Business flexibility in accelerated “new normal” is driving the European tape industry

Afera’s 4th webinar in post-lockdown series covers U.S. and European demand for tapes and the opportunities coming out of a changing business environment which is adopting new communication cultures and systems at record speed

The European Adhesive Tape Association continues to offer a platform to our Membership for exchanging experiences, knowhow and best practices during COVID-19 disruption and to determine how best to support our Member Companies in the post-lockdown phase. With over 40 registrants again, our 14 May webinar marked the 4th and in the biweekly interactive series we launched in April, this time themed “preparing your organisation for the near and more distant future” and including a Member panel of 4 “conversation-starters”.

Discussion revealed fascinating business phenomena related to an accelerated “new normal” characterised by changing production and demand, business flexibility, evolving attitudes and structures of communication, new opportunities, and increased trust and transparency not only within companies but between companies in the adhesive tape value chain.

E.U. economic outlook and programme developments

Afera Regulatory Affairs Manager Pablo Englebienne described the current post-lockdown situation as a “new normal” which is starting to feel more stable and less improvised.

During his recap of Afera’s 2, 16 and 30 April webinars, Mr. Englebienne reminded listeners that the E.U. information agency for occupational safety and health (EU-OSHA) is continually updating its OSHWIKI article “COVID-19: Back to the workplace – Adapting workplaces and protecting workers,” at the end of which is a table of guidelines for specific sectors or occupations listed per country.

The E.C. issued an invitation to Schengen Member States and Schengen Associated States to extend the temporary restriction on non-essential travel to the E.U. for another 30 days, until 15 June.

The E.C. also released a “Spring 2020 economic forecast: A deep and uneven recession, an uncertain recovery” article, which Afera also released in its latest edition of Afera News:

The new forecast projects that the euro area economy will contract by a record 7¾% in 2020 and grow by 6¼% in 2021. The E.U. economy is forecast to contract by 7½% in 2020 and grow by around 6% in 2021. Growth projections for the E.U. and euro area have been revised down by around nine percentage points compared to the autumn 2019 economic forecast.

The shock to the E.U. economy is symmetric in that the pandemic has hit all Member States (MSs), but both the drop in output in 2020 (from -4¼% in Poland to -9¾% in Greece) and the strength of the rebound in 2021 are set to differ markedly. Each MS's economic recovery will depend not only on the evolution of the pandemic in that country, but also on the structure of their economies and their capacity to respond with stabilising policies. Given the interdependence of E.U. economies, the dynamics of the recovery in each MS will also affect the strength of the recovery of other MSs.

Note that the labour market is not expected to return to the levels of 3 months ago until the end of 2021.

Mr. Englebienne reported additionally on the increasing number of MS aid programmes, which can be found here.

European lockdown developments

At the time of Afera’s 30 April webinar, we saw the beginning of the easing of lockdown measurements, and this trend continues. Introducing longer periods of forecast, several MSs are also planning the structural phasing out of lockdown restrictions for the medium term, i.e. June through September.

Social distancing and wearing of PPE is still either advised or mandatory in all MSs, with more countries, such as France and Germany, requiring the wearing of facemasks in all public places. Other MSs, such as the Netherlands and Belgium, only require those using public transportation to wear masks. Norway was the first European country to reopen all schools at all levels in May.

In a joint statement, the E.C., European Parliament and the European Council reaffirmed their commitment to address climate change and so building Europe’s economic recovery on the European Green Deal.

Mr. Englebienne also remarked on a few trends and threats he has seen:

• Many shops, restaurants and entertainment facilities are slowly reopening in new forms including enforced social distancing. This trend will continue through the summer.
• For many, WFH will continue through autumn.
• School opening and the raising of travel restrictions will vary among MSs. Some countries, such as Poland and Greece, may loosen restrictions somewhat in order to enable summer tourism.
• Large gatherings will likely be postponed through the fall and, in some cases, through the end of the year.

