The firm's chief executive, Philip Neal, said that RFID is expected to be 'the company's largest long-term health opportunity'.
RFID technology is based on a relatively simple concept. It consists of two elements that communicate through radio transmission - a tag and a reader. The tag contains a small chip and an antenna and can be placed on any object. The information on the tag, such as an identification number, can be transmitted to an RFID reader over a distance of a few metres.
Pharmaceutical companies have been using RFID technology for years in niche applications such as tracking lab samples, and recently have begun examining the potential benefits of using RFID to track finished products. This examination has been accelerated by the decision by US retailer Wal-Mart to require its top 100 suppliers to use RFID-tagging early next year.
But the drug industry is leading the way with this effort, and is already using RFID to monitor the supply to Wal-Mart pharmacies of controlled drugs with the potential for abuse.
In a report issued last year by the FDA, the agency estimated that pharmaceutical companies would complete full-scale, pallet- and case-level RFID tagging of most pharmaceutical products within a three-year timeline, using electronic product code (EPC)-compliant RFID tags.
Avery Dennison plans to make the most of its existing labeling relationship with the drug industry and scale to move into the RFID sector in strength. It will have the advantage of being able to draw on its existing distribution system by marketing RFID inlays and tags to its label converter customers, who supply pressure-sensitive labels to the pharmaceutical and other industries.
The company maintains that pressure sensitive labels are the best vehicle for carrying the chip and antenna components of an RFID tag, and that as one of the top companies in this category worldwide, it should be able to capture a significant share of the RFID label market. It is building an infrastructure that will produce quantities of RFID labels in the hundreds of millions.
The new RFID business unit will be headed by Mathew Mellis, 58, who has also been appointed vice president, RFID and specialty converting. Stan Drobac, vice president of RFID Applications, will continue to lead the division's sales, marketing, research and development activities and will report to Mellis.
Earlier this year, the comany exhibited its RFID printer/encoder, which can print bar codes on labels with embedded UHF Class 1 and Class 0 RFID tags, at the Retail Systems exhibition in Chicago, US.
The company intends to roll out the reader in service bureaus around the world which will provide preprogrammed tags and printed labels for manufacturers.
Avery Dennison expects to begin generating revenue from its RFID business by the end of 2004, with 'significant growth' expected in 2005 and beyond.
RFID technology is expected to be a significant growth driver for the electronics sector, growing by 255 per cent from $900 million in 2003 to $2.3 billion (€1.86bn) in 2010, according to Future Horizons, a market research firm based in the UK.