Pernod Ricard vodka business Absolut produces and bottles all its vodka in Sweden. The bottling lines at its main site in Åhus run on a “just in time” structure and the facility only has enough supply for three hours of production.
It churned out 12.7 million nine-litre cases of vodka in 2023, which amounts to approximately 140 million bottles each year. Those numbers make Absolut the largest by volume brand in Pernod Ricard’s portfolio, followed by Jameson at 10.7 million nine-litre cases.
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Packaging group Ardagh supplies the glass bottles for Absolut’s production. Both companies signed a ten-year supply contact in 2019. Glass production is carried oiut at an Ardagh facility in the Swedish town Limmared, 250km north of the Åhus distillery in the south of the country.
Absolut and Ardagh have also been working on using hydrogen fuel to power one of the glass-melting furnaces at the packaging supplier’s site. The initiative that aims to reduce the site’s fossil fuel use and help Absolut reduce its own Scope 3 emissions.
Just Drinks sat down with Absolut VP of operations Anna Schreil and director of operations Billy King to talk about the partnership with Ardagh and pushing for operational efficiency.
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Just Drinks: How long have you been working with the Ardagh Group?
Anna Schreil: We have been working with each other from the beginning, when Absolut vodka was launched back in 1979. We have been through all the years, including all its ups and downs. One example would be during the pandemic when things were extremely unpredictable and, of course, with a one-to-one – more or less – relationship with the supplier what happens to us will happen to them.
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By GlobalDataOf course, they have other customers as well. We are one of their biggest customers, so I think we are somehow in it together. And when you have a close relationship, you are probably a bit more willing to invest and invest more in each other.
Just Drinks: How have you invested together?
Schreil: I think not only investment like hardware, but it can also be to investing time and investing in new technology, it can be trying things out together and to drive innovation.
I think that we have pushed the limits a bit with regards to bottle designs that we didn’t even believe are possible. Quite some years back now, we decided to do the ultimate limited edition by producing four million unique pieces of glass. One couldn’t look like the other. Everything was then done in the design and the coating or printing on the bottle. They took the challenge.
So not only related to investments like hardware or sustainability, although that is extremely important, but it has also been in innovation.
Billy King: It’s a very close relationship obviously and part of that is the proximity, that factory is nearby so it makes a lot of sense. There is that trust in each other, in that history.
I think more generally, when we’re looking at this kind of innovation, and particularly our industry, as old as the glass industry, the things that need to happen there will cost a huge amount of money and the glass guys are probably not going to be able to finance that on their own.
To make those step-changes in the glass industry is going to have to come with collaboration, whether you’re talking about the electrification of furnaces, or whether you’re talking about hydrogen, these all come with a huge price ticket. This is where you need partnerships, like the one Absolut has with Ardagh in Limmared, to make those things happen. It’s the only way to move them forward because one party on its own probably isn’t going to be able to finance that.
Just Drinks: Why did you and Ardagh decide to embark on a project that would fuel one of its furnaces with hydrogen gas?
Schreil: We believe that we have come to a point where we really need to look at the source of the energy in itself. And of course, this is something that they [Ardagh] are monitoring themselves because this is part of their industry best practices.
So, maybe a couple of years back we were discussing the question and things evolved. We basically decided to go for it together. Since then, it has been ordered and the construction is taking place.
I would say that this is really part of a longer roadmap, since glass is one of our major remaining contributors to our carbon footprint. Scope 1 and 2 [emissions] are very, very tiny from our own manufacturing. I mean, the two big areas for us to continue to work on is packaging material, with the glass as the main component, and wheat.
Just Drinks: When will the furnace start using hydrogen gas?
Schreil: We hope that it will be up and running in April. There have been a couple of delays to the project related to supply chain disturbances and disruptions in the global system of supply. But were hoping for it being up and running in the spring.
Just Drinks: How much can you tweak the Absolut bottle itself, say to reduce logistics costs?
Schreil: So I would say that the last step is not taken, we took quite a big step some years back, where we took out between eight and ten per cent of the weight.
You simply just cannot take out the weight because what happens is that it will come from somewhere. The dimensions of the bottle will be slightly, slightly different. At some point when you take another step and another step you need really to be careful not to lose the identity in the shape of the bottle.
There is still a bit of room within the current technology to take a bit more out. That’s something that we are looking into.
King: There’s no defined timeline for that yet but, if we were to go ahead with that, you’re probably looking at some time in the next two or three years when that would be executed.
