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TLMI: Tag & Label Manufacturers Institute, Inc.

510 King St., Ste. 410

Alexandria, VA 22314

Phone (571) 645-5086

Fax (571) 645-5091

Email: [email protected]

www.tlmi.com

Cover & Design by Sarah Perkins, TLMI

Copyright © 2016 by TLMI: Tag & Label Manufacturers Institute, Inc.

Permission to reproduce or transmit in any form or by any means, electronic or mechanical,

including photocopying and recording, or by an information storage and retrieval system,

any portion of this work must be obtained in writing from the manager of marketing &

communications at the address or fax number above.

Table of ContentsI. Introduction and Methodology 1

A. Key Findings and Study Takeaways 2

B. Study Methodology 4

II. Market Size and Growth Rates 6

Exhibit II 1: The North American Labelstock Market by Format: 2015 6

Exhibit II 2: The North American Labelstock Market by Format: 2015 v. 2020 7

A. Annual Growth by Labelstock Format 8

Exhibit II 3: Projected Annual Growth by Labelstock Format to 2020 8

Exhibit II 4: Projected Annual Growth of Pressure-Sensitive Paper Labels to 2020 9

Exhibit II 5: Projected Annual Growth of Pressure-Sensitive Film Labels to 2020 10

Exhibit II 6: Projected Annual Declines of Glue Applied Labels to 2020 11

Exhibit II 7: Projected Annual Growth of Sleeve Labels to 2020 12

Exhibit II 8: Projected Annual Growth of In-Mold Labels to 2020 13

B. Release Liners and Adhesives 14

Exhibit II 9: The North American Labelstock Release Liner Market by Material Type 14

Exhibit II 10: Projected Annual Growth by Liner Material Type to 2020 15

Exhibit II 11: The North American Labelstock Adhesive Market by Material Type: 2015 16

Exhibit II 12: Projected Labelstock Adhesive Growth by Type to 2020 17

III. Labelstock Trends and the Converter Labelstock Survey Study 18

Exhibit III 1: Annual Revenue Ranges of Survey Participants 18

Exhibit III 2: Labelstock Survey Participation by Association Membership Status 19

Exhibit III 3: Total Converter Throughput by Vertical 20 Exhibit III 4: A Breakdown of Participating Converters by Markets Served 21

A. New Application Areas for Label Converters and Format Migrations 22

Exhibit III 5: New Label Format Areas Converters Have Entered Within the Last Three Years 22

Exhibit III 6: End-Use Categories Served by Converters that Recently Entered ECL Space 24

Exhibit III 7: Labeling Format Migrations in All End-Use Sectors 25

Exhibit III 8: Format Migrations in Food Labeling by Type 26

Exhibit III 9: Format Migrations in Beverage Labeling by Type 27 Exhibit III 10: Format Migrations in Personal Care Labeling by Type 28

Exhibit III 11: Format Migrations in Industrial and Household Chemicals by Labeling Type 29

Exhibit III 12: Format Migrations in Industrial Products (Non-Consumer Durables) 30

B. Brand Owner Enforcement of Pre-Set Labelstock Specifications 32

Exhibit III 17: Pre-Set Labelstock Specifications among Brand Owners and Packaging Buyers 32

C. In-house Coating of Labelstocks 34

Exhibit III 18: Percentage of Converters Coating their own Labelstocks In-house 34

Exhibit III 19: Annual Revenues of Converters Coating their own Labelstocks In-house 35

D. The Label Converter Material Supplier Dynamic 36

Exhibit III 20: Labelstock Supplier Loyalty among Converters 36

TLMI Labelstock Study 2016 1

The evolution of labelstocks has propelled the North American label printing industry into

the 21st century. The development of labeling substrates has been a constant exercise in

optimizing printability, maximizing functionality and securing the best total applied cost

solution.

Labelstock formats continue to migrate and evolve. Glue applied labeling applications are

migrating towards pressure-sensitive labeling applications, despite showing a slower pace

of migration in recent years. Pressure-sensitive applications are migrating towards sleeves

and in-mold applications. Pressure-sensitive paper labelstocks are migrating to films for

better environmental resilience, and some film applications are migrating to paper to save

costs.

At the center of this shifting dynamic is the label converter. Brand owners and packaging

buyers want to lower costs without compromising aesthetics, functionality and application

performance. Converting companies are creating entire departments with the primary

purpose of constantly qualifying thinner, ‘l ight-weight’ materials in an effort to lower costs.

Companies are looking at whether or not the facestock and liner can down-gauge; or if a

semi-permanent adhesive can replace a permanent adhesive when the extreme end of the

range is not needed? They are asking questions about the container’s structural integrity

impacted when applying thinner films at high speeds.

Both small and large converters report that economics remain the driving factor for the

development of labelstocks. While environmental practices are increasingly scrutinized, the

majority of brand owners and packaging buyers remain focused on economics rather than

waste management practices down the supply chain.

The table on the following pages provides a synopsis of the key findings and takeaways of

this study. These findings include information from interviews with North American industry

suppliers, brand owners, packaging buyers, and label converting companies. The findings

also include analysis derived from quantitative surveys sent to brand owners, packaging

buyers, and label converters located throughout the U.S. and Canada.

I. Introduction and Methodology


Subject Finding/Takeaway

Annual Growth

Format by

Labelstock Format

Pressure-sensitive labels will make up nearly 60% of the North American label

market’s total value and the sector is projected to grow at annual rates of

.5% above GDP in 2020. Glue applied market share will continue to contract

1-2% per year and the total glue applied market is projected to represent less

than 20% of the total market’s value by 2020. Sleeve and in-mold labels will

continue to grow at rates of .5-1.5% above GDP over the next five years.

A Market of

Generalists:

Number of

Sectors and Label

Converters Served

Most label converters are generalists, printing applications for multiple end-

use sectors. For 35% of surveyed converters, one sector makes up 50% or more

of total annual revenues. For 28% of converters, the food and/or beverage

sector makes up 50% or more of total annual revenues. While both large

and small companies specialize in three end-use verticals or fewer, of the

surveyed sample 69% of companies serving three end-use verticals or fewer

have annual sales of more than $10 million and 31% have annual sales of less

than $10 million.

Entry into New

Application Areas

Nearly one in five respondents indicated that their companies have entered

the flexible packaging space within the past three years (excludes shrink

sleeves). Seventeen percent of respondents indicated their companies have

started producing shrink sleeves and/or non-shrink sleeves (wraparound

labels) within the past three years.

A. KEY FINDINGS AND STUDY TAKEAWAYS


Subject Finding/Takeaway

Label Format

Migrations Across

End-Use Sectors

Labeling formats continue to shift from other formats as brand owners and

packaging buyers seek ways to maximize billboard space, remove costs and

optimize label resilience. The Labelstock Survey asked converters to indicate

label format migrations within each end-use category they serve. More than

60% of all respondents indicate their applications have recently migrated from

one labeling format to another.

Adhering to Pre-

set Labelstock

Specifications:

Converter

Perspective

Research indicates that for the most part label converters have control over

the recommendation and creation of new labelstock constructions. Ninety-

eight percent of converters cited that some of their customers have pre-set

material specifications in place. However, only 17% of converters indicated that

the majority of their customers demand their applications abide by a set of

established labelstock specifications.

