New York City's move to ban expanded polystyrene has Berry Plastics Corp. seeing growth opportunities for its new line of Versalite polypropylene cups.
And recent falling oil prices also has the Evansville, Ind.-based company feeling pretty good as well.
“On the innovation front, we continue to make progress with our commercial introductions of Versalite insulated cups and containers,” CEO Jonathan Rich said on a recent earnings conference call.
“With the recent decision to ban expanded polystyrene in New York City, the commercial interest in Versalite technology has certainly escalated,” he continued. “We‘ve landed new customers throughout the U.S. Specifically in New York, we're working to help customers meet the July 2015 timing of the new regulations in New York City.”
Food service establishments, stores and manufacturers, starting July 1, will be banned from possessing EPS in certain forms, although there is a grace period.
That has people looking for alternatives for items such as cups and food containers.
“Versalite cups continue to far exceed the performance of any paper cup available in the market today,” Rich said. “It keeps coffee hotter longer. (It) doesn't require a sleeve or putting two cups together to keep from burning your hand.”
Berry also touts Versalite's sturdiness and the ability to use high-definition graphics on the cups.
“When you're done, you simply put it in the recycling bin with your other No. 5 plastics. Versalite is among the most easily recycled cups available today,” Rich said.
Dunkin' Donuts, in particular, has come out in strong support of Versalite and has signaled a plan to move away from EPS to the new cup.
The higher cost of PP, compared with EPS and paper, however, also is an issue regarding adoption.
But Rich said that falling oil prices, and the resulting falling resin prices, could help in that regard.
“As falling prices for our key raw materials reduce our costs, we'll be able to offer our customers all of these advantages at a price that is very competitive with paper cups,” he said about the general market.
Berry, as a major buyer of resin to make its products, loves to see the price of oil decline. Not only for Versalite, but it's entire business.
“If oil remains constant and resin prices respond as we have described, we would anticipate that resin related raw material cost could reduce our cost of goods sold over $500 million on an annualized basis,” Rich said on the earnings call.
Berry, he said, did not see the oil price drop coming. “But we like it.”
Berry reported earnings of $13 million, or 11 cents per diluted share, on revenue of $1.22 billion for the first fiscal 2015 quarter. That compares with earnings of $6 million, or 5 cents per diluted share, on revenue of $1.14 billion for the first fiscal quarter of last year.
The higher revenue, the company said, primarily was due to sales from businesses acquired during the past year, increased selling prices due to higher material costs and non-resin related inflation that was partially offset by what the company called “soft customer demand.”
Rich, on the call, also signaled to the investment community that the company still has its eye on overseas growth opportunities.
About 10 percent of the company's sales currently comes from outside the United States.
“On the international front, Berry continues to pursue a strategy of growing our business overseas, especially in areas such as Latin America and Asia where we believe growth in population demographics and rising average incomes will provide substantial future opportunities,” the CEO said.