Skip to main content
Sister Publication Links
  • Sustainable Plastics
  • Rubber News
Subscribe
  • Login
  • Register
  • Subscribe
  • News
    • Processor News
    • Suppliers
    • More News
    • Digital Edition
    • End Markets
    • Special Reports
    • Newsletters
    • Resin pricing news
    • Videos
    • Injection Molding
    • Blow Molding
    • Film & Sheet
    • Pipe/Profile/Tubing
    • Rotomolding
    • Thermoforming
    • Recycling
    • Machinery
    • Materials
    • Molds/Tooling
    • Product news
    • Design
    • Mergers & Acquisitions
    • Sustainability
    • Public Policy
    • Material Insights Videos
    • Numbers that Matter
    • Automotive
    • Packaging
    • Medical
    • Consumer Products
    • Construction
    • CEO Issue
    • Diversity
    • Best Places to Work
      • 2022 winners
    • Processor of the Year
    • Rising Stars
    • Women Breaking the Mold
  • Opinion
    • The Plastics Blog
    • Kickstart
    • One Good Resin
    • BRICS and Plastics
    • All Things Data
    • Viewpoint
    • From Pillar to Post
    • Perspective
    • Mailbag
    • Fake Plastic Trees
  • Shop Floor
    • Blending
    • Compounding
    • Drying
    • Injection Molding
    • Purging
    • Robotics
    • Size Reduction
    • Structural Foam
    • Tooling
    • Training
  • Events
    • K Show Livestream
    • Plastics News Events
    • Industry Events
    • Injection Molding & Design Expo
    • Livestreams/Webinars
    • Editorial Livestreams
    • Ask the Expert
    • Plastics News Events Library
    • Processor of the Year submissions
    • Plastics News Executive Forum
    • Injection Molding & Design Expo
    • Plastics News Caps & Closures
    • Women Breaking the Mold Networking Forum
    • Plastics in Automotive
    • Reuters Responsible Business Europe 2022
    • Reifenhäuser Technologies Livestreams
    • Polymer Points Live
    • Numbers that Matter Live
    • Plastics in Politics Live
    • Sustainable Plastics Live
    • Plastics Caps & Closures Library
    • Plastics in Healthcare Library
    • Women Breaking the Mold Networking Forum Library
  • Resin Prices
    • All Resins
    • Commodity TPs
    • High Temp TPs
    • ETPs
    • Thermosets
    • Recycled Plastics
    • Historic Commodity Thermoplastics
    • Historic High Temp Thermoplastics
    • Historic Engineering Thermoplastics
    • Historic Thermosets
    • Historic Recycled Plastics
  • Rankings & Data
    • Injection Molders
    • Blow Molders
    • Film Sheet
    • Thermoformers
    • Pipe Profile Tubing
    • Rotomolders
    • Mold/Toolmakers
    • LSR Processors
    • Recyclers
    • Compounders - List
    • Association - List
    • Plastic Lumber - List
    • All
  • Directory
  • Custom
    • Sponsored Content
    • LS Mtron Sponsored Content
    • Conair Sponsored Content
    • KraussMaffei Sponsored Content
    • ENGEL Sponsored Content
    • White Papers
    • Classifieds
    • Place an Ad
    • Sign up for Early Classified
MENU
Breadcrumb
  1. Home
  2. News
March 08, 1999 01:00 AM

CAPTIVE OR CUSTOM: WHY SOME OEMS MIND THEIR OWN BUSINESS

Roger Renstrom
  • Tweet
  • Share
  • Share
  • Email
  • More
    Print

    Many major original equipment manufacturers can't seem to decide which works best, producing plastic components in-house or buying them from custom processors.

    The past decade has seen automakers furiously outsource work and sell or spin off their captive parts-making operations. General Motors Corp.'s Delphi Automotive Systems and Ford Motor Co.'s Visteon Automotive Systems are prime examples.

    But the soft drink industry has taken the opposite approach. Coca-Cola Co.'s bottlers have led the charge to move PET bottle making in-house, and today are among the largest U.S. blow molders.

    Custom suppliers that once dominated the industry have survived. But they've had to scramble for new customers and develop markets to stay intact.

