The move from traditional to digital printing carries similar advantages throughout the industry. For the label market, brand owners push for digital with demands for inventory control, shorter lead times, and customized runs. With digital, label providers expand into smaller, cost-effective run lengths; product localization and promotions; versioning, SKU/article number proliferation; barcoding; and just-in-time manufacturing. There is further opportunity in security and brand protection as well as track and trace applications.
The potential for digital label production is apparent to potential investors. With the implementation of a digital label press, traditional label converters accept shorter run, lower margin jobs that were historically turned away. To be profitable, traditional converters need to be smart with their investments, ensuring that the demand is there and proper workflows are set up to profitably accept more frequent, shorter runs.
Depending on key markets served, commercial print providers with or without current digital capabilities are good candidates for the digital label market. By expanding services to include labels, a print-for-pay becomes more of a one-stop-shop for customers that require labels and/or packaging products. The type of equipment a print provider or marketer chooses should reflect considerations such as type of output, expected volumes, and future growth.
Start-ups, agencies, and in-house marketing departments are candidates to experience the benefits of digital label production. Bringing a solution in house can help reduce outsourcing costs and increase control. It is important that these companies understand volume to determine whether or not it makes sense financially. Additionally, they should plan for the dedicated resources necessary to operate the equipment.
Hardware, software, and workflow components are available to meet every digital label production need—large and small. As print continues its steady move to digital, brand owners are clear beneficiaries of the latest solutions dedicated to shorter run label and packaging solutions. Dedicated label presses range from easy-to-use and affordable desktop devices to high-quality, heavy-duty equipment offerings that feature all of the bells and whistles.
For those not ready for a dedicated solution, many find success testing the market by utilizing wide format printers or print-to-cut solutions to output small runs of digitally printed labels. Additionally, depending on the required substrate, existing digital printing presses are able to produce these applications as needed.
It is evident that the use of digital technology is on the rise. Label applications are no exception. According to the 2011 InfoTrends report, Color Digital Packaging and Labels Market Forecast: 2010-2015, converters worldwide spent $166 million on this category of digital color presses in 2010, and the total is expected to grow at a 10.3 percent annual growth rate during the forecast period.
“After flexographic printing and UV flexographic printing, digital label production is the next major technology cycle about to peak,” predicts Sean Skelly, VP/GM, Jetrion, EFI.
Based on EFI’s internal research, around eight percent of all labels produced worldwide could potentially be produced digitally. Out of that percentage, the company estimates that only six percent are actually produced digitally. This means there is a large, untapped digital label market.
Rich Egert, GM, strategic technology provider business group, OKI Data Americas, sees the biggest opportunity within the short-run color label market, historically produced by 13-inch wide or narrower flexographic devices. Additionally, small converters—those doing less than five million dollars a year—are another target for opportunity in the space. “About 70 percent are privately owned but fewer than five percent have adopted digital,” he notes. “Mid-range—those that pull in about five to ten million dollars a year—have older flexographic equipment, and about 25 to 30 percent are digital savvy.”
Both profitability and creativity fuel digital label production. Increased customization is a reality—both in the context of online and printed product decoration. Larry Brining, label and packaging business manager, Indigo and Inkjet Web Press Solutions, Hewlett-Packard (HP), explains that for consumer product companies, online marketing efforts and packaging solutions on the shelf are becoming inter-related tools to capture market share and maintain relevancy with the consumer.
The potential for digitally produced labels rests with brand owners. Print providers should embrace this and consider what niches are not being served, brand owner expectations, and how to move beyond commodity printing to provide a compelling value proposition.
Brand owners are pressured to quickly introduce new products to a changing consumer base. They need to contend with increased competition. Therefore, efforts must be dedicated beyond the tangible to maintain a brand presence in stores, online, on smartphones, and in social media networks. The pull in multiple directions places print providers in a position where they can truly become a marketing partner when it comes to the printed aspects of brand management.
“Just like any new opportunity, label converters that choose to compete on price alone will simply be joining a race to the bottom,” says Filip Weymans, business development manager, labels and packaging, Xeikon.
