Share of the label and packaging segments in the MENA region
The United Arab Emirates (UAE) is a federation of seven emirates which has a population of about 9 million of which over 85% are expatriates from countries like India and Pakistan. Yet the area has a label industry that is growing steadily and is attracting interest from global suppliers.
by Harveer Sahni
UAE is a federation of seven emirates which was established in 1971. The constituent emirates are Abu Dhabi (which is recognised as the capital), Ajman, Dubai, Fujairah, Ras al-Khaimah, Sharjah and Umm al-Quwain. UAE is a major international tourist and business hub and has one of the highest per capita incomes in the world at nearly USD 25,000. UAE has approximately 10% of the world’s total known oil reserves, 90% of which are in Abu Dhabi and only about 10% in Dubai. The UAE is now not solely reliant on oil and gas revenues, however the oil sector still contributes about 30% of the country’s GDP. Led by Dubai the trade, tourism, real estate and construction industries are large contributors to the UAE economy. Indians form over 25% of UAE population with the country being home to between 50,000 and 60,000 Indian companies, today India is UAE’s largest trading partner.
Dubai – The face of UAE
Dubai has always been the face of UAE even though in terms of area it is less than 5% of the total of 83,600 km2 area of UAE and has a population of 2.7 million which is approaching a figure twice that of the population in Abu Dhabi. The largest emirate in UAE is Abu Dhabi. Surprisingly the percentage of women in Dubai (and other emirates) is just 31% and men 69% according to data available as of 2014. This is largely due to an expatriate population who work in UAE and travel home for holidays and rest periods.
The MENA region
According to a recent Smithers Pira report, total printing revenues in the Middle East and North Africa (MENA region) were USD 17.6 billion in 2012, and are forecast to grow 7.2% per annum reaching USD 26 billion by 2018. In an attempt to estimate an approximate market size in the region; we consider labels to be 20% of the total print industry, the size of the label industry in this region in 2018 is estimated at USD 5.2 billion. Pressure sensitive labels are thought to be a little over 40% of the total labels industry. Then it can estimated that the market size of pressure sensitive labels in the MENA region in 2018 is about approximately about USD 2.08 billion.
The country’s label industry
At the beginning of this millennium the number of label printers in UAE worth a mention was less than ten however this number has been growing rapidly ever since. It was also the time when industrial growth started seeing an upswing in UAE. Indian label printers who were ambitious to go global started to make efforts to use UAE as a gateway to the world of international business. Therefore, large parts of the recent UAE label industry is either owned, run or managed by Indian expatriates. The label market in the UAE continues to grow as do the number of printers which means that competition is more intense and margins are lower. Being a federation of emirates or countries with a low population, it is actually the exports that are driving growth in labels. From being a trading distribution centre, UAE has transformed into a manufacturing hub selling globally. The immediate access to Middle-Eastern and African markets is the starting point for many label companies and as they increase their capabilities, they venture into Europe and beyond.
The structure of the printing market
This label printing market is divided into three distinct segments and consists of five to six major players, several medium size companies and the smaller companies manged by individuals. As always, the middle segment suffers the most as they are continuously held back by the competition from the smaller players making it difficult for them to invest and expand because of lower margins and unacceptable returns on investment.
The niche or top segment has the least competition but delivering to customer’s expectations and retaining those customers is in itself a big challenge that the top players have to keep in mind. Therefore, the increase in the number of printing companies greatly affects the segments within which they operate. The established top companies in UAE include; Emirates Printing Forms in Abu Dhabi, Kimoha in Jebel Ali-Dubai, Pacman CCL in Alquoz-Dubai, Futurepack in Sharjah and Gulf Adhesive Label Factory in Ajman. In recent times established Indian companies who have invested in UAE include Gulfscan, Prakash Labels and Ajanta packaging.
After discussion with several leading printers NarrowWebTech’s editor Harveer Sahni has arrived at a rough estimate of the total market size in terms of labelstock usage in UAE as being approximately 50 million square metres per year. We cannot really translate this in terms of per capita usage as about 80% of the labelstock is exported either as converted labels or as part of manufactured end products. UAE appears to be a bigger market then Saudi Arabia for production of labels because of better infrastructure and liberal policies aided by no tax regime for sales within the GCC countries. According to Nimeesh Lilani at PacmanCCL, “The reason for this is the ease of doing business in UAE, easy availability of funds and it being a logistic hub with ease of making clearances and shipments”.