    The PET market isn't difficult to enter, said beverage analyst Skip Carpenter, vice president of Donaldson Lufkin & Jenrette Inc. in New York, noting that ``glass and aluminum are more intensive'' because of capital demands.

    And machinery suppliers like Husky Injection Molding Systems Ltd. and Groupe Sidel have taken the mystery out of PET production with super-efficient, easy-to-use equipment to make preforms and bottles.

    Low resin prices also have fueled the trend.

    ``I would like to see what happens when resin prices go up,'' said packaging analyst Joel Tiss of Lehman Bros. in New York. ``Even at these resin prices, plastic is more expensive than a bottle, and a bottle is more expensive than a can.''

    But a huge part of the equation has been consolidation among soft drink bottlers themselves.

    Coca-Cola owns about 40 percent of its largest bottler, Coca-Cola Enterprises of Atlanta, a voracious acquirer.

    At present, CCE produces 70 percent of the domestic bottle-and-can volume of Coca-Cola brands, said DLJ's Carpenter. ``In the next five to seven [years], that may get to 90 percent of volume,'' he said.

    Coke's remaining 104 independent bottlers may be forced to sell to CCE, Carpenter said.

    CCE admits to holding ``more than 65 percent of Coca-Cola Co.'s bottle and can volume in North America,'' spokeswoman Laura Asman said.

    CCE buys plastic bottles in the United States from manufacturers jointly owned by CCE and other Coca-Cola bottlers, according to Securities and Exchange Commission filings. CCE ``believes that ownership interests in certain suppliers and the self-manufacture of certain packages serve to reduce or manage costs.''

    Within Coca-Cola's world, packaging is a small piece of the total picture, Tiss said.

    But while PET is moving toward captive production, he pointed out that in the packaging industry overall, container production has ``been going the other direction for 20 years.''

    Only 10 percent of the food-can industry is in-house, he said.

    Crown Cork & Seal Co. Inc. of Philadelphia, Schmalbach-Lubeca AG of Ratingen, Germany, and Ball Corp. of Muncie, Ind., are leading nonaffiliated makers of PET soft drink containers.

    Shelly Steele, marketing director of the Schmalbach-Lubeca Plastic Containers unit in Manchester, Mich., said CCE's transition to captive bottle making ``wasn't a surprise.'' The bottler came out with plans early on, so suppliers had time to react.

    It's ``pretty much a question of these systems becoming much more efficient and being able to do the same job with controlled resources. Coca-Cola Enterprises would be a prime example,'' said Joan Holleran, editor of Beverage Industry magazine in Northbrook, Ill.

    ``Beverage consumption has not warranted fewer bottlers,'' Holleran noted. ``It is just economy of scale that has driven the trend toward consolidation.''

    Now, Pepsi-Cola Co. is going to a similar system with a separate structure for bottling operations, Holleran said.

    In the Pepsi camp, Whitman Corp. of Rolling Meadows, Ill., is making major moves. Whitman focuses on the soft drink industry through its principal unit, Pepsi-Cola General Bottlers, the brand's largest independent.

    General Bottlers has 12 percent of Pepsi's domestic business, with its production and distribution in 12 states in the central United States. That could go to 16-18 percent, Carpenter said. Whitman also distributes in Poland, Russia, Latvia, Lithuania and Estonia.

    RECOMMENDED FOR YOU
    Hillenbrand cites recycling as 'strategic growth' area with Herbold acquisition
    Letter
    to the
    Editor

    Do you have an opinion about this story? Do you have some thoughts you'd like to share with our readers? Plastics News would love to hear from you. Email your letter to Editor at [email protected]

    Most Popular
    1
    Hillenbrand cites recycling as 'strategic growth' area with Herbold acquisition
    2
    Eastman Chemical looking to build another major plastics recycling facility
    3
    California passes strictest plastics law in US, with EPR and recycling targets
    4
    Congress debates pause on plastics growth, ‘disposable communities'
    5
    Newell closing Coleman plastics plant in Texas
    SIGN UP FOR TO RECEIVE THESE EMAILS AND ENEWSLETTERS
    EMAIL ADDRESS

    Please enter a valid email address.

    Please enter your email address.

    Please verify captcha.