He notes that growth in the digital label market is also affected by the economic situation. “Print buyers want to limit their risk for obsolete stock, keep operational costs within limits, and increase their efficiency in launching new products and promotions,” continues Weymans. “A crisis is always an opportunity and this crisis has changed the minds of print buyers allowing them to enjoy the flexibility of digital printing. This will only further grow,” he adds.
While service providers make up a large portion of the digital label market potential, others also benefit from the availability of these devices. “A growing facet of our customer base is actual end users who cannot find a provider to supply them with small quantities of custom-shaped labels at a fair price,” says Mark Vanover, VP sales and marketing, Allen Datagraph Systems, Inc.
From a materials standpoint, Victor Gomez, VP of sales and marketing, label segment, North and South America, Durst Image Technology US, LLC, sees the largest opportunities in pressure sensitive as well as durable labels. In the near future, he expects a trend towards unsupported films, flexible packaging, and molds.
In addition to studying the factors driving growth, it is important to look at what is hindering the adoption of digital label printing solutions. Gary Falconbridge, president, Colordyne Technologies, notes that according to Memjet research, high equipment costs, overly complicated machinery and processes, large power consumption requirements, and a high cost per label are all prohibiting factors.
“In the next five years, at least 30 percent of the flexographic market will transition over to digital printing. A vast majority of labels are still printed on flexographic presses and the market is starting to realize the opportunities it provides, such as quick turnaround at low costs, but it will take time for the market to adapt,” predicts Falconbridge.
Overall, labels are a clear growth segment among digitally printed applications. “The label market continues to grow with advances in digital printing technology,” notes Crystal Baus, marketing director, iSys Label. The amount of new manufacturer entrants and product launches in the space over the past few years is indicative of the market potential.
“Today, the technology has matured to the point where viable solutions exist across the board,” notes Jim Lambert, VP/GM, INX International’s Digital Division.
Labels are feasibly produced on most digital printing devices that accept the required substrate. However, the efficiency and profitability of these applications are at risk as label requests become more frequent and if longer runs are demanded. A variety of solutions are available, ranging from desktop products to advanced continuous web devices designed for mid- to high-volumes of output.
As previously noted, the addition of digital label printing is achievable with devices other than dedicated label presses. But, when should organizations consider a dedicated label printing solution? For EFI’s Skelly, the answer is simple—whenever they feel they are wasting money and profits due to inefficiencies.
“The productivity of a dedicated roll-to-roll inkjet label press far surpasses that of devices that are not fixed array, but the capital investment must be supported by existing orders,” notes Durst’s Gomez. He suggests calculating the return on investment of a dedicated press and converting solution based on realistic numbers. When comparing with existing processes, include the cost of finishing and waste and determine whether the label jobs are crowding out others.
Falconbridge notes that businesses should consider a dedicated in-house label printing solution if its average label needs are between 500 and 15,000 linear feed per label SKU, and if having printed labels ready on the production line is needed.
Many factors should help a print provider realize the right time to bring a dedicated label and/or packaging solution on board. HP’s Brining says first is the ability to tap deeper into existing customer relationships. Another reason is to increase margin on existing work, which is currently produced less effectively on existing print platforms—whether those are conventional presses or other digital assets that are not primarily designed for label and packaging production.
“Consumer product companies are looking for innovative print service providers who deliver new concepts and new ways of building revenue streams based on customized packaging solutions. The print provider that offers a rational program, opposed to reactively quoting projects, will thrive in today’s digital world,” notes Brining. Building more mutually beneficial relationships with end customers is a primary reason to bring digital label and packaging production in house.
While there are clear benefits to implementing a dedicated label press if the demand justifies the cost, it also is important to consider the required efforts to keep it up and running. “There is a great amount of packaging and spend expected to convert to digital production, so commitment to this area as a new market segment is likely more important than initial revenue levels,” adds Brining.
For those serious about label production, some form of a dedicated solution may be the best answer. Ken Pawlowski, business development manager, commercial and industrial inkjet, Epson America, Inc., argues that while there are a number of wide format label options available today, they are regulated to very small, micro runs. “Producing labels on 36- or 48-inch width materials requires both stripping the waste and applying the product by hand. The migration to a roll-to-roll system makes the most sense when quantities increase and the automatic application is required,” he adds.