IML too costly? Ask the processors in China and India

According to figures shared during the IMLCON inmold labeling event this week in Tempe, AZ, the use of inmold labels is really taking off in China and India, which is interesting given so many consider IML an expensive technology.

That’s according to William Llewellyn, VP and senior consultant at AWA Alexander Watson Associates, which organized the IMLCON event. According to Llewellyn, the global label market saw demand of 39.2 billion square meters in 2008, or 1.5-2% growth compared to 2007.

It was “far less than the 5-7% that we saw in 2007, with most of that 2008 growth in the last two quarters of 2008, but we went over the cliff in the fourth quarter of 2008,” explained Llewellyn. However, he noted that the industry is seeing “some signs of revival” and 2009 may end up better than 2008.
 
Of global demand for labels, 26% of that was in the North American market with 10.5 billion square meters; 30% of the demand was from Europe; 31% came from Asia with most of that coming from China; and 9% from South America. India represented about 16% of the Asian market demand. “China and India are really taking over the market for IML,” said Llewellyn. The reason, apparently, is that the perception of IML’s extra cost often isn't borne out in reality, according to the In-Mold Decorating Association (IMDA), which held its annual meeting in conjunction with the IMLCON conference. When the labor and extra steps involved in secondary operations for applying glue-backed labels or pressure-sensitive labels are considered, then IML can compete on a cost basis, argues the Association and its 34 member companies.

Nevertheless, pressure-sensitive (PS) labels and glue-applied labels still command the largest share of the label market at 42% each. Sleeves represent 9% of the market. There was a 1.8% growth in PS labels, and a 2% growth in glue-applied labels. Shrink sleeves saw a 4% growth. “Heat shrink labels are holding up well in the global market,” said Llewellyn, “but the problem with the inmold market is that it’s easily changed by the dynamics in the North American and European marketplaces.”

Additionally, the 5% decline in the extrusion blowmolded (EB) packaging market in North America hurt the IML market demand because it represents the largest user (88%) there of IML, Llewellyn explained. “IML in the EB market was hurt by competition from PS and shrink sleeves in key market segments,” said Llewellyn. “Injection molding saw a 30% growth rate in 2008 over 2007, but we still need domestic (NA) supply of labels and base film. Currently, we’re importing some 50% of those products.”

Peter Paelinck, North American business development manager for Belgian label supplier Verstraete, agreed with Llewellyn. “That 50% import figure of labels to North America is about right,” Paelinck said. “Approximately 15% of the 28 million labels Verstraete makes come to North America. People underestimate the potential of the IML market in North America.”

IMLCON was held Oct. 28-29 in Tempe, AZ. Approximately 130 attendees were present. Ron Schultz, executive director of the IMDA, gave the market update for inmold decorating, and noted “one of the most important needs in the industry is to correct the perception that IMD is too expensive and too difficult.” The IMDA and its 34 member companies work to promote the technology.

“IMDA is the only trade organization that serves the entire IMD and IML value chain,” said Schultz. “That chain includes the materials suppliers, the label converters and printers including the press and die cutting suppliers; the blowmolders and injection molders including the molding machine and mold suppliers; the end users/brand owners; the retailers and consumers.”

Looking ahead, Llewellyn provided a SWOT (strengths/weaknesses/opportunities/threats) analysis for the North American market showing that the strengths of IML include product resilience, security and durability. “There’s a stronger growth potential in injection molding for IML, but much of that depends on developing a domestic supply base,” Llewellyn said. “And there are no language issues to fragment the brand and increase the number of SKUs.” The weaknesses of IML in North America, said Llewellyn, continues to be “an extended, more complex value chain, and a need for integration all along that value chain.”

Opportunities lie in new markets—food service, do-it-yourself, stadium cups, new products, large containers, and non-packaging applications. A main threat to the technology’s growth remains brand fragmentation. “The greater number of SKUs, with each SKU requiring its own label, is a deterrent, and retailers now command market dynamics,” said Llewellyn. “(With IMLd containers) there’s the continued risk of holding pre-labeled containers, having to deal with obsolete stock and design changes.” —Clare Goldsberry