These are things that have a huge impact sometimes because, [when] you make changes to the bottle, it can also mean changes, for example, to all the parts in the bottling lines and that can be a huge cost. Reducing the diameter of a bottle by two millimetres could have a massive impact on other areas of the business.
Schreil: Just a tiny removal of glass can actually lead to savings beyond the grams of glass that you would take out. All of a sudden your shipping cases might become a little bit smaller and you can fit one layer more onto the pallet to fit with the maximum height on a container. So, if we take those grams out of the height or from the width, what would that mean when we are optimising our containers? That’s the optimum that you really need to compute and calculate.
Just Drinks: How big a part is operation technology or AI playing in your operations right now?
Schreil: We normally speak about industry four [Industry 4.0] that’s basically the umbrella that we normally speak about. So, we do have a layer of monitoring cross all the lines that is really helping us monitor performance down to very, very tiny details that can help us understand minor stoppages, what is it that is causing problems on the line, etc, etc.
That layer that sits just below the enterprise resource planning layer is extremely useful and, when we can integrate that kind of information to other systems, all of a sudden, we can predict even better.
When I started working in the food industry it was about preventive maintenance. Nowadays, it’s predictable maintenance.
Anna Schreil
When I started working in the food industry it was about preventive maintenance. Every year we have figured out when we need to do preventive maintenance in order to prevent the machine from failing, which was absolutely great. The concept was to start to involve everyone in that maintenance, including production operators, etc. I think over the years that help has evolved, so nowadays, it’s predictable maintenance.
The machinery itself can tell you when it’s time by predicting – and this is really fine technology – when a shaft is starting to shiver. That’s when it’s time to maintain not before, not after.
However, I think that the mindset of continuous improvement, a paper and a pen is enough to start with. I mean, for every time your line is stopping, draw a line and another line and another line and you will figure out quite quickly what the problems are. I think you need to pass through that first before you start to be extremely advanced in the details.
Digitalisation will require a new type of profile and skills with our employees. Today, it’s super hard to get hold of super-scale automation engineers. So what do we do to attract the new kind of skills that we would need to operate the factory of the future? And how do we anticipate that? We’re already now bringing people to train them.
Just Drinks: What lessons were learnt during the recent years of supply chain disruption and volatility?
Schreil: So, up until the pandemic, of course, things were not completely predictable, but things were more predictable than they have been over the last four years. When things are predictable, you can slim and optimise because you know what to expect to a certain extent, which also enables you to have basically zero stock, just in time, extremely lean and efficient production.
What we had to learn during the pandemic, when all of a sudden things became very unpredictable, not only driven by the surge in demand as restaurants and bar were opening and closing, it was driven by the gridlock in our supply chain system. What we learned is that, on one hand, we should keep the mentality of just in time and we need somehow to build into this system, agility and flexibility, which is a bit contradicting who we were before.
It’s not only about annual capacities. Normally, we speak about annual capacity. We can do so many litres of something in a year. That’s not really relevant any longer. It’s the momentary capacity. How do you deal with quick changes?
It doesn’t really help if you have the annual capacity if you cannot do what’s expected in a month. So there are several dimensions that we basically had to rethink, to adapt to the organisation.
Things have smoothened out a bit but still I think this is maybe what we need to get used to and adapt to.
Just Drinks: Billy, you were brought in as director of operations at Absolut in January having previously worked for Pernod brands Malibu and Kahlua in Scotland. What particular issues are you looking to fix?
King: There’s no one thing in particular, you know, when Anna brought me in here that she’s not done and said, you know, we have a problem in this area that we need you to look at. It’s not been like that at all.
I’m in a fortunate situation where I’ve been brought in to manage an organisation that’s already performing extremely well, thanks to Anna and many others. We have a very talented team here. At the same time, none of us can ever sit back and say, ‘okay, we’re great now we don’t need to move forward anymore.’
I can bring some new ideas from various other places that I’ve seen around the world. It may not be anything major but when you get to this level of performance these little small wins, sometimes that can keep you moving forward. That’s more or less what I’m looking for here. It’s a series of little small wins where we can just do things a little bit differently, a little bit more efficiently.
I’ve been here a month. There are some things that I’m not going to share with you. But I’m still at the asking questions stage. I’m not drawing any conclusions yet. It would be crazy of me to walk in here and, after a month, start telling everyone how they’re going to do their thing. I’m asking questions and seeking advice from the people who worked here for 25 years because you can’t ignore that knowledge and experience. Then, over time, there will be a plan developed and there’ll be specific areas that I hope I can make some sort of difference.
