After a seven-year struggle, Avery Dennison Corp. – which pioneered self-adhesive labels 75 years ago – may finally be gaining traction on a new technology that could boost its lagging sales.

Radio Frequency Identification Devices – also known as RFID overlays – are being used to track luggage at McCarran International Airport in Las Vegas and Hong Kong International Airport following deals the company struck last year.

And just within the last few months, the technology has been purchased by German fashion retailer Gerry Weber Group, a major accomplishment after a series of false starts.

“We’re approaching the level of growth that people anticipated back in 2003,” said Jack Farrell, vice president and general manager of Avery’s RFID division. “Our sense is that 2010 will be the best in the industry by a significant amount.”

Worldwide sales of RFID-related technology are expected to hit $5.4 billion this year, up from about $4.7 billion in 2008, according to ABI Research, an Oyster Bay, N.Y. consultancy. And by 2014, worldwide revenues are expected to grow by at least another 12 percent.

If the projections hold up, the RFID business could breathe some life into Avery Dennison, an old-line company that has been lagging for years as its core business of pressure sensitive labels and office products experiences weak sales.

RFID tags are paper thin chips-on-a-label that allow products to be tracked without bar code scanning devices. Instead, the tags emit radio signals that are picked up remotely by proprietary electronic readers.

The tags are used to track products through the supply chain – from the factory to the store. And when affixed to pieces of luggage checked in at an airport, for example, they help baggage handlers track luggage and recover lost pieces.

RFID competitors include privately-held Alien Technology, a Bay Area company in Morgan Hill, and several Scandinavian companies, including UPM Raflatac, in Helsinki, Finland. Alien Technology does not disclose its financials.

The technology was seen as the next big thing in supply chain management when it was first introduced, especially when Wal-Mart ordered its suppliers to put RFID tags on all pallets and cases of goods being shipped to its warehouses and stores.

“We had investigated the business and there was a strong sense that RFID would be replacing bar codes in high volume,” Farrell recalled. “The Wal-Mart mandate gave everyone the confidence to leverage their investments and move faster.”

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