Feature Article November 2007

After arriving home full of ideas from Hewlett Packard’s Digital Solutions Cooperative Conference in February, Peter Renton of Lightning Labels Inc. sat down, pulled up a keyboard and wrote a blog entry. For him, one message in particular stood out during his days at the conference.

“One interesting fact HP shared was that worldwide digital printing accounts for 8 percent of the approximately 48 trillion pages that are printed annually. But in the label industry, digital printing accounts for less than 1 percent of all labels printed,” Renton wrote in his company blog. “There is definitely room for growth.”

Renton says he wasn’t really surprised by those statistics. As the founder and director of business development at the Denver-based digital label manufacturer, Renton has witnessed the great digital divide. He believes it has taken digital labels longer than some other digitally printed products to catch on with customers. “They are doing variable data a ton in the commercial printing industry,” he says. “I get plenty of personalized direct mail pieces, but very few people are doing VDP labels. The public isn’t really educated about this stuff.”

The Pluses and Minuses of Digital
Peter Schaumbs, product and sales manager at Digitalabel Inc., Durham, N.C., says he’s also had to educate his label customers about capabilities of digital presses. “They not only have to be educated, but I also have to share samples with them,” Schaumbs says. “They are dumbstruck that there are no plate charges. Many digital printers have even started to integrate the cost of the die charges into the cost of the SKU. And there are no minimum run numbers like you would have with lithographic or flexographic printers.”

Schaumbs also explains to customers that digital labels excel in just-in-time ordering. “With digital printers you don’t have to keep an inventory of labels anymore,” Schaumbs says. “Digital labels can accommodate four-day orders and for us, if it’s an existing label we can turn it around in 48 hours.”

But it isn’t just the lack of buzz that’s holding digital labels back, according to some. It’s also the shortcomings of the medium.

“Unfortunately, digital presses just can’t compete with flexo presses in longer runs,” Schaumbs concedes. “Digital printers can’t get the price down low enough to compete and the presses don’t have the same speed of output yet. You’re talking about a flexo press at 300 feet per minute compared to a digital press at 80 feet per minute.”

“It’s not just the speed of the presses but also the consumable costs,” says Dan Adler, president of DA Digital Services, a digital printing consultancy firm in Leawood, Kan. “Traditionally, whether it be digital ink or toner, those will usually cost more than traditional offset ink. There’s also the additional maintenance cost that comes with presses by some vendors.”

But as the technology becomes more advanced, some print providers see the digital gap closing.

“I see the press rates going up to a point where it will compete with flexo head to head,” Schaumbs says. “We could buy a flexo press, but we won’t because we have confidence in digital technology.”

Where Digital Labels Excel
Digital presses excel at short runs and right now that is the biggest area of sales in the digital label market, says Vince Pentella, business manager of HP Indigo Label and Packaging Group. “When we’ve done the analysis in the average shop, digital printing accounts for 60 to 65 percent of jobs that come in at runs of 50,000 or less,” he says.

Within those short runs is an array of applications. The first applies to certain markets such as the nutraceutical (“healthy” foods), retail and consumer product industries. A lot of these customers seek high-quality, short-run labels that can be produced quickly and cost-effectively. These labels can be sold just as easily to a small specialty sauce manufacturer who ships only a few thousand bottles a year as they could to a big retailer who wants to sell a limited-edition item with unique packaging.

“In the wine industry the label has become a work of art,” Pentella says. “And some of them produce runs as small as 20,000 to 25,000 labels.”

“We’ve done the sequencing for bottles that show that it’s a limited edition,” says Jay Dollries, president of Innovative Labeling Solutions, a digital label manufacturer in Hamilton, Ohio. “We’ve also done graphic changes for different SKUs.”

Another digital label application that may become more popular in the future is unique bar code symbology. “There is a slow, methodic trend toward machine readable, symbolic coding and bar coding produced on digital presses,” Pentella explains. “They ensure tracking and trace capability. They are being used now because of concerns about counterfeiting.”

Handle the Pressure with On-Demand Labels

Noto

Premier Print and Services Group penetrates the warehouse and distribution markets

It wasn’t a faulty piece of equipment or a labor strike that threatened to shut down the food distribution plant: It was a dwindling supply of bar code labels. Tony Noto, sales rep for Chicago-based distributor Premier Print and Services Group, calmly took his client’s rush order and immediately went about getting it filled.

