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Friday, Feb 3, 2023

Label Maker Finds Profits Are Transparent

Over the Fourth of July weekend, the year’s biggest beer drinking holiday, coolers full of ice-cold beer all over Southern California had paper labels floating in them.

But if Avery Dennison Corp., the nation’s largest label maker, has its way, this will be the last summer for that mess.

Avery is supplying Anheuser-Busch Cos. Inc. with waterproof, transparent, pressure-sensitive labels, which has remade the look of its top-selling Bud Light brand, and it is now counting on other beer makers to follow.

The company is one of only a handful of label makers able to produce and quickly deliver mass quantities of the material and it recently earmarked $30 million to expand its production in anticipation of brewer demand.

“Frankly, there’s a bit of a herd mentality here,” said Dean Scarborough, chief executive of Avery, said at a recent investor conference.

For domestic brewers, the new labels are seen as a way of making their products appear more upscale so they can compete against more expensive imports and premium beers. Total U.S. beer sales were off nearly 1.5 percent last year.

Company founder R. Stanton Avery invented the pressure-sensitive adhesive label in 1935 by putting adhesive on a continuous backing that could be removed by machine and applied to a surface by touch. The new labels, which use transparent film, were first applied to wine bottles in the early 1990s.

The Pasadena-based company, which had $5.3 billion in revenues last year, refuses to disclose sales of the labels but said they are a growing part of its business.

Other brewers expected to follow market leader Anheuser-Busch include Heineken NV, which has had clear labels on its bottles in France for two years and will introduce them in the U.S. this year. SABMiller Plc, the London-based owner of Miller Brewing Co., and Molson Coors Brewing Co., based in Montreal and Denver, are both testing the labels.

“We constantly look for innovations in products and packaging to improve the image of our beer,” Bob Lachky, vice president of brand management and director of global brand creative at Anheuser-Busch, said via e-mail. “We’ve received tremendous favorable response since we introduced the applied plastic label.”

The $30 million that Avery plans to spend to boost pressure-sensitive production will go to a new plant in the U.S., but the company has not yet decided the exact location. They are currently produced at domestic plants outside California.

Brewers are gravitating toward the labels despite it costing two to three times more than paper and glue labels. They already account for about half the cost of bottling, aside from the contents, said Albert Groen, global business director for the beer segment at Avery.

But the pressure sensitive labels can be integrated more easily into the bottling process, with the resulting increase in efficiency, as well as reduced glue mess, offsetting the higher cost.

(Avery sells the rolls of transparent film, with adhesive and a paper backing to converter companies that print them with the end user’s designs, die cut them and deliver them.)

Since wine makers first used pressure sensitive labels, they have been adopted by food manufacturers and others who package their products in glass. But for Avery, none of that would equal a switch by the beer makers.

Beer accounted for 56 percent of the total alcohol market last year, while wine accounted for 13.9 percent. And of course, beer bottles are smaller so there are more of them.

“One person doesn’t usually drink a whole bottle of wine, but one person can drink many bottles of beer, so there’s much more opportunity for us to sell labels,” Groen said. “With wine, it was big business for Avery, but by no means as big as beer.”

Besides the new labels, Anheuser-Busch introduced B(E), a new brand of caffeinated, flavored beer late last year and a flashy aluminum bottle for several brands this summer.


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