Weathering the economic storm
The fields of Ukraine – the bread-basket of Eurasia – have been turned into a war zone by the Russian invasion – restricting global food supplies and fuelling inflation. Image: Ukraine ministry of defence
Worldwide inflation is impacting the can making industry and its supply chain partners. Metal packaging prices have risen by at least 25% this year, according to industry association FoodDrinkEurope. A key reason has been soaring prices for energy used in manufacture, up more than 50% in 2022 according to the World Bank.
Raw material prices have also risen, because of the sharp rise in energy costs with aluminium being a particularly energy-intensive base metal to produce. Aluminium prices rose recently with the World Bank predicting moderate growth from an average of US $1,703/tonne in 2020 to $2,050/tonne in 2022.
The ability of the European Union (EU) aluminium sector to increase production to profit from these prices, and cause them to level off, has also been limited by the fact that the EU has lost 30% of its primary aluminium production capacity since 2008, noted Kale Symons, communications director for rigid metal packaging association Metal Packaging Europe (MPE). He told CanTech International that Russia’s invasion of Ukraine continued to increase prices: “As the situation in Eastern Europe continues, supply chains are further disrupted by rising fuel prices.”
For example, one ad-hoc Belgian business survey led by the National Bank of Belgium (NBB), the country’s central bank, conducted 26-28 September 2022, revealed that between the start of 2021 and September 2022, Belgian businesses saw energy price increases of 120% for electricity and 143% for gas. Other European countries have suffered from comparable price hikes.
As a result of these problems, FoodDrinkEurope has called on policymakers in the EU and its member states’ policymakers to “formally recognise all food chain actors [including can manufacturers] as essential and to ensure their access to affordable and stable supplies of energy as a critical step to keeping shelves and fridges well stocked.”
EU farmers and agri-cooperatives body CopaCogeca and the EU Primary Food Processors (PFP) association have also called on member states to deliver a solution that brings down energy prices, giving targeted support to the agri-food supply chain and exempting food and can businesses from requirements to reduce energy consumption during peak hours.
Alexis Van Maercke, secretary general of the Association of European Producers of Steel for Packaging (APEAL), noted that United Nations data showing the first half of 2022 saw global food prices rise by 12%. “Compared to figures before the pandemic, prices have risen as much as 65 per cent,” he said. Indeed, according to global financial services provider Morgan Stanley, food costs have increased globally by 65% in the last two years.
This situation is reflected across Europe. France’s federation for the preserved food industry FIAC (la Fédération des Industries d’Aliments Conservés) in February 2021 had already highlighted high price rises for metal cans. “This is a worrying situation for businesses as empty cans, depending on their composition, can represent up to 50% of [fillers/canners’] production costs,” FIAC said, noting that the major steel and aluminium producers in Western Europe saw price rises of between 8% and 12% during 2020.
French can manufacturers have also been hit by the increased contribution demanded from France’s packaging recovery organisation CITEO (formerly Eco Emballages) for the recycling of metal packaging. These rose in 2021 by 10% for steel and 12.5% for aluminium cans. The current EU joint – aluminium and ferrous – metals packaging recycling target is 50%; by 2025 the targets will be 50% for aluminium and 70% for ferrous metals, and by 2030 rising to 60% and 80% respectively. With these additional demands on can buyers and fillers, “these increased costs put companies in peril,” the FIAC warned, stating that these additional costs must be reflected in the sale price to distributors.
Moreover, inflation hinders companies from investing and innovating in environmental technologies that might help them meet these requirements, the French federation argues.
Can manufacturing majors have been reluctant to say how they will be impacted by inflation, which hit 11.5% in October 2022, EU-wide, according to business data service Statista, compared to a 7.7% rate for the USA according to US Labor Department data published on 10 November.
Crown Europe declined to comment on how inflation will impact its business. Leading aluminium firm Ball Corporation told CanTech International that information on inflation was commercially sensitive. Even industry association MPE said it did not have “consistent data on the impact of inflation.”
Any silver linings?