Of further importance to the tape business is that fact that the auto industry has been hard hit during COVID-19 disruption. Production plants are gradually reopening at lower-than-previous levels, and demand is significantly reduced. The European Automobile Manufacturers Association (ACEA) has published a list of policy recommendations for a successful restart of the EU’s automotive sector.

Finally, the easing of lockdown measures comes with the possibility of secondary outbreaks. We have seen this happen in countries such as South Korea and Germany over the last few weeks. Reports from China are still conflicting. In any case, these should be kept under control, but there is the looming threat of measures being reinstituted.

Demand for tapes in U.S. and Europe

Timothy Saddow, market development manager at Eastman Chemical Company (U.S.), shared that in the U.S. market, there has been elevated demand and growth in anything tape-related for e-commerce. But tapes related to automotive, aerospace and even big painting projects in building & construction seem to be challenged. Box sealing is mixed, as anything e-commerce-related has done well, while any of the B2B shipment of goods requiring boxes is depressed, although there is an increase in business at box stores. “I think companies were very concerned about COVID-19 hitting their factories, so they were producing quite heavily just until recently, and then there seemed to be a drop-off somewhere around May 1st,” said Mr. Saddow. “So I am curious if you have also seen this happen in Europe?”

“Of course I can only speak about what I see around me, but I think it is a very mixed bag in Europe as well,” answered Evert Smit, Afera president and head of R&D at Lohmann GmbH & Co. KG (Germany). He said that sectors such as medical and hygiene were doing well, as expected, and that everyone will be hit to some extent by the drop in automotive, electronics, building & construction, etc. “But without revealing too many details about the true business situation per company, I don’t get the feeling that the tapes and adhesives businesses are as hard hit as some other businesses,” Mr. Smit continued. “Somehow a lot of things will continue.” He said that demand might still be there, but the serious effect of COVID-19 disruption would only be visible at the end of the second quarter, thus somewhere in July we will know what’s happening.

Michel Merkx, GTF vice chairman, PSTC president and general manager at American Biltrite, Inc. - ABI Tape (U.S.), added that he supported Mr. Saddow’s take on the American industry, which saw a strong first quarter for most of the businesses into April, depending on the segment. “Clearly in the second quarter we will see the true effects of COVID-19’s impact,” he echoed. “Clearly automotive and building & construction have been hard-hit, but many factories and construction sites are beginning to open up, so those sectors will begin to see some relief.” But overall, he said, there is a lot of hunkering down in the face of the pandemic’s severe economic impact on the Industry overall.

The new, accelerated, not-completely-clear normal based on flexibility

For the last 10 weeks, companies have made the maximum of safe organisational changes to continue operating within the available room to manoeuvre, often with a short time horizon as their guiding principle. The mindset was basically, “this is temporary and short-term”. Then, after over 2 months of week-to-week progressive insights, we are now in May, entering into a stage of easing of lockdowns across Europe and the U.S., and everyone is trying to extend the planning horizon to a period ending in September or October.

“Preparing your organisation for the near and more distant future” was Afera’s chosen theme of the first truly post-lockdown webinar. But this involves knowing what the future will be like, began moderator and marketing strategist Bert van Loon. “Companies and their workers are putting in place their organisational structure for a longer time horizon to be able to function optimally in the new normal,” he said. “At the same time, business leaders are aware that they will need to respond rapidly to “known unknown” situations in the foreseeable future.” Therefore, business flexibility is now, more than ever, key for companies to be able to react rapidly in an uncertain and volatile environment.

From the last webinar, we learned that for many companies maximum flexibility is the biggest priority in preparing for strategic future planning as well. “Afera is also deeply interested in developing industry-wide flexibility which will contribute to our collective’s mission of making the European adhesive tape industry future-proof,” the Association’s Secretary General, Astrid Lejeune, pointed out. “After all, if one element of the value chain is not flexible, it affects all other elements as well.”

