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For FMCG producers who are looking to buy glass packaging better, this episode provides a macro-view of the Australian Glass Packaging Sector – it’s manufacturers, capacities, and constraints.
Essential listening for procurement & innovation leaders.
Hello & welcome to this launch edition of Margin Matters
In this series on Packaging … we will be providing Glass Bottle customers with an insider’s perspective on the needs of their glass Suppliers…
To be clear … this is not a “how -to beat up your glass producer for a better price-guide” … Instead it’s about channelling Stephen Covey’s approach of “Seek first to understand. then to be understood.”
Our aim … is to equip packaging customers with the information they need to co-create value with suppliers … at a time when both parties need it most.
Our briefing begins with the fast facts that glass explain Supplier behaviour:
- Glass packaging demand in Australia is divided between the following segments: Wine 40%, Beer 40%, Soft drink 10% & food, spirits and juice making up the balance.
- Crucially, 60% of all wine produced in Australia is exported. Much to China. Whilst slowing Beer consumption in glass is being exacerbated by covid restraints & the rise of craft beer in cans. So 80% of glass demand is facing tropical strength headwinds.
- Green, Amber and flint are the three Major colours, used to produce 3 specific types of bottle: Press & blow, blow/blow and NNPB
- Domestically, there are two glass producers – The privately owned Visy Glass and the publicly listed Orora. Together they supply about 93% of domestic demand.
- This demand equates to circa 900k tonnes and falling, whilst local capacity is approx.. 1m tonnes and growing.
- Visy has plants in Ad, Mel, Syd, and Brisbane, Whilst Orora is based in Adelaide an imports from the Philippines
- Both have undergone major internal changes in the past 12 months. Orora has offloaded it’s box division and Visy has onboarded the OI Glass business, so both are eager to settle their respective ships at a time when market inputs, production, distribution and demand has never been more disrupted.
- Added to this, Glass Production is like larva production from an active volcano – you can’t idle the machines. You must keep making and packaging glass. So, if demand doesn’t equal supply, producers have a major inefficiency, working capital and storage problem.
So, here’s the vital message. Supply is clearly exceeding demand and will do for some time. The profit implications for glass producers are dire. This means it’s a great time to be a customer. Especially a well prepared one.
In the next briefing, I’ll begin a countdown of the top 10 Supplier needs that every Glass procurement lead will want to understand and be ready to meet.