Adam Greenlee: Well, I think maybe we should just talk about that by business segment because I think the answer will vary by segment. So certainly in Dispensing and Specialty Closures, promotion is part of the answer for those prestige and luxury fragrance and beauty products and we are seeing greater promotion. We understand greater promotion will continue in those particular markets. And maybe I would jump over to the Metal Containers business and say, we have seen more promotion in soup and we believe it’s working for whatever that’s worth. And I think pet foods, you’re going to see more promotion in pet food in a variety of different formats. So I think in fits and starts, yes, there’s more promotional activity. It’s where I think volume growth is coming from as well.
They’re trying to leverage that volume growth and turn it into an even greater set of volume for the business. So I think our customers are feeling better broadly speaking, about where we are, where our products collectively sit in the marketplace for consumers as we turn the page to 2023.
Arun Viswanathan: And then just lastly, if I could, just on the M&A front, maybe you can just discuss maybe some of your priorities, if you do have any, maybe does the Russia exit provide you with any extra capital to potentially deploy into that area? Or how should we think about M&A here going forward?
Robert Lewis: Yes. Look, I think as I mentioned before, M&A is a core part of the strategy. It’s where a lot of our growth over a longer period of time comes from. So we’ll continue to remain active. I don’t think it’s any secret that Dispensing and Specialty Closure side of the business is kind of the tip of the spear of where we would like to continue to invest. But we’re also not afraid to look for opportunities to strengthen other parts of our business as well. But I think if we could draw off the playbook, it would be oriented towards the dispensing side. The withdraw from Russia really doesn’t have any bearing on our ability or our desire to allocate capital across the rest of the business. It remains part of the core competency. So that’s just a — that part of the business is just a victim of circumstance and we’ll deal with it and we’ll get on with running the broader business.
Operator: We’ll go next now to Daniel Rizzo at Jefferies.
Daniel Rizzo: I know you’re a different company now but can you just for historical purposes, just show us what happened with volumes during the 2008 and 2009 recession. Were you largely unaffected? Or was it kind of a different time, different thing?
Robert Lewis: Yes. I think that the — the main impact, at least the 1 that I talked about the most was on food can volumes in that time frame. And essentially, what you saw was volumes hold pretty steady across both in the downturn and in the recovery for very different reasons, right? And so you saw, as an example, during the downturn, sort of fruit and vegetable, it really improved as you might expect, as people sort of hunker down and ate at home more often. Likewise, at that particular point in time, the pet food market, which was a different pet population, if you will, more broadly larger pets and that converted away from wet pet food to dry. And then as the recovery happened, there was a reversion. So through both periods, volumes were pretty steady.
The mix changed, if you will. I think what’s different this go around is the fact that there has been such a change in pet ownership and pet population that it is far more dependent on the wet pet food market and less likely to see a meaningful change away from what the pets are eating and how people are treating the pet. So I would expect that the food can business will continue to do well.
Daniel Rizzo: I’m sorry for the dumb question but does it mean people have smaller dogs now? Is that what we’re kind of saying?
Robert Lewis: More of them as well. So yes, the pets in the households have trended to the smaller size and there’s more of them as a consequence of smaller pets being more manageable in the house.
Adam Greenlee: And the wet pet food category, Dan, is both small dogs and cats. And the cat population has continued to grow over recent years as well.
Daniel Rizzo: Okay. And then you mentioned, I think, 80% pass-through for metal costs or metal containers. Have you ever said what resin — how much of resin is pass through? Did I miss it or something?
Robert Lewis: Generally, we pass through resin on a lagged basis. So it varies by resin type and by business. But at its longest, it’s probably 60 days in terms of the lag pass-through and in many cases, much shorter than that.
Adam Greenlee: But to be clear, we do pass through the cost changes of resin to the market as well. And I think if you go back to our Dispensing and Specialty Closures segment, it was a large negative roughly in 2021, if memory serves me correct and we basically recovered that negative through the course of 2022 and now we’re anticipating relatively stable prices for resin as we move forward into 2023.
Operator: And we’ll go next now to Jeff Zekauskas at JPMorgan.
Jeff Zekauskas: Different pet associations are talking about how people can’t afford their pets now, 1/3 of pet owners are worried that pet is putting too much of a strain on their income. And the number of pets and shelters has really risen both in the United States and Europe. Is the pet food — is the cat food market that you’re in higher end so that it’s sheltered from some of these trends? Or do you not see these trends? That is, do you see more stress on the pet owner that may affect can demand or you don’t?
Adam Greenlee: So a couple of things there, Jeff. I think, first of all, we don’t see that stress through the markets that we serve. And again, I think Bob really highlighted a very good point about the mix of business that we had, call it, back in ’08 or ’09, I think large pets do have the pressure that you’re talking about, a, the consumption of product just by the sheer nature of the size of the pet is much greater. And I do think you see a trade down to dry. I’ll also say a 40-pound bag of dried pet food is quite expensive. When you look at the products that we manufacture and the markets that we serve and that kind of small dog and cat wet food population, we don’t see a trade down. We don’t see that same level of stress that you’re describing again, we talk a lot about the Silgan customer service model and our customer intimacy, where we spend a lot of time talking to and with our customers about the specifics of the markets that we collectively serve.
And we are not feeling that pressure in dealing with our customers having that dialogue.
Robert Lewis: Yes, Jeff, I would take that a step further and just remind you that we are not speculating on the market, right? We’re making investments where our customers are making investments and we’re doing that with commitments from those customers. So we feel like we’re pretty well aligned with what is happening in their markets and where their markets are going.
Jeff Zekauskas: Okay. And then for my follow-up, is it fair to say that your EBIT growth in 2023 to really be a function of your volume growth and that the price raw material spread really won’t make so much of a difference to the EBIT change?
