Sonoco reveals composite can ambitions

By Guy Montague-Jones

- Last updated on GMT

Related tags Revenue Compound annual growth rate

Sonoco has outlined plans to capture the North American coffee tin market on the back of its Maxwell House success during an investor conference on Friday.

President and CEO Harris DeLoach told investors in New York that Sonoco sees opportunities to grow composite coffee container sales by $50m over the next few years.

Sonoco has recently developed a composite container for Maxwell House, providing the Kraft coffee brand with all six can components, including a new patent-pending over-cap to protect flavour. DeLoach said the new composite can is produced at a lower financial and environmental cost than traditional metal containers.

Sales expansion

Following the Maxwell House deal, Sonoco is in discussions with several coffee brands to grow its composite can sales. The company is also expanding composite can sales in other markets.

Its new composite can for Heinz powdered infant formula won the Italian Institute of Packaging Special Quality Design Oscar. Following on from that success, Sonoco hopes composite can sales for the powdered infant formula market will grow from $62m in 2007 to $125m by 2012.

In the meantime the Heinz and Maxwell House containers are expected to help Sonoco set a record in new product sales for 2009. For the first three quarters of the year, the company has generated $124m in sales from new products, compared with $136m for all of 2008.

Financial results

While Sonoco may be gaining new business with new products, it has also lost sales revenue since the recession began, especially in its industrial division. For the first nine months of the year, net sales fell from $3.187bn in 2008 to $2.595bn this year.

The recession has put the brakes on expansion plans, but the company has not given up on ambitions to reach $6bn in annual sales. The target date has been put back from 2012 to 2014 but achieving the new goal still demands a compound annual growth rate (CAGR) of 11.1 per cent.

Sonoco plans for 4.6 per cent organic growth, with the remaining amount coming from acquisitions. To fund substantial acquisitions over the next few years, Sonoco has worked on improving it financial fitness, and adapting its cost structure to the recession.

Gross profit margins have improved from 16.9 per cent in Q4 in 2008 to 18.6 per cent in Q3 2009. And on Friday, Sonoco increased its earnings per diluted to share forecast for the year from $1.62 - $1.67 to $1.69 – $1.72.

Related topics Processing & Packaging

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