In-house Coating of

Labelstocks

Seventeen percent of participating converters indicate they are coating their

own labelstocks in-house, either by employing a designated print station on an

existing press or a standalone system that has multiple coating and finishing

capabilities.

A. KEY FINDINGS AND STUDY TAKEAWAYS


The TLMI Labeling Adhesive and Labelstock Trends Market Study provides an analysis of

the market for label materials and adhesives in the North American marketplace. Market

forces are driving label converters and labelstock suppliers to implement supply chain

strategies that address the preferences of consumers and the priorities of brand owners

and packaging buyers. Some of these forces include:

� The light-weighting (down-gauging) of label materials.

� Converters’ adopting coating technology to manufacture their own labelstocks in-

house.

� The adoption of linerless labeling technologies.

� The impact of recycling requirements.

The TLMI Labeling Adhesive and Labelstock Trends Market Study delivers feedback and

analysis from the following primary survey groups:

� Packaging Buyers: Brand managers, packaging engineers, print production managers,

research and development managers and sourcing personnel at consumer packaged

goods companies.

� TLMI Supplier Members: Labelstock suppliers and adhesive manufacturers.

� TLMI Converter Members in North America.

� Non-TLMI Converting Companies in North America: Non-members also participated in

the surveys and qualitative interviews to ensure the survey sampling represented the

entire marketplace.

Brand owner and packaging buyer surveys asked participants to indicate label sourcing/

procurement projections for each label decoration format. Interviews with brand owners

explored migrations per end-use vertical (pressure-sensitive to shrink, pressure-sensitive

paper to pressure-sensitive film, etc.) .

B. STUDY METHODOLOGY


B. STUDY METHODOLOGY

The study also reports on the state of the North American labelstock market by primary

type (papers, VIP papers, films, etc.) and predicts year-over-year growth per format to 2020.

The study also reports on projected growth for adhesives and liners by type.

The converter Labelstock Survey was a central part of the research process. An advisory

team was put together of label converters, labelstock suppliers and adhesive manufacturers

to ensure the analysis stemming from the converter questionnaire would offer the most

pertinent information possible. More than 130 TLMI member and non-member converting

companies completed surveys that addressed the following areas:

� Growth projections per primary labeling format.

� Entry into new application areas.

� Primary labelstock migrations per end-use vertical.

� The implementation of pre-set labelstock specifications.

� In-house coating of labelstock materials.

� Forces that prompt a change in labelstock suppliers.


The TLMI Labeling Adhesive and Labelstock Trends Study sizes the market in two ways.

The first chart and correlating table show the total value of the market expressed as

converter sales - converter revenues for products that fall within each of the primary

format categories including pressure-sensitive, glue applied, sleeve and in-mold labels.

The remaining charts in this section show labelstock, liner and adhesive sizing by mmsi

(labelstock consumption).

Applying growth rates to labelstock, liner and adhesive types is a complex exercise that

includes using historical TLMI labelstock consumption data and formulating an algorithm

applied to projected North American GDP rates to 20201. Calculations were then checked

against annual sourcing growth projections from brand owners and packaging buyers, per

labeling format. The graph below shows North American value by labelstock format in 2015.

Exhibit II 1: The North American Labelstock Market by Format: 2015

Following the economic downturn of 2008-2009, average annual growth in the North

American labelstock market has hovered around average GDP rates over the same period.

The sleeve and in-mold sectors witnessed highest annual growth while the size of the glue

applied labeling sector had steady year-over-year contraction.

1 Projected GDP rates used were a composite of projections from the World Bank and Economist Intelligence Unit

11

packaging buyers, per labeling format. The graph below shows North

American value by labelstock format in 2015.

Exhibit II-1: The North American Labelstock Market by Format: 2015

Following the economic downturn of 2008-2009, average annual

growth in the North American labelstock market has hovered right

around average GDP rates over the same period. The sleeve and in-mold

sectors witnessed highest annual growth while the size of the glue

applied labeling sector had steady year-over-year contraction.

The table below shows 2015 market values by format against

projected values for 2020.

Exhibit II-2: The North American Labelstock Market by Format:

North American Labelstock Market Value (Converter Sales) by Format (in $ millions / 000,000 omitted)

57%23%

18%

2%

North American Labelstock MarketValue (Converter Sales) by Labeling Format: 2015

Pressure-sensitive Glue applied Sleeve In-mold

II. Market Size and Growth Rates


The table below shows 2015 market values by format against projected values for 2020.

Exhibit II 2: The North American Labelstock Market by Format 2015 vs. 2020:

North American Labelstock Market Value (Converter Sales) by Format (in $ millions/000,000 omitted)

FORMAT 2015 VALUE 2020 VALUE

Pressure-Sensitive $7,333 $8,345

Glue Applied $2,973 $2,778

Sleeves $2,293 $2,663

In-Mold $258 $292

Total $12,857 $14,047

CAGR (2015 - 2015) 1.8%

II . Market Size and Growth Rates


In 2020 pressure-sensitive labels will make up nearly 60% of the North American market’s

total value. The sector will grow at projected annual rates of .5% above GDP. Glue applied

label market share will continue to contract 1-2% per year and the total glue applied market

is projected to represent less than 20% of the total market’s value by 2020. Sleeve and in-

mold labels are projected to continue to grow at rates of .5-1.5% above GDP over the next

five years. The graph below indicates projected annual growth rates for each labelstock

format to 2020.

Exhibit II 3: Projected Annual Growth by Labelstock Format to 2020

Over the next five years, the North American pressure-sensitive paper market is projected

to grow at an average annual rate of 2.2%. The pressure-sensitive film market is projected to

grow at an average annual rate of 3.5%.

North American label market growth will be driven by different forces specific to each end-

use vertical. Some of these forces will be the same ones that drive growth throughout the

North American manufacturing sector, while others will include migrations away from direct

print (label-less) decoration formats to pressure-sensitive, sleeves or in-mold labels,

A. Annual Growth by Labelstock Format

13

Exhibit II-3: Projected Annual Growth by Labelstock Format to 2020

This graph shows projected annual growth rates for each

labelstock format in addition to indicating market value growth for

pressure-sensitive papers and pressure-sensitive films. Over the next

five years, the North American PS paper market is projected to grow at

an average annual rate of 2.2%. The PS film market is projected to grow

at an average annual rate of 3.5%.

North American label market growth will be driven by different

forces specific to each end-use vertical. Some of these forces will be the

same ones that drive growth throughout the North American

manufacturing sector while others will include migrations away from

direct print (label-less) decoration formats to pressure-sensitive,

sleeves or in-mold labels, Overall market growth will be driven by the

following forces:

SKU proliferation across most prime labeling sectors (food,

beverage, pharmaceuticals/nutraceuticals, personal

care/cosmetics and household chemicals)

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

2016 2017 2018 2019 2020

North American Labelstock Growth (Converter Sales) by Format to 2020

PS Paper PS Film Glue-applied Sleeves In-mold


Overall market growth will be driven by the following forces:

� SKU proliferation across most prime labeling sectors (food, beverage,

pharmaceuticals/nutraceuticals, personal care/cosmetics and household chemicals).

