Beer should mean cheer to U.S. blow molders this year — and the machinery firms that supply them — as PET beer bottles finally hit U.S. shores.
Meanwhile, a healthy automotive sector should keep sales of accumulator-head machines healthy. The other major packaging sector — high density polyethylene bottles for markets such as shampoo and motor oil — is fairly flat, but it could get a boost from new technologies such as in-mold labeling, according to industry officials.
Overall, the biggest blow molding story of 1998 was Milacron Inc.'s purchase of the Uniloy blow molding business from Johnson Controls Inc. for $210 million. Milacron already was making accumulator-head machines, but the addition of Uniloy means Milacron is competing in some brand-new markets, such as HDPE and PET packaging. Watch for Milacron to boost Uniloy's PET presence this year.
The biggest PET machinery development? New competition for France's Groupe Sidel. Krones AG of Neutraubling, Germany, showed its Contiform blow molding machine at two U.S. packaging trade shows and at K'98 in Dusseldorf, Germany. Krones already has beer connections through years of supplying production lines to the industry.
Sidel, the leading two-stage PET blow molding machinery maker, shored up its beer position in 1997 when it bought Gebo Industries SA, a fellow French company that makes beverage bottler conveying systems and production lines.
At K'98 in October, upstart Krones scored credibility points by handing out German beer in PET bottles and announcing it sold a PET bottle molding and filling line to soft drink giant Coca-Cola Co. in Berlin.
In late December, Konie Brenneman, marketing manager at Krones Inc., the U.S. unit in Franklin, Wis., said the firm is close to its first sale in the Americas.
``We're in negotiations with quite a few different companies in North America, Mexico and Central America,'' she said in late December, though no orders had been booked.
Miller Brewing Co. and its bottle maker, Continental PET Technologies Inc., started a six-city trial of 20-ounce PET beer bottles in November, marking the first major U.S. distribution of beer in plastic. Look for Miller in plastic in Los Angeles, Miami, Dallas, San Antonio, Phoenix and Norfolk, Va.
PET prices have stayed low, but high prices for other materials — oxygen-barrier resins and polyethylene napththalate — remain speed bumps on the road to plastic beer bottles.
Packaging analyst Tim Burns thinks gains in beer, even fairly small ones, could force PET prices higher this year.
``We're going to go from a glut to a psychologically tightened market over the next year. Yes, now there's capacity everywhere, but if the beer thing at all starts to materialize, we could have some tightness develop by the end of '99, and prices should reflect that in mid-'99.''
Burns is conservative about PET beer bottles, which he thinks will become a niche container. But questions remain about whether PET can break out. Will U.S. consumers, as they turn to super-premium beers and micro-brews now in glass, view plastic as ``cheap''?
Jean-Guy Delage, vice president of global sales for Groupe Sidel, said PET will compete against glass immediately in niches such as beer sold at sporting events. Can replacement is promising, but still competitive.
``The can is not a very favored package from a customer acceptance standpoint, but the can is also very cheap,'' said Delage, former president of Sidel's U.S. business, who was promoted Jan. 1 to the global spot in France.
Krones' Brenneman also thinks cans are vulnerable.
``If PET is going to come in and have any play with beer, it's going to be at the expense of cans,'' she said.
Burns said aluminum can makers won't go down easy.
``What people forgot is that the beverage can business has been extremely competitive. It's cut prices and lowered costs dramatically, so it's growing in the 1-2 percent area. That's a stellar performance. I don't want to say they're giving them away, but they're very cognizant that PET is ready to eat their lunch,'' he said in December.
Burns, president of Cranial Capital Inc. in Chagrin Falls, Ohio, thinks PET has room to grow in the U.S. market for soft drinks, water and sports drinks.
``The half-liter bottle may make a national showing. The 20-ounce still has some supermarket space to gobble up,'' he said.
Delage said supermarket multipacks show promise.
``And we think there's still significant growth in single-serve vending machines,'' he said.
