Ball sees strong growth in beverage can market
throughout central and eastern Europe over the next decade, fuelled
by growing consumer spending power and the arrival en masse
of major western drinks groups. But it is not just drinks brand
owners which are set to benefit - packaging companies such as Ball
are also expecting strong growth, write Simon Pitman and Chris
Jones.
Earlier this year, Germany-based Ball Packaging Europe announced plans to construct a new beverage can production plant in the Serbian capital Belgrade, the biggest foreign investment project in the country valued at some €50 million - an indication of the importance of the beverage market throughout the region.
When the facility comes on stream in May 2005 - just a year after first breaking ground - it will supply 650 million cans a year to beverage companies such as Coca-Cola, Pepsi, Interbrew, Heineken and SAB, operating in Serbia, Slovenia, Croatia, Bosnia, Macedonia, Bulgaria, Romania, Hungary and Albania.
Beverage consumption in these markets is expected to grow rapidly over the next few years, and Ball has already earmarked a further €25-40 million to expand capacity at the Serbian plant, whose central location makes it the ideal choice to supply the company's customers throughout the central and eastern Europe region.
"For the markets in central and eastern Europe, we expect double-digit growth rates for the next few years," Jan Driessens, president of Ball Packaging Europe, told CEE-foodindustry.com. "A comparison of per capita consumption of beverage cans illustrates the potential of the region: in western Europe, an average of 70 beverage cans are consumed annually; the figure for Eastern Europe is currently as low as 13."
That Ball has confidence in the further growth in the market is underlined by the fact that the Serbian packaging plant is the company's second in the region. The company opened its facility in Radomsko, Poland, back in 1995, when the deregulation of the former Soviet states was still in its infancy. Even then the company, called Schmalbach-Lubeca at the time, saw the huge potential in central and eastern Europe, and with a population of 38 million, Poland was the obvious place to begin its expansion eastwards, Driessen said.
"Poland was not only one of the largest sales markets in the region, but also underwent the most promising economic development. Our plant in Radomsko therefore concentrates mainly on the domestic market and, thanks to the dynamic development of demand in Poland, has more than doubled its production volume over the past ten years."
Beverage industry analysts Canadean said that Poland's packaged beverage market, including beer, carbonates and water, grew by 12 per cent in volume terms in 2002, with beer alone increasing 9 per cent. More tellingly, can volumes in the beer market grew strongly, accounting for almost 35 per cent of fillings, while refillable glass continued its long-term decline, losing another 3 per cent in 2002.
With the accession of eight central and eastern European countries to the EU in May, boosting growth prospects, but Driessen said that the structural reforms that these countries had been obliged to carry out over the last 15 years in order to qualify for EU membership had already encouraged spectacular growth.
"The Polish government began to support the economic upswing years ago with far-reaching structural reform, and demand for consumer goods - including food and beverages - has grown continuously as a result: consumption of beverage cans in Poland has more than doubled over the past five years, for example.
"Prospects for the markets in Poland and the other east European countries are still good, and this is why we created additional production capacity for the region by converting the production line in our Hermsdorf plant in the east of Germany from steel to aluminium cans. This also helped offset the slump in sales in Germany caused by the introduction of the mandatory deposit on one-way packaging."
But Poland and Serbia are unlikely to be Ball packaging Europe's only production facilities in central and eastern Europe in the long term.
"Because of their enormous growth, Russia and Ukraine are important markets for the beverage can," said Driessen. "It is part of our strategy to be present in these markets, and for quite some time now we have had business relations with customers in these countries, which we will intensify once our plant in Serbia is in operation.
"The Serbian site is located on the banks of the Danube and thus has a direct link to the Black Sea, giving us a central site from which we can supply our customers in Russia and Ukraine."
With the beer market alone in Russia set to increase by 60 per cent by 2008, according to Canadean, driven by the increasing consolidation of the market into the hands of a few major players (Carlsberg, Scottish & Newcastle, Interbrew, Heineken), Driessen's optimism seems well founded - although both Russia and Ukraine are increasingly being used as test markets for PET beer bottles (PET had a 39 per cent share of the Russian beer market in 2003, according to Moscow-based converter NB-Retal), a factor which could impact long-term growth for cans in the beer market.
But for now, at least, the prospects for growth look excellent, and Ball Packaging Europe is already looking at the next phase of developing its business in the region. "Our aim now consists of gaining a strong foothold for the beverage can as a consumer- and environmentally friendly package in these markets," Driessen said.
"The beverage can's success in Poland is not least due to the fact that our company played a leading role in the development of a functioning recycling system for beverage cans there. Ball Packaging Europe will therefore actively campaign for the development of environmental and recycling organisations in the new sales markets in eastern Europe."
Indeed, to coincide with the new packaging facility in Serbia the company has established a Belgrade-based association called RECANS which will help cultivate environmental awareness and promote recycling through a series of events and collection campaigns.