� Continued rise of click-and-ship retail will continue to drive non-prime VIP labeling

sectors.

� Off-shoring will continue to drive growth in the consumer durables, automotive and

industrial sectors.

� The aging population of the U.S. and Canada will continue to drive growth across the

pharmaceutical, nutraceutical and medical device sectors.

In addition to the factors that will drive regional manufacturing growth, specific label

formats will continue to take market share away from other formats. The graph below shows

projected growth to 2020 for pressure- sensitive paper labelstocks.

Exhibit II 4: Projected Annual Growth of Pressure-Sensitive Paper Labels to 2020

Pressure-sensitive paper applications will continue to migrate to pressure-sensitive films

in the food, beverage, pharmaceutical, household chemicals, transportation and logistics

and industrial sectors. Brand owners and packaging buyers will increasingly enforce

environmental resilience, and scuff and handling resistance. Glue applied/cut and stack


14

Continued rise of click-and-ship retail will continue to drive non-

prime VIP labeling sectors

Offshoring will continue to drive growth in the consumer

durables, automotive and industrial sectors

The aging population of the U.S. and Canada will continue to drive

growth across the pharmaceutical, nutraceutical and medical

device sectors

In addition to the factors that will drive regional manufacturing

growth, specific label formats will continue to take marketshare away

from other formats. The graph below shows projected growth to 2020

for pressure- sensitive paper labelstocks.

Exhibit II-4: Project Annual Growth of PS Paper Labels to 2020

Pressure-sensitive paper applications will continue to migrate to

pressure-sensitive films in the food, beverage, pharmaceutical,

household chemicals, transportation and logistics and industrial

sectors. Brand owners and packaging buyers will increasingly enforce

environmental resilience, and scuff and handling resistance. Glue

2.3%2.6% 2.6%

1.3%

2.4%

0.0%

1.0%

2.0%

3.0%

2016 2017 2018 2019 2020

PS Paper Label Annual Growth (mmsi) to 2020



labels will continue to migrate to pressure-sensitive as brand owners and packaging buyers

seek the total applied cost advantages of pressure-sensitive and move away from the OEE

(overall equipment effectiveness) challenges inherent in glue applied label application

lines.

In 2015, VIP papers represented 52% of all paper pressure-sensitive throughput in North

America. VIP papers include EDP, thermal transfer, direct thermal, laser and inkjet papers.

Pressure-sensitive film growth is projected to grow at rates of 1-1.5% above GDP and will

continue to take market share away from pressure-sensitive papers across the prime and

non-prime (including VIP) labeling sectors. The graph below shows projected growth to

2020 for pressure-sensitive film labelstocks.

Exhibit II 5: Projected Annual Growth of Pressure-Sensitive Film Labels to 2020

Pressure-sensitive film growth will continue to out pace paper. Pressure-Sensitive films

are projected to grow at annual rates of 1,5-2% above GDP over the next five years. While

pressure-sensitive film growth rates will be higher than pressure-sensitive paper overall,

there have been some prime labeling sectors that have witnessed some migration back to

pressure-sensitive papers from films. While pressure-sensitive film to paper migrations are

infrequent, the market has witnessed a small number of food, beverage and pharmaceutical

15

applied/cut and stack labels will continue to migrate to pressure-

sensitive as brand owners and packaging buyers seek the total applied

cost advantages of PS and move away from the OEE (overall equipment

effectiveness) challenges inherent in glue applied label application

lines.

In 2015, VIP papers represented 52% of all paper pressure-

sensitive throughput in North America. VIP papers include EDP, thermal

transfer, direct thermal, laser and inkjet papers.

Pressure-sensitive film growth is projected to grow at rates of 1-

1.5% above GDP and will continue to take marketshare away from

pressure-sensitive papers across the prime and non-prime (including

VIP) labeling sectors. The graph below shows projected growth to 2020

for pressure- sensitive film labelstocks.

Exhibit II-5: Project Annual Growth of PS Film Labels to 2020

3.6%3.9% 3.9%

2.6%

3.7%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

2016 2017 2018 2019 2020

PS Film Label Annual Growth (mmsi) to 2020



applications moving from pressure-sensitive films back to pressure-sensitive papers. In

2015, paper labelstocks made up 75% of total pressure-sensitive label throughput, pressure-

sensitive films made up 25%.

The only labelstock market projected to contract year over year to 2020 is the glue applied

label sector. Glue applied labels will continue to migrate to pressure-sensitive paper and

pressure-sensitive film labelstocks in the food and beverage markets. The graph below

shows projected annual contraction rates to 2020 for glue applied labelstocks.

Exhibit II 6: Projected Annual Declines of Glue Applied Labels to 2020

Over the next five years, glue applied labelstocks are projected to decline at rates of 1-2%

as competing label decoration technologies continue to capture glue applied market share.

In addition to pressure-sensitive migration, glue applied label applications will also migrate

to sleeves, in-mold labels and direct print.

17

Over the next five years, glue applied labelstocks are projected to

decline at rates of 1-2% as competing label decoration technologies

continue to capture glue applied marketshare. In addition to pressure-

sensitive migration, glue applied label applications will also migrate to

sleeves, in-mold labels and direct print.

Annual growth projections for sleeves over the next five years are

higher than any other label decoration format. Pressure-sensitive films

are projected to grow at slightly higher rates, however in comparing and

contrasting growth rates between sleeves and PS overall, sleeve

consumption growth is projected to outpace pressure-sensitive.

The graph below shows projected annual growth rates to 2020 for

sleeves.

-1.4%-1.1% -1.1%

-1.8%

-1.3%

-2.0%

-1.0%

0.0%

2016 2017 2018 2019 2020

Glue Applied Label Projected Annual Declines (mmsi) to 2020



Annual growth projections for sleeves over the next five years are higher than any other

label decoration format. Pressure-sensitive films are projected to grow at slightly higher

rates. However in comparing and contrasting growth rates between sleeves and pressure-

sensitive overall, sleeve consumption growth is projected to out pace pressure-sensitive.

The graph below shows projected annual growth rates to 2020 for sleeves.

Exhibit II 7: Projected Annual Growth of Sleeve Labels to 2020

Projected consumption growth encompasses all sleeve technologies including heat shrink

sleeves, stretch sleeves and RFS/ROSO MD sleeves (roll-on-shrink-on-machine direction).

North American converters report that one of the most active areas of migration in the

marketplace is currently pressure-sensitive applications migrating to sleeves. The markets

that are witnessing highest pressure-sensitive to sleeve migration include food, beverage,

personal care/cosmetics, pharmaceuticals/nutraceuticals, and automotive. Sleeve

throughput growth is projected to remain .5-1% above GDP to 2020.

18

Exhibit II-7: Projected Annual Growth of Sleeve Labels to 2020

Projected consumption growth encompasses all sleeve

technologies including heat shrink sleeves, stretch sleeves and

RFS/ROSO MD sleeves (roll-on-shrink-on-machine direction). North

American converters report that one of the most active areas of

migration in the marketplace Is currently pressure-sensitive

applications migrating to sleeves.

