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Friday, Mar 29, 2024

For Avery Dennison, It’s a Promotional Wrap

Since divesting its office products division four years ago, Avery Dennison Corp. in Glendale has built its business on product labels and industrial materials. But now the packaging supplies giant is moving into a new sector with a $3 million investment in Wrapify Inc., a San Diego startup that compensates drivers for wrapping their cars in a temporary adhesive film printed with advertisements. “Avery Dennison sees the promise in what we’re building,” James Heller, founding chief executive of Wrapify and a member of Forbes’ “30 Under 30” list for 2017, said. “We’ve been working with them since the very beginning.” Automotive wraps are used by businesses, individuals and even the military to alter a vehicle’s exterior color without paint. The global market value of these so-called “car wraps” hit roughly $909 million in 2014, according to a report by Grand View Research Inc., an investment research and consulting agency based in San Francisco. That figure will swell to more than $4.2 billion by 2022, the firm predicts, as demand for mobile advertising rises and car enthusiasts catch on to the concept of treating their vehicles to a commitment-free makeover. Avery Dennison sees investing in Wrapify as a way to benefit from that trend, said Bill Podojil, senior business director of the graphics solutions arm of Avery Dennison North America. Wrapify has relied on Avery Dennison’s adhesive films to build its car wraps since the company’s inception in 2015. It currently operates in 29 cities and plans to use some of Avery Dennison’s investment to expand to the 50 largest metropolitan areas by the end of the year, exposure that will ideally generate a larger market for Avery Dennison’s products. “We’re hoping that the Wrapify investment will bring awareness that this technology even exists,” Podojil said. “We thought (investing) would be a way to leverage technology that we think is quite innovative when we get into the consumer world.” Consumer car wraps Though Avery Dennison has been manufacturing car wraps for some time, the product has become increasingly valuable to its business in recent years. In 2016, car wraps accounted for half of sales in the company’s label and graphics materials segment, Podojil said, a division that generated roughly 70 percent of the company’s $6 billion in total revenue, according to documents filed with the Securities and Exchange Commission. “Car wrap sales have increased significantly over the past five years,” Podojil said. “They’ve been used for a while on the commercial side, but seeing it move into the individual consumer side is going to be very interesting.” Avery Dennison sells both “digitally printed” wraps, which are typically purchased by businesses for use on fleets of trucks; and “color-change” wraps, often billed as an alternative to paint for personalizing one’s vehicle. The wraps are sold through automobile customization professionals who have been certified by Avery Dennison to install them. The price to completely wrap a car can range from $2,500 to more than $6,000, depending on the installer, the wrap itself and other specifics. While printed wraps are fairly common in the U.S., the domestic market for color-change wraps is still emerging, Podojil said. “If you look at our customer base for our color-change films, you have pretty much automotive enthusiasts and re-stylers,” he explained. “On the digitally printable side, it’s more directed to the commercial segment, like fleets or entrepreneurs that just want to advertise their businesses on the side of their van.” Wrapify’s business model offers an opportunity for the two markets to converge, Podojil said. The startup charges brands to run advertising campaigns on the cars of individual drivers who sign up through its smartphone application. The brand’s cost is based on the number of cars involved, the duration of the campaign and the type of wrap used; drivers are paid according to an algorithm that prices each mile dynamically according to traffic density, location and time of day. Ideally, this two-sided marketplace leaves both parties happy by giving brands an out-of-home advertising platform that can cost less than $2 for every thousand impressions, according to Wrapify, and offering drivers a chance to make money while they’re sitting in traffic. “It was the first business I’d seen in my career that takes commercial advertising and targets it to consumer vehicles … instead of a billboard, for example,” Podojil said. “You have cars on the road with the advertisements, and those people driving the cars are actually getting paid for the miles that they drive.” Acquisition strategy Podojil left his first meeting with Wrapify with a hunch that investing in the startup would be a smart move for Avery Dennison, he recalled. But at the time, he wasn’t sure others in his company would share his enthusiasm. “I would have invested my own money – I thought it was a great idea,” Podojil said of his initial meeting with Heller. “I just didn’t know how our company would respond.” Avery Dennison historically has foregone investing in young startups in favor of buying out firms with lucrative technologies, which it has done frequently in recent months. So far this year, the company has agreed to purchase Chinese specialty tape manufacturer Yongle Tape Co. Ltd. for $190 million and has closed on the $75 million acquisition of Hanita Coatings, a maker of pressure-sensitive materials. Last August, Avery Dennison finalized a deal to buy the European arm of MacTac, another pressure-sensitive materials company, for about $170 million. Despite his uncertainty, Podojil took it upon himself to spread the word about Heller’s business within the chain of command at Avery Dennison. He was surprised to find that most managers were as excited by the prospect as he was. “When we finally got to the main decision-makers, it was absolutely clear that this was something that we should be doing, because it’s investing in a technology or a company that will ultimately improve and grow our overall industry,” he said. To Heller, working with Avery Dennison just made sense. The company has long been involved in the production of materials for traditional out-of-home advertising venues, such as billboards, making it a natural fit for promoting Wrapify’s business model. “We’re enabling an existing segment of the signage industry,” Heller said. “Avery Dennison likes what we’re doing, so they decided to put their money where their mouth is.” Technology transfer In addition to funding Wrapify’s expansion, Avery Dennison also is granting the startup a bit of research and development expertise. The companies have been working together for more than six months to develop a specialty film that can be removed quickly after shorter campaigns without damaging drivers’ vehicles. “The safety of drivers’ vehicles is the utmost important thing,” Heller said. “(With Avery Dennison), we’ve been able to hone in on a film that meets all our specifications.” Avery Dennison’s color-change wraps are made with a cast vinyl that is both durable and highly conformable, allowing them to adhere to complex curves without wearing around the edges. Its digitally printed wraps are designed to prioritize color integrity. Both are made to adhere to the vehicle much longer than the average Wrapify campaign, which lasts about three months. “This is a very unique application, because typically whether someone is having their car wrapped for commercial use or to have a new color attached to a finish, there is an underlying assumption they’re going to want to have film on the car for at least two or three years,” Podojil said. “Where the challenge for Wrapify came in is that they need our films to print like premium films with the conformability of our premium cast films, but we also have to have an adhesive that sticks down and is going to maintain it and lay flat and not curl up, but then will remove cleanly after three months.” The process required mixing and matching many of Avery Dennison’s products to get the formula right, but the companies managed to develop some solutions. The films’ endurance is currently being tested in San Diego, where they are exposed to high UV intensity, salty air and heat. After two months in the sun, Podojil is happy to report that the films are performing well.

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