FoodDrinkEurope and the NBB study make clear that despite the tough economic context, food businesses have invested in energy-saving technology and renewable energy to compensate. Morgan Stanley said that food prices will peak this year and will fall in 2023, due to increased output by farmers, weather normalisation and the potential for Russia to be driven out of Ukraine, or an agreement between Kiev and the invading Russians.
“Despite economic pressure, the demand for metal packaging remains high,” MPE’s Symons said, as people are searching for ways to reduce spending such as choosing canned products that do not require refrigeration.
An online survey from May 2021 on 800 people aged 18-70 in Belgium, Denmark, France, Germany, Italy, the Netherlands, Poland, Spain and the UK conducted by global market research company IPSOS on behalf of MPE, concluded that increased food prices make consumers more likely to buy canned food than food in other or no packaging. Canned food’s longer shelf life and ease of storage means consumers can stock up early as prices rise.
“We’ve seen consumer food prices shoot up 13 per cent since last year, putting a great strain on people’s day-to-day budgets,” said Will Surman, director public affairs and communications at FoodDrinkEurope. Citing Belgium’s food industry federation FEVIA (Fédération de l’industrie alimentaire belge) September 2022 member survey, he said the energy crisis has caused 63% of Belgium’s food and drink companies’ gas and electricity bills to more than double in 2022.
“In this context, canned food remains a great option for consumers by providing good value and good quality options,” Mr Surman said. “Given their long life, canned goods have the added bonus of lasting for long periods on our shelves, thus helping consumers reduce their food waste… However, we note that light metal packaging prices have increased by 25 per cent in the past year, putting further pressure on the food manufacturers.”
Despite this, global research company Censuswide’s July 2022 survey indicated that more than a third of consumers (39%) in the UK were buying canned fruit and vegetables instead of fresh because of price rises.
Additionally, Nantes, France-based metal packaging major Eviosys released a study based on research carried out in September 2022 on 2,000 people in the UK, France, Germany and Spain, which revealed that 40% of citizens would buy more canned food to help weather the cost-of-living crisis.
Eviosys chief commercial officer Olivier Aubry noted, when releasing the report dated 18 October in Paris, that cans’ recyclability remained a draw for consumers concerned about the environment: “Tinned food can be an answer to many pressing issues at once.”
APEAL’s Van Maercke also highlighted Eviosys data showing that 72% of consumers would not compromise on their choice of sustainable packaging, despite inflation. “The findings of the research demonstrate that consumers remain concerned about the impact of less sustainable packaging materials on the planet. Steel packaging can be recycled endlessly and ensures products stay fresher for longer even at ambient or high temperatures, helping consumers to reduce waste and limit the cost of rising food prices,” said Van Maercke.
He continued, “At the same time, steel packaging is helping consumers make a positive choice for the environment, as Eviosys data indicated that more than half of western European citizens (61%) would still consider paying more for sustainably packaged products.”
Maarten Labberton, director packaging group European Aluminium, noted that aluminium packs especially remained a choice for sustainability-focused consumers. “Despite the inflation, we believe aluminium will remain the packaging of choice for many food and drink products because aluminium provides a total barrier function, keeping products safe from bacterial contamination, oxidation, moisture and light to product the product and extend its shelf life.”
He added, “It is also very light, making it easy to stack and less costly to transport. Finally, the endless recyclability of our metal allows us to offer highly circular packaging solutions in a fast-moving consumer goods area which allows can makers to reduce the input of primary aluminium needed for production. In other words, aluminium packaging prevents food and energy waste.”
Van Maercke also stressed that canned food brands can argue that buying their products is also good for health as well as wallets and the environment. “The good news is that fruit and vegetables are usually canned within hours of harvesting and retain their nutrients throughout their shelf life,” he said. “Furthermore, no additional preservatives are required to protect canned food stored at ambient temperatures. In short, food packaged in steel cans offers consumers the equivalent vitamin content to freshly prepared food, without needing preserving agents, often at significantly lower prices.”
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