Crown Cork & Seal Co. Inc.'s 1992 purchase of Constar International Inc. of Chattanooga, Tenn., vaulted it into a leading position in the U.S. plastic beverage container business.
The $515 million deal delivered nearly $550 million in Constar sales — primarily PET, along with some high density polyethylene bottles. Crown Cork, of Philadelphia, had produced aluminum and steel cans, and closures made of plastic, aluminum and steel. The move was strategic for the company in many ways.
``This was a good acquisition that met our original criteria — balance in materials, fast growth, relevance to beverage customers and increased share of the food and household products markets,'' a Crown Cork spokesman said recently by telephone.
``This provided a meaningful position in plastic for us. Constar was the market leader at the time and [the acquisition] was a real coup for us.''
As a leader in metal cans, Crown Cork hedged its bets well in the beverage market. The acquisition came at a time of acceleration in PET single-serve beverage containers. Since then, those single-serve containers have seen tremendous growth.
A $3.8 billion company, Crown Cork coveted Constar not only for its beverage packaging business, but also for its ability to make custom containers like wide-mouth jars and refillable PET bottles. Now, about one-third of Crown Cork's business is nonbeverage, such as the processed food and household chemical markets.
At the time of the deal, Crown Cork Chairman William Avery said his goal was to make Crown Cork the premier packaging company in the world. But analysts questioned whether Crown Cork was paying too much for Constar. Now, looking back from a world leadership position, company officials think the $515 million the firm paid was fitting.
Since then, Crown Cork has worked to stay at the forefront in technology and profitability. In the mid-1990s, it invested in equipment, changing from two-piece bottles with basecups to one-piece blow molded bottles. It expanded its international network, first with Constar's 44 percent interest in Wellstar Holdings BV; then, in 1995, with its own $5.2 billion acquisition of Carnaudmetalbox of Paris. Although Crown Cork's PET container business outside the United States is largely focused on beverage containers, it sees other global markets as promising territory for growth, the spokesman said. ``There is potential to grow other areas where we are among the leaders here, such as PET food and household products containers.''
Over the years, the firm has weathered the effects of volatile resin prices and the emergence of new competitors. But in August 1997, in a move to improve the structure of its U.S. PET business, Crown Cork closed four Constar plants, saving itself about $20 million. The shutdowns were aimed at eliminating small, high-cost plants, in an effort to improve profits, the spokesman said.
``While we're still pursuing this, the restructuring was a success,'' he said.
Today Crown Cork, with more than $8.5 billion in sales and 250 plants, still sees its PET container and aluminum can businesses as a good balance since they serve different distribution channels.
Executives say the company's growth will not come from cannibalizing competing packaging. Their work now, they say, is geared towards helping customers grow volume and developing new products on the rise, like beer bottles and PET motor oil bottles.