This industry covers establishments primarily engaged in manufacturing coated, laminated, or processed paper and film from purchased paper, except for packaging. Also included are establishments primarily manufacturing gummed paper products and pressure sensitive tape with backing of any material other than rubber, for any application. Establishments primarily engaged in manufacturing coated and laminated paper for packaging are classified in SIC 2671: Packaging Paper and Plastics Film, Coated and Laminated; those manufacturing carbon paper are classified in SIC 3955: Carbon Paper and Inked Ribbons; and those manufacturing photographic and blueprint paper are classified in SIC 3861: Photographic Equipment and Supplies.
322222 (Coated and Laminated Paper Manufacturing)
This classification incorporates a wide variety of products and companies. In 2001, the value of shipments for the laminated and coated paper industry declined to $10.61 billion, down from nearly $11.19 billion in 1997, but still higher than the $8.87 billion worth of goods shipped in 1994. Industry establishments employed approximately 38,824 workers in 2001, down from 41,541 workers in 1997. The industry's 26,867 production workers earned an average hourly wage of $16.28. This industry had grown rapidly from the late 1970s to the late 1990s as more specialty applications for its products were developed. For example, in the late 1990s, the U.S. Postal Service rapidly expanded its use of self-stick postage stamps, representing an enormous market for this industry. However, rising paper costs in the late 1990s, coupled with recessionary economic conditions in the United States during the early 2000s, hindered demand for coated and laminated paper.
Most companies in this industry limited their activities to the coating of paper or other materials, but produced diverse products from this process. Of the many products in the industry, the vast majority of shipments came from one of two sectors: pressure-sensitive products and "other" coated and laminated paper not produced at paper mills. The pressure-sensitive products group included cellophane tape, almost all labels, and a variety of other pressure-sensitive adhesives (PSAs), but did not include gummed tape. Other coated and laminated paper products included paper that was treated or coated to enhance the paper's utility. PSAs were by far the largest product class produced by this industry, accounting for $6.8 billion, or about 60 percent, of all shipments in 2001, according to the U.S. Economic Census. The next largest category was printing paper, coated at establishments other than where paper was produced, which held 4.4 percent of all shipments in 2001, followed by gift wrap (3.5 percent); wall coverings, (3.2 percent); and gummed paper products (1.6 percent). All other products accounted for roughly 23 percent of the total.
Pressure-Sensitive Products. Even within this subsegment of the industry, there was a great deal of diversity. Pressure-sensitive products ranged from cellophane tape to shrinkable labels to sealing tapes. Advances in adhesive technology and continuing development work by manufacturers of PSAs led to increases in applicability and quality. Lighter weight products offering greater flexibility and lower cost than traditional materials allowed some types of adhesives to be used in place of rivets, bolts, and chemical compounds in assembly processes. Even heavy industrial processes such as engine manufacturing and truck frame assembly found applications for PSAs.
To produce PSAs, manufacturers used paper, plastic films, nonwoven cloth, or polyethylene as a base. A chemical solvent or waterborne acrylic, which provides the adhesive necessary for the PSA to stick, is applied to the base, usually to one side. PSAs can be measured using three different criteria: tack, PSA's bonding quality with a given surface; peel, difficulty of removing the tape from the surface; and shear resistance, PSA's response to "creep" over time. The type of adhesive that coats the film depends on the PSA's desired application. Labels can be made of paper, polystyrene, film, or other materials, but the defining feature of a label is its mode of application.
The value of shipments for pressure-sensitive products declined from $7.22 billion in 2000 to $6.83 billion in 2001, according the U.S. Economic Census. According to the North American Label Study, commissioned by the Tag & Label Manufacturers Institute, the finished pressure-sensitive labels market was projected to reach $5.35 billion by 2003, representing a 6.4 percent compound annual growth rate. That means the industry's growth rate slowed from between 8 and 10 percent annually in the early 1990s to between 5 and 7 percent by the onset of the twenty-first century.
Competing Technologies. Pressure-sensitive labels faced competition from several other technologies, the two most common being wet glue and shrink sleeve. Wet glue applications affix a paper or plastic label using a preapplied adhesive. Beverages and foods in glass containers often use wet glue labels. Glue-applied labels were the leading labeling method, holding an estimated 50 percent share of the total label market in the early 2000s, compared to about 40 percent for PSAs. All other technologies had about 10 percent of the market.
Shrink sleeve applications, in which the label is wrapped around the product and then shrunk directly on to it to form a bond, were most common on batteries and film products. Other competing technologies included heat transfer, heat seal, and in-mold labels. Gummed labels, with about 25 percent of the label market in the 1960s, dropped to below 2 percent in 2001 and are not a significant competitor. Most of the erosion in the gummed label market has been linked to increased use of pressure-sensitive labels. Shipments of gummed products declined from $249.3 million in 1997 to $177 million in 2001.