Testimonials of local players
According to Vinesh Bhimani heading Kimoha, “from the just a handful of label companies, originally there are now in excess of 45 label companies. The market is becoming crowded”.
Chinnadurai at Future Pack says, “New entrants are just one part of the story affecting margins, online auctions have started to surface in UAE also, this will be another headache!” he further added, “We are trying to replace old machines with new technologically advanced equipment to produce cost effectively.”
Sachin Arya at Ajanta packaging says, “Prices have become challenging and payments are being delayed making it difficult for us to operate. More and more Indians are wishing to locate outside India and in order to succeed they are undercutting prices”. Chinnadurai feels that if the trend continues it will not be long before we see some people exiting this business.
Assad Antonios heading Abu Dhabi based Emirates Printing Forms says, “The cost of living in UAE has gone up and with new printing companies being established in Africa the market place is shrinking bringing pressure on the smaller companies”.
The increasing number of printing companies, bring the need for more skilled operators who wish to bring their families to UAE as well which means that it is becoming very expensive to hire operators. One wonders how the new entrants with just one basic machine can survive in an economy where the per capita income is one of the highest in the world and the market appears to be almost saturated. However, most of the big printers have said that there is definite growth in the market.
Domination by a few companies
The UAE market as mentioned earlier in this report is dominated by a few large printing companies. Dubai based PacmanCCL is headed by John Dawson and has been in the news for their recent takeover of Mumbai based Super Labels.
The company is a joint venture between the Albwardy group and Geoffrey Martin led CCL Label, the world’s largest label company who have units in Dubai, Oman, Egypt, Saudi Arabia, Pakistan and now India. Jebel Ali headquartered Kimoha headed by Vinesh Bhimani has been a front runner and is always striving to excel. Abu Dhabi located Emirates Printing Forms has been another success story. They have grown from just being a computer forms manufacturer to a huge enterprise manufacturing continuous forms, self-adhesive labels, document security printing, wrap around labels on wide web machines, EDP products, shrink sleeves, IML, cut & stack labels, etc. Assad Antonios of Lebanese descent has been heading the company for the last 26 years which has been growing at a steady rate of 10% per annum and now operates out of over 100,000 sqft shop floor space with 140 employees.
Sharjah based Future Pack is a part of the Saudi Arabian ENPI group which in turn is a part of the Saudi Printing and Packaging Co. (a public listed company in Saudi Arabia). The company produces a diverse range of paper and plastic packaging. Chinnadurai as their vice president operations at Sharjah has led the company from just labels to even production of specialized labelstocks and innovative label products.
Printers spread over all emirates
The label industry in UAE began in Dubai then spread to other emirates like Abu Dhabi, Sharjah and Ajman. With real estate prices escalating and the cost of living in Dubai becoming unaffordable, label printing started to be established in other Emirates like Ras Al Khaimah, Umm al-Quwain and Fujairah. Today label printers are spread over all the emirates.
However, it is interesting to note that it is not the domestic sales or location advantage that makes them locate their units in far off emirates rather than in Dubai. It is actually the need to produce cost effectively with lower overheads.
Gulf Print & Pack Dubai
The growing market in this manufacturing hub has persuaded Tarsus the organizers of the Labelexpo series of events around the world to invest in Gulf Print & Pack Dubai. The show has become a premier event in Middle East Asia and printers from all countries in the region visit the show. This year’s edition, which took place in March 2017, had over 200 exhibitors which was an increase of 26.7%, and 11,918 visitors from 110 countries visited the last edition of the show.
A transformation of the economy
The interesting fact about the UAE is that the local governments recognize the need for exporting and increasing their share of global trade rather than relying on the limited and fast depleting oil reserves. They have transformed the UAE economy from an oil revenue based one to one based on global trading, manufacturing, tourism and real estate development. It is evident that the mindset of the rulers of the country will ensure that manufacturing will prosper and with that effort, the market for labels in UAE will surely grow.