Although Burns thinks PET should grow at two or three times the rate of the overall soft drink market, the analyst questions how much more soda Americans can drink. He thinks PET should not try to compete in small sizes.
``There are not a lot of new ways to introduce growth into the consumer's palate, other than attaching a bladder bag onto the back of your body. So what you want to do is increasingly use bigger containers that look like they're value purchases. And if they throw out a quarter of the product, who cares?'' he said.
``The game might be continuing to entice customers to buy bigger and bigger packages. ... It's to PET's advantage, I think, to stay larger in size. You get above 12 ounces and a can really doesn't do very well.''
The slowdown in Asia hurt PET blow molding machinery makers, but Latin America has stayed strong, officials said. Delage said Sidel has seen no slowing in the Brazilian market.
In other blow molding business news, Germany's Krupp Kunststofftechnik GmbH opened its first U.S. assembly factory, in North Branch, N.J. The 38,500-square-foot plant is home to Krupp's U.S. unit, Krupp Plastics & Rubber Machinery (USA) Inc.
Krupp makes both Kautex blow molding machines for producing industrial parts, Corpoplast machines for PET bottles and Fischer-W. Muller machines that make polyethylene bottles.
Krupp Corpoplast reported a K-show sale to Multiplas Inc. of Little Rock, Ark., a producer of mineral-water bottles. Multiplas is buying a complete, two-stage Corpoplast system for about $2 million. The equipment includes a Premax 48 injection molding machine that turns out 9,600 preforms an hour and a Blomax 6 injection stretch blow molder that makes 7,200 bottles an hour. Delivery is scheduled for February.
Also at K'98, Nissei ASB Machine Co. Ltd. announced it was spending $38.5 million to build its single-stage PET bottle machines in Mumbai, India, and in China near Shanghai International Airport.
While PET continues to shine, the market for machines to blow mold PE bottles continues its steady, if unspectacular, pace, according to machinery executives.
Last year ``fell somewhat short of our projections'' after several strong years, said Martin Stark, president of Bekum America Corp. in Williamston, Mich. Stark said Bekum's efforts to develop in-mold labeling systems finally is bearing fruit in the U.S. market.
``It has taken a little longer to catch on with some of the blow molders here, but right now I'm very happy because we've booked some nice orders in this area,'' he said.
Consolidation among PE blow molders has thrown a wild card into the machinery sales game, according to Bekum's Stark and Bryan Street, president of the year-old Open Machine Systems LLC in Jackson, Mich. Acquisition-hungry firms like Pretium Packaging LLC of St. Louis and Dallas-based Suiza Foods Corp. keep gobbling up processors.
Street said the rules can change quickly at potential customers.
``You get a customer where one section of the business needs equipment, and they buy another company that maybe has excess capacity,'' he said. ``All of a sudden they don't need new machines.'' Open Machine Systems, which makes reciprocating-screw extrusion blow molding machines, expects to sell its first machine in early 1999.
Stark agreed: ``It probably is a little harder to predict [sales] because of all the consolidations. But based on our quoting activity after the K show in Dusseldorf, I feel pretty confident about a good year in 1999.''
Sales of accumulator-head machines, used to make large parts such as garbage cans and car bumper beams, should continue to be strong, said Richard Morgan, national sales manager for Milacron's blow molding accumulator-head business.
``The market's very strong now and has been for the whole year,'' Morgan said in December.
Automotive customers lead the charge. Normally, automotive molding accounts for about 35 percent of Milacron's accumulator-head machine sales. Morgan said that jumped to more than 50 percent in 1998.
Graham Engineering Corp. of York, Pa., will strengthen its work in Europe through a joint venture. Details should be announced early this year, President Joe Spohr said at K'98.
Meanwhile, a new machine from Wilmington Machinery does away with the accumulator head, replacing it with reciprocating-screw extruders. Each screw pumps out a separate layer through a multilayer parison. The Wilmington, N.C., firm can produce parts with a barrier layer, add a coating to a part and mold a foam inner layer between two skins.