Stiff competition

When BAA, the British Airports Authority, was deemed to have a monopoly on the UKs airports the Competition Commission stepped in, conducted a full review of the situation, and then promptly ordered it to sell off three facilities to rival companies – two of which were in the London area.

If you translate the information to our own industry, you can’t help but think that similar concerns may arise should the Rexam/Ball acquisition go ahead.

It would effectively create a behemoth metal packaging company, with operations around the world in every area of the industry. But is this a good thing or a bad thing?

In terms of innovation, a company such as this, undoubtedly with very deep pockets, would be able to combine forces and push forward with research and development projects in order to best meet the challenges today’s brands are facing in terms of packaging. This could result in new and exciting products being brought to market far sooner than could be realised should the status quo remain.

But the fact remains that should the deal be finalised the resulting company will effectively control over 60 per cent of the market in Europe, North America and Brazil.

The knock-on effect this would have for smaller companies operating in this arena is as yet unknown, but analysts are suggesting that Crown would benefit from any asset sales required to address competition concerns and would therefore increase its own market share in areas such as Europe.

Ball itself has made it clear that it will back out of the deal should competition concerns lead to the sales of assets totalling more than $1.58bn, meaning a break fee would be payable to Rexam shareholders, but all signs at the moment lean towards those involved being confident that a deal will be done.

However, one should never underestimate the competition authorities. BAA, it could be said, did just that, and look what happened there.

What are your views on the potential merger? Is it a good or a bad thing for the industry?

Please leave your comments here.

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2 responses to “Stiff competition”

  1. Graham Price says:

    As you say it may be a double edged sword with supply capacity driving prices rather than demand. Ball will now acquire a very productive engineering machine rebuild capacity at RTC with additional project support and experience from both sides of the sale. Again it will depend on the monopolies commissions and how they review the sale especially in the EU region. I believe that the loss in innovation has already begun with smaller entrepreneurial companies moving towards the smaller independent companies or alternative industries as the large can makers have tied their boats to the large OEM docks. I believe the ones who are watching this closely will be Coke and Pepsi beverage with INBEV and SAB on the beer side.

  2. Evert van de Weg says:

    I am not so sure that this big concentration is a good development. The market share of the new combination in various countries in Europe, but also in other parts of the world will become so high that there is hardly any strong competitor left there and that limits the choice for brand owners very much. And history has shown that very high market shares of suppliers do not necessarily mean more R & D activities; now and then it leads to ”laziness” as the drive to offer better propositions than your competitor to customers is lacking.
    On the other hand, the concentration on the brand owners/fillers side is also very big and still increasing. This leads to the fact that brand owners require global contracts from can suppliers and you have to give a proper response to that and be able to take a strong stand against that challenge.
    The one company that could take the most profit from the new situation might be not necessarily Crown, but the current number 4 in the worldwide ranking of beverage can makers….

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