With so many other things to worry about, plant managers sometimes neglect to keep tabs on their bar code label inventory. Yet, the successful distribution of most consumer goods depends on bar code labels. From the time a product is manufactured, packaged and bundled on a pallet, bar code labels are used to track its whereabouts. “The retail industry is one of the leaders of automatic ID. Their receiving systems are based on bar code,” says Noto. “If these labels aren’t available, the distribution centers can’t ship anything, because the retailers won’t accept it.” In other words, a lot of time and money is lost if distribution centers run out of bar code labels. That means the opportunity to penetrate warehouse and distribution accounts is open for distributors who offer fast turnaround.

Since it was founded 24 years ago, Premier Print and Services Group has specialized in supplying pressure sensitive labels quickly to a range of industries. In fact, beating other companies’ turnaround times helped Premier establish itself in the niche. “When we approach bigger companies, what really works for me is that by the time their order would get processed by a big manufacturer, we’ve already shipped it,” says Noto.

Chandler

Noto makes sure his clients have the bar code labels they need, when then need them, by providing digital on-demand labels. When the food distribution plant contacted Noto for labels, he called Lake Villa, Ill.-based manufacturer ID Label to produce them. The client called on a Monday and asked to receive 27,000 labels the following Friday. ID Label’s Chief Operating Officer Jeff Chandler worked with Noto to fill the order: “Customers are always going to say ‘I’ve got the last one in my hand, what can you do for me?’ We’ve put processes in place to meet those demands.” For example, if the client regularly uses a certain amount of labels, the company will keep a small inventory to accommodate rush situations.

—Andy Brown

Digital presses can produce highly complex, hybrid security applications such as identification labels that have variable color bars, symbols or microtext that appear different on each label. The labels can even be printed in a specific order to match other packaging workflow.

“You can include variable data on RFID labels,” Adler says, giving another example of a unique digital label solution. “You want the label itself to have the same number that the RFID is broadcasting. It’s an integrated application.”

And finally, another trend in digital labels, though not as prevalent, is personalized labels. From Heinz Ketchup to Jones Soda bottles, retailers are finding ways to differentiate themselves from other supermarket competition by selling products with packaging that contains the names and even photos of customers. These products have the same appeal of a 1-to-1 marketing direct mail piece, but many now are used more as a novelty than a strategic way to produce higher ROIs.

“There’s no reason why you should have the exact same label on each product,” Renton insists. “You want some parts to look the same. You want your brand to be consistent, but why not put in a different image too? It’s just so competitive on the retail shelf. I’m surprised that more people aren’t doing it.”

As the technology becomes more advanced and more customers realize the opportunities digital labels can offer, manufacturers have a few predictions for what will happen with the medium.

“In 20 years’ time, I believe that personalized labels will be the standard,” Renton says. “It’d be five years if I had it my way. We’re growing up in such a personalized world, with MySpace and YouTube. Why wouldn’t people want their products personalized too?”

But Adler thinks the trend will shift in another direction. “We’re going to see variable labels used more and more on produce for tracking purposes,” he says.“Consumers will want to know more about where each piece of fruit comes from, whether it’s local or from a foreign country. And retailers are going to want to know what their customers are buying. They’ll incorporate this information into database management.”

The Sales Challenge
Though many manufacturers are optimistic about the future of digital labels, they say it’s a challenge to get distributors and customers on board.

“When it comes to distributors, most of the time it’s an educational process because there’s definitely larger potential markets out there with digital than if you were using flexo,” Dollries says. “Now the distributors are selling products that they couldn’t before and at a higher margin because of the run sizes and the quality.”

Some say part of the challenge is getting distributors to understand the new sales process. “You have to get around the corporate print buyer or the procurement officer for this,” Pentella says. “For these types of applications you need to speak to the merchandise managers and the brand owners.”

“If we can convince distributors to sell more to the marketing people than the print purchasing officer, they’ll see those margins,” Dollries says.

Ventella says it’s pretty simple. “A lot of brokers need to be a lot more educated,” he says. “They don’t really have direct contact with [press vendors].”

But once distributors know which doors to knock on, the key is to keep knocking. “There was a false sense in the 1990s that printers would get a big return on their digital press investment at 25, 35, maybe even 40 percent,” Schaumbs says. “But it didn’t manifest. You have to have the sales force to support it. The customer has to be educated about what a digital press can do for them. They won’t come to you. You have to go to them.”

LaShell Stratton is former assistant editor at Print Solutions magazine. Email comments to editors@psda.org.

The Digital Label Market Is Surprisingly Underserved… For Now