When asked to pinpoint his idea of the “new normal” for strategic planning purposes, European Senior Sales Manager of Regions at Nitto EMEA N.V. (Italy) Luca Villa confirmed that now more than ever is the “most critical period for all companies in the European adhesive tape value chain” – that with the restart of business operations in many places, although it may not be completely clear, we are operating in the new normal, but hopefully not the “new normal for life”.

Similarly, Mike Ayres, chairman and chief executive of Advance Tapes International, Ltd. (U.K.), described the new normal as “just emerging” as “we are getting a clearer idea of how things are starting to settle down.”

Gianluca Micci, general manager of Erga Tapes srl (Italy), believes that “we already have been living in the new normal, because the market and economy and all aspects of our activities have already been changing very fast.” He thinks COVID-19 is merely the accelerator challenging us to improve every aspect of our business for our best rate of survival. “In my company, we are converters, so we were already used to wearing masks,” Mr. Micci explained. “We can make the best of these disruptive times and improve our processes for the near future of the new normal.”

Navigating risks and challenges to meet new opportunities

“Yes, it seems like we are on a sort of cusp at the moment between a feeling that it is a period of maximum risk but also maximum opportunity,” Mr. Ayres added. “And then things will start to solidify in the coming months, and those things will start to settle then into what we describe as the new normal.” He said that as the new normal is “firming up”, there are some opportunities that are open to us now that will probably close in the coming months, after which times will be much more the same for a reasonable period ahead.

Speaking of grabbing a hold of available opportunities, Mr. Smit turned the new normal concept around: “I am curious what companies are doing already to define their own new normal. At the top levels of your companies, are you reviewing the last 10 weeks in terms of what has worked and not worked?” He said that with the new WFH culture at Lohmann, they still need to analyse whether the benefits outweigh the hindrances. “WFH is largely based on trust among stakeholders within the company, and I do think it can work. I want to have a running discussion on this and other larger business practices going into 2021. Let’s explore the boundaries of what can be achieved.”

Restructuring the way your company does things now, in terms of work culture, systems of communication and connectivity, IT infrastructure, etc., may be what your company needs to gain its competitive edge. Along the same vein, Mr. Villa sees the new normal as being characterised by “over-communication and even scattered communication now,” leading into a new era of business practices and culture that support flexibility in companies which want to survive and thrive. “Flexibility and efficiency in this new normal will be key in sales and project management.”

Changing communication both structurally and culturally

“The way business is being conducted both within our company and with customers and suppliers has fundamentally changed with COVID-19 disruption,” Mr. Smit told listeners. “Working and communicating remotely has brought us this immense freedom from commuting and travelling, but you also miss the element of human contact.” He said that online meetings can be more efficient and effective, as usually people are better prepared for them, but he also feels that they can very energy-consuming. “What I see now are many of our customers and suppliers using tools like Zoom in order to become more flexible—but not all of them are doing it yet.”

Mr. Micci agreed with these points and said that employee attitudes toward face-to-face contact and communication were evolving because of the social distancing measures Erga has put into place. “People who resisted working digitally before now have to get used to it, and this will contribute to business efficiency in the company’s future plans. We are now using online video communication for over 60% of our work with final customers.” Mr. Micci shared this has brought about an important change in culture and structure in their operations. “Now we are in contact with regional sellers and marketeers digitally. I think the effect in online communication can truly make a difference over the next year.”

Regarding sales, many companies have said they are maintaining existing relationships online. But searching out new contacts the normal way – the physical handshakes – is different now. How do you set up new sales in a low-touch, low-travel society? “Putting our European sales organisation into place in this new era is the challenge,” said Mr. Villa. Especially in Southern Europe, he explained, your success is based on your ability to network, and this is no longer possible by conventional means, so Nitto Europe has had to change its way of doing things. “Especially where sales are concerned, digital communication with customers is increasing the flexibility of our team,” Mr. Villa added. “And researching new customer and vendor contacts is changing from the voice of the customer to the voice of the computer, which holds a lot of information for us.” He was surprised that people of the former generation like him have adapted to the new, online way of conducting business rather well, and this says a lot about the possibilities for flexibility in the future.

