State of the Industry: Labels, Digital Printing Making Significant Inroads

Global label production was 146.9 billion sq. ft. in 2012, with North America representing 22 percent of this volume. Global volume is projected to grow at an average annual compound rate of 3.4 percent from 2012 to 2016 (see Table 1 in the photo tab to the right). While conventional print, led by flexo, will continue to dominate, the greatest growth in label printing will be in digital printing, which is growing at 27 percent per year.

The greatest growth is in the Asia/Pacific region, which grew at more than 6 percent in 2012, while the slowest growth is in Europe, which grew less than one percent in 2012. North American growth was just over 2 percent (See Figure 1 in the photo tab to the right).

Corey Reardon, president and CEO at AWA Alexander Watson Associates, notes that growth in labels has been constrained by alternatives such as flexible packaging (which is replacing rigid packaging), as well as direct printing on rigid packaging. Indeed, flexible packaging is growing faster than either labels or rigid packaging and "the impact of direct inkjet printing is significant," says Reardon.

Labels are available using a variety of substrates, including coated and uncoated paper, metallized paper, metallized or opaque films such as biaxially oriented polypropylene (BOPP) or polyolefins, and pressure-sensitive (ps) media from companies such as MACtac, UPM Raflatac, and Avery Dennison. Labels include ps, sleeves and wraps, in-mold, and glue-applied (cut-and-stack). Wraps and sleeves represent two of the fastest growing segments.

Trends

Consolidation continues to be a major factor in label printing. In 2012, Multi-Color Corp. acquired Labelgraphics of Scotland and in 2011 acquired York Label Group in the U.S., plus other printers in Italy, Poland, and China. Similarly, CCL Labels made numerous acquisitions in 2011 and 2012, and most recently announced the acquisition of Avery Dennison's office and consumer label business, plus an Avery Dennison unit that provides designed and engineered solutions. The $910 million deal will push CCL annual revenue above $2 billion and is expected to close during the third quarter of 2013.

Jennifer Docshtader, managing director at the consulting firm LPC, Inc., explains that the major trend driving change in label printing is the proliferation of SKUs, and this is led by the brands. "This has led to a downward trend in run length and this has fostered the growth in digital print," she adds.

Neil Falconer, managing director at UK-based consulting firm Printfuture concurs: "Labels are an integral part of the packaging of products. However, exponential growth in SKUs, the use of VDP for versioning, smart label applications, and security features for brand protection have all driven major growth in the digital labels sector."

Other forms of packaging such as folding cartons and flexible packaging have not yet embraced digital print to the same degree as labels despite the proliferation of SKUs. Why?

Relative to other forms of packaging, labels are small. This is significant for two reasons: because the size of labels makes them a good fit for current digital press formats, where presses are narrower and suitable for labels but not for folding cartons or corrugated, and also because while a run of 50,000 folding cartons is a "long" run, a run of 50,000 labels is a "short" run.

Bob Leahey, associate director of InfoTrends' Color Digital Label and Packaging Service, expands on the trend toward digital. "There are two megatrends among brand owners that support the growth of the color digital press market in label and packaging uses. One is the brand owners' focus on target marketing, and the other is their focus on lean manufacturing."

Gerry Zampini, national account manager, Multi-Color Label Canada Corporation (MCC), details the value proposition. Companies like MCC often do vendor-managed inventory (VMI) for customers. They might print 600,000 labels over 12 months, and Zampini says, "We see the break-even point for digital vs. conventional is moving toward 50,000 labels, so we have a decision to make: is it better to print all the labels in one run of offset or flexo, or is it better to print as needed using digital?" MCC has multiple HP Indigo WS6000 and WS6600 presses, and digital is growing.

Currently, electrophotography (EP), or toner-based printing, dominates the digital label market with 83 percent of global digital label volume in 2012, and is growing at 22 percent per year (see Table 2 in the photo tab to the right). While EP leads digital label print, inkjet is growing even faster, at 57 percent per year.

Digital labels are virtually all narrow web printed and two press manufacturers dominate: HP Indigo and Xeikon. Printfuture estimates that Indigo has a 70 percent share of the EP market.

Christian Menegon, HP Indigo worldwide business development manager, explains that "digital has its specs and is not designed to fully replace analog; both coexist and each has its place." Menegon points out that the tradeoffs between digital and flexo are more complex than just run length: "Flexo can do printing and converting of any kind in one pass." This includes PMS spot colors, embossing, foil stamping, and in-line finishing, but Menegon points out, "this means longer set-up times and higher waste, hence flexo is more appropriate for longer runs. The whole chain efficiency has to be considered, not only one element."

Menegon also notes that digital run lengths are trending upward: "Some customers are doing digital runs of 50,000 and well beyond." Menegon adds that requirements for flexibility are leading to a more modular approach for both printing and finishing. This can mean hybrid printing and can also mean off-line finishing.

One example of longer digital runs and hybrid printing is the Share a Coca-Cola campaign, which was launched across Europe in May and was designed to help Coca-Cola engage directly with consumers. It substitutes the iconic Coca-Cola logo on bottles of Coca-Cola, Coca-Cola light, and Coca-Cola Zero with 150 of the most popular first names, nicknames, and terms of affection in each country.

The project combined conventional printing technology with HP Indigo digital printing to create 800 million high-quality personalized labels on 12 Indigo WS6000 series presses with eight label converters across Europe. To ensure that the Coca-Cola brand color was maintained across all machines, HP Indigo formulated the Coca-Cola Red Ink, which served as the benchmark for all of the conventional and digital printing for the Share a Coca-Cola campaign.

Xeikon offers a range of dry toner-based label presses with entry-level as well as higher capacity models. Michael Ring, Xeikon America president, reiterates that the driver for digital is the "massive proliferation of SKUs." While a standard flexo label press is 13 inches wide, the 20.3 inch Xeikon presses offer improved productivity and flexibility. Ring explains that Xeikon presses are "designed to meet the focused needs of the converter. The productivity of our presses yields greater profitability for the converter."

For even smaller runs, there are low-cost, high-quality presses available. One example is the Xante Excelagraphix L850 Digital Narrow Web Press. "This system features the revolutionary Memjet Printhead Technology™ that delivers high print speeds while increasing overall shop production and profits," says Mark Swanzy, Xante COO. "More and more small end users are producing their own labels. Customers are both brand owners and printers." Swanzy described one customer that produces sinks. The label is 8.5 inches wide and 27 inches long, and it produces only a few hundred per week using a Xante press.

As noted, inkjet label volume is smaller than EP, but is growing at 57 percent per year. By one count, there were 39 inkjet players at the last Labelexpo in Brussels. Inkjet for labels is virtually all UV, led by EFI Jetrion. While UV offers better image quality than aqueous, food contact issues limit the growth of UV, and provide an impetus for aqueous inkjet. Xerox Impika uses piezo-electric printheads with dye or pigment water-based inks, while Epson offers its Micro Piezo inkjet technology aqueous inkjet with water-based pigment inks. Epson handles standard ps label substrates including gloss and matte paper stocks, plus films such as BOPP and PET.

Conclusion

In the world of packaging, labels lead in the adoption of digital with rapid growth in both electrophotography and inkjet. While the main force behind this is the proliferation of SKUs, driven by the brands, there are many other factors that are enabling this growth. Dochstader highlights what may be the biggest factor of all: "The narrow web label industry is phenomenal at efficiently and adeptly shifting to meet the changing needs. The industry is nimble–driven by problem solving entrepreneurs."

About the author—Jack Miller is principal consultant at Market-Intell, a supplier of strategic consulting and market intelligence in paper, print, and packaging. pP