    Please select at least one newsletter to subscribe.

    Get our newsletters

    Staying current is easy with Plastics News delivered straight to your inbox, free of charge.

    Subscribe today

    Subscribe to Plastics News

    Subscribe now
    Connect with Us
    • LinkedIn
    • Facebook
    • Twitter
    • Instagram

    Plastics News covers the business of the global plastics industry. We report news, gather data and deliver timely information that provides our readers with a competitive advantage.

    Contact Us

    1155 Gratiot Avenue
    Detroit MI 48207-2997

    Customer Service:
    877-320-1723

    Resources
    • About
    • Staff
    • Editorial Calendar
    • Media Kit
    • Data Store
    • Digital Edition
    • Custom Content
    • People
    • Contact
    • Careers
    • Sitemap
    Related Crain Publications
    • Sustainable Plastics
    • Rubber News
    • Urethanes Technology
    • European Rubber Journal
    • Tire Business
    Legal
    • Terms and Conditions
    • Privacy Policy
    • Privacy Request
    Copyright © 1996-2022. Crain Communications, Inc. All Rights Reserved.
    • News
      • Processor News
        • Injection Molding
        • Blow Molding
        • Film & Sheet
        • Pipe/Profile/Tubing
        • Rotomolding
        • Thermoforming
        • Recycling
      • Suppliers
        • Machinery
        • Materials
        • Molds/Tooling
        • Product news
        • Design
      • More News
        • Mergers & Acquisitions
        • Sustainability
        • Public Policy
        • Material Insights Videos
        • Numbers that Matter
      • Digital Edition
      • End Markets
        • Automotive
        • Packaging
        • Medical
        • Consumer Products
        • Construction
      • Special Reports
        • CEO Issue
        • Diversity
        • Best Places to Work
          • 2022 winners
        • Processor of the Year
        • Rising Stars
        • Women Breaking the Mold
      • Newsletters
      • Resin pricing news
      • Videos
    • Opinion
      • The Plastics Blog
      • Kickstart
      • One Good Resin
      • BRICS and Plastics
      • All Things Data
      • Viewpoint
      • From Pillar to Post
      • Perspective
      • Mailbag
      • Fake Plastic Trees
    • Shop Floor
      • Blending
      • Compounding
      • Drying
      • Injection Molding
      • Purging
      • Robotics
      • Size Reduction
      • Structural Foam
      • Tooling
      • Training
    • Events
      • K Show Livestream
      • Plastics News Events
        • Plastics News Executive Forum
        • Injection Molding & Design Expo
        • Plastics News Caps & Closures
        • Women Breaking the Mold Networking Forum
        • Plastics in Automotive
      • Industry Events
      • Injection Molding & Design Expo
      • Livestreams/Webinars
        • Reuters Responsible Business Europe 2022
        • Reifenhäuser Technologies Livestreams
      • Editorial Livestreams
        • Polymer Points Live
        • Numbers that Matter Live
        • Plastics in Politics Live
        • Sustainable Plastics Live
      • Ask the Expert
      • Plastics News Events Library
        • Plastics Caps & Closures Library
        • Plastics in Healthcare Library
        • Women Breaking the Mold Networking Forum Library
      • Processor of the Year submissions
    • Resin Prices
      • All Resins
      • Commodity TPs
        • Historic Commodity Thermoplastics
      • High Temp TPs
        • Historic High Temp Thermoplastics
      • ETPs
        • Historic Engineering Thermoplastics
      • Thermosets
        • Historic Thermosets
      • Recycled Plastics
        • Historic Recycled Plastics
    • Rankings & Data
      • Injection Molders
      • Blow Molders
      • Film Sheet
      • Thermoformers
      • Pipe Profile Tubing
      • Rotomolders
      • Mold/Toolmakers
      • LSR Processors
      • Recyclers
      • Compounders - List
      • Association - List
      • Plastic Lumber - List
      • All
    • Directory
    • Custom
      • Sponsored Content
      • LS Mtron Sponsored Content
      • Conair Sponsored Content
      • KraussMaffei Sponsored Content
      • ENGEL Sponsored Content
      • White Papers
      • Classifieds
        • Place an Ad
        • Sign up for Early Classified