WEBVTT 00:00:00.000 --> 00:00:01.899 Welcome back to the Deep Dive, where we take 00:00:01.899 --> 00:00:03.819 the sources you share with us and turn them into 00:00:03.819 --> 00:00:06.339 immediately usable knowledge, providing you with 00:00:06.339 --> 00:00:08.419 that shortcut to being thoroughly well -informed. 00:00:08.900 --> 00:00:11.859 Today, we are analyzing a company whose products 00:00:11.859 --> 00:00:14.400 are, well, they're literally stuck to your clothes, 00:00:14.580 --> 00:00:17.640 your food packaging, your car, and even potentially 00:00:17.640 --> 00:00:20.660 your skin, but whose actual business structure 00:00:20.660 --> 00:00:23.160 and, frankly, incredible strategic transformation 00:00:23.160 --> 00:00:26.300 remain largely invisible to the public. We are 00:00:26.300 --> 00:00:28.519 diving deep into Avery Dennison Corporation. 00:00:29.309 --> 00:00:32.369 Now, be honest. When you hear that name, what's 00:00:32.369 --> 00:00:34.329 the first thing that springs to mind? That's 00:00:34.329 --> 00:00:36.429 the key question, isn't it? For me, it's those 00:00:36.429 --> 00:00:38.289 ubiquitous white labels, the ones you'd print 00:00:38.289 --> 00:00:40.429 addresses on, or maybe those giant institutional 00:00:40.429 --> 00:00:43.130 binders we all used in school. I think of office 00:00:43.130 --> 00:00:45.710 supplies. I think of stickers. It gives this 00:00:45.710 --> 00:00:48.149 impression of a reliable, maybe slightly boring 00:00:48.149 --> 00:00:51.350 legacy paper company. And that mental image. 00:00:51.950 --> 00:00:54.750 is exactly what we need to dismantle today. Because 00:00:54.750 --> 00:00:58.429 that perception is not only outdated, it's financially 00:00:58.429 --> 00:01:00.869 and strategically misleading. That association 00:01:00.869 --> 00:01:03.429 is what they sold off over a decade ago. Really? 00:01:03.509 --> 00:01:06.129 The whole thing? The whole consumer -facing brand. 00:01:06.709 --> 00:01:10.030 So our mission today is to uncover how a company 00:01:10.030 --> 00:01:12.950 founded on a very simple... elegant adhesive 00:01:12.950 --> 00:01:17.129 idea the pressure sensitive label executed one 00:01:17.129 --> 00:01:19.269 of the most remarkable corporate transformations 00:01:19.269 --> 00:01:22.430 of the last few decades okay they went from gummed 00:01:22.430 --> 00:01:25.840 labels to pioneering the digital identity of 00:01:25.840 --> 00:01:28.340 physical objects. That's a massive leap. We're 00:01:28.340 --> 00:01:31.120 talking about shedding an entire legacy identity 00:01:31.120 --> 00:01:34.260 to become a 21st century tech enabler. Precisely. 00:01:34.260 --> 00:01:36.739 This is not just a label company anymore. It's 00:01:36.739 --> 00:01:39.859 a critical multinational manufacturer of fundamental 00:01:39.859 --> 00:01:42.379 materials. Yes, the pressure sensitive adhesive 00:01:42.379 --> 00:01:45.319 materials are still core, but the future is built 00:01:45.319 --> 00:01:47.670 around high tech solutions. Like what specifically? 00:01:48.069 --> 00:01:50.469 Things like apparel branding systems, the foundational 00:01:50.469 --> 00:01:53.790 technology for RFID inlays, and highly specialized 00:01:53.790 --> 00:01:56.510 medical products like wearable sensors. When 00:01:56.510 --> 00:01:58.090 you look at the sheer scope of their influence 00:01:58.090 --> 00:02:00.549 across modern intelligent supply chains, it's 00:02:00.549 --> 00:02:02.890 genuinely surprising. The numbers certainly support 00:02:02.890 --> 00:02:05.189 the idea that this is far from a simple office 00:02:05.189 --> 00:02:07.890 supply vendor. Avery Dennison is a behemoth. 00:02:08.009 --> 00:02:10.210 Oh, absolutely. They are headquartered in Mentor, 00:02:10.210 --> 00:02:12.789 Ohio, but the roots go all the way back to 1935. 00:02:12.949 --> 00:02:15.750 That's 90 years ago. Founded originally in Los 00:02:15.750 --> 00:02:18.710 Angeles, California. 90 years of continuous operation, 00:02:18.889 --> 00:02:22.469 but more importantly, 90 years... of continuously 00:02:22.469 --> 00:02:25.729 evolving its core competency in material science. 00:02:25.969 --> 00:02:28.169 That's the key. They've managed to stay relevant 00:02:28.169 --> 00:02:30.569 through multiple industrial and technological 00:02:30.569 --> 00:02:32.930 shifts. It's pretty incredible. And the scale 00:02:32.930 --> 00:02:35.270 today is just staggering. They operate in more 00:02:35.270 --> 00:02:37.650 than 50 countries globally, employing approximately 00:02:37.650 --> 00:02:40.870 35 ,000 people. 35 ,000. And when we talk about 00:02:40.870 --> 00:02:43.990 financial heft, their 2024 revenue snapshot was 00:02:43.990 --> 00:02:47.870 U .S. $8 .76 billion, paired with a net income 00:02:47.870 --> 00:02:52.009 of U .S. $705 million. Right. This isn't a niche 00:02:52.009 --> 00:02:54.789 industrial supplier. This is a Fortune 500 entity 00:02:54.789 --> 00:02:57.550 that provides the backbone, literally and digitally, 00:02:57.770 --> 00:03:00.530 for a vast amount of global commerce. That's 00:03:00.530 --> 00:03:02.330 a perfect way to put it. They don't just supply 00:03:02.330 --> 00:03:04.490 labels. They supply the intelligence necessary 00:03:04.490 --> 00:03:07.569 for modern retail and logistics. Okay, let's 00:03:07.569 --> 00:03:10.250 unpack this history. Because you can't appreciate 00:03:10.250 --> 00:03:12.650 the digital pivot without understanding the sticky 00:03:12.650 --> 00:03:15.629 foundation it was built upon. It all starts in 00:03:15.629 --> 00:03:19.150 1935 in Los Angeles, CA, with a classic American 00:03:19.150 --> 00:03:21.430 entrepreneur story. That's right. The company 00:03:21.430 --> 00:03:23.590 was founded by R. Stanton Avery and his wife, 00:03:23.689 --> 00:03:26.669 and it was initially called Kum Clean Products. 00:03:27.030 --> 00:03:30.469 Kum Clean. I love that. The brilliance of that 00:03:30.469 --> 00:03:33.629 name captures the entire value proposition. Kum 00:03:33.629 --> 00:03:37.800 Clean. It highlights the simple yet elusive technical 00:03:37.800 --> 00:03:40.620 goal they achieved, a self -adhesive material 00:03:40.620 --> 00:03:43.259 that stuck securely when needed but could also 00:03:43.259 --> 00:03:45.599 be peeled away cleanly. Without leaving residue. 00:03:45.860 --> 00:03:47.840 Exactly, without leaving that bunk behind. That 00:03:47.840 --> 00:03:50.280 seems so simple to us now, but at the time, this 00:03:50.280 --> 00:03:53.139 was a eureka moment. Before our Stanton Avery, 00:03:53.259 --> 00:03:55.219 labels were often attached with messy, water 00:03:55.219 --> 00:03:57.460 -activated glue or they were pasted on. Yeah, 00:03:57.460 --> 00:03:59.599 it was a whole process. This self -adhesive or 00:03:59.599 --> 00:04:02.840 pressure -sensitive adhesive, PSA material, allowed 00:04:02.840 --> 00:04:05.379 for rapid application and... removal and it just 00:04:05.379 --> 00:04:07.539 revolutionized how products were priced and branded. 00:04:07.759 --> 00:04:10.879 It was a true industrial innovation. And think 00:04:10.879 --> 00:04:12.719 about the complexity of the pressure sensitive 00:04:12.719 --> 00:04:15.979 concept itself. It's not just one thing. It involves 00:04:15.979 --> 00:04:19.620 three layers. The face stock. That's the material 00:04:19.620 --> 00:04:22.019 you print on. Right, the paper or the film. Then 00:04:22.019 --> 00:04:24.699 the adhesive layer, the sticky part, and then 00:04:24.699 --> 00:04:26.899 the crucial release liner, the backing you peel 00:04:26.899 --> 00:04:29.379 off. Getting the chemical formulation of the 00:04:29.379 --> 00:04:32.339 adhesive just right so it adhered immediately 00:04:32.339 --> 00:04:34.579 with light pressure. Hence the name pressure 00:04:34.579 --> 00:04:37.459 sensitive. And perfectly balancing the bond strength 00:04:37.459 --> 00:04:39.779 to the surface and the ease of separation from 00:04:39.779 --> 00:04:42.240 the liner. Well, that was a massive materials 00:04:42.240 --> 00:04:44.439 challenge he solved. And Avery's company name 00:04:44.439 --> 00:04:46.600 tracked this evolution in precision, didn't it? 00:04:46.879 --> 00:04:49.879 From Come Clean Products in 1935, they became 00:04:49.879 --> 00:04:53.019 Avery Adhesives in 1937. Then they were incorporated 00:04:53.019 --> 00:04:56.259 as the Avery Adhesive Label Corps in 1946. By 00:04:56.259 --> 00:04:58.560 1964, they were the Avery Products Corporation, 00:04:58.699 --> 00:05:01.220 and then came the crucial international recognition, 00:05:01.680 --> 00:05:05.160 Avery International Corporation in 1976. And 00:05:05.160 --> 00:05:07.879 that international shift was absolutely necessary. 