On the Ball

Ball Packaging has acquired Neuman Aluminum, a producer of aluminium slugs used to make extruded aerosol cans, beverage bottles, tubes etc. This is a strategic move to get access to critical technology. In the existing beverage can oligopoly it is crucial to get a technological advantage. This is another well placed step on that route for the Ball Corporation.

Rexam did what it had to do

Yesterday Rexam announced that sales the first 6 months this year has been up 2% and that operating profit is up by 25%, all organic and compared to the same period last year. With a new CEO you have to show the share holders, and any other bystanders, that the shift by the helm worked very well indeed.

And it did, cash is flowing and the so important segment beverage cans are also growing by 2%. Beverage cans are the backbone of Rexam with some 2/3 of the business. Speciality cans are said to be one of the drivers of the 2% recording. Generally cans are a growing packaging segment, growing in South America and East Europe, stable in North America and West Europe and a very uncertain matter in Russia. This is obviously a concern when you are leading the market in that particular place.

Nevertheless, speciality cans are back which is a good sign as such. It indicates that confidence in the market among customers is back to a degree.

A few plants have been sold and a few people have been made redundant and now Rexam is floating. The share price is still remarkably low but time will tell what is right there.

On the plastic side closures, in particular beverage closures, are dragging while personal care packaging is up.

So far so good for Rexam this year.

Sustainability – a matter for the CEO

Accenture has recently made a study together with the UN where they surveyed CEO’s from around the world. http://bit.ly/bPXoL9 The subject was sustainability and the view the CEO’s might have on this. The research team seem to have made quite an effort and they have got 766 responses from the survey and on top of that they have made 50 in-depth interviews. Impressive.

I must say that also the findings are in many ways impressive.

  • 93% of CEO’s believe that sustainability issues will be critical to the future success of their business.
  • 96% of CEO’s believe that sustainability issues should be fully integrated into the strategy and operations of a company (up from 72% in 2007).
  • 88% of CEO’s believe that they should be integrating sustainability through their supply chain. Only 54% believe that this has been achieved within their company. An almost identical performance gap is seen for subsidiaries.

Besides all the comments and remarks you can make, “how is sustainability defined”, “how many questionnaires were distributed”, “pc responses were expected” and “54 %(!) Believe that this has been achieved…….”, it’s great. It is great that sustainability is a recognised problem and/or opportunity.

Not long ago very few CEO’s would have had the intention to integrate sustainability in the strategy of their company. Strategic planning is still the process of building up a plan that will make the company survive and prosper in the near future. Now sustainability has made it to that level, that it is critical to a company’s survival.

This is great news and the journey to this point has been long and far from a straight line. We can now expect to see some policy changes across the board in the near future.

This also makes you think. After sustainability, what is going to be the next big issue….?

Beer in China

It was a few years back in time when China took over the position as the largest beer country from the US. In 2003 more beer was officially consumed in China than in the US, the former beer giant. Beer consumption in the US is stagnant while in China it is booming, like so much else in the new land of hope and glory. From a packaging perspective however the Chinese situation is a gigantic opportunity, for everyone, as 95% of the volume is in refillable glass bottles.

Now the country consequently, within a couple of years, is going to become also the largest market for packaging machinery.  This through an outstandingly rapid growth and it obviously makes sense given the size and potential of the market.

Everything is growing but the big question is what will be the beer container preferred in a few years time? The market is developing fast and does not necessarily have to go through all the phases we have seen in the developed world. The market can go straight to whatever it pleases, PET bottles or cans or one-way glass bottles. That is the big question and probably it will be a bit of everything in the end but it is all determined now. It is now that the market is buying packaging machines and filling lines. What they invest in now will set the future pack-mix.

Legislators – water bottles, on or off?

Colorado Governor Bill Ritter recently announced that he is cutting state spending on bottled water.  He is not alone out there, according to a US national survey more and more cities are phasing out bottled water from city budgets. The decisions not to use bottled water are “about civic pride and protecting common resources.”

The situation is entirely different on the opposite side of the planet. According to FoodBev.com the city of Mumbai is planning to deal with insufficient water quality by using bottled water. Public water taps are planned to be replaced by water bottle booths where 20 litre bottles will be handled. The reason is obviously health related.

The interesting thing is that it is so easy for legislators and similar to rock the boat of packaging and change the scene over night. There are many examples, for instance Germany in 2003 when the beverage can was in practice banned over night. This happened because of a change in power and hence a new minister with a new agenda. That move made an industry geared up to provide an annual 8 billion cans go idle. One man’s ceiling is a another man’s floor, no matter how well meaning the initiative is.

Fresh produce packaging

According to a study from Reportlinker the market for fresh produce packaging is growing fast. The growth is driven by the rebound from the global recession and retailers demand for display ready packaging.

We have, hopefully, behind us what is called the deepest economic contraction in the last 50 years, the great recession. The lamps have started to flash green and we can see signs that we are returning to stability.

The demand for display ready packaging is fuelled by the expansion of centralised supermarket chains in developed countries together with the development of advanced retail infrastructure in developing markets.

The fresh produce segment is fast growing and includes flexible plastic films of many kinds, plastic trays, and bags and pouches. Consumers expect their fresh produce to be packaged in formats that are both clear and convenient.

Fresh fruit and vegetables, pose many challenges for packaging manufacturers, because they continue to breathe after harvesting and processing. In Europe approximately 40% of pre-packed fruit and vegetables are packed in modified atmosphere packaging (MAP), with the bulk of the remainder being packaged in polyethylene (PE) or polypropylene (PP) flow wrap.

Demand for environmentally friendly packaging is driving the development of packaging using bio polymers or other renewable resources.

Light weighting of packaging

Aluminium beverage cans are 28% lighter today than 20 years ago. Similar statistics can be derived from glass bottles and plastic containers of all kinds.

Simply using less material will improve the environmental footprint. The general drive in the industry to light weight any packaging for cost purposes, is also leading to improved eco friendliness.

This is a win-win that there is a natural end to. There is a limit to how far it can go before losing material strength to maintain a stability to handle the packaging throughout its life. There is also a limit to what  the material can withstand when thinned out.

As Britain’s Industry Council on Packaging and the Environment (Incpen) points out: “Inadequate packaging is usually far worse for the environment than over-packaging, because 10 to15 times more energy and materials are locked up in household goods and food than in the packaging around them.”

Incpen also says that when an under-packaged item is spoiled or damaged, that  can waste 100 percent of the resources used to produce both the contents and its packaging, and all of the fuel used to distribute it.

The increased usage of nanomaterials will be crucial to this development as this can strengthen a material so that less is needed.