Global packaging industry revenue is expected to rise to $739.9 billion in 2014 at an average annual growth rate of 3.1% from the last five years. Growth in this industry is driven by rising demands from manufacturing and retail sectors.
I have analyzed three packaging companies, which entered the Fortune 500 list of largest corporations of the U.S. last year. These companies have implemented certain strategies which will improve their rankings. These strategic steps include installations of new plants, expanding existing ones, and developments in major revenue generating segments.
Better revenue opportunities from Asia Pacific and Brazil
Globally, volume of beverage cans for Crown Holdings, Inc. (NYSE:CCK) increased 6% year-over-year in the first-quarter of 2013, primarily driven by growth in Asia Pacific and Brazil.
Crown Holdings’ Americas beverage segment revenue increased to 3.4%, year-over-year, in the first-quarter of 2013, primarily due to growth in Brazil. The beverage can market of Brazil grew 10% in 2012, due to carnival season. To strengthen its market in Brazil, Crown Holdings began construction of a new, $1 billion plant in this region. The plant is expecting to commence production in the beginning of next year with 900 million cans annually. In the first-quarter of 2013, the company contracted out around 70% of total plant’s production to three of its customers. Anticipating growth from the new plant, Crown Holdings, Inc. (NYSE:CCK) expects revenue to increase from $349.4 million in 2010 to $533.69 million in 2013 from Brazil.
Net sales in the Asia Pacific market increased by $51 million, year-over-year, to $276 million, in the first-quarter of 2013. Rapid urbanization and emerging middle class are both growth drivers of the beverage industry in Asia Pacific region. Crown Holdings, Inc. (NYSE:CCK) expects continued growing demand from this region, so it announced a new beverage can manufacturing plant in Sihanoukville, Cambodia. The plant will have an initial annual production of 725 million aluminum cans. The facility is expected to start production by the third-quarter of this year. With the increasing demand and production facility, Crown Holdings expects its Asia pacific segment’s earnings to increase from $137 million in 2012 to $166 million in 2013.
The major risk for Crown Holdings, Inc. (NYSE:CCK) comes from foreign currency translation. Approximately, 70% of the company’s sales are from outside the U.S.
Moreover, the company’s core business is metal beverage packaging. Looking at the rise in metal prices, the beverage producers might shift to cheaper alternatives like plastics or glass.
Growth in corrugated and consumer package segment
Rock-Tenn Company (NYSE:RKT)’s corrugated cardboard package segment registered growth in the first quarter of 2013, due to increment in cardboard’s selling price and improved product mix. Its cardboard product mix improves with a higher ratio of high performance cardboard, which have high compressive strength, and white-top cardboard than standard valued cardboard.