00:05:08.259 --> 00:05:10.439 I mean, it was crucial to meet the increasing 00:05:10.439 --> 00:05:13.920 standardization of global retail. But the final... 00:05:14.279 --> 00:05:16.240 Definitive Identity, the one we analyzed today, 00:05:16.480 --> 00:05:20.199 arrived in 1990. Avery Dennison. After the merger 00:05:20.199 --> 00:05:22.180 with the Dennison Manufacturing Company. That 00:05:22.180 --> 00:05:25.160 1990 merger is what put the current name on the 00:05:25.160 --> 00:05:27.620 map. But it also distracts us from the fact that 00:05:27.620 --> 00:05:29.480 the early success of Avery required not just 00:05:29.480 --> 00:05:32.160 the inventor, our Stanton Avery, but a vital 00:05:32.160 --> 00:05:34.720 business partner to provide the muscle and scale. 00:05:35.079 --> 00:05:38.579 Yes, that partner was H. Russell Smith. He was 00:05:38.579 --> 00:05:40.680 a college friend of Avery's who joined in 1946 00:05:40.680 --> 00:05:43.550 as a one -third owner. And he served as president, 00:05:43.689 --> 00:05:46.550 CEO, and chairman for nearly four decades. So 00:05:46.550 --> 00:05:49.230 if Avery was the innovator... Smith was the operator. 00:05:49.529 --> 00:05:51.689 While Avery provided the innovative technical 00:05:51.689 --> 00:05:54.269 genius, Smith provided the professional, the 00:05:54.269 --> 00:05:56.810 industrial, and the financial backbone. So what 00:05:56.810 --> 00:05:59.170 specifically did Smith do that turned an innovative 00:05:59.170 --> 00:06:02.350 startup into a multinational corporation? He 00:06:02.350 --> 00:06:05.290 was the system builder. In 1946, he formally 00:06:05.290 --> 00:06:07.889 incorporated the fledgling 50 -person company. 00:06:08.300 --> 00:06:11.139 He standardized the manufacturing processes that 00:06:11.139 --> 00:06:13.379 allowed them to produce the core label materials 00:06:13.379 --> 00:06:16.800 reliably and at a massive scale. And he was the 00:06:16.800 --> 00:06:19.019 one who pushed them to go global, right? Trucially, 00:06:19.160 --> 00:06:21.779 yes. He was the engine of global expansion. They 00:06:21.779 --> 00:06:23.680 knew they needed to move beyond the U .S. market, 00:06:23.779 --> 00:06:26.899 and he drove that push, establishing their first 00:06:26.899 --> 00:06:29.500 overseas subsidiary in the Netherlands in 1955. 00:06:30.060 --> 00:06:33.279 In 1955. Yeah. This early European extension 00:06:33.279 --> 00:06:35.339 meant they were geared toward global standards 00:06:35.339 --> 00:06:38.040 from the midpoint of the 20th century. And on 00:06:38.040 --> 00:06:39.959 the financial side, he's credited with taking 00:06:39.959 --> 00:06:42.259 the company public, leading to its listing on 00:06:42.259 --> 00:06:45.199 the New York Stock Exchange in 1967. That's right. 00:06:45.300 --> 00:06:47.720 That's the ultimate validation of moving from 00:06:47.720 --> 00:06:50.060 a niche inventor shop to an industrial power 00:06:50.060 --> 00:06:52.800 player. It is. Dean Scarborough, who was a later 00:06:52.800 --> 00:06:56.699 CEO, he noted upon Smith's death in 2014 that 00:06:56.699 --> 00:06:59.120 Smith gave Avery's elegant technical invention 00:06:59.120 --> 00:07:02.040 the necessary structure, professionalism, and 00:07:02.040 --> 00:07:04.360 scale to endure. I like that phrase. It's the 00:07:04.360 --> 00:07:06.819 ability to scale an elegant technical innovation 00:07:06.819 --> 00:07:10.199 into a reliable, mass -produced global product 00:07:10.199 --> 00:07:12.459 that separates the novelty company from the enduring 00:07:12.459 --> 00:07:15.420 corporation. Smith provided that industrial backbone. 00:07:15.759 --> 00:07:19.160 So that's the Avery side. 20th century adhesion 00:07:19.160 --> 00:07:22.319 innovation. Now let's look at the Denison half 00:07:22.319 --> 00:07:25.939 of that 1990 equation, the Denison Manufacturing 00:07:25.939 --> 00:07:28.839 Company. This side takes us back much, much further 00:07:28.839 --> 00:07:31.759 in time. The Denison lineage is almost a century 00:07:31.759 --> 00:07:34.079 older than the Avery side. It's kind of amazing. 00:07:34.180 --> 00:07:36.600 It was founded way back in 1844 in Brinswick, 00:07:36.660 --> 00:07:39.899 Maine, by Andrew Denison and his son, Aaron Lufkin 00:07:39.899 --> 00:07:43.860 Denison. 1844. That's a staggering lifespan for 00:07:43.860 --> 00:07:46.459 a modern Fortune 500 predecessor. And they didn't 00:07:46.459 --> 00:07:48.740 start with adhesives at all, did they? No, not 00:07:48.740 --> 00:07:50.699 at all. They started in the precision craft space, 00:07:50.959 --> 00:07:53.639 manufacturing jewelry and watch boxes. So very 00:07:53.639 --> 00:07:57.699 high -end, detailed work. Exactly. The son, Aaron 00:07:57.699 --> 00:07:59.540 Lufkin Dennison, eventually turned the company 00:07:59.540 --> 00:08:02.000 over to his younger brother, Eliphalet Worf Dennison, 00:08:02.139 --> 00:08:04.240 who then developed it into a significant industrial 00:08:04.240 --> 00:08:06.500 enterprise focused on things like specialized 00:08:06.500 --> 00:08:08.339 paper products and tags. And they eventually 00:08:08.339 --> 00:08:10.589 moved to Massachusetts. Right. The business moved 00:08:10.589 --> 00:08:13.709 to Framingham, Massachusetts, in 1898. Here's 00:08:13.709 --> 00:08:16.149 where the historical connection gets intellectually 00:08:16.149 --> 00:08:19.850 fascinating, though. Aaron Lufkin Dennison, the 00:08:19.850 --> 00:08:22.790 co -founder, is a major figure in American industrial 00:08:22.790 --> 00:08:25.550 history for something he did after leaving the 00:08:25.550 --> 00:08:28.089 family company. He is. This is a great little 00:08:28.089 --> 00:08:31.550 historical footnote. After departing. Aaron Lufkin 00:08:31.550 --> 00:08:34.210 Dennison went on to co -found the famed Waltham 00:08:34.210 --> 00:08:37.370 Watch Company in 1850. The Waltham Watch Company. 00:08:37.730 --> 00:08:40.330 And their historical significance wasn't just 00:08:40.330 --> 00:08:43.210 making watches. It was that they perfected the 00:08:43.210 --> 00:08:45.690 American system of watch manufacturing. Which 00:08:45.690 --> 00:08:48.230 was all about precision. The system focused entirely 00:08:48.230 --> 00:08:51.789 on producing highly accurate, standardized, and 00:08:51.789 --> 00:08:54.470 most importantly, interchangeable parts. And 00:08:54.470 --> 00:08:57.230 this is the connective tissue. This is the fundamental 00:08:57.230 --> 00:08:59.370 philosophy that the two companies brought together 00:08:59.370 --> 00:09:02.700 in 1990. You have the Denison legacy, which is 00:09:02.700 --> 00:09:05.620 rooted in 19th century precision, standardization, 00:09:05.740 --> 00:09:08.179 and the mastery of mass manufacturing required 00:09:08.179 --> 00:09:10.820 for interchangeable parts. That conceptual foundation 00:09:10.820 --> 00:09:14.220 is the ancestor of modern standardized supply 00:09:14.220 --> 00:09:17.679 chain elements. The ability to produce billions 00:09:17.679 --> 00:09:20.580 of identical reliable components like tags or 00:09:20.580 --> 00:09:23.970 labels. So we merged the 19th century mastery 00:09:23.970 --> 00:09:26.990 of standardized high volume manufacturing from 00:09:26.990 --> 00:09:30.129 Denison with the mid 20th century innovation 00:09:30.129 --> 00:09:32.649 and chemical adhesion technology from Avery. 