The markets that are witnessing highest PS-to-sleeve migration

include food, beverage, personal care/cosmetics,

pharmaceuticals/nutraceuticals, and automotive. Sleeve throughput

growth is projected to remain .5-1% above GDP to 2020.

In-mold label growth over the next five years closely mirrors

annual growth rate projections for pressure-sensitive labelstocks

overall. Converters are currently reporting PS-to-in-mold migration in

end-use sectors where in-mold has had little exposure. These include

the consumer durables and industrial label markets and applications

such as toys, household and industrial glues, gardening products and

pet food/pet care.

3.1%3.4% 3.4%

2.1%

3.2%

0.0%

1.0%

2.0%

3.0%

4.0%

2016 2017 2018 2019 2020

Sleeve Label Projected Annual Growth (mmsi) to 2020



In-mold label growth over the next five years closely mirrors annual growth rate projections

for pressure-sensitive labelstocks overall. Converters are currently reporting pressure-

sensitive to in-mold migration in end-use sectors where in-mold has had little exposure.

These include the consumer durables and industrial label markets and applications such as

toys, household and industrial glues, gardening products and pet food/pet care. The graph

below shows projected annual growth rates to 2020 for in-mold labels.

Exhibit II 8: Projected Annual Growth of In-Mold Labels to 2020

19

The graph below shows projected annual growth rates to 2020 for

in-mold labels.

Exhibit II-8: Projected Annual Growth of In-Mold Labels to 2020

2.6%2.9% 2.9%

1.6%

2.7%

0.0%

1.0%

2.0%

3.0%

4.0%

2016 2017 2018 2019 2020

In-mold Label Projected Annual Growth (mmsi) to 2020


Annual growth for labelstock release liners has averaged 2% over the past five years.

Release liners used in the labelstock sector include paper, film, and hybrid/composite liner

materials. The graph below shows release liner consumption in the North American market

broken down by material type.

Exhibit II 9: The North American Labelstock Release Liner Market by Material Type: 2015

Paper release liners make up 85% of total market consumption. Annual growth for paper

liners has averaged an estimated 1.9% over the past five years. Projected annual growth for

paper labelstock liners is .5-1% above GDP to 2020.

B. Release Liners and Adhesives

20

B. RELEASE LINERS AND ADHESIVES

Annual growth for labelstock release liners has averaged 2% over

the past five years. Release liners used in the labelstock sector include

paper, film and hybrid/composite liner materials. The graph below

shows release liner consumption in the North American market broken

down by material type.

Exhibit II-9: The North American Labelstock Release Liner Market by Material Type: 2015

Paper release liners make up 85% of total market consumption.

Annual growth for paper liners has averaged an estimated 1.9% over the

past five years. Projected annual growth for paper labelstock liners is .5-

1% above GDP to 2020.

Annual growth for film liners has averaged just over 3% over the

past five years. Projected growth for film labelstock liners is more than

twice the rate of paper liners, 1.5-2% above GDP over the next five years.

The graph on the following page shows release liner growth (in the

labelstock market) by material type to 2020.

Exhibit II-10: Projected Annual Growth by Liner Material Type to 2020

85%

14%

1%

Release Liner Consumption (mmsi) by Type: 2015

Paper Film Composite


Annual growth for film liners has averaged just over 3% over the past five years. Projected

growth for film labelstock liners is more than twice the rate of paper liners, 1.5-2% above

GDP over the next five years. The graph below release liner growth (in the labelstock

market) by material type to 2020.

Exhibit II 10: Projected Annual Growth by Liner Material Type to 2020

21

Annual growth for composite liners will average only slightly

higher than growth rates for paper liners. Projected annual growth for

composite liners is .5-1% above GDP to 2020.

0%

1%

2%

3%

4%

5%

2016 2017 2018 2019 2020

North American Liner Growth by Material Type to 2020

Paper Liner Film Liner Composite



Annual growth for labelstock adhesives has also averaged 2% over the past five years.

Labelstock adhesives categories include hot melt, aqueous, solvent and radiation-cured.

The graph below shows adhesive labelstock consumption in the North American market by

type.

Exhibit II 11: The North American Labelstock Adhesive Market by Type: 2015

Note: Radiation-cured adhesives made up less than .03% of the total North American market in

2015.

Aqueous labelstock adhesives make up 76% of the total market with annual growth rates

averaging 2.5% over the past five years. Aqueous labelstock adhesives are projected to

grow at GDP rates to 2020. Average year-over-year growth for hot melt adhesives has been

the highest, growing at an average annual rate of 1.5-2% over the past five years. Projected

annual growth for hot melt adhesives is .5-1% above GDP to 2020, driven by the increased

adoption of in-house coating systems at the converter level. Solvent labelstock adhesive

consumption has declined at an average rate of -.5% per year over the past five years.

Projected annual growth for solvent adhesives is 2.5-3% below GDP to 2020.


22

Annual growth for labelstock adhesives has also averaged 2%

over the past five years. Labelstock adhesives categories include hot

melt, aqueous, solvent and radiation-cured. The graph below shows

adhesive labelstock consumption in the North American market by type.

Exhibit II-11: The North American Labelstock Adhesive Market by Type: 2015

22%

76%2%

Adhesive Consumption (Labelstock mmsi)by Type: 2015

Hot melt Aqueous Solvent


The graph below shows labelstock adhesive growth by type to 2020.

Exhibit II 12: Projected Labelstock Adhesive Growth by Type to 2020

Converter adoption of in-house coating units is on the rise. Labelstock adhesive companies

report hot-melt direct sales to large label converters (annual sales over $35 million) has

increased at double-digit rates annually over the past three years. Primary forces driving in-

house adoption of hot melt coating systems at the converter level include:

� In-house coating systems are becoming more affordable.

� Converters want more control over labelstock supplies, reporting extended back-

ordered periods for specific constructions and liner types.

� The ability to achieve cost-savings by producing their own labelstock constructions in-

house.

� The ability to print on the reverse-side of film substrates (with in-line coating stations

installed on press).

24

Converter adoption of in-house coating units is on the rise.

Labelstock adhesive companies report hot-melt direct sales to large

label converters (annual sales over $35 million) has increased at

double-digit rates annually over the past three years.

Primary forces driving in-house adoption of hot melt coating

systems at the converter level include:

In-house coating systems are becoming more affordable

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

2016 2017 2018 2019 2020

North American Adhesive Growthby Type to 2020

Hot Melt Aqueous Solvent



More than 130 label converters in the U.S. and Canada took part in the Labelstock Survey.

Participants serve every major end-user vertical and represent a wide range of annual

revenues. Annual revenues for all participants totaled more than $3 billion in 2015,

representing more than 25% of the total value of the U.S. and Canadian label printing

industry. The largest multi-national converters took part in the survey in addition to label

converters with annual sales less than $5 million. The graph below breaks down the total

participant group by annual revenues.

Exhibit III 1: Annual Revenue Ranges of Labelstock Survey Participants

27

All TLMI converter members were invited to take part in the

Labelstock Survey. To ensure the results represented the greater

industry, a number of non-member converters also completed

questionnaires and participated in qualitative interviews. The chart

below shows a breakdown of member/non-member participation.

