Global Label Markets, Industry Trends, Challenges and Opportunities

Roger Pellow Managing Director Labels & Packaging Group

Mike Fairley Director of Strategic Development

Global Label Market Trends

Key topics to be reviewed: Global trends End user trends and rise of Own Brand Rise of digital printing Brand protection opportunities Environment and sustainability challenges Adding value to grow What does the future hold

Global Label Trends

The label industry in perspective The label industry today is a totally global business It currently converts around 42 billion sq m of labelstock of all kinds each year And has a global sales value of around US $73 billion Labels are produced by more than 30,000 converters worldwide

Global Label Trends

Pressure-sensitive labels are the dominant label technology in developed markets And are growing rapidly in emerging markets Per capita consumption of pressure-sensitive labels varies widely around the world Highest per capita usage is in the developed markets Highest annual growth is in the emerging markets

Global Label Trends

The global label market by region
Estimated breakdown of the global label market in 2009/10.
All kinds of labels now in excess of 42billion sq.m

Eastern Europe 7.80%

South America 5.6%

India 1.4% Rest of World 0.6%

Japan 7.20%

North America 28.4%

China/Asia Pacific 21.9%

Western Europe 27.1%

Global Label Trends

Volume Growth in emerging markets
Global challenges environment and sustainability

Value growth in developed markets

Global Markets Estimated per Capita Label Consumption

Global Markets Estimated per Capita Label Consumption

Scandinavia 17-18m2
USA 15-16m2

W Europe E Europe/ME 12-15m2 6-7m2

India 0.9m2

China 1.2m2

SE Asia 2-3m2

Brazil 2.2m2

PS Labelstock Consumption by End-Uses in Europe as % of Total Volume

Food Logistics & Transport Retail Personal care Home care Beverage Oil & Ind. Chemical Pharmaceutical Office Wine Autom. & Cons. Durables Other
0 5 10 15 20

% 25

30

35

PS Labelstock Consumption by End-Uses in USA as % of Total Volume

Global Label Trends

New emerging markets have been opened to foreign global competition in recent years
Global brand owners and retail groups have started to take market share from domestic ones They have established manufacturing bases in the new markets, which then provide new opportunities for international and local label converters Knowledge and skills start to transfer and help local industry, which then also starts to invest and develop to international standards Export opportunities arise for local converters and these, in turn, also help local communities

Key Global Label Printing Trends

Brand-owner requirements are changing:
Packaging reduction Further down-gauging Run lengths decreasing Pack rationalisation

Key Label Printing Trends Globally

Brand owner trends
Shorter product lifecycles Ability to tap in to supplier databases (with MIS) Environmental challenges

Key Label Printing Trends Globally

End User Trends
The rise of the private label What can go digital, will More brand protection solutions required End users still looking for cost reductions

Key Label Printing Trends Globally

End User Trends
Wanting global launches (proofing solutions) End users becoming pure marketing and sales operations (technical issues eg migration, fitness for use, responsibility of printer)

Key Label Printing Trends Globally

End User Trends
Global brands looking for one stop shop Reducing time to market No inventory (total cost evaluation)

Global label market trends

Major growth opportunities for labels in emerging markets are mainly related to:
Manufacturing by global brands particularly in Health and personal care products Pharmaceutical Development of organized retailing particularly for Food labeling Logistics and distribution labeling Private/own brand labeling

Global label market trends

Growth of private/own brand labels
Private labels now account for over 22% of all retail unit sales in North America Private label growth up 25% in UK, Germany, France and Spain One in five items sold in U.S. supermarkets, pharmacies is private label Store brand private label growth up 10% for 30 countries, 2008 survey
Sources: Private Label Manufacturers Association (PLMA), Nielsen

The Rise Of The Private Label

Private Label as a whole is the biggest brand in the world
Walmart private label Nestle total company P&G total company J&J total company Unilever total company Aldi private label Tesco private label PepsiCo total company Royal Ahold private label Metro Group private label Coca Cola total company Danone total company ITM (Intermarche) private label 0 17 14 20 40 60 80 100 120 140 27 26 23 36 33 41 Worldwide sales $bn 51 50 70 75 126

Global label market trends

Growth of digital label printing
Total number of narrow-web digital color label presses installed in roll-label industry 1996-2010
1400
1400 1200 1000 800 600 400

1169 985 787 585 460

130
200 0 1996 1999

185

15

2002

2005

2006

2007

2008

2009

2010

Global label market trends

Growth of digital label printing 15% of all new rolllabel presses installed worldwide in 2009/10 were digital. 40% by 2020? Digital is the new growth technology
Trend in key European label press installations by technology 1980-2012
80% 70% 60% 50% 40% 30% 20% 10% 0%

80

83

86

88

90

92

94

96

98

00

02

04

06

08

10 20

19

19

19

19

19

19

19

19

19

20

20

20

20

20

Rotary letterpress

Flexo

UV flexo

Digital

20

12

Global label market trends

Now well over 30 digital POD label press suppliers in the market with around 40 different models