00:09:32.889 --> 00:09:36.429 By 1990, you have a combined entity, Avery Denison, 00:09:36.629 --> 00:09:39.730 that is perfectly positioned to dominate the 00:09:39.730 --> 00:09:42.250 global production of standardized technical high 00:09:42.250 --> 00:09:45.450 volume materials. The name Avery Denison captures 00:09:45.450 --> 00:09:48.289 two entirely distinct yet perfectly complementary 00:09:48.289 --> 00:09:50.889 industrial strengths. It's the definition of. 00:09:50.919 --> 00:09:53.379 of a synergistic merger. They combine the expertise 00:09:53.379 --> 00:09:55.159 in what to make, you know, the adhesive science 00:09:55.159 --> 00:09:57.340 with the expertise in how to make it at scale 00:09:57.340 --> 00:09:59.500 and distribute it globally, the manufacturing 00:09:59.500 --> 00:10:02.519 and standardization expertise. Now we come to 00:10:02.519 --> 00:10:04.259 the great pivot. We talked about how the Avery 00:10:04.259 --> 00:10:06.679 Dennison name became cemented in the public consciousness 00:10:06.679 --> 00:10:09.929 in 1990. For many, that consciousness was built 00:10:09.929 --> 00:10:11.769 on their office and consumer products division, 00:10:12.049 --> 00:10:14.970 which was formally created back in 1982. Right. 00:10:15.090 --> 00:10:17.169 This is the business line that defined them to 00:10:17.169 --> 00:10:19.909 the average consumer. Absolutely. When people 00:10:19.909 --> 00:10:22.370 think of the recognizable Avery Brandon logo, 00:10:22.730 --> 00:10:24.750 they are thinking of the products that came out 00:10:24.750 --> 00:10:27.909 of this division. The three ring binders, the 00:10:27.909 --> 00:10:30.289 file folders, the simple self -adhesive name 00:10:30.289 --> 00:10:33.090 badges, the mail merge labels. These were the 00:10:33.090 --> 00:10:36.169 finished or converted materials aimed directly 00:10:36.169 --> 00:10:39.090 at you, the consumer. Or at small businesses. 00:10:39.230 --> 00:10:41.250 That's the key distinction, right? That's the 00:10:41.250 --> 00:10:44.090 one. These were final products, contrasting sharply 00:10:44.090 --> 00:10:46.889 with their much larger materials division, which 00:10:46.889 --> 00:10:50.029 sold raw label stock in giant rolls to other 00:10:50.029 --> 00:10:52.330 industrial converters who would then turn them 00:10:52.330 --> 00:10:54.370 into final products. That distinction is vital. 00:10:54.789 --> 00:10:57.330 The office products division was high volume, 00:10:57.470 --> 00:10:59.750 but eventually it became lower margin, especially 00:10:59.750 --> 00:11:02.409 as the market changed. That division flourished 00:11:02.409 --> 00:11:04.470 throughout the late 80s and 90s with the boom 00:11:04.470 --> 00:11:06.750 in personal computing and printing. Oh, yeah. 00:11:06.870 --> 00:11:09.169 If you were doing any conventional mailing or 00:11:09.169 --> 00:11:11.470 organization, you needed their products. You 00:11:11.470 --> 00:11:13.850 had to have them. But the global communication 00:11:13.850 --> 00:11:16.669 landscape fundamentally shifted. You mentioned 00:11:16.669 --> 00:11:19.309 the rise of email and the decline in conventional 00:11:19.309 --> 00:11:22.490 mail volumes. That entire market began to plateau 00:11:22.490 --> 00:11:25.559 and eventually shrink. Which leads to the big 00:11:25.559 --> 00:11:29.000 question. Why would a major company sell the 00:11:29.000 --> 00:11:31.659 most recognizable, reliable cash flow business 00:11:31.659 --> 00:11:34.899 it had? It seems counterintuitive. It was a clear 00:11:34.899 --> 00:11:37.059 -eyed recognition macro trends and a calculated 00:11:37.059 --> 00:11:39.940 financial decision. The conventional office products 00:11:39.940 --> 00:11:42.740 business was becoming a drag on growth. Oh, so? 00:11:43.019 --> 00:11:45.399 It required constant physical distribution and 00:11:45.399 --> 00:11:47.940 the margins were being squeezed by digital competition. 00:11:48.759 --> 00:11:52.159 So Avery Dennison had a choice. Either try to 00:11:52.159 --> 00:11:54.779 save a declining business. or double down on 00:11:54.779 --> 00:11:56.879 their high -margin, specialized material science 00:11:56.879 --> 00:11:59.759 and emerging high -tech solutions. They chose 00:11:59.759 --> 00:12:02.460 the latter, resulting in the massive divestiture. 00:12:02.679 --> 00:12:06.340 On July 1, 2013, they sold the entire Office 00:12:06.340 --> 00:12:08.799 and Consumer Products division, including the 00:12:08.799 --> 00:12:11.720 popular Avery brand logo and name for those specific 00:12:11.720 --> 00:12:15.399 products, to CCL Industries. This move was a 00:12:15.399 --> 00:12:17.519 defining moment for the modern corporation. They 00:12:17.519 --> 00:12:19.909 retained their full corporate name. Avery Dennison, 00:12:20.029 --> 00:12:21.590 their history and their intellectual property, 00:12:21.909 --> 00:12:24.029 but they shed the entire business line that most 00:12:24.029 --> 00:12:25.950 people associated with them. So they were signaling 00:12:25.950 --> 00:12:28.909 a change. A huge one. They were signaling that 00:12:28.909 --> 00:12:31.190 their identity was no longer defined by finished, 00:12:31.330 --> 00:12:34.509 consumer -facing office goods, but by specialized 00:12:34.509 --> 00:12:36.710 industrial materials and digital technology. 00:12:36.950 --> 00:12:39.549 It was a calculated separation of brand legacy 00:12:39.549 --> 00:12:43.279 from future strategic direction. If the office 00:12:43.279 --> 00:12:45.240 products are gone, what is the modern structure 00:12:45.240 --> 00:12:48.120 of this $8 .76 billion company? You said they 00:12:48.120 --> 00:12:51.039 operate on two main pillars. They do. Based on 00:12:51.039 --> 00:12:54.559 2023 net sales figures, the organization is clearly 00:12:54.559 --> 00:12:57.340 bifurcated. The first pillar, and still the foundational 00:12:57.340 --> 00:12:59.779 business, is the materials group. This accounted 00:12:59.779 --> 00:13:03.559 for a massive $5 .8 billion in net sales in 2023. 00:13:04.190 --> 00:13:07.389 $5 .8 billion. That is huge. This is where the 00:13:07.389 --> 00:13:10.330 core R. Stanton Avery legacy lives, right? Absolutely. 00:13:10.529 --> 00:13:13.070 This group is tasked with manufacturing and producing 00:13:13.070 --> 00:13:15.549 the essential raw and highly specialized pressure 00:13:15.549 --> 00:13:17.909 -sensitive materials. This includes standard 00:13:17.909 --> 00:13:20.769 film and paper labels, but critically, it extends 00:13:20.769 --> 00:13:23.169 to complex high -performance applications. Like 00:13:23.169 --> 00:13:25.490 what? Sophisticated graphics, durable reflective 00:13:25.490 --> 00:13:27.850 materials, and specialty functional products. 00:13:28.110 --> 00:13:30.149 Can you give us a sense of what functional products 00:13:30.149 --> 00:13:33.320 means in this context? Sure. Think about durability 00:13:33.320 --> 00:13:36.019 and environment. This includes things like high 00:13:36.019 --> 00:13:37.960 -tech adhesives for industrial equipment, whether 00:13:37.960 --> 00:13:40.379 resistant films used in construction, or the 00:13:40.379 --> 00:13:42.960 specialized media used for full vehicle wraps. 00:13:43.379 --> 00:13:46.019 Ah, so the stuff that has to survive in the real 00:13:46.019 --> 00:13:49.159 world. Exactly. The materials group provides 00:13:49.159 --> 00:13:51.980 the raw composite materials, the multi -layer 00:13:51.980 --> 00:13:54.480 sandwiches of face stock, adhesive, and liner 00:13:54.480 --> 00:13:56.919 to other companies who then convert them into 00:13:56.919 --> 00:13:59.840 the final product. Their continued success relies 00:13:59.840 --> 00:14:02.279 on constantly innovating the acrylic and polymer 00:14:02.279 --> 00:14:04.740 chemistry behind the adhesive itself. Like I 00:14:04.740 --> 00:14:06.679 said, that's pillar one. And the second pillar, 00:14:06.759 --> 00:14:09.139 which is their engine for future growth and higher 00:14:09.139 --> 00:14:12.360 profitability, is the Solutions Group. Correct. 