It's been 15 years since Ball Corp. joined the PET bottle market. The decision, announced June 15, to sell the business to Amcor Ltd. for $280 million says a lot about the rapidly changing market.
Ball first made noise about entering the PET market in 1994. “We anticipate being in the market in 1995,” Harold Sohn, then-vice president for corporate relations, told Plastics News in a Dec. 4, 1994 story. “We have been exploring the opportunities there might be to enter the market at a high level.”
At the time, the company was the world's third-largest maker of glass packaging, and it was No. 4 in both metal beverage cans and metal food cans. As packaging analyst Tim Burns noted at the time, those markets were very mature, and Ball was interested in finding a position where more growth was possible. “This is a plain case of Ball facing the music, seeing the PET parade going by, and knowing that they need to get into the parade,” Burns said.
Ball formed a plastic container division and staffed it with three former executives from Atlanta-based Constar International Inc.
If any company was ever prepared to tackle a big, important new market, Ball was ready in PET. Within weeks, Ball announced it would build a PET bottle plant in California to supply Pepsi-Cola Co. The rest of the PET market had to take notice — this was a new player that had the ability to hit the ground running.
In May, George Sissel, who then was president and CEO of Ball, went to New York for the PaineWebber Packaging Wrap-Up to tell investors and analysts how excited he was to be in PET.
Compared with Ball's traditional glass, steel and aluminum product lines, PET looked like a growth market.
Now, 15 years later, Ball is getting out of PET. The market has changed dramatically. Carbonated soft drink makers moved to self-manufacturing — a trend that was already beginning before Ball's move. As the CSD market matured, consumers turned to water, sports drinks, energy drinks and tea — and those bottlers, too, turned to self-manufacturing. That's the big picture, at least. There's still room in the market for custom blow molders. But clearly it's not the potential high-margin, high-growth niche that Ball was hoping to capitalize on back in 1994.
According to a recent report from the International Bottled Water Association, U.S. consumption of bottled water dropped 2.5 percent in 2009. Likewise, consumption of carbonated soft drinks fell 2.3 percent; sports drinks fell 12.3 percent; packaged fruit beverages fell 2 percent; and flavored and vitamin-added bottled water dropped 8.8 percent. Those aren't numbers that make your chief financial officer — or your investors — smile.
Meanwhile, bottles have downsized to the point where they're more like bags than rigid containers, and profit margins have gotten to be razor-thin. The PET market is officially mature.
Some still hope for a “next big breakthrough” — like beer packaging. But the fact that Eastman Chemical Co. also is looking to exit PET is a pretty clear sign that the changes in this sector of the industry have been powerful.
It's been interesting to watch these changes first-hand, and I look forward to seeing whether Amcor's strategy will succeed.
Loepp is managing editor of Plastics News and author of “The Plastics Blog.”