Global label market trends

Growth of digital label printing presses by type to 2015
3000 2500 2000 1500 1000 500 0 2010 2015 Electrophotographic Inkjet

Digital Label Printing

Regional distribution of installed base of digital label presses
Asia Pacific 15% Other 7% Europe, ME, Africa 44%

North America 34%

Brand protection
What is the global problem? Global annual losses due to counterfeiting have recently been estimated at $600bn Over 200,000 jobs are lost worldwide each year because of counterfeiting 100s of people die or are injured each year through using counterfeiting products

Protecting your brand

What can the label industry and brand owners do to help authenticate products, reduce counterfeiting, enhance brand security and minimise theft or product tampering?

Protecting your brand

Answer:
Wherever possible, build counterfeit deterrence, product authentication and brand protection technologies into the design of the label or pack Combine technologies to provide the most effective overall solutions If possible, make each label/pack unique Keep ahead of the counterfeiters by changing the solutions used on a frequent basis

Brand protection solutions

Global label market trends

Environment and sustainability
Label industry environment and sustainability pressures being driven by governments, international and national standards, consumer groups - and global brand owners and international retail groups, particularly
- Unilever - Proctor & Gamble - Johnson & Johnson - Marks & Spencer - Tesco - Walmart

Some of the key environmental schemes and logos now found in the global label industry

Spear Earth

Global label market trends

The key aims of the environmental and sustainability requirements now being placed on the label industry are to: Use more sustainable materials Reduce materials usage Reduce and eventually eliminate waste to landfill Reduce energy consumption Reduce the converter carbon footprint

Global label market trends

Sustainable and environmentally friendly label materials
Sustainable, green and environmentally friendly label paper solutions

Paper sourced from trees in sustainable and managed forests

Paper made from or including recycled paper fibers

Thinner, lighter and reduced basis weight papers

Specific chemical, chlorine or acidfree papers

Bio-degradable and compostable papers

Paper made from other cellulose and/or tree-free fibers

Options for disposal or reduction of edge trim and matrix waste from self-adhesive label converting plants.
Options for disposal or reduction of edge trim and matrix waste

Dispose in landfill

Mixed incineration

Energy from fuel pellets and briquettes

Industrial composting

Recycling into new paper or film products

Making building, decking, agricultural, packaging products

Reduce or prevent the waste linerless, downgauging

Need to become greener

No special requirements

Requires separating into paper, film or compostable

What Are The Environmental Challenges?

Environment and sustainability will become the biggest issue for the label industry over the next few years Need for better guidelines for converters on meeting environment and sustainability issues More work to resolve end-user challenges standards, rationalization of logos/schemes, etc Greater involvement/liaison by industry in global and national groups working on environmental and sustainability issues

Adding Value and Growth to the Label Business

Becoming more sustainable also improves the bottom line and profitability by:

Reducing materials wastage - substrates - inks/varnishes Improving production times in: - pre-production - presses, particularly downtime - finishing Optimising workflow and handling Reducing energy usage

Add Value and Growth to the Label Business

New markets Existing products into new markets IMPROVING MARGINS

Improve quality and service to existing customers

Analyse existing markets and products by revenue and profitability. Target new markets and new products

New products into existing markets

New products Existing markets & products

Adding Value and Growth to the Label Business

Strategy for growth, addedvalue diversification and improved profitability

Production of other types of labels and products

Production using other related printing technologies

Supply of ancillary products

Production of other addedvalue narrow web products

Production of other narrow web converting

Sleeve labels, in-mold labels, cut-and-stack film labels, patch film labels

High performance industrial labels, e.g. electronics, automotive, electrical, aeronautics, etc

Digital label printing, including ink jet

Sheet-fed label printing including in-mold, patch film, swing tickets, etc

Table-top printers, applicators, bar code scanners, readers, hand guns, etc

Swing tickets and tags, hang tags, garment tags, booklets, leaflets

Smart, smart active, and intelligent labels including brand protection and security printing. Membrane switches And keypads

Flexible packaging, sachets, pouches, etc

Growth Opportunities for the Label Converter

(survival)
Use new technology to keep ahead Become customer focused service driven operations MIS systems to link printer and customer Web to print portals

Growth Opportunities
Converters must become one stop shops Global standards required by global brands Sales and marketing organisation not just printing Creating partnerships with brands and the supply chain incl contract packers Acquisition/greenfield/global partners?

What Does The Future Hold?

Short run in-line printing and converting is hot and the right place to be Marketing using social media and packaging combined Smart labels New label regulations food/pharma

What Does The Future Hold?

Increasing use of sophisticated pre press software (and MIS systems) More products going to short run in line printing i.e. package printing, flexibles, carton and card Environmental solutions

What Does The Future Hold?

Increasing use of brand protection and anti-counterfeit solutions Smart labels Nano technology