00:14:12.480 --> 00:14:15.039 The Solutions Group brought in $2 .6 billion 00:14:15.039 --> 00:14:18.799 in net sales in 2023. This is the high -tech, 00:14:18.860 --> 00:14:21.600 high -value engine focused on providing not just 00:14:21.600 --> 00:14:23.940 a material, but a complete solution centered 00:14:23.940 --> 00:14:26.500 around information and identity. And this is 00:14:26.500 --> 00:14:28.779 where we see that three C's strategy you mentioned 00:14:28.779 --> 00:14:31.159 earlier. This is it in action. Connectivity, 00:14:31.259 --> 00:14:34.179 customization, and care. Let's start with connectivity 00:14:34.179 --> 00:14:36.840 and customization here. What products drive that 00:14:36.840 --> 00:14:39.830 $2 .6 billion? This segment handles sophisticated 00:14:39.830 --> 00:14:42.610 branding and information management, particularly 00:14:42.610 --> 00:14:45.009 for the global apparel and general retail industries. 00:14:45.350 --> 00:14:47.629 They provide everything from woven and printed 00:14:47.629 --> 00:14:50.409 labels, external embellishments, price management 00:14:50.409 --> 00:14:53.269 systems, and specialized graphic elements. So 00:14:53.269 --> 00:14:55.509 if you bought a shirt and it has a fabric tag 00:14:55.509 --> 00:14:57.669 listing the size, that probably came through 00:14:57.669 --> 00:15:00.070 the solutions group. If it has a synthetic patch 00:15:00.070 --> 00:15:02.470 on the sleeve or specialized external branding, 00:15:02.669 --> 00:15:05.250 that's them. Yes, but the most impactful element 00:15:05.250 --> 00:15:07.809 within connectivity is their work in radio frequency. 00:15:07.850 --> 00:15:11.750 Frequency identification, RFID, tags, labels, 00:15:11.990 --> 00:15:14.690 and inlays. The digital voice of the product. 00:15:14.789 --> 00:15:18.190 That's it. An RFID tag contains a tiny chip and 00:15:18.190 --> 00:15:20.809 antenna. And when activated by a radio frequency 00:15:20.809 --> 00:15:23.990 reader, it can transmit a unique digital ID. 00:15:24.289 --> 00:15:26.409 And why is that so much more valuable than a 00:15:26.409 --> 00:15:28.450 standard barcode? I mean, barcodes work fine, 00:15:28.549 --> 00:15:30.370 don't they? They do for what they were designed 00:15:30.370 --> 00:15:33.029 for. But a barcode requires line of sight and 00:15:33.029 --> 00:15:35.710 can only identify the type of product, the SKIOU. 00:15:36.220 --> 00:15:39.379 An RFID tag identifies the specific individual 00:15:39.379 --> 00:15:42.360 item, its unique serial number, and it can be 00:15:42.360 --> 00:15:44.799 read almost instantly from a distance, hundreds 00:15:44.799 --> 00:15:47.779 at a time, without line of sight. This fundamentally 00:15:47.779 --> 00:15:50.820 revolutionizes inventory management, loss prevention, 00:15:51.139 --> 00:15:54.279 and supply chain visibility. The Solutions Group 00:15:54.279 --> 00:15:57.220 is a global leader in manufacturing these RFID 00:15:57.220 --> 00:15:59.700 transponders. Now let's pivot to the third C, 00:15:59.879 --> 00:16:03.269 care. The adhesive expertise, which started with 00:16:03.269 --> 00:16:05.570 peeling a sticker off a piece of paper, is now 00:16:05.570 --> 00:16:08.610 being deployed in life -critical medical applications. 00:16:09.049 --> 00:16:11.450 That's a fascinating evolution. It truly is. 00:16:11.570 --> 00:16:14.009 This falls under the Other Specialty Converting 00:16:14.009 --> 00:16:17.470 Businesses designation. And it houses Avery Dennison 00:16:17.470 --> 00:16:19.789 Medical, which used to operate under the name 00:16:19.789 --> 00:16:21.950 Vansive Medical Technologies. And who do they 00:16:21.950 --> 00:16:24.029 sell to? They sell highly engineered products 00:16:24.029 --> 00:16:26.110 directly to healthcare device manufacturers. 00:16:26.409 --> 00:16:29.350 What makes this material science so different 00:16:29.350 --> 00:16:32.149 from, say, a standard shipping label? The technical 00:16:32.149 --> 00:16:34.090 demands are just. They're exponentially higher. 00:16:34.250 --> 00:16:37.389 A skin contact adhesive must be biocompatible. 00:16:37.429 --> 00:16:39.850 It cannot cause irritation over long periods 00:16:39.850 --> 00:16:42.009 of wear. Which is a huge challenge for devices 00:16:42.009 --> 00:16:44.490 like continuous glucose monitors or long -term 00:16:44.490 --> 00:16:47.450 wearable sensors. A massive challenge. They provide 00:16:47.450 --> 00:16:50.110 specialized barrier films. sophisticated wound 00:16:50.110 --> 00:16:52.029 dressings that might incorporate different layers 00:16:52.029 --> 00:16:54.950 for absorption and protection, and custom -engineered 00:16:54.950 --> 00:16:57.669 securementates designed to reliably hold vital 00:16:57.669 --> 00:17:00.090 medical devices or tubes in place on the body 00:17:00.090 --> 00:17:03.370 without causing trauma upon removal. So it has 00:17:03.370 --> 00:17:05.650 to stick, but not too much. Right. It's a very 00:17:05.650 --> 00:17:08.769 delicate balance. This segment leverages their 00:17:08.769 --> 00:17:11.710 polymer and adhesive chemistry expertise to solve 00:17:11.710 --> 00:17:13.809 critical problems in patient safety and long 00:17:13.809 --> 00:17:16.230 -term care. So the move away from paper office 00:17:16.230 --> 00:17:18.470 supplies wasn't just lateral. It was a fundamental 00:17:18.470 --> 00:17:21.529 strategic elevation toward high margin, high 00:17:21.529 --> 00:17:24.650 tech, and mission critical applications across 00:17:24.650 --> 00:17:27.309 the three vectors of connectivity, customization, 00:17:27.710 --> 00:17:30.720 and care. And that strategic elevation was driven 00:17:30.720 --> 00:17:33.799 almost entirely by money, by an aggressive, intense 00:17:33.799 --> 00:17:36.180 merger and acquisition strategy over the past 00:17:36.180 --> 00:17:38.640 15 years. They weren't just waiting for technology 00:17:38.640 --> 00:17:41.039 to appear. They were buying intellectual property, 00:17:41.299 --> 00:17:44.339 deep expertise, digital platforms, and access 00:17:44.339 --> 00:17:46.880 to new high -value customer segments. A shopping 00:17:46.880 --> 00:17:50.509 spree. A very strategic one. The M &A activity 00:17:50.509 --> 00:17:53.490 signals a deep commitment to transforming into 00:17:53.490 --> 00:17:55.609 an information and connectivity provider. Okay, 00:17:55.650 --> 00:17:57.910 let's break down this M &A activity by those 00:17:57.910 --> 00:18:01.190 strategic focus areas. Starting with the massive 00:18:01.190 --> 00:18:04.210 push into retail, apparel, and identification, 00:18:04.529 --> 00:18:07.349 which firmly establishes the connectivity and 00:18:07.349 --> 00:18:10.130 customization pillars. The foundation for this 00:18:10.130 --> 00:18:12.990 vertical integration was laid back in 2007 with 00:18:12.990 --> 00:18:15.670 the acquisition of Paxar. Paxar was foundational 00:18:15.670 --> 00:18:18.410 because they were already a major manufacturer. 