Exhibit III-2: Labelstock Survey Participation by Association Membership Status

25%20% 18% 17%

14%

6%0%

5%

10%

15%

20%

25%

30%

<$5million

$5-10million

$10-15million

$15-35million

$35-75million

>$75million

% C

on

vert

ers

Annual Revenues of Surveyed Converters

III. Labelstock Trends and the Converter Labelstock Study


All TLMI converter members were invited to take part in the Labelstock Survey. To ensure

the results represented the greater industry, a number of non-member converters also

completed questionnaires and participated in qualitative interviews. The chart below shows

a breakdown of member/non-member participation.

Exhibit III 2: Labelstock Survey Participation by Association Membership Status

It was essential that the converters surveyed indicated the end-use sectors that they serve

and the percentage that each sector makes up of total labelstock consumption. Breaking

down the participating universe by end-use vertical allowed researchers to calculate

specific metrics and analyze trends within each category (food, beverage, chemicals,

consumer durables, industrials, etc.) . The graph on the following page breaks down total

converter throughput by end-use vertical.

28

It was essential that surveyed converters indicated the end-use

sectors they serve and the percentage each sector makes up of total

labelstock consumption. Breaking down the participating universe by

end-use vertical allowed researchers to calculate specific metrics and

analyze trends within each category (food, beverage, chemicals,

consumer durables, industrials, etc.).

The graph on the following page breaks down total converter

throughput by end-use vertical.

67%

33%

Labelstock Survey Participation

TLMI Member Converters Non-Member Converters



Exhibit III 3: Total Converter Throughput by Vertical

Note: Values do not add up to 100% due to rounding.

Labels for food and beverage applications make up more than 44% of total converter

throughput. The sampling differs from the overall market. In North America, food and

beverage make up 56% of the total market’s value. The chemicals category includes

applications for both household and industrial chemical products. The pharmaceutical

category includes nutraceutical and medical device applications.

29

Exhibit III-3: Total Converter Throughput by Vertical

5.3%

5.4%

3.9%

3.6%

9.9%

8.8%

5.2%

5.0%

4.4%

3.9%

22.4%

22.1%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0%

Other

Industrial Prod.

Office Products

Retail

Transport/Log.

Cons. Dur/Elec.

Automotive

Chemicals

Pharma/Nut.

Personal Care/Cos.

Beverage

Food

Total Converter Throughput (msi) by End-Use Vertical



There are an estimated 2,000 label converting companies with annual sales revenues of $1

million or greater in the North American market. Out of all of the printed packaging sectors,

the label industry is the most fragmented. Consolidation will continue as established

industry players acquire smaller competitors to strengthen their market position.

As the owners of small to mid-sized companies position themselves for future acquisition,

companies often move away from being label-printing generalists to specializing in a

smaller number of end-use verticals and/or labeling formats. The graph below breaks down

surveyed participants by the number of end-use markets they serve.

Exhibit III 4: A Breakdown of Participating Converters by the Number of Markets Served

Most label converters are generalists, printing applications for multiple end-use sectors.

For 35% of surveyed converters, a single end-use vertical makes up 50% or more of total

annual revenues. For 28% of converters, the food and/or beverage sector makes up 50% or

more of total annual revenues. Both large and small companies ‘specialize’ in three end-

use verticals or fewer. However, 69% of companies serving three end-use verticals or fewer

have annual sales of more than $10 million and 31% have annual sales of less than $10

million. This indicates that ‘specializing’ is more of a large company strategy.

31

Most label converters are generalists, printing applications for

multiple end-use sectors. For 35% of surveyed converters, a single end-

use vertical makes up 50% or more of total annual revenues. For 28% of

converters, the food and/or beverage sector makes up 50% or more of

total annual revenues. Both large and small companies ‘specialize’ in

three end-use verticals or fewer. However, 69% of companies serving

three end-use verticals or fewer have annual sales of more than $10

million and 31% have annual sales of less than $10 million. This

indicates that ‘specializing’ is more of a large company strategy.

A. NEW APPLICATION AREAS FOR LABEL CONVERTERS AND FORMAT MIGRATIONS

59%

25%15% 1%

0%

10%

20%

30%

40%

50%

60%

70%

Serve >3 EUSectors

Serve 3 EUSectors

Serve 2 EUSectors

Serve 1 EUSector

% C

on

vert

ers

Number of End-Use Sectors Label Converters Serve



Historically, pressure-sensitive applications have dominated narrow web presses

throughout the U.S. and Canada. As pressure-sensitive took market share away from sheet-

fed glue applied applications, printing and converting supported substrates on in-line

presses delivered double digit year-over-year growth for decades.

Today’s label converters are positioning their products in a mature market that is becoming

increasingly becoming a commodity to brand owners and packaging buyers. Pressure-

sensitive growth hovers at, or only slightly above, annual GDP growth and converters are

seeking higher profits in non-pressure-sensitive application areas including unsupported

flexible packaging applications, sleeves, in-mold, and extended content applications. The

Labelstock Survey asked converters to indicate the new markets their companies have

entered within the past three years.

Exhibit III 5: New Label Format Areas Converters Have Entered Within the Past Three Years

Nearly one in five respondents indicated that their companies have entered the flexible

packaging space within the past three years. Shrink has long been considered a traditional

flexible packaging application, however, it was separated out as a category for the purposes

of the research. Seventeen percent of respondents indicated that their companies have

started producing shrink sleeves and/or non-shrink sleeves (wraparound labels) within the

past three years.

32

Historically, pressure-sensitive applications have dominated

narrow web presses throughout the U.S. and Canada. As pressure-

sensitive took marketshare away from sheet-fed glue applied

applications, printing and converting supported substrates on inline

presses delivered double digit year-over-year growth for decades.

Today’s label converters are positioning their products in a

mature market that is becoming increasingly commoditized in the eyes

of brand owners and printed packaging buyers. Pressure-sensitive

growth hovers at, or only slightly above, annual GDP growth and

converters are seeking higher profits in non-PS application areas

including unsupported flexible packaging applications, sleeves, in-

mold, and extended content applications. The Labelstock Survey asked

converters to indicate the new markets their companies have entered

within the past three years.

Exhibit III-5: New Label Format Areas Converters Have Entered Within the Past Three Years

Nearly one in five respondents indicated that their companies

have entered the flexible packaging space within the past three years.

Shrink has long been considered a traditional flexible packaging

application however was separated out as a category for the purposes

2%0%

17%

3%

18%

12%

6%

0%

5%

10%

15%

20%

PS Glue-applied

Sleeves In-mold FlexiblePackaging

ExtendedContent

Linerless

% C

on

vert

ers

New Label Format Areas for Converters -All End-Use Sectors

A. New Application Areas for Label Converters and Format Migrations


Narrow web flexible packaging is one of the most significant trends occurring in the North

American label industry. The forces that are driving this trend include:

� Narrow web in-line presses are better equipped to handle thinner, unsupported

substrates while maintaining registration and optimal web temperatures.