Other Coated and Laminated Papers. The products produced through the coating and laminating process ranged from specialty papers to wax paper, carbonless, and thermographic business papers. For this category, the U.S. Economic Census includes only paper produced at establishments other than base paper producers. As a result, this category does not include the vast majority of coated paper produced in the United States, which is produced on site at paper mills (see SIC 2621 ). Most coated paper manufacturers have off-or on-paper machine coaters that can be set to coat the paper (or be left off to produce uncoated paper) as it leaves the production line. Paper produced in this fashion (coated on site) is classified under SIC 2621. The coated and laminated paper that is included in SIC 2672 is produced by companies that purchase "base stock" paper from paper mills and then coat or laminate it. In fact, three-fourths of the "other coated and laminated papers" category in SIC 2672 is accounted for by carbonless paper coated at establishments other than where the paper was produced.
The value of coated printing paper included in SIC 2672 (paper coated at establishments other than where the paper was produced) is extremely small, compared with the value of the entire coated printing paper market, which is included in SIC 2611. For example, U.S. shipments of paper coated at establishments other than where the paper was produced had a 2001 value of $472 million, compared to the value of coated printing paper produced at U.S. paper mills, which amounted to more than five billion dollars.
Some of the factors involved in coating papers include the printing process (offset, rotogravure, nonimpact, etc.), the type of ink used (colored, black and white, thickness), and environmental considerations. Coating must take into account the uniformity of the coating application, the evenness of the coat weight, and the smoothness and uniformity of the coat. There are five grades of coated paper, the first one being the heaviest and generally the highest quality.
Paper is coated with pigments, which can consist of either chemical solutions or clay compounds. Titanium dioxide has long been a favorite coating material because of its opacity, though substitutions are usually sought since titanium dioxide is fairly costly. Other popular coatings include calcium carbonate and kaolin (clay), a naturally occurring mineral.
Within the coated and laminated paper sector, converters may apply any number of coatings to change the function or quality of paper—gummed resins to make flypaper or gummed adhesive tape; cloth or fluids to produce cloth-lined or porous impregnated papers. The carbonless paper segment of this industry had continuing growth in the 1990s and early 2000s. This type of paper is manufactured by weaving small beads of ink into the paper fiber itself. When pressure is applied, the beads are broken and ink darkens the paper to emulate the pen strokes of the writer.
Technological advances in coatings, paper manufacturing processes, and adhesives have long been the driving force behind developments in the coated and laminated paper industry. One clear event that prodded the growth of the label industry was the development of the self-adhesive label by Stanton Avery in 1935. From this initial product line came a whole range of self-adhesive (now called pressure-sensitive) products, including thermal films, airline bag tags, computer imprintable films, and thermal transfer self-adhesives. A wide range of industries in the early 2000s made extensive use of pressure-sensitive labels, including airlines, automotive, consumer durables, food and beverages, health and beauty aids, chemicals, pharmaceuticals, retailing, and transportation.
The coated and laminated paper industry is generally characterized by small firms that have sought to stake out dominant shares in niche markets. However, there is one industry giant (3M Corporation) and several other relatively large companies (Appleton Papers, Nashua Corporation, and Wausau-Mosinee Paper Corporation) that hold commanding positions in this industry segment.
Coated Paper Markets. Along with much of the rest of the paper industry, the coated market experienced slow growth through the downward business cycle of the early 2000s. This trend was exacerbated by the fact that publishers, which had been faced with enormous price hikes in 1994 and 1995 (as much as 75 percent in a 12-month period), cut back on the number of magazine or catalog pages they printed or dramatically trimmed circulation in order to conserve paper. Many publishers had turned to online publications as a means of circumventing these price increases. As a result, by the early 2000s, the value of coated paper shipments was on the decline.
One problem facing producers of coated papers in the early 1990s—demands for more recycling—has eased for two reasons: in the late 1990s and early 2000s, manufacturers began producing more coated papers made at least partially from recycled paper, and magazines and catalogs printed on coated paper were being recycled in greater volumes. While paper recyclers once shunned coated paper because of the coating materials used, recycling operations have learned how to process this type of paper. Still, coatings and fillers typically account for a large part of the paper. When the paper is recycled, these materials have to be separated, removed from the process, and sent to landfills. Some coated papers can consist of as much as 50 percent coating and filler, which greatly reduces the amount of recoverable paper fiber. As a result, most recycling operations tend to mix small amounts of coated paper with much larger volumes of uncoated paper.