00:18:18.799 --> 00:18:21.440 of identification and tracking systems specifically 00:18:21.440 --> 00:18:23.900 for the retail supply chain. So they bought the 00:18:23.900 --> 00:18:26.599 infrastructure. Exactly. This immediately gave 00:18:26.599 --> 00:18:28.960 the newly forming solutions group the infrastructure 00:18:28.960 --> 00:18:31.220 and market access needed to integrate subsequent 00:18:31.220 --> 00:18:33.900 identification technologies. It was the platform 00:18:33.900 --> 00:18:36.579 upon which they built their RFID dominance. And 00:18:36.579 --> 00:18:39.299 speaking of RFID dominance, 2020 saw perhaps 00:18:39.299 --> 00:18:41.839 the most significant single technology acquisition, 00:18:42.339 --> 00:18:45.539 Smartrack's RFID transponder business. That was 00:18:45.539 --> 00:18:47.920 the move that cemented them. as the undisputed 00:18:47.920 --> 00:18:51.099 global leader in the RFID space. SmartRack was 00:18:51.099 --> 00:18:52.980 one of the other leading technology platforms, 00:18:53.299 --> 00:18:55.900 and by absorbing that business, Avery Dennison 00:18:55.900 --> 00:18:58.839 consolidated expertise, patents, and market share. 00:18:59.160 --> 00:19:02.220 It provided them with unrivaled scale in manufacturing 00:19:02.220 --> 00:19:04.819 those critical inlays that power the digital 00:19:04.819 --> 00:19:07.380 identity of products. Now let's look at how they've 00:19:07.380 --> 00:19:09.759 integrated this digital ID into the physical 00:19:09.759 --> 00:19:12.849 garment. It's a rapid -fire series of acquisitions 00:19:12.849 --> 00:19:15.349 designed to provide an end -to -end service for 00:19:15.349 --> 00:19:17.410 apparel brands. You see that progression from 00:19:17.410 --> 00:19:21.650 2022 and 2023. In 2022, they acquired Textrace, 00:19:21.789 --> 00:19:24.609 a Swiss technology developer. Textrace, what 00:19:24.609 --> 00:19:26.329 did they bring to the table? They specialize 00:19:26.329 --> 00:19:29.049 in custom -made woven and knitted RFIB products. 00:19:29.369 --> 00:19:32.809 Now, this is a subtle but profound step. The 00:19:32.809 --> 00:19:35.089 identification system is no longer just a hang 00:19:35.089 --> 00:19:37.750 tag. It can be woven or knitted directly into 00:19:37.750 --> 00:19:39.529 the fabric of the garment. So it becomes part 00:19:39.529 --> 00:19:41.470 of the shirt itself. Why does weaving it into 00:19:41.470 --> 00:19:43.890 the fabric matter so much for the brand? It matters 00:19:43.890 --> 00:19:46.650 for durability and aesthetics. If the tag is 00:19:46.650 --> 00:19:49.049 durable and discreetly integrated, it lasts the 00:19:49.049 --> 00:19:51.130 life of the product and can withstand industrial 00:19:51.130 --> 00:19:54.569 washing. Which is crucial for workwear or rental 00:19:54.569 --> 00:19:57.430 garments. Absolutely. It moves the embedded intelligence 00:19:57.430 --> 00:20:00.789 from a simple accessory to being part of the 00:20:00.789 --> 00:20:03.029 material structure itself. And the acquisitions 00:20:03.029 --> 00:20:06.069 in 2023 focus on adding aesthetic and functional 00:20:06.069 --> 00:20:09.710 customization capabilities. They acquired ThermoPatch. 00:20:10.089 --> 00:20:12.490 A specialist in labeling, embellishments, and 00:20:12.490 --> 00:20:15.490 transfers. Often used in high durability environments 00:20:15.490 --> 00:20:17.690 like industrial laundry and workwear. And then 00:20:17.690 --> 00:20:20.250 they followed that up with Lion Brothers. A designer 00:20:20.250 --> 00:20:23.089 and manufacturer of high -end apparel brand embellishments. 00:20:23.210 --> 00:20:26.029 Think decorative patches, logos, and badges. 00:20:26.250 --> 00:20:28.809 And then Silver Crystal Group. Right. A company 00:20:28.809 --> 00:20:31.089 that customizes jerseys and apparel for sport 00:20:31.089 --> 00:20:33.529 organizations. If you look at those three together. 00:20:34.320 --> 00:20:36.460 Thermopatch, Lion Brothers, and Silver Crystal. 00:20:36.740 --> 00:20:39.279 It paints a picture of massive vertical integration. 00:20:39.839 --> 00:20:42.099 Avery Dennison isn't just selling the raw label 00:20:42.099 --> 00:20:45.220 stock anymore. Not even close. They are now involved 00:20:45.220 --> 00:20:47.119 in the design, customization, manufacturing, 00:20:47.619 --> 00:20:49.880 and application of the branded embellishment 00:20:49.880 --> 00:20:52.180 itself. They are moving up the value chain from 00:20:52.180 --> 00:20:55.180 material supplier to full -service branding partner. 00:20:55.500 --> 00:20:58.759 And I'm guessing they can build the RFID right 00:20:58.759 --> 00:21:01.779 in from the start. And crucially... Yes, they 00:21:01.779 --> 00:21:04.099 can integrate their RFID technology directly 00:21:04.099 --> 00:21:06.539 into those embellishments from the point of manufacture, 00:21:06.920 --> 00:21:09.420 ensuring the digital identity is built in from 00:21:09.420 --> 00:21:12.599 day one. This provides massive competitive advantage 00:21:12.599 --> 00:21:15.339 and much higher margins than selling raw materials. 00:21:16.039 --> 00:21:18.299 Let's shift focus to the materials group, the 00:21:18.299 --> 00:21:21.720 $5 .8 billion pillar, which also saw a necessary 00:21:21.720 --> 00:21:24.200 expansion to stay competitive in specialty films 00:21:24.200 --> 00:21:26.819 and substrates. This shows the second strategic 00:21:26.819 --> 00:21:29.960 focus area. That's right. They continuously invested 00:21:29.960 --> 00:21:33.019 in upgrading their foundational science. In 2016, 00:21:33.180 --> 00:21:35.799 they acquired Ink Mill Corporation. This was 00:21:35.799 --> 00:21:38.039 purely a technology play. What kind of technology? 00:21:38.220 --> 00:21:40.319 It was about combining their advanced ink capabilities 00:21:40.319 --> 00:21:42.779 with Avery Dennison's portfolio for specialized 00:21:42.779 --> 00:21:46.160 media, like complex reflective materials. Reflective 00:21:46.160 --> 00:21:48.359 media, which we'll see later, is a high -stakes 00:21:48.359 --> 00:21:50.880 area used heavily for safety, road signs, and 00:21:50.880 --> 00:21:53.380 transportation applications. Extremely high stakes. 00:21:53.599 --> 00:21:56.220 They then expanded their film expertise in 2017 00:21:56.220 --> 00:21:59.819 with two key acquisitions. First, Haneda Coatings, 00:21:59.819 --> 00:22:02.220 a manufacturer specializing in specialty films 00:22:02.220 --> 00:22:04.839 and laminates. And what are those used for? These 00:22:04.839 --> 00:22:06.960 films are often used for things like window films, 00:22:07.259 --> 00:22:10.019 specialized industrial coatings, or flexible 00:22:10.019 --> 00:22:12.920 packaging barriers. Very technical stuff. And 00:22:12.920 --> 00:22:16.140 second, Youngle Tape Company Ltd., a manufacturer 00:22:16.140 --> 00:22:19.380 of specialty tapes and related products. What 00:22:19.380 --> 00:22:22.539 constitutes a specialty tape that justifies an 00:22:22.539 --> 00:22:25.180 acquisition? Specialty tapes are high -performance 00:22:25.180 --> 00:22:27.920 industrial adhesives. They are engineered to 00:22:27.920 --> 00:22:30.579 perform reliably under severe environmental stress 00:22:30.579 --> 00:22:33.200 that a consumer tape just couldn't handle. So 00:22:33.200 --> 00:22:35.519 not the stuff you have in your junk drawer. Definitely 00:22:35.519 --> 00:22:38.259 not. We're talking about tapes used in the automotive 00:22:38.259 --> 00:22:40.779 sector for sealing and dampening, or potentially 00:22:40.779 --> 00:22:43.700 in electronics for bonding components, or tapes 00:22:43.700 --> 00:22:46.599 that must maintain adhesion through extreme temperature 00:22:46.599 --> 00:22:49.619 fluctuations or specific chemical exposures. 