Increased beer consumption in emerging markets is the driving force behind beverage can demand, according to Omega Research Associates.
Gene Leo, principal author of the report ‘Outlook for Metal Cans 2014’, told FoodProductionDaily.com metal can producers are taking a risk in addressing these markets - but it’s a strategy that’s likely to pay off.
A saturated market in the US is also pushing manufacturers into emerging regions.
“Beer packaging is the engine that’s pulling beverage cans [outside the US] right now,” Leo said.
Brazil, Vietnam and China
“Beer production is increasing in Brazil, Vietnam and China, and as a result companies are anxious to enter these markets. They see a good opportunity for beverage cans to replace bottles for many reasons –beverage cans don’t break during transport, for example.
“Demand is being met by multinational producers. They are increasingly moving into developing countries, emerging frontier markets, countries off the beaten path. It’s a little more risky, but they see potential.”
Beverage can demand in the US is dropping, with nine consecutive years of decline in carbonated soft drink consumption recorded in 2013. Meanwhile, metal can demand is increasing in areas where urbanization is taking hold. However, there are risks in addressing these markets, Leo said.
“These are countries that are very volatile economically, and are subject to highs and lows. Not just economically, but politically as well. On one hand you want to go into markets you feel are safe. But the safe markets are pretty much saturated, so you take a risk, a gamble.
“For the most part, it will pay off.”
As an example, Crown Holdings said it expects to become one of the leading beverage can producers in China this year , despite describing beverage can pricing in the country as 'very challenging.' Reporting its FY 2013 results for the year ending, it said North American beverage sales volumes fell 1%.
Urbanization boosts demand for metal cans
The US market for metal cans is ‘well into its mature stage’ and contraction can be expected, Leo said. For example, carbonated soft drinks and canned fruits have suffered as healthy diets and fresh foods are encouraged.
Metal cans for food are also doing well in areas where urbanization is increasing.
“Traditionally, people would buy fresh products daily, and prepare them at home,” Leo said. “In urbanization – for example in China or India - they have to rely more and more on processed and packaged items. They don’t have refrigeration, or at least large refrigerators.
“Convenience is a factor, and when incomes increase, they tend to improve their diets and the standard of living increases. Protein becomes a greater portion - one example is canned seafood.”
However, with only a couple of exceptions, multinational food can manufacturers have not taken the same steps as their beverage counterparts in entering new markets and demand is being met by local and regional suppliers, Leo said.