� Growing numbers of brand owners and packaging buyers want a one-stop shop for all

of their printed packaging products (labels, flexible packaging and folding cartons).

� The flexible packaging industry is growing at rates of .5-1% above annual label industry

growth.

� Run size/job size contractions make it impossible to produce some flexible packaging

applications on 40-50” central impression presses profitably.

More than 50% of participating companies have entered a new application and/or format

area within the past three years. The companies that have entered the pressure-sensitive

space are companies that primarily produce cut and stack and glue applied applications.

It’s important to also note the percentage of companies that have started producing

extended text/extended content (ECL) applications. Twelve percent of respondents

indicated their companies have entered the extended content application space within the

past three years. Federal food labeling requirements are demanding labels convey higher

volumes of information to consumers, continuing to drive ECL growth across end-use

verticals.



Extended content labeling is growing at the highest rates in the food, pharmaceutical/

nutraceutical and household chemical sectors. The chart below breaks down the companies

that have indicated new entry into the extended content labeling space by the end-use

categories they serve.

Exhibit III 6: End-Use Categories Served by Converters that Recently Entered Extended Content

Labeling Space

Extended content labels with a pressure-sensitive base make up the vast majority of

the total ECL market in the U.S. and Canada. In recent years however, converters have

pioneered extended content labels in both the roll-fed and cut and stack markets.

34

volumes of information to consumers, continuing to drive ECL growth

across end-use verticals.

Extended content labeling is growing at highest rates in the food,

pharmaceutical/nutraceutical and household chemical sectors. The

chart below breaks down the companies that have indicated new entry

into the extended content labeling space by the end-use categories

they serve.

Exhibit III-6: End-Use Categories Served by Converters that Recently Entered Extended Content Labeling Space

4%

4%

9%

13%

18%

22%

30%

0% 5% 10% 15% 20% 25% 30% 35%

Retail

Automotive

Personal Care

Pharma/Nut.

Chemicals

Beverage

Food

% Converters

Sectors Served by Companies Entering Extended Content Market



Labeling formats continue to take market share away from other formats as brand owners

and packaging buyers seek ways to maximize billboard space, remove costs and optimize

label resilience. The Labelstock Survey asked converters to indicate label format migrations

within each end-use category they serve. The graph below breaks down the percentage of

migrations by category.

Exhibit III 7: Labeling Format Migrations in All End-Use Sectors

More than 60% of surveyed participants report migration in format in their labeling

applications. Of the converters reporting labeling format migrations, 32% report one

migration, 27% report two different migrations and 25% report three or more migrations

in format. The most reported migration is pressure-sensitive paper applications moving

to pressure-sensitive films. As brand owners and packaging buyers seek increased

environmental resilience, application durability and ‘no label look’ differentiation, pressure-

sensitive films will continue to replace pressure-sensitive papers. However, 8% of

companies reporting format migrations cited the move away from pressure-sensitive films

back to pressure-sensitive papers. Converters reporting pressure-sensitive film to paper

migrations serve the food, personal care and pharmaceutical sectors.


36

Exhibit III-7: Labeling Format Migrations in All End-Use Sectors

More than 60% of surveyed participants report that one or more

labeling applications have recently migrated to a different format. Of

the converters reporting labeling format migrations, 32% report one

migration, 27% report two different migrations and 25% report three or

more migrations from one labeling format to another.

The most reported migration is pressure-sensitive paper

applications moving to pressure-sensitive films. As brand owners and

packaging buyers seek increased environmental resilience, application

durability and ‘no label look’ differentiation, pressure-sensitive films

will continue to replace pressure-sensitive papers. However, 8% of

companies reporting format migrations cited the move away from PS

films to PS papers. Converters reporting PS film-to-paper

migrations serve the food, personal care and pharmaceutical sectors.

31%

8% 2%

22%26%

8% 1% 3%0%

10%

20%

30%

40%

% C

on

vert

ers

Format Migrations - All End-Use Sectors

PS P

aper to P

S Film

PS F

ilm to

PS P

aper

PS to N

on-Shrin

k Wra

paround

PS to

Shrin

k

T

hinner F

ilms

Glu

e-Applie

d to P

S

Dire

ct Prin

t

P

S to In

-Mold


The survey asked converters to break down label format migrations by end-use sector. Half

of all respondents printing food label applications indicated recent format migrations with

39% reporting pressure-sensitive paper to pressure-sensitive film migrations followed by

17% reporting migrations of pressure-sensitive film back to pressure-sensitive paper. The

graph below breaks down format migration by type.

Exhibit III 8: Format Migrations in Food Labeling by Type

Seventeen percent of converters indicating format migrations in food applications also

report that light-weighting, the migration to thinner caliper films, is occurring. The migration

away from glue applied to pressure-sensitive remains a force in the food sector as 13% of

converters are reporting this labeling format change.

37

The survey asked converters to break down label format

migrations by end-use sector. Half of all respondents printing food label

applications indicated recent format migrations with 39% reporting PS

paper to PS film migrations followed by 17% reporting migrations of PS

film to PS paper. The graph below breaks down format migration

by type.

Exhibit III-8: Format Migrations in Food Labeling by Type

Seventeen percent of converters indicating format migrations in

food applications also report that light-weighting, the migration to

thinner caliper films, is occurring. The migration away from glue applied

to PS remains a force in the food sector as 13% of converters are

reporting this labeling format change.

The graph below breaks down format migration by type for

converters active in the beverage category.

4%

13%

17%

10%

17%

39%

0% 10% 20% 30% 40% 50%

Label to Direct Print

Glue-applied to PS

Thinner Films

PS to Shrink

PS Film to PS Paper

PS Paper to PS Film

% Converters Indicating Format Migration in Foods

Dominant Label Format Migrations - Food




The graph below breaks down format migration by type for converters active in the

beverage category.

Exhibit III 9: Format Migrations in Beverage Labeling by Type

More than 60% of converters serving the beverage sector report migrations from one

label format to another. One in three converters producing beverage applications report

the migration away from pressure-sensitive to shrink sleeves. As beverage companies

increasingly seek new ways to achieve product marketability, products across beverage

categories are migrating from pressure-sensitive to shrink sleeve labels. Shrink sleeves are

more prevalent in beverage than any other end-use category.

38

Exhibit III-9: Format Migrations in Beverage Labeling by Type

More than 60% of converters serving the beverage sector report

migrations from one label format to another. One in three converters

producing beverage applications report the migration away from

pressure-sensitive to shrink sleeves.

As beverage companies increasingly seek new ways to achieve

product marketability, products across beverage categories are

migrating from pressure-sensitive to shrink sleeve labels. Shrink sleeves

are more prevalent in beverage than any other end-use category. The

forces that continue to drive PS-to-shrink migration in beverage include:

Product differentiation as brand owners and packaging

buyers seek more billboard space for graphics and branding

Built-in tamper evidence characteristics of a full-bodied

sleeve

2%

16%

20%

33%

5%

24%

0% 5% 10% 15% 20% 25% 30% 35%

Label to Direct Print

Glue Applied to PS

Thinner Films

PS to Shrink

PS to Non-Shrink Wraparound

PS Paper to PS Film

% Converters Indicating Format Migration in Beverages

Dominant Label Format Migrations - Beverage


The forces that continue to drive pressure-sensitive to shrink migration in beverage include:

� Product differentiation as brand owners and packaging buyers seek more billboard

space for graphics and branding.