00:22:49.740 --> 00:22:52.440 They are small components, but absolutely mission 00:22:52.440 --> 00:22:54.599 critical for the durability and safety of the 00:22:54.599 --> 00:22:57.519 final product. And linking back to the care segment, 00:22:57.680 --> 00:22:59.660 don't forget the acquisition of Finesse Medical 00:22:59.660 --> 00:23:03.259 in 2017. Right. Finesse Medical, based in Ireland, 00:23:03.420 --> 00:23:05.559 immediately brought new product lines and manufacturing 00:23:05.559 --> 00:23:08.180 capabilities into that high -value health care 00:23:08.180 --> 00:23:11.259 materials business. It fast -tracked their ability 00:23:11.259 --> 00:23:13.640 to produce advanced medical adhesives and films, 00:23:13.819 --> 00:23:16.819 reinforcing their focus on biocompatibility and 00:23:16.819 --> 00:23:19.039 patient care applications. Okay, we've covered 00:23:19.039 --> 00:23:21.259 their efforts to solidify their existing business 00:23:21.259 --> 00:23:23.980 and vertically integrate into apparel. But the 00:23:23.980 --> 00:23:26.940 third focus area is perhaps the most revolutionary 00:23:26.940 --> 00:23:30.660 and future -forward, the push into digital identity, 00:23:30.920 --> 00:23:33.839 connectivity, and sustainability. This is where 00:23:33.839 --> 00:23:36.220 we see the company truly embracing its role as 00:23:36.220 --> 00:23:38.680 an information conduit rather than just a material 00:23:38.680 --> 00:23:42.650 supplier. In 2021, Avery Dennison launched at 00:23:42.650 --> 00:23:47.670 AveryMade .io, spelled A -T -M -A dot I -O. They 00:23:47.670 --> 00:23:49.970 marketed it as a digital product cloud to connect 00:23:49.970 --> 00:23:52.470 physical and digital worlds. That phrase, digital 00:23:52.470 --> 00:23:54.789 product cloud, sounds like sophisticated marketing 00:23:54.789 --> 00:23:57.910 jargon. In plain terms, what exactly is the competitive 00:23:57.910 --> 00:24:01.130 advantage of at AMA .io? Aren't they competing 00:24:01.130 --> 00:24:04.029 with massive cloud providers like Amazon or Salesforce 00:24:04.029 --> 00:24:06.890 in the supply chain data space? They are, but 00:24:06.890 --> 00:24:08.930 they have a unique advantage. They manufacture 00:24:08.930 --> 00:24:11.970 the physical gateway. At my .io is essentially 00:24:11.970 --> 00:24:14.029 the operating system or the specialized data 00:24:14.029 --> 00:24:17.029 infrastructure built specifically to manage the 00:24:17.029 --> 00:24:19.609 concept of the digital twin. The digital twin. 00:24:19.730 --> 00:24:21.609 Every product that receives a unique digital 00:24:21.609 --> 00:24:24.549 ID, usually for one of their RFID tags or sensors, 00:24:24.750 --> 00:24:27.549 gets a corresponding data profile hosted and 00:24:27.549 --> 00:24:31.099 tracked on at ma .io. The sticker or the tag 00:24:31.099 --> 00:24:33.779 isn't just a physical identifier. It's the trigger 00:24:33.779 --> 00:24:36.880 that initiates and updates a massive data profile 00:24:36.880 --> 00:24:40.579 in the cloud. Exactly. Atmana .io allows brands 00:24:40.579 --> 00:24:42.880 to track that item's entire lifecycle. Yeah. 00:24:42.940 --> 00:24:45.619 From raw material sourcing through every stage 00:24:45.619 --> 00:24:47.759 of manufacturing, shipping, retail, consumer 00:24:47.759 --> 00:24:50.740 sale, and crucially, its eventual recycling or 00:24:50.740 --> 00:24:53.279 disposal. Wow. This provides unparalleled supply 00:24:53.279 --> 00:24:55.589 chain visibility. and enables brands to verify 00:24:55.589 --> 00:24:57.670 authenticity or even communicate with the consumer 00:24:57.670 --> 00:24:59.710 post -purchase, for instance, providing recycling 00:24:59.710 --> 00:25:01.890 instructions specific to that item's materials. 00:25:02.210 --> 00:25:04.710 The label is the physical key to a massive stream 00:25:04.710 --> 00:25:07.849 of lifecycle data. And to make those keys ubiquitous 00:25:07.849 --> 00:25:10.490 and cheap, they needed to invest in futuristic 00:25:10.490 --> 00:25:13.700 hardware. Look at their investment in Pragmatic 00:25:13.700 --> 00:25:16.799 back in 2016, focused on flexible electronics. 00:25:17.279 --> 00:25:20.339 The goal there was to miniaturize and cheapen 00:25:20.339 --> 00:25:22.460 the electronics used in intelligent packaging, 00:25:22.660 --> 00:25:24.960 making the package itself a data broadcasting 00:25:24.960 --> 00:25:27.500 point. But the technology that truly illustrates 00:25:27.500 --> 00:25:29.579 the future they are betting on is the investment 00:25:29.579 --> 00:25:32.599 in Williott. Avery Dennison joined Williott's 00:25:32.599 --> 00:25:35.539 Series B funding round in 2019. This is where 00:25:35.539 --> 00:25:38.059 we move into the realm of truly pervasive... 00:25:38.460 --> 00:25:41.039 inexpensive connectivity. Goliath specializes 00:25:41.039 --> 00:25:44.599 in what they call ambient IoT, specifically battery 00:25:44.599 --> 00:25:47.099 -free Bluetooth sensors. This is a breakthrough. 00:25:47.359 --> 00:25:50.299 Battery -free? Yes, because traditional IoT sensors 00:25:50.299 --> 00:25:52.779 require batteries, which are bulky, expensive, 00:25:52.960 --> 00:25:55.259 and require maintenance. Goliath sensors are 00:25:55.259 --> 00:25:57.779 paper -thin, tiny digital pixels. And the technical 00:25:57.779 --> 00:25:59.799 marvel is how they power these things if there's 00:25:59.799 --> 00:26:02.000 no battery. They harvest power from ambient radio 00:26:02.000 --> 00:26:04.180 frequencies. Wait, what does that mean? It means 00:26:04.180 --> 00:26:06.240 they run on the energy floating in the environment. 00:26:06.759 --> 00:26:09.440 Wi -Fi signals, cellular signals, or existing 00:26:09.440 --> 00:26:11.819 Bluetooth signals. Because they don't need a 00:26:11.819 --> 00:26:14.960 battery, they can be made incredibly cheap, highly 00:26:14.960 --> 00:26:17.539 resilient, and essentially permanent fixtures 00:26:17.539 --> 00:26:20.619 embedded into the material itself. That means 00:26:20.619 --> 00:26:22.859 these sensors can be embedded into nearly anything 00:26:22.859 --> 00:26:25.980 without adding weight, volume, or requiring maintenance. 00:26:26.680 --> 00:26:29.019 Can you give us an analogy for the listener about 00:26:29.019 --> 00:26:31.920 the real -world application here? Sure. Imagine 00:26:31.920 --> 00:26:35.180 every single item in a grocery store. Every jar. 00:26:35.740 --> 00:26:38.579 every head of lettuce, every box, having a sensor 00:26:38.579 --> 00:26:41.119 the size of a postage stamp embedded in its label. 00:26:41.240 --> 00:26:44.039 That sensor is constantly broadcasting data about 00:26:44.039 --> 00:26:46.160 its location, its temperature, and its status 00:26:46.160 --> 00:26:49.049 using the surrounding radio waves. A store manager 00:26:49.049 --> 00:26:51.369 could instantly know if milk is about to expire, 00:26:51.630 --> 00:26:54.069 if a specific product is misplaced, or where 00:26:54.069 --> 00:26:56.109 every single item is globally without ever needing 00:26:56.109 --> 00:26:58.529 to manually scan or even install a power source. 00:26:58.769 --> 00:27:01.670 That is incredible. That level of pervasive battery 00:27:01.670 --> 00:27:04.049 -free visibility is what Avery Dennison is buying 00:27:04.049 --> 00:27:06.329 into. They are buying into the idea that every 00:27:06.329 --> 00:27:08.410 physical object will soon have a real -time, 00:27:08.450 --> 00:27:11.630 permanent digital identity. And linking the physical 00:27:11.630 --> 00:27:14.029 world to the digital future must also address 00:27:14.029 --> 00:27:16.329 the enormous environmental challenge associated 00:27:16.329 --> 00:27:20.190 with manufacturing billions of materials. This 00:27:20.190 --> 00:27:22.049 is where their sustainability investments come 00:27:22.049 --> 00:27:25.410 in. It's a crucial business necessity for a company 00:27:25.410 --> 00:27:27.970 that produces billions of labels, tags and specialty 00:27:27.970 --> 00:27:30.650 films that inevitably end up on packaging and 00:27:30.650 --> 00:27:32.789 apparel. They need to ensure their materials 00:27:32.789 --> 00:27:35.329 can participate. in the circular economy. Right, 00:27:35.450 --> 00:27:37.450 or they become part of the problem. Exactly. 00:27:37.730 --> 00:27:40.109 This led to investments like Roadrunner Recycling 00:27:40.109 --> 00:27:43.569 in 2020 and Cirque in 2023. Before we move on, 00:27:43.670 --> 00:27:46.130 what does the Cirque investment in textile -to 00:27:46.130 --> 00:27:48.650 -textile recycling specifically mean in the context 00:27:48.650 --> 00:27:50.849 of the billions of apparel tags they produce? 