Neil farmer discusses why mergers and acquisitions are good news for the internation FMCG packaging industry …
Over the past year I have observed with interest the spate of merger and acquisition activity in the consumer goods packaging sector. The deal that caught the eye was the purchase by RPC Group of the international closures business Global Closures Systems (GCS) for a reported £472 million. Having worked in the closure industry for many years, I know the expertise, innovation and technical skills within GCS. The deal will allow RPC to offer closure solutions with its extensive portfolio of rigid plastic packaging solutions. Global Closure Systems, a business with revenues of £426.6 million, produces closures and dispensing systems for consumer products in 100 countries.
It has a global reach with local presence, with 21 manufacturing sites and two mould shops in 13 countries. As 80% of RPC’s sales are in mainland Europe and it has operations in North America and China, the true geographic spread of the expanded group is clear to see. It’s only a year since RPC snapped up Promens of Iceland, a leading European producer of rigid plastics products for personal care, health care, chemicals, food and beverages. The other major deal is the proposed takeover by Ball of its metal packaging rival Rexam, which looked under threat in October when the EU raised objections owing to competition concerns, but got the go-ahead in January, subject to the divestment by Ball of 12 plants. The economic, geographic and technological benefits that applied to the RPC /GCS purchase also apply to the Ball/Rexam deal. Analysts say the combined company would have 60% of the North American market and 70% in Europe. In Brazil it would have 75%. Such deals mean major groups can access international fmcg producers. Unilever, Coca-Cola, Procter and Gamble and others want high quality packaging from a local source. By extending their reach, they extend their markets.
According The Economist Pocket World in Figures 2016, China’s GDP per person has risen eight-fold over the past 25 years to $6,807. China has pulled 600 million of its population above the poverty line. Its industrial output, which was one seventh of the Unites States’ in 1988, overlook it in 2010. In Latin America, South America and other parts of Asia, expanding consumer markets and growing GDP per head mean great opportunities for consumer goods producers and packaging groups.
In India there is massive investment in plastics technology. There are very low levels of plastic use. In November Indorama Ventures of Thailand purchased Micro Polypet Private Ltd, the sole manufacturer of PET resin in North India, with an estimated 12% of the country’s market share. India uses 1.3 pounds of PET per person annually compared with 5.7 pounds in China and 24 pounds in the USA. The company says PET consumption in India is growing at 20% pa, from a low base. It also said the average Indian drinks three litres of soft drinks a year, compared with 90 litres in the USA and, most significantly, PET only has a 30% share of India’s beverage market. For those of us excited by the prospects of emerging markets and international consumer goods packaging expansion, these statistics tell an positive story.