On the back of carbonated soft drinks, PET packaging has seen experienced unprecedented growth in the last decade. But as Steven Lewis reports, product diversification and a changing business environment are set to transform the industry.

Double-digit annual increases in the use of PET packaging among Latin America's carbonated soft drink (CSD) bottlers may be a thing of the past, but analysts still believe that with the right adaptations, growth of 5% to 10% is still achievable for years to come.

During the 1990s, rapid acceptance of PET packaging was driven primarily by the CSD sector. However the strongest gains through the remainder of this decade is likely to come from other beverage sectors such as bottled water, beer, juice, sports drinks and wine.

And, producers of PET packaging are making inroads into an ever-widening array of beverage sectors by extending their product ranges. The PET division of Eastman Chemical Company, for example, released ten new products in 2000 and several more during the first half of 2001.

Meanwhile, recent product improvements have also allowed PET to make major inroads in hot fill beverage sectors throughout Latin America. According to Eastman's Dewey Johnson: "The trend toward acceptance of PET in hot fill products (juices, juice beverages and isotonics) will soon make PET the packaging of choice."

But by far the most dynamic growth sector over the past year has been bottled water. As Johnson puts it: "Use of PET in individual water packaging is growing at rate of over 25% in the United States and growth should be very healthy in Latin America as well."

Indeed nearly 100% of individual water servings in Mexico are now sold in PET packaging and the same trend can be seen in other leading Latin markets such as Brazil and Colombia.

The debate over in-house production

The growth of PET has meant that some of Latin America's leading beverage and bottling companies have had to reassess their strategies towards the production of the packaging.

Some, of course, are in the enviable position of overcoming their dependence on outside sources of packaging by producing their own PET packaging. However the great majority of bottlers have had to opt to outsource their PET packaging.


"Most bottlers who self-manufacture are re-considering outsourcing their injection and/or blow production"
Jorge Sanz

Jorge Sanz of Schlamback Lubelca USA explains: "With technology changing very rapidly to higher cavitation and more efficient machine platforms, most of the bottlers who self-manufacture at the moment are re-considering outsourcing their injection and/or blow production.

"Outsourcing allows them to stay up to date on technology while avoiding the burden of owning equipment that could become obsolete in a very short period of time."

In a number of very high-volume bottling companies, management have contracted PET packaging companies to operate bottle production equipment within or adjacent to their plants. As Sanz says: "Outsourcing does not necessarily mean that production is off site. We are seeing many cases where PET converters purchase and take over in-house equipment and run it for the bottler."

It makes little sense for small to medium-sized bottling companies to produce their own PET bottles given the fact that 700m preforms per annum is considered to be the bottom limit for negotiating favourable PET resin prices. Smaller bottling companies are turning to outside suppliers who can negotiate high volume discounts by producing standard size PET bottles for multiple customers in the beverage industry.

Return to sender

With the exception of the beer industry, leading bottlers of Latin America have steadily reduced their inventories of glass bottles in recent years. In the CSD sector, one the few remaining strongholds for glass is "mom and pop" stores in price sensitive Latin American markets. However the eventual elimination of returnable glass bottles seems inevitable as bottlers seek to eliminate handling costs associated with returnables.

Supermarkets in the region were willing to handle returnable glass and PET bottles until recently, but not anymore. Disposable PET packaging now enjoys a dominant presence in the non-alcoholic section of supermarket beverage departments. PET packaging has more than a 70% market share in Latin America's CSD sector and over 80% in individual servings of bottled water.

One of the last bastions of glass packaging, Latin America's beer industry, has taken the first stride toward adopting PET packaging. Faced with rising distribution costs, Quilmes of Argentina took the lead by introducing its Cristal beer in a 500cc PET bottle. The verdict is still out on the Quilmes experiment, but market factors weigh in favour of other leading breweries introducing PET bottles for at least some of their products within the next two years.

Competition time

But it has not been all good news for the industry. During the 1990s one of the most important factors that drove Latin American acceptance of PET packaging was low unit cost. However rising international oil prices drove up the price of resin during last year, causing PET to lose its cost competitive edge relative to other packaging options.

Leaders in the PET packaging industry believe that the cost of resin will determine the pace of growth in price-sensitive regions like Latin America. Peter Weggeman of Innovative Beverage Packaging says: "The supply of PET will be tight over the next two years because natural gas and oil prices will dampen the growth of supply. Both cans and glass bottles will play a catch up game. If PET prices are lower than other materials, then PET packaging will continue to gain market share, and if not, growth will be slower."

As 2001 draws to a close, PET producers in the region are increasingly concerned at the prospect of a prolonged military conflict in the Middle East in the aftermath of the 11th September attack on the US. Any direct or indirect threat to oil supplies will likely cause a substantial increase in global crude oil prices, which will inevitably put upward pressure on the price of PET resin.

To view related research reports, please follow the link below:-

Beverage Containers Forecasts to 2005 & 2010