White paper for Gallus
By AWA Alexander Watson Associates
Highlights of Developing Markets across the Globe
Prior to the global pandemic, according to the IMF, the global economy was projected to grow at 3.6% in the current year – a figure that AWA forecast would be higher than growth in the mature label markets of Europe and North America. However, it is not possible to make a serious growth estimation for the near future, so all existing forecasts are given with reservations. AWA are actively studying the current situation in the label markets around the globe and will be appending special COVID-19 supplements to its 2020 label market studies. More activity was forecast in the world’s developing packaging and labeling markets – Asia, Africa and the Middle East, and South America. While these regions are all significantly different, they share in some measure the dynamism created by developing urban-based populations with increasing purchasing power and retail and online sales.
Africa and the Middle East
The ‘youngest’ of the developing markets, Africa and the Middle East together make up a diverse geographical region offering real growth opportunities today for technical know-how and business expertise of every kind – and therefore for packaging and labeling of all kinds. The region is a combination of technologically-advanced and underdeveloped countries, speaking an estimated 60 languages; and its lack of homogeneity makes it, even today, a challenge as well as an opportunity.
However, the region grew last year by 3.3%. South Africa, Israel, North Africa and the Middle East are currently the main areas of regional market activity, and the overall label and product decoration market in the region is very much focused currently on the Middle East, and primarily on the Gulf States and Saudi Arabia.
Ongoing geopolitical and economic issues across much of the region – particularly in Syria and Iraq – are still detracting from the realization of higher penetration rates for packaged and labeled products, but IMF projections still suggested before COVID-19 that 3% economic growth regionally could be expected this year.
At the heart of the established label market in the region are the United Arab Emirates (UAE). A high proportion of their manufactured products, and therefore their labels, are exported to other countries, both within and outside the region. This growing international packaging market profile initially attracted the interest of strong Indian label converters with globalization ambitions and, as a result, most of the UAE label industry is today owned or controlled by Indian parent companies. It is a lively, expanding sector, continuing to attract converter companies, and increasingly focusing on offering regional rather than simply domestic label print services – often across the full range of labeling technologies. This is creating intense competition, coupled with the challenge to maintain profitability levels.
Across the region, South Africa, Israel, North Africa and the Middle East remain the prime label markets, and the ongoing political and economic issues across much of the rest of the region detract from the realization of higher penetration rates for packaged and labeled products. Regional growth in 2019 was 3.7%and total label market volumes were 2.766million sqm.
Food is the largest end-use segment for labels overall, at 47%, with beverage in second place at 29% – characteristics of a developing consumer-led market. Glue applied labels, with a 54% market share in 2019, will continue to account for the majority of additional total label volumes through 2022. Pressure-sensitive labels, with a 27% share, enjoyed 3.6% growth in 2019. However, it should be noted that MEA is still the world’s smallest regional pressure-sensitive label market, representing just 3% of worldwide pressure-sensitive label consumption.
Sleeve labels, claiming just a 10% market share, grew at an estimated 3% in 2019, dominated by heat shrink TD sleeves. While this is an active arena, there are still limited sources of quality sleeve labeling films within the region.
In-mold labels are today forecast to be the fastest-growing label technology in the region, at a pree-COVID-19 forecast CAGR of 4.5% through 2022, with labels for blow molding the leading application technology, claiming an estimated 70% of MEA demand. Countries such as Israel are already advanced in the use of the technology, and in the production of in-mold labels, but in other countries in the region – such as Egypt – local conversion capabilities are still limited, and those markets are therefore largely based on label imports – for example from other countries such as Turkey.