� Built-in tamper evidence characteristics of a full-bodied sleeve.

� Clear films provide apertures through which the package’s contents can be viewed

clearly.

� Narrow web in-line press technology advancements in printing unsupported film

substrates while maintaining registration tolerance, web tension and optimal web

temperatures.

� Compatibility with full range of print processes included digital (toner-based and inkjet),

flexo and gravure.

Pressure-sensitive paper to pressure-sensitive film migration is the second most reported

migration in beverage with 24% of converters that print labels in the category reporting

paper to film migrations.

The graph below breaks down format migration by type for converters active in the personal

care category.

Exhibit III 10: Format Migrations in Personal Care Labeling by Type

Note: Values do not add up to 100% due to rounding.


39

Clear films provide apertures through which the package’s

contents can be viewed clearly

Narrow web inline press technology advancements in

printing unsupported film substrates while maintaining

registration tolerance, web tension and optimal web

temperatures

Compatibility with full range of print processes included

digital (toner-based and inkjet), flexo and gravure

Pressure-sensitive paper to PS film migration is the second most

reported migration in beverage with 24% of converters that print labels

in the category reporting paper-to-film migrations. The graph below

breaks down format migration by type for converters active in the

personal care category.

Exhibit III-10: Format Migrations in Personal Care Labeling by Type

36%

45%

18%

0% 10% 20% 30% 40% 50%

Thinner Films

PS to Shrink

PS Film to PS Paper

% Converters Indicating Format Migration in Personal Care

Dominant Label Format Migrations -Personal Care


Thirty percent of converters serving the personal care sector report labeling format

migrations. Pressure-sensitive labels to shrink sleeves is the most widely reported migration

with 45% of converters indicating a portion of their pressure-sensitive personal care/

cosmetics labels has shifted to shrink sleeves.

Converters report that one of the primary forces driving shrink sleeve usage in the

personal care and cosmetics industries is the ability of shrink sleeves to fit the unique

and sometimes complex contours of personal care and cosmetics containers for products

that include lotions, powders, creams and gels. For some personal care products branding

extends to container shape and design. Shrink sleeves offer brands the ability to accent the

shape of a container and achieve further product differentiation.

Film facestocks dominate the North American personal care and cosmetics sectors. Thirty-

six percent of converters indicate that their personal care applications are moving to thinner

films. However, 18% of converters serving the personal care industry are reporting migration

away from films and back to laminated paper constructions as some packaging buyers look

to remove costs from the label decoration process.



The graph below breaks down format migration by type for converters active in the

chemicals category (including both industrial and household chemicals).

Exhibit III 11: Format Migrations in Industrial and Household Chemicals Labeling by Type

More than 30% of converters serving the industrial and household chemicals sectors report

format migrations. Laminated pressure-sensitive paper applications continue to migrate to

pressure-sensitive films in this sector and 55% of surveyed converters printing chemicals

applications indicated pressure-sensitive paper to pressure-sensitive film migration.

The usage of shrink sleeves is also a growth market in household chemicals, particularly

in the laundry detergent, hand soap, trigger bottles and air freshener sectors. Converters

and brand owners in the household chemicals sector report that a driver of shrink sleeves

in this sector is the ability to use the more economical standard, opaque white resin in the

production of containers. The ability to achieve 360-degree color differentiation is available

with shrink sleeves, allowing brands to move away from more costly, custom-color resins.


41

Exhibit III-11: Format Migrations in Industrial and Household Chemicals Labeling by Type

More than 30% of converters serving the industrial and household

chemicals sectors report format migrations. Laminated pressure-

sensitive paper applications continue to migrate to PS films in this

sector and 55% of surveyed converters printing chemicals applications

indicated PS paper to PS film migration.

The usage of shrink sleeves is also a growth market in household

chemicals, particularly in the laundry detergent, hand soap, trigger

bottles and air freshener sectors. Converters and brand owners in the

household chemicals sector report that a driver of shrink sleeves in this

sector is the ability to use the more economical standard, opaque white

resin in the production of containers. The ability to achieve 360-degree

27%

18%

55%

0% 10% 20% 30% 40% 50% 60%

Thinner Films

PS to Shrink

PS Paper to PS Film

% Converters Indicating Format Migration in Chemicals

Dominant Label Format Migrations -Chemicals


The graph below shows format migration by type for the industrial products category.

(Industrial products are defined as non-consumer durables.)

Exhibit III 12: Format Migrations in Industrial Products (Non-consumer Durables)

Twenty-three percent of converters that print labels for industrial products are reporting

format migrations. All migrations fall into two categories – the utilization of thinner films

and shifting from pressure-sensitive papers to pressure-sensitive films. The industrial

products category includes a wide range of labeling applications and end-use products.

Industrial product labeling includes everything from deli machine labels, to labels

found on institutional fire extinguishers, construction products and containers of non-

flammable gas. Environmental demands in this sector continue to drive the migration from

pressure-sensitive papers to film labelstocks. However, even in this sector of increasing

environmental durability, removing costs by light-weighting films remains a high priority.


42

color differentiation is achievable with shrink sleeves, allowing brands

to move away from costlier, custom-color resins.

The graph on the following page breaks down format migration by

type for the industrial products category. (Industrial products are

defined as non-consumer durables.)

Exhibit III-12: Format Migrations in Industrial Products (Non-consumer Durables)

Twenty-three percent of converters that print labels for industrial

products are reporting format migrations. All migrations fall into two

categories – the utilization of thinner films and shifting from pressure-

sensitive papers to pressure-sensitive films.

The industrial products category includes a wide range of

labeling applications and end-use products. Industrial product labeling

includes everything from deli machine labels, to labels found on

institutional fire extinguishers, construction products and containers of

non-flammable gasses. Environmental demands in this sector continue

to drive the migration from pressure-sensitive papers to film

labelstocks. However, even in this sector of increasing environmental

29%

57%

0% 10% 20% 30% 40% 50% 60%

PS Paper to PS Film

Thinner Films

% Converters Indicating Format Migration in Industrial

Dominant Label Format Migrations -Industrial


As reported, the light-weighting of labelstock materials is a major trend across end-

use sectors. When it comes to light-weighting, having high level application engineering

expertise in-house benefits converters in multiple ways. The utilization of down-gauged

materials results in more labels per roll, optimizing productivity and requiring fewer roll

changes on press. Light-weighting also offers converters a way to position themselves

as better environmental stewards – reducing the volume of raw materials used in their

labelstock constructions.

A skill set in the usage and application of down-gauged materials and alternate adhesives

also offers converters a sales tool for prospects. By offering a more environmentally

friendly and lower cost construction, brand owners, retailers, distributors and contract

packagers are more likely to listen to what a potential label vendor has to say. How set

in stone, however, are label constructions at the packaging buyer level, and how much

flexibility do converters have in approaching their customers and prospects with new

construction solutions? The Labelstock Survey asked converters to indicate the number

of customers that have pre-set labelstock specifications in place. The graph below breaks

down converters’ responses.

