Comment - Soft Drinks & Water - Glass Still Classy
Earlier this month, private equity fund KPS Capital Partners committed to pay Ardagh Glass a not inconsiderable sum of money for Anchor Glass. But, will it be money well spent? Richard Corbett investigates.
According to beverage researchers Canadean, sales of beer in glass bottles is relatively stable and accounts for nearly two thirds of all beer sales. However, the use of glass in the soft drinks sector has fallen dramatically in the last few decades.
For over 150 years, the humble glass bottle has helped facilitate the progress of the global soft drinks industry by being the main vehicle by which the producer could give consumers access to their beverages. In the 1970s, however, Nathaniel C. Wyeth invented polyethylene terephthalate, a material that could withstand the pressure of carbonated liquids. We came to know this as the PET bottle, an invention that was to prompt a massive, long-term move away from soft drinks in glass bottles.
PET was lighter, relatively unbreakable and provided the flexibility to reach out to more consumption occasions. Bottlers could opt for a 2-litre bottle for the at-home market, or use a 50cl bottle for the on-the-move drinker. PET helped significantly increase sales of soft drinks in the convenience channel. The shrinking demand for glass was compounded by the fact that, in the juice, nectar and still drink categories, the carton had become established as the main packaging format, further limiting demand for glass bottles.
The erosion of glass share in soft drinks would seem to make for gloomy reading for glass manufacturers. At the turn of the Century, glass bottles still made up 16% of soft drink volumes and PET less than half. But today, glass share has halved and plastic PET bottles account for nearly two thirds of soft drink products. This process is ongoing and glass will continue to have a declining presence in the soft drinks market. In North America, soft drinks in glass account for just 2% of total soft drink sales.
All is not lost for glass, however, for the simple reason that soft drinks generally taste better out of a glass bottle; this is a perception widely-held among consumers. Glass bottles will always be visible in bars, restaurants and other on-premise outlets. If an on-premise retailer wants to justify charging three or four times as much for a soft drink, then they simply cannot just pour it out of a plastic bottle. Most consumers believe that a soft drink will deliver a superior experience if it is served from a glass bottle.
It is thanks to this that glass will also continue to be very well represented at the high-end of the soft drinks market. If a producer wants to give a product a premium image, they put it in a glass bottle and it will send out the right message to the consumers they are trying to reach. The adult soft drinks market in particular provides considerable opportunities for glass manufacturers. Glass gives a soft drink status.
When Coca-Cola Co promotes its namesake brand, it invariably uses an image of its iconic contour bottle in glass. That bottle will celebrate its 100th anniversary next year and has come to represent all of the values of the brand. The Root Glass Co of Terre Haute, Indiana designed the bottle to reflect the ‘curves and groves’ of the cocoa bean. One of the major selling points to Coca-Cola representatives at the time was that you could smash the bottle and you could still recognise it as a Coke bottle. Such is the popularity of the bottle that, in the UK, the company has opted to put its 200cl into a 175cl pack utilising the design of the bottle.
Glass will always be visible in Horeca outlets and in top-end products, but there is another factor why the future of glass is far from downbeat. Much of the glass bottles being substituted with PET bottles are refillable. Numbers vary, but a refillable glass bottle can be used as many as 35 times (although I have been quoted 17 or as low as ten). If you wanted to continue to sell your soft drinks in a glass bottle then, in theory, you might be using 35 bottles instead of just one. For this reason the global market for soft drinks in non-refillable glass bottles is actually on the up.
Not everything is how it seems and, whereas you may think that the glass bottle is a format that is unpractical and out-dated, then you would be very wrong. With both non-refillable glass beer and soft drink bottles increasing year-on-year, KPS Capital Partners has probably made a shrewd investment.
The Coca-Cola Co has seen the ongoing issue of groundwater use in India hit its plans to build a bottling plant in the southern state of Tamil Nadu....
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