“I must admit that I was a bit slow in embracing Zoom and Skype, but now that I have to use it regularly, I see the opportunities of increased time and contact simultaneously, and this means more room for creativity,” offered Mr. Ayres. He explained that while video conferencing for local association meetingsin the U.K., he has discovered a technique for networking within the online chat function. “You can achieve the same results as you could in a physical setting,” he said. “And I have seen a lot of things accelerate because of this: We have just launched today a new product which we developed in 2 weeks. I have never met our partners for this face-to-face. We have done it all by using Zoom.” Mr. Ayres emphasised that working with new communication systems is very possible and “the way to speed things up going forward.”

“So we are basically forced to do this, but getting ‘kicked in the butt’ has helped us accelerate and open our minds to new systems and cultures,” Mr. Van Loon concluded. “If things are too comfortable, we won’t be open to change.” Mr. Smit added that making sure all team members get on board with organisational changes requires constant one-on-one conversations with his entire team. These are geared toward determining their individual feelings and needs in the workplace and setting up a schedule and landscape which gels with both standards of safety and productivity.

Flexibility based on transparency and trust

How do we cultivate business flexibility not just in our own organisations, but in the adhesive tape industry as a whole? “One of the things we need to do is keep on talking to one another—keep explaining what you need—and this is especially possible now with our improved connectivity—and can probably be done much faster,” answered Mr. Smit. “Our accelerated way of being in touch with each other has to be driven first by companies themselves—by the top management—and this improved contact and sharing will strengthen the entire value chain as it breeds a culture of flexibility that is absolutely essential in these times.” He explained that they need to learn from the strengths and weaknesses coming out of COVID-19 disruption together in order to make the tape industry future-proof.

Mr. Villa added that collaboration among upstream and downstream partners is “one of the strengths and big opportunities of this period.” He works across departments of Nitto and other customer companies around Europe, and he has seen the possibilities of meeting with peers at various levels and disciplines open up like never before. “Whereas it would have been impossible in the past, this week I met with 5 different companies each time with 3 to 4 colleagues from different departments.”

The challenge to the successful momentum of building flexible communication systems across the Industry is the physical supply chain aspect—actually moving the goods in order to conduct business. There again, Mr. Smit said, being in close contact with the entire value chain and working through the barriers, whether they are legal or financial, will ensure the continuity of the tape business: “together we will find a way.”

“We all want all the parts of our chain to continue to survive, because we all rely on each other,” Mr. Ayres commented. “So we certainly have been talking with all those who are key to our business—from raw materials suppliers to suppliers of services—to make sure that we fulfil each other’s needs to keep the whole chain working well together—it’s critical.” He explained that because we are currently functioning in a riskier environment, people’s mindsets have changed, and they are more inclined to take important decisions more quickly, “because quicker reaction is necessary in the current climate to make things progress.” And companies are also on average more inclined to take on more risk, although this is a personal decision which requires more trust.

Mr. Micci said the financial relationship within and between companies is crucial at the moment, and good communication plays a positive role in this. “We have to transmit a sense of safety to our customers.” Erga has sent them an email offering the possibility of adjusting some terms and conditions. “They are already worried about their own business problems, and we want to convey a sense of calm and safety for the future,” Mr. Micci concluded.

Ms. Lejeune said that Afera’s community values our webinars highly, and that starting in June, the COVID-19 series would take on a new name, “Afera biweekly updates”, featuring information on projects run by Afera, e.g. in the areas of sustainability and regulatory affairs. She also encouraged any Member with an idea or who would like to participate in a panel discussion to contact her here.

Next webinar – register now!

Afera’s next exclusive Webinar in its post-lockdown series “Navigating the COVID-19 crisis within the adhesive tape value chain” will cover localisation of business resources in Europe. It will be held on Thursday, 28 May, 14.00-15.00 CEST. Please register here.

Recording

The recording of the 14 May webinar is now available here using the password 3O@Kow!8