Growth in Pressure-Sensitive Products. Applications for pressure-sensitive products have been driven by the bewildering array of technology options available to manufacturers and new products targeted toward the consumer sector. Removable adhesives—such as those found in Post-It notes—have driven growth, as have new applications of traditional products. For example, the U.S. Postal Service has converted most of its stamp products to PSAs. The value of pressure-sensitive product shipments increased from $6.99 billion in 1998, to $7.17 billion in 1999, and to $7.22 billion in 2000. Due in large part to the softening of the U.S. economy, particularly in technology sectors, the value of these shipments declined to $6.83 billion in 2001.
Label markets grew faster than the U.S. gross domestic product (GDP) in the late 1990s and early 2000s. Some of the factors contributing to the growth of this sector include increased use of bar codes at end point-of-sale processors (such as supermarket deli counters); legislation requiring food manufacturers to disclose an increased amount of information on food labels; and advances in application and material technologies, which have allowed manufacturers to increase the use of labels.
In terms of the "face stock" used to produce pressure-sensitive labels, the fastest growing segment is sheeted laser paper, reflecting the increase of in-house printing of information by label users. Laser paper accounts for more than 15 percent of the face stock used by pressure-sensitive label manufacturers. Despite the growth of laser paper usage, general paper remains the largest single face material used, accounting for about 50 percent of the market. General paper is said to be growing more slowly than the market as a whole, reflecting displacement by film face stock in some applications. Film prices are declining and approaching high-end paper grade prices. Film accounts for roughly 25 percent of the market.
While the use of pressure-sensitive labels is growing, they face more competition from other technologies. For example, the use of shrink sleeve and in-mold labels greatly increased in the late 1990s. Shrink sleeve labels, which dominated much of the plastic beverage bottle market, grew 7 percent annually in the late 1990s and early 2000s. In-mold labels, used on blow-molded plastic containers, had a high penetration rate in the health and beauty products and household chemicals markets and had an annual growth rate of 10 percent in the late 1990s and early 2000s.
The fragmented and specialized nature of the coated and laminated paper industry makes true dominance across all sectors a virtual impossibility. Certain firms, however, have managed to carve out strongly defensible niches and have consistently maintained innovation and expertise to keep a strong position in their particular sector. Appleton Papers, Incorporated, a division of the United Kingdom-based firm Arjo Wiggins Appleton (AWA), is a market leader in carbonless and thermo-graphic papers. Sales in 2002 totaled $898 million, and the firm employed 2,500 workers. Among the notables in the pressure-sensitive products area is the Minnesota Mining & Manufacturing Company (3M), which posted 2003 sales of $18.2 billion and employed 67,072 workers. 3M pioneered cellophane tape and manufactures some of the best-known brand names in the industry with its Scotch tape and Post-It notes. 3M manufactures only part of its products within this industry but still has a sizeable representation within the industry leaders.
One challenge to companies in this industry continued to be in-house label manufacturing units at large companies. For example, Anheuser-Busch, the nation's largest beer brewer, was manufacturing its own labels at the turn of the twenty-first century. Advances in graphics technology made it possible for smaller companies to do the same.
According to the 2001 North American Label Study, leaders in this industry also needed to develop and incorporate prepress/digital technology for pressure sensitive applications. The study showed that most companies in the label industry have avoided digital technology because it is costly and not fully developed. However, the study also noted that this technology offers the capacity to handle shorter and faster runs and that the label companies should consider implementing these innovations.
Because of the extremely specialized nature of the industry, those who work with coated and laminated papers tended to be more specialized than workers within the rest of the paper industry group. At the same time, the wide array of activities within the classification tended to minimize variance of wages; wages for the roughly 26,000 production workers in the industry averaged $16.28 per hour in 2000, roughly on par with the rest of the paper industry. Because of the dispersion and fragmentation of the industry, organized labor tended to be less represented.
A high value-to-weight ratio along with the unique nature of many of the products within the industry have contributed to a globalization of the industry. Since technologies are often proprietary, few barriers existed to stop products from migrating from one market to another. A list of the world's leading thermal coaters, for example, would list few U.S. firms. Another factor hindering U.S. growth in this sector is the fact that many of the advances in coating equipment technology have come from overseas. This has meant a delay in the diffusion of technology to the United States and a subsequent lag in U.S. competitiveness in certain sectors.
It has also been noted that large PSA converters need to develop successful market entry strategies for Latin America. According to the 2001 North American Label Study, Mexico was showing strong growth in the label sector, with the rest of Latin America not far behind. The study advised U.S. converters to identify strategies for success in these markets.
Tag and Label Manufacturers Institute Inc. "2001 North American Label Study." Naperville, IL: 2002. Available from http://www.tmli.com .
U.S. Census Bureau. "Statistics for Industry Groups and Industries: 2000." February 2002. Available from http://www.census.gov/prod/2002pubs/m00as-1.pdf .
——. "Value of Shipment for Product Classes: 2001 and Earlier Years." December 2002. Available from http://www.census.gov/prod/2003pubs/m01as-2.pdf .
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