Avery Dennison to sell one billion RFID tags in 2011?
To close out our recent theme on RFID tag cost, I thought I would point out an under reported story from the Wall Street Journal earlier this month (RFID 24-7 was one of the few). It was an analysis of Avery Dennison’s retail information unit which includes RFID and commands healthy 12-14% profit margins.
The other side of RFID Tag Cost is Revenue
After a disappointing 2009 when retailers saw sales volumes plummet, Avery is experiencing a strong comeback this year. The article cites estimates that Avery will generate $50 million in RFID revenue in 2010 and it could grow to $150 million next year. At the industry average tag price of 12.35 cents cited in ODIN’s recently published RFID Tag Pricing Guide, it calculates to over 400 million RFID tags sold.
Avery isn’t alone in its rapid growth and improving economics. As we reported earlier (RFID Tag Supply Chain Delays) many tag suppliers are on back order due to such strong demand. It is widely known in the industry that companies such as Alien Technology have produced record tag sales each quarter this year.
Will Avery Sell a Billion RFID Tags in 2011?
Let’s do some math. What if Avery’s RFID unit triples its revenue to a whopping $150 million next year as some analysts predict? Even if we assume a price drop of only 5% in 2011, that would generate over 1.25 BILLION tags sold. If the revenue is only $100 million and prices drop by 10%, the total volume would be 900 million. One billion annual tag sales seem certain no later than 2012 and we are probably looking at numbers closer to two billion for that year.
These are clearly the kind of numbers many early investors were looking for when Walmart and the U.S. Department of Defense made their first RFID announcements in 2003. It has been fashionable to talk down RFID due to growth rates over the past six years that didn’t meet short-term expectations. With RFID adoption growing rapidly across multiple industries, we expect the dominant RFID narrative to shift permanently in 2011.
What do you think about Avery’s march to one billion tags?
Who do you think will be the tag market share leader next year?
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