00:27:51.210 --> 00:27:53.869 Cirque focuses on breaking down used polyester 00:27:53.869 --> 00:27:56.269 and cotton blends and separating them at the 00:27:56.269 --> 00:27:59.049 molecular level so the fibers can be fully reused 00:27:59.049 --> 00:28:01.890 to make new fabric, hence textile -to -textile. 00:28:01.990 --> 00:28:04.819 I see. For Avery Dennison, this is about ensuring 00:28:04.819 --> 00:28:07.099 that the materials they use for embellishments, 00:28:07.140 --> 00:28:09.900 labels, and identification systems are compatible 00:28:09.900 --> 00:28:13.799 with modern recycling streams. If the label or 00:28:13.799 --> 00:28:15.799 the adhesive contaminate the textile recycling 00:28:15.799 --> 00:28:19.539 process, the whole system fails. By investing 00:28:19.539 --> 00:28:21.700 in this technology, they are ensuring their products 00:28:21.700 --> 00:28:23.880 are designed for circularity, which is essential 00:28:23.880 --> 00:28:26.579 for meeting brand sustainability goals. Beyond 00:28:26.579 --> 00:28:29.680 their core areas of materials, apparel ID, and 00:28:29.680 --> 00:28:32.220 digital cloud, they made a few other noteworthy 00:28:32.220 --> 00:28:34.359 acquisitions that show their willingness to pivot 00:28:34.359 --> 00:28:37.859 into adjacent market spaces. Absolutely. In 2017, 00:28:38.059 --> 00:28:40.500 they invested in Wrapify, which is focused on 00:28:40.500 --> 00:28:43.200 expanding the car wrap industry. This is a direct 00:28:43.200 --> 00:28:44.960 play on their high -performance graphics and 00:28:44.960 --> 00:28:47.220 materials group, exploring how their advanced 00:28:47.220 --> 00:28:50.160 adhesive films can be used for wide format, durable 00:28:50.160 --> 00:28:52.539 outdoor advertising, and vehicle personalization. 00:28:52.940 --> 00:28:55.119 And showing a pivot toward food retail operational 00:28:55.119 --> 00:28:58.759 automation, a key emerging sector. In 2021, they 00:28:58.759 --> 00:29:01.759 acquired Zipium. Zipium is a California -based 00:29:01.759 --> 00:29:04.200 startup focused on developing software and hardware 00:29:04.200 --> 00:29:07.000 solutions specifically for operational automation 00:29:07.000 --> 00:29:09.440 and inventory management for food retailers. 00:29:09.759 --> 00:29:12.460 This moves them beyond simply providing label 00:29:12.460 --> 00:29:15.079 and into providing the system that manages the 00:29:15.079 --> 00:29:17.579 product lifecycle within a quick service or grocery 00:29:17.579 --> 00:29:20.069 environment. Again, leveraging digital IDs and 00:29:20.069 --> 00:29:23.930 streamlined logistics. And also in 2021, they 00:29:23.930 --> 00:29:27.430 acquired Vestcom. Vestcom is a provider of pricing 00:29:27.430 --> 00:29:29.890 and branded labeling solutions, but specifically 00:29:29.890 --> 00:29:32.569 focused on the retail shelf edge. This is a very 00:29:32.569 --> 00:29:34.690 targeted acquisition. The shelf edge. The shelf 00:29:34.690 --> 00:29:38.029 edge is a critical, high -volume, necessary retail 00:29:38.029 --> 00:29:40.809 touchpoint where consumers make their final purchasing 00:29:40.809 --> 00:29:43.819 decisions. By owning that space, they reinforce 00:29:43.819 --> 00:29:46.319 their presence exactly where the physical material 00:29:46.319 --> 00:29:48.759 meets the consumer interaction point. So the 00:29:48.759 --> 00:29:51.539 overall acquisition strategy is profoundly cohesive. 00:29:52.140 --> 00:29:55.119 Solidify dominance and specialty materials, acquire 00:29:55.119 --> 00:29:58.299 the best digital ID technology like SmartTrack 00:29:58.299 --> 00:30:00.380 and Williott, build the cloud infrastructure 00:30:00.380 --> 00:30:03.000 to manage the resulting data with AppMe .io, 00:30:03.279 --> 00:30:06.019 and then vertically integrate into high -value 00:30:06.019 --> 00:30:08.140 customer segments like apparel customization 00:30:08.140 --> 00:30:11.000 and specialized healthcare. That's the playbook. 00:30:11.400 --> 00:30:13.920 is a stunning transformation driven by strategic 00:30:13.920 --> 00:30:16.720 investment. A company of this stature, operating 00:30:16.720 --> 00:30:18.819 at the intersection of critical industrial IP, 00:30:19.079 --> 00:30:21.880 faces inevitable corporate challenges and competition. 00:30:22.500 --> 00:30:25.339 That scale often leads to confrontations with 00:30:25.339 --> 00:30:27.859 other industry giants. Which is why the 2012 00:30:27.859 --> 00:30:30.920 litigation with 3M Company is worth noting. Yes, 00:30:30.940 --> 00:30:33.380 the 3M dispute was significant because it highlighted 00:30:33.380 --> 00:30:35.940 the fierce competition and high stakes involved 00:30:35.940 --> 00:30:38.259 in their legacy materials group, particularly 00:30:38.259 --> 00:30:40.730 around proprietary safety technology. The core 00:30:40.730 --> 00:30:43.289 dispute revolved around highly specialized, high 00:30:43.289 --> 00:30:46.930 -performance materials, specifically retro -reflective 00:30:46.930 --> 00:30:49.430 sheeting used for road signs, traffic control 00:30:49.430 --> 00:30:52.210 devices, and other transportation products. And 00:30:52.210 --> 00:30:55.329 3M, of course, is a massive player in this space. 00:30:55.490 --> 00:30:58.150 And they allege that Avery Dennison infringed 00:30:58.150 --> 00:31:01.170 on their patents related to this retro -reflective 00:31:01.170 --> 00:31:04.569 technology, particularly focusing on Avery Dennison's 00:31:04.569 --> 00:31:07.200 Omnicube product line. And just to clarify, retro 00:31:07.200 --> 00:31:09.460 reflective sheeting is that stuff that seems 00:31:09.460 --> 00:31:11.480 to glow at night when your headlights hit it, 00:31:11.519 --> 00:31:14.200 right? Exactly. It's deceptively complex. It 00:31:14.200 --> 00:31:17.380 uses micro prisms or beads to reflect light directly 00:31:17.380 --> 00:31:19.500 back to the source, like a car's headlights, 00:31:19.740 --> 00:31:22.859 to maximize visibility at night. The proprietary 00:31:22.859 --> 00:31:25.539 design of those prisms is immensely valuable 00:31:25.539 --> 00:31:28.799 intellectual property. And 3M requested an injunction 00:31:28.799 --> 00:31:31.319 to stop Avery Dennison from selling Omnicube, 00:31:31.519 --> 00:31:33.279 which would have been an immediate and significant 00:31:33.279 --> 00:31:35.319 blow to that part of the materials group. It 00:31:35.319 --> 00:31:37.259 would have been, yes. But fortunately for Avery 00:31:37.259 --> 00:31:39.940 Dennison, the court denied 3M's request for the 00:31:39.940 --> 00:31:42.779 injunction, which signaled skepticism about 3M's 00:31:42.779 --> 00:31:44.940 immediate claim to harm. And then things got 00:31:44.940 --> 00:31:47.440 interesting. And here's where the legal maneuvering 00:31:47.440 --> 00:31:50.640 got intense. Avery Dennison brought counterclaims 00:31:50.640 --> 00:31:53.480 of their own against 3M, alleging both patent 00:31:53.480 --> 00:31:56.220 infringement by 3M and critically antitrust violations. 