With just over a month to go till the online ELF, we have completed a full cycle since the outbreak of the Pandemic here in Europe. What looked like a converging pattern of slowing growth between the general economy and our industry since 2017, abruptly ended a year ago. At that time, the label industry turned ‘north’ after the outbreak in March 2020, where the European economy went ‘south’.
As the chart above nicely demonstrates, whilst the economic climate collapsed as a result of the public health crisis and resulting lockdowns, market conditions for the self-adhesive label industry tightened sharply. This was the result of excess demand for labels in the essential sectors food, health and personal hygiene, pharmaceutical, medical labels, e-commerce, logistics, and due to the demand for signage in public places. The effect of hoarding by retailers also played its part.
As employers were facing lockdowns and healthcare measures for their staff, and while supply chains were obstructed by cross-border traffic restrictions, our industry had to face stress tests in the 2nd and 4th quarters. In the 2nd quarter of last year, demand for filmic label materials even recorded an unprecedented annualized growth of almost 25%. At the same time, however, we should not forget that markets for durable goods like consumer electronics and automotive, as well as travel and entertainment, were badly hurt last year.
On aggregate, the year 2020 finished in a plus of 4.3% on 2019, in a year when the EU recorded a drop of 6.4% in its GDP. In north-west Europe, the long-feared effects of Brexit were completely overshadowed by Covid-19.
Where are we, now that the first quarter of 2021 has passed and the effects of vaccination campaigns are slowly but gradually progressing? It seems that with an overall growth of 1.1% in Q1 compared to the same, first Covid quarter last year, label demand is back to where it was just before the pandemic. Filmic roll label demand is still booming (overall plus 5%), driven by an excess demand for PP-based materials, while demand for paper roll labels has stagnated. At the same time, economic forecasts are pointing at general economic recovery in the EU for the next two years, albeit not as spectacular as overseas in the US or China.
The outlook: back to normal or never the same again?
Are we returning to the pattern of correlating growth between roll label demand and GDP in Europe that existed prior to 2020? Or will we see the effect of fundamental changes sparked by the Pandemic? Some fundamental questions:
- Will we see changes in industry structure as a result of accelerated consolidation through inward investment, helped by healthy fundamentals and abundance of cheap capital?
- As a spin-off of consolidation, will we see the emergence of small entrepreneurial, innovative start-ups to grab new opportunities in market niches?
- Will there be changes in supply chains as a result of ‘reshoring’ of raw materials, or advanced digital integration, both accelerated by Covid?
- Will business models change now that we have learned that development, manufacturing, and marketing processes can swiftly be redesigned or even decoupled in times of emergency?
- Will work practices and work behaviours change due to the experience gathered while working remotely and collaborating without travel?
- Will the EU’s ‘Green recovery’ measures and societies’ pressing need to combat climate change and become more circular spark product, process, and service innovations?
In short: will it be back to normal or never the same again? Will the Pandemic result in a major RESET? Or will it be a FAST FORWARD?