the Arab states. Cogital, part of the Altea Group, makes flexible packaging and sleeve labels mostly for local agricultural products.

A recycler’s dream
Recycling pressure sensitive waste materials, as everyone admits, is a nightmare. Everyone wants it done, no one wants to pay for it. One of the main obstacles is the transport cost. Now a Belgian company, Seliplast (“Second Life for Plastics”), reckons it has at least partly solved the problem. The company’s recycling plant is well sited in Eastern Belgium, within a stone’s throw of some of Europe’s biggest industrial centers in Germany, the Netherlands and Belgium. It claims it can accept and recycle all forms of label waste, including used liner. However, its specialty is a patented process for converting PE or PP matrix rolls into usable raw materials. Another Seliplast machine takes any spoiled or unusable rolls of PS labels and separates the label from the liner at speeds up to 500 fpm, rewinding them so that each part can be recycled separately. The company works in partnership with Avery’s Turnhout, Belgium, plant, for which it converts plastic laminates and matrix waste into granulate for industrial and household products. Admittedly, with less than one in five PS labels being plastic, this still leaves a lot of the problem unsolved, but it is a promising initiative.