SML Group Buys CGP Labels

Jul 31, 2012Global apparel branding and packaging company SML Group has acquired U.S. label manufacturer CGP Labels, enabling the Hong Kong-based firm to meet the growing need for item-level RFID tags in the retail sector. The company aims to broaden its capacity for RFID research and development, by means of CGP's own R&D laboratory in Clayton, N.C., as well as increase its label production worldwide. The sale was completed on Thursday, July 19.

SML Group provides paper and woven labels for item-level retail applications, such as hangtags, pressure-sensitive labels, booklet labels and coupons, with approximately 90 percent of that business is unrelated to radio frequency identification. However, the RFID business is growing, the company reports. In 2012, the firm expects to sell 200 million RFID tags, while that number is anticipated to double in 2013. SML Group provides ultrahigh-frequency (UHF) Gen 2 EPC labels for retail apparel applications, and can also supply high-frequency (HF) labels. In addition, it has released an end-to-end RFID solution, known as ViziT, comprising labels, printing, encoding, reader infrastructure, installation and software. The company is currently developing a cloud-based server for managing data related to the ViziT system, according to Philip Calderbank, SML Group's global RFID VP.

"We've been on an expansion path with RFID since early 2011," Calderbank says. The company's largest customer base, consisting of apparel manufacturers, is located in Asia.

CGP Labels' own product sales are divided about evenly between RFID and non-RFID labels, says J. Thomas Dew, CGP's president, with most of the customer base (about 75 percent) located within the United States, and the rest elsewhere throughout the Americas and in Europe. SML Group, on the other hand, has a global market with an Asian focus, serving goods manufacturers located within that region, as well as offering a global network of service bureaus for tag-commissioning services.

"What CGP brings to us is a full innovation and production center," Calderbank states. At its production facility in North Carolina, CGP manufactures a range of RFID hangtags and paper stickers, with a capacity of 250 million pieces annually. SML's R&D and production work, currently being carried out at its facilities in the southern Chinese city of Dongguan, will now be augmented by CGP's U.S. operations. At its Chinese R&D site, SML Group conducts development work related to its RFID-based labels and its ViziT solution. With the acquisition, some of this work will now be performed by CGP's engineers as well. Calderbank says his firm intends to continue the development it has begun on several innovations, including creating a woven RFID tag, as well as a tag combining EPC UHF and Near Field Communication (NFC) HF RFID capabilities. "CGP will now join our R&D group," he says, "and help to work on the design of special inlays for woven labels."

The acquisition of CGP also introduces SML to further business opportunities in the United States and Europe. This enables SML Group to better reach end users more likely to be product distributors than goods manufacturers, and also adds to the company's customer base.

CGP Labels—which, according to Dew, will continue serving its customers under its existing name, and be based at its existing facility—will now have access to SML's service bureaus for the commissioning of CGP's RFID labels. For both companies, he notes, the merger provides an opportunity to fill orders more quickly, in any part of the world, whether involving RFID labels or otherwise.

"If CGP had a problem [before the acquisition], it was that we were growing too fast," Dew says. "We have a significant customer base" that is expanding at a rate that would be difficult to serve without joining another entity, he adds. Many of those customers are retail product suppliers based in the United States, and are deploying RFID to meet mandates from retailers that sell those goods within their stores. "The RFID part was what was growing fastest, and we needed to find someone with a like infrastructure. We needed someone like SML, with a global presence and the same products and services."

According to Calderbank, engineers at CGP's laboratory will begin working on SML's R&D projects immediately.