Feature China
120 billion, and Europe with 72 billion of two-piece cans. At the same time, China is the second-largest global market if its three-piece beverage cans market is included, standing at 29 billion cans. The technology used for two-piece
beverage cans in China is the same universal standard found everywhere in the world and is instantly recognisable when visiting a factory in China. However, nearly everything else is different. This is beverage can with Chinese characteristics. For a start the players are different.
dynamic beverage cans
China’s market RICHARD MOORE highlights how the
beverage can market in China has taken a very different path to Western markets,
while still generating growth, innovation, and new ways of doing business.
The sheer size of beverage cans market in China
The sudden upturn in consumer demand for beverage cans in the US and Europe, the ensuing shortages and wave of investments in new capacity and the importing of 12 billion cans from outside the US in 2021 were all surprising news items that have been well documented. Along with Mexico, Canada and others, China was one of the countries helping to meet the deficit. But not much was reported on the state of the market in China. This is surprising because with annual
sales of 50 billion beverage cans China is the third largest two-piece beverage cans market in the world, after the US with
In North America, Europe and Latin America, the market is dominated by three familiar names: Ball, Crown, and Ardagh. Ball withdrew from China in 2019 and Crown reduced its footprint from ten plants in 2012 to three today. Chinese can makers have been quick to fill the gap. Having purchased the previous Ball plants, Shenzhen-listed ORG Technology is now the clear beverage can market leader. ORG also owns 27% of the second largest beverage can maker CPMC Holdings, listed in the Hong Kong stock market. Baosteel Metal’s Shanghai Baoyi Can-making is the third player, an offshoot from Baosteel, the huge national steelmaker.
A competitive edge: the ‘comprehensive solution’ model
New “bevcan” players have emerged, such as Shenzhen-listed Sunrise Group (previously ShenXing) thanks in good part to their now completed acquisition of the previous Pacific can plants. Despite continuing consolidation, the structure of the market in China is far more competitive than elsewhere: the top three account for only 55% versus 80% in the US and Europe. Overcapacity and intense competition
were the factors that made Ball and Crown rethink their hitherto gung-ho expansion in China. In 2014 sales-to- capacity ratio was only 65%, and prices stayed low, just above variable costs for two years. Since then, the gap has narrowed and pricing has improved, but the sales-to-capacity ratio has remained at about 75%, low by comparison with the US and Europe. Surprisingly this extra competitive
pressure in China doesn’t show in their published results. ORG for instance has notched up an average 15.6% EBITDA in the last three years, slightly better than the averages for Ball, Crown and
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Ardagh in the same years. The other two listed companies have lower EBITDA at between 11% and 12% of sales, but they’re still profitable. Have they found a way of being immune from pricing pressures? In the case of ORG, some reasons filter through, and they’re all to do with what they call broadly the ‘Comprehensive Solution’. Six of ORG’s facilities in China are also filling centres for their customers, as part of a total service package, a model also used successfully by Kian Joo Can Factory Berhad in Malaysia. ORG also offer ‘QR Code Marketing’ which goes beyond simply printing the QR code under the tab or on-pack, to include managing the resulting promotions and consumer contacts, and helping their beverage customers build databases and tracking their on-line purchases. ORG also features an in-house branding consultancy providing ‘one-stop solutions for customers’ brand issues’, covering positioning, design, shaping, promotional videos, and even exhibition material. Ball and Crown withdrew from China
to avoid overcapacity and the heat of tough local competition, but now they’re having to confront the same can makers in their home markets. CPMC, China’s number two beverage can maker, has popped up with a new plant in Belgium, now in full operation, and has announced a new investment in Eastern Europe in a joint venture (JV) with ORG and another Chinese company. Not enough yet to challenge the extensive networks of the top three, but a warning of possible things to come.
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