Global PET packaging leader Schmalbach-Lubeca AG is gearing up for a major European push into more technically challenging markets for PET bottles, such as beer, fruit juice and food containers. The company, based in Ratingen, Germany, is investing heavily to develop new preforms, and also in a far-reaching modernization program for its injection and blow molding facilities.
Meanwhile, the company still sees enormous growth potential in Southeast Asia, and plans to develop other operations in that region.
"The newer equipment is going into the developed countries, and we're moving some existing machinery to developing countries," said George Moore, president of the European/Asian arm of Schmalbach's PET Containers Division.
Although parent company Viag AG of Munich, Germany, has publicly announced plans to sell Schmalbach, the world's largest PET packaging producer is determined to pursue its bold global expansion plans even while it awaits word of a new owner.
Schmalbach has budgeted more than 200 million deutsche marks ($93 million) for new plants and equipment in Europe and Asia this year and next. It intends to cut costs, boost product quality and improve customer service to make it more competitive in an increasingly tight marketplace.
This year the company is replacing more than 40 of its injection molding presses in European plants with high-output, 48- and 96-cavity machines from Husky Injection Molding Systems Ltd. Some older presses will be switched to plants in Asia and elsewhere, Moore said.
The changes will help Schmalbach compete in Europe's commodity PET soft drink and edible oil sectors, he said.
The PET division also is installing an unspecified number of new injection presses in Europe to handle the growing array of new preform designs Schmalbach is developing for innovative PET packages.
The company plans to follow "parallel paths," Moore said, as it strives to become more efficient and competitive in the commodity area and innovates with containers suitable for the newest markets.
Moore would not be specific about which of Schmalbach's European sites is installing the new equipment, nor the overall amount being purchased. However, he did indicate the additions would begin at the company's new product development center in Brecht, Belgium, and would involve several other European sites.
The timing of the introduction of the new injection presses will depend on market requirements, he said.
Schmalbach has pioneered the market for European PET beer bottles. Its multilayer PET/nylon containers already are being used by major regional brewers, including Karlsberg in Germany and France; Brau-Union in Austria; Carlberg-Tetley in the United Kingdom; and Pripps-Ringnes in Sweden.
The molder, ranked No. 1 in Europe with a 22 percent share of the total PET bottle market, expects to introduce a broader range in PET for beer and is working on barrier containers suitable for fruit juices.
In addition, food packaging in PET holds out "huge potential," Moore said, including heat-stable, wide-mouth containers. Schmalbach has several customers interested in these containers and expects to announce by the end of this year that "a major European food manufacturer" will take on the new container, he said.
Milk is another sector Schmalbach is targeting in Europe. Several European countries already use PET milk bottles, Moore said.
"There's nothing to prevent PET growing in areas such as beer and juices," Moore said. "Anything in glass now can be packaged in PET."
Schmalbach is devoting up to a third of the investment going into the latest modernization program to upgrading and boosting its blow molding capacity. The two-year investment includes replacement of blow molding equipment at its own plants and in its existing through-the-wall operations at customers' production sites. New equipment will include Krones and Sidel blow molding machines, Moore said.
Schmalbach expects to expand its use of through-the-wall operations. The company already runs five such operations in Europe, including a Coca-Cola Co. bottling plant in Sidcup, England, that launched in January, and a PepsiCo. franchise bottling plant in Becton, England.
"We have worked with a number of customers, providing on-site blowing facilities. It's saving the customers money," Moore said.
In Asia, Schmalbach already operates PET container plants in Pune, India, and Santa Rosa, Philippines. Between last year and the end of this year, it intends to have installed up to five new injection machines at the Pune site, Moore said.
Schmalbach's European and Asian restructuring began in 1998, following the company's takeover of Johnson Controls Inc.'s Plastics Container division.
"The acquisition of JCI added a broader base to our business in Europe and Latin America," Moore said. "It doubled our business and formed a neat fit between the two. There was no loss of preform or bottle business as a result of the merger.
"But, as a result of bringing the two together, there were some cases in France and Spain of duplication and cost base aspects needed attention."
In France the reorganization meant closing an injection molding plant in Beaune, cutting 50 jobs and moving operations to its Dunkerque and Brecht, Belgium, facilities.
In Spain, Schmalbach consolidated operations into a Toledo injection molding operation, which turns out more than 1 billion preforms annually.
In Britain, it concentrated operations at Gresford, Wales, which now produces 2 billion preforms a year.
Meanwhile, Schmalbach has launched a new PET container plant in Istanbul, Turkey. Output there should reach 500 million preforms by the end of this year. In addition, the company last year commissioned a new operation in Casablanca, Morocco, to serve the North African market.
The reorganization in Europe will result in some job cuts, but the numbers involved are not likely to be great, Moore said.
"We are increasing sales annually and increasing output, but there may be some releases in some locations," he said.