00:31:56.559 --> 00:31:59.019 So it wasn't just a defensive posture. It was 00:31:59.019 --> 00:32:01.539 an aggressive counterattack introducing the element 00:32:01.539 --> 00:32:05.119 of antitrust. Exactly. The dual pressure IP infringement 00:32:05.119 --> 00:32:07.819 allegations going both ways, plus the threat 00:32:07.819 --> 00:32:10.619 of a prolonged, costly antitrust investigation, 00:32:10.980 --> 00:32:13.900 led to a resolution where the parties ultimately 00:32:13.900 --> 00:32:17.019 agreed to dismiss the three pending cases. So 00:32:17.019 --> 00:32:20.200 nobody won. but nobody lost it was a mutual strategic 00:32:20.200 --> 00:32:22.839 dismissal rather than a decisive court ruling 00:32:22.839 --> 00:32:25.539 it demonstrated that neither party had the clear 00:32:25.539 --> 00:32:28.410 upper hand and both preferred to avoid extended 00:32:28.410 --> 00:32:31.750 public litigation over highly sensitive intellectual 00:32:31.750 --> 00:32:34.569 property. That detail underscores that while 00:32:34.569 --> 00:32:37.049 the company is chasing the digital cloud, the 00:32:37.049 --> 00:32:39.529 complexity and high value of their core materials 00:32:39.529 --> 00:32:42.369 group products, like specialized films and sheeting, 00:32:42.430 --> 00:32:45.130 remain a fierce competitive battleground. It 00:32:45.130 --> 00:32:47.069 also demonstrates their willingness to defend 00:32:47.069 --> 00:32:49.740 their IP aggressively. even against a titan like 00:32:49.740 --> 00:32:52.759 3M. You don't execute a near $9 billion transformation 00:32:52.759 --> 00:32:55.500 without being willing to take risks and fight 00:32:55.500 --> 00:32:57.319 for market share in both the physical and digital 00:32:57.319 --> 00:32:59.720 domains. And speaking of that physical domain, 00:32:59.980 --> 00:33:02.619 it's vital to remember that despite the flash 00:33:02.619 --> 00:33:05.960 of Atmed .io and Williott, they are still fundamentally 00:33:05.960 --> 00:33:09.420 an adhesive science company. We see proof of 00:33:09.420 --> 00:33:11.240 their continued investment in that foundational 00:33:11.240 --> 00:33:15.579 R &D with the 2022 ASC Innovation Award. Yes, 00:33:15.640 --> 00:33:18.880 the Adhesive and Sealant Council. ASC, recognize 00:33:18.880 --> 00:33:21.839 them for advanced acrylics technology for high 00:33:21.839 --> 00:33:24.480 -performance pressure -sensitive adhesive applications. 00:33:24.839 --> 00:33:27.460 Which sounds very technical. It is, but it's 00:33:27.460 --> 00:33:30.180 a crucial detail for you, the learner. It shows 00:33:30.180 --> 00:33:32.220 they aren't neglecting the chemistry that supports 00:33:32.220 --> 00:33:35.039 the entire enterprise. Acrylics are versatile 00:33:35.039 --> 00:33:37.380 polymers, and advancing their technology allows 00:33:37.380 --> 00:33:40.200 them to create better, longer -lasting, thinner, 00:33:40.359 --> 00:33:42.720 and more specialized adhesives. And why does 00:33:42.720 --> 00:33:45.240 that matter today? Why is better glue still so 00:33:45.240 --> 00:33:47.700 important? Because every single high -tech application 00:33:47.700 --> 00:33:49.940 we discussed relies on that foundational chemistry. 00:33:50.240 --> 00:33:52.859 Better acrylics mean better, more skin -friendly 00:33:52.859 --> 00:33:55.480 adhesives for wearable medical sensors. It means 00:33:55.480 --> 00:33:58.940 better, more durable bonding agents for permanent 00:33:58.940 --> 00:34:02.180 automotive graphics and more reliable, heat -resistant 00:34:02.180 --> 00:34:05.059 bonds for the RFID inlays that are sewn into 00:34:05.059 --> 00:34:08.239 textiles. The digital future is literally held 00:34:08.239 --> 00:34:11.000 together by Better Glue. It connects their 90 00:34:11.000 --> 00:34:13.199 -year history directly to the future of the solutions 00:34:13.199 --> 00:34:15.659 group. And finally, let's return to the massive 00:34:15.659 --> 00:34:17.739 corporate scale we mentioned at the start, driven 00:34:17.739 --> 00:34:20.780 by these strategic moves. The decades of growth. 00:34:21.320 --> 00:34:23.360 The strategic divestiture of the low -margin 00:34:23.360 --> 00:34:25.800 business and the relentless acquisition strategy 00:34:25.800 --> 00:34:28.619 have cemented their place among America's largest 00:34:28.619 --> 00:34:31.940 manufacturers. The company ranked number 421 00:34:31.940 --> 00:34:35.420 on the 2023 Fortune 500 list, reporting total 00:34:35.420 --> 00:34:38.599 sales of $8 .4 billion for that period. Wow. 00:34:38.960 --> 00:34:41.480 That rank doesn't just represent success. It 00:34:41.480 --> 00:34:43.519 represents an essential, globally significant 00:34:43.519 --> 00:34:46.400 position in modern manufacturing and supply chain 00:34:46.400 --> 00:34:48.480 management. They successfully transformed from 00:34:48.480 --> 00:34:50.400 a traditional manufacturer into an essential 00:34:50.400 --> 00:34:52.980 partner in global commerce and technology deployment, 00:34:53.280 --> 00:34:55.199 proving that corporate reinvention is possible, 00:34:55.380 --> 00:34:58.000 even for a company rooted in 19th century manufacturing. 00:34:59.179 --> 00:35:01.059 What does this all mean for you, the learner, 00:35:01.219 --> 00:35:03.440 taking the deep dive today? The transformation 00:35:03.440 --> 00:35:06.239 of Avery Dennison is really a masterclass in 00:35:06.239 --> 00:35:08.880 strategic corporate evolution. They recognized 00:35:08.880 --> 00:35:11.079 that the old business model selling basic office 00:35:11.079 --> 00:35:13.659 products was obsolete. And they acted on it. 00:35:13.739 --> 00:35:16.179 They successfully navigated that challenge by 00:35:16.179 --> 00:35:18.900 investing heavily and strategically in what we 00:35:18.900 --> 00:35:21.940 defined as the three Cs, connectivity. That's 00:35:21.940 --> 00:35:25.840 the RFID, Williott, and at Alma .io. customization, 00:35:26.320 --> 00:35:28.960 the vertical integration into apparel embellishments, 00:35:28.960 --> 00:35:31.679 their high -value specialty medical materials. 00:35:31.900 --> 00:35:34.539 They successfully merged two distinct industrial 00:35:34.539 --> 00:35:37.480 histories, Denison's 19th century mastery of 00:35:37.480 --> 00:35:40.340 standardization and Avery's 20th century adhesion 00:35:40.340 --> 00:35:43.619 innovation into a 21st century digital and specialty 00:35:43.619 --> 00:35:45.760 materials conglomerate. The resulting company 00:35:45.760 --> 00:35:48.780 spans 50 -plus countries and employs 35 ,000 00:35:48.780 --> 00:35:51.239 people, proving that scale and high -tech relevance 00:35:51.239 --> 00:35:54.099 can coexist. They are not just selling a product, 00:35:54.300 --> 00:35:56.449 they're selling the underlying intelligence that 00:35:56.449 --> 00:35:58.690 powers the visibility and efficiency of global 00:35:58.690 --> 00:36:01.530 retail and logistics. The fundamental insight 00:36:01.530 --> 00:36:03.769 here is that the physical material they produce 00:36:03.769 --> 00:36:06.570 is no longer inert. It is a conduit for information. 00:36:07.130 --> 00:36:10.329 The label is no longer just paper and glue. It 00:36:10.329 --> 00:36:12.909 is the physical manifestation of a digital identity, 00:36:13.210 --> 00:36:16.170 serving as the gateway to the digital twin concept. 00:36:16.429 --> 00:36:18.989 Which brings us to our final provocative thought 00:36:18.989 --> 00:36:21.590 for you to chew on. Avery Dennison is heavily 00:36:21.590 --> 00:36:24.849 focused on using invisible, paper -thin, battery 00:36:24.849 --> 00:36:27.550 -free sensors and digital ID platforms like at 00:36:27.550 --> 00:36:30.650 AFMA .io to track products from manufacturing 00:36:30.650 --> 00:36:33.909 through to recycling. This implies pervasive 00:36:33.909 --> 00:36:37.090 tracking infrastructure. Consider. How far are 00:36:37.090 --> 00:36:39.210 we, really, from a future where every single 00:36:39.210 --> 00:36:41.489 physical object you own, from the appliances 00:36:41.489 --> 00:36:43.429 in your kitchen to the individual clothes in 00:36:43.429 --> 00:36:46.170 your closet, has a constant real -time digital 00:36:46.170 --> 00:36:48.429 identity embedded directly within the material 00:36:48.429 --> 00:36:51.269 itself, constantly streaming data about its history, 00:36:51.409 --> 00:36:53.730 location, authenticity, and potential for reuse? 00:36:54.030 --> 00:36:56.050 It's a vision where the physical and digital 00:36:56.050 --> 00:36:58.780 worlds are seamlessly unified. and that Unity 00:36:58.780 --> 00:37:01.219 is powered by a remarkably sophisticated piece 00:37:01.219 --> 00:37:04.059 of pressure -sensitive adhesive technology. Thank 00:37:04.059 --> 00:37:05.679 you for joining us for the Deep Dive. We'll see 00:37:05.679 --> 00:37:06.139 you next time.