Exhibit III 17: Pre-Set Labelstock Specifications among Brand Owners and Packaging Buyers

B. Brand Owner Enforcement of Pre-Set Labelstock Specifications

51

Exhibit III-17: Pre-Set Labelstock Specifications among Brand Owners and Packaging Buyers

Research indicates that for the most part label converters have

control over the recommendation and creation of new labelstock

constructions. Ninety-eight percent of converters cited that some of

their customers have pre-set material specifications in place. However,

only 17% of converters indicated that the majority of their customers

demand their applications abide by a set of established labelstock

specifications.

Since 2013, the majority of TLMI converters have reported that

their labelstock costs have remained the same. The

reports on material cost fluctuations year over year. In

the December 2015 issue of the report, 82% of TLMI converters indicated

that material costs had either decreased or stayed the same compared

to the previous year.

Although material costs continue to remain steady for the

majority of converters, labelstocks are susceptible to raw material

2%

40%

41%

17%

0% 10% 20% 30% 40% 50%

None of our customers have pre-set material specs in place

Very few of our customers havepre-set material specs in place

Some of our customers have pre-set material specs in place

The majority of our customershave pre-set material specs in

place

% Converters

Adhering to Pre-Set LabelstockSpecifications


Research indicates that for the most part label converters have control over the

recommendation and creation of new labelstock constructions. Ninety-eight percent of

converters cited that some of their customers have pre-set material specifications in place.

However, only 17% of converters indicated that the majority of their customers demand their

applications abide by a set of established labelstock specifications.

Since 2013, the majority of TLMI converters have reported that their labelstock costs

have remained stable. The TLMI Biannual Index & Trend Report reported on material

cost fluctuations year-over year. In the December 2015 issue of the report, 82% of TLMI

converters indicated that material costs had either decreased or stayed the same compared

to the previous year.

Although material costs continue to remain stable for the majority of converters, labelstocks

are susceptible to raw material pricing fluctuations. In addition to the other factors

discussed in this section, these fluctuations will also continue to drive down-gauging

practices across end-use verticals.

B. Brand Owner Enforcement of Pre-Set Labelstock Specifications


The research shows that converters are actively investing in in-house coating systems.

For smaller converters the investment entails the installation of a designated in-line print

station to apply adhesive. Larger converters are investing in standalone systems that can

coat, die-cut and strip matrix in one pass. The ability to control a portion of labelstock

inventory, coupled with the opportunity to match inventory with production will continue to

drive the adoption of in-house coating systems.

The Labelstock Survey asked converters to indicate if they are coating their own labelstocks

in-house. The graph below shows the percentage of companies that currently have this

capability, in addition to the percentage of companies that plan to invest in the technology

with the next one to two years.

Exhibit III 18: Percentage of Converters Coating their own Labelstocks In-house

C. In-House Coating of Labelstocks

53

Seventeen percent of participating converters indicate they are

coating their own labelstocks in-house, either by employing a

designated print station on an existing press or a standalone system

that has multiple coating and finishing capabilities. To gauge the impact

converter size has on the adoption of in-house coating; the data was

broken down by converter scale.

Exhibit III-19: Annual Revenues of Converters Coating their own Labelstocks In-house

5%

78%

17%

0% 20% 40% 60% 80% 100%

Don't coat in-house currently,plan to do so in near future

No

Yes

% Converters

Percentage of Converters Coating theirown Labelstocks In-house

36%

19%

45%

0% 10% 20% 30% 40% 50%

>$50 million annual revenues

$10-50 million annual revenues


% Converters

Annual Revenues of Converters Coating Labelstocks In-House


Seventeen percent of participating converters indicate they are coating their own

labelstocks in-house, either by employing a designated print station on an existing press

or a standalone system that has multiple coating and finishing capabilities. To gauge the

impact converter size has on the adoption of in-house coating; the data was broken down

by converter revenues.

Exhibit III 19: Annual Revenues of Converters Coating their own Labelstocks In-house

The data indicates that scale has no impact on the adoption of in-house coating, only on the

cost of the technology employed to do it. More than 50% of participants coating their own

labelstocks in-house have annual sales revenues of more than $10 million while just under

half of participants have annual sales of less than $10 million.

C. In-House Coating of Labelstocks

53

Seventeen percent of participating converters indicate they are

coating their own labelstocks in-house, either by employing a

designated print station on an existing press or a standalone system

that has multiple coating and finishing capabilities. To gauge the impact

converter size has on the adoption of in-house coating; the data was

broken down by converter scale.

Exhibit III-19: Annual Revenues of Converters Coating their own Labelstocks In-house

5%

78%

17%

0% 20% 40% 60% 80% 100%

Don't coat in-house currently,plan to do so in near future

No

Yes

% Converters

Percentage of Converters Coating theirown Labelstocks In-house

36%

19%

45%

0% 10% 20% 30% 40% 50%

>$50 million annual revenues



% Converters

Annual Revenues of Converters Coating Labelstocks In-House


The final questions in the Labelstock Survey asked companies about their relationships with

labelstock suppliers. Trends like increased label functionality, material l ight-weighting and

higher application performance standards have made the converter to labelstock supplier

relationship more important than ever before. Label converters report that calling on their

customers in conjunction with their labelstock suppliers is increasing. The survey asked

converters to indicate if they have made a change with their primary labelstock supplier

within the past two years. The graph below shows converters’ responses.

Exhibit III 20: Labelstock Supplier Loyalty among Converters

D. The Label Converter-Material Supplier Dynamic

55

The survey asked converters to indicate if they have made a

change with their primary labelstock supplier within the past two years.

The graph below shows converters’ responses.

Exhibit III-20: Labelstock Supplier Loyalty among Converters

Converters are loyal to their primary labelstock suppliers. Only

17% of participating converters have changed their primary material

supplier within the past two years.

When asked what prompted the change in labelstock suppliers,

converters’ responses fell into the following categories listed from most

to least cited.

Service issues (separate of lead times)

Lead times for materials/availability

Quality issues/performance

Pricing

Fitness for use criteria

Product(s) discontinued

17%

83%

Have Converters Changed their Primary Labelstock Supplier within the Past Two Years?

Yes, we have a new primary supplier

No, we are using same primary supplier


Converters are loyal to their primary labelstock suppliers. Only 17% of participating

converters have changed their primary material supplier within the past two years. When

asked what prompted the change in labelstock suppliers, converters’ responses fell into the

following categories listed from most to least cited.

� Service issues (separate of lead times).

� Lead times for materials/availability .

� Quality issues/performance .

� Pricing .

� Fitness for use criteria.

� Product(s) discontinued .

When listing the reasons why they change labelstock suppliers, converters cited service,

lead times or availability and quality more often than pricing. Converters also report that

within the past two years the lack of availability and delayed delivery of specific labelstock

constructions has been an increasingly significant production pain point.

D. The Label Converter-Material Supplier Dynamic

cover & design by sarah perkins, tlmistatic.webfulfillment.com/tlmi/blogs.dir/31/files/...the...

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