Packaging group Nampak believes there is a significant opportunity to replace plastic bottles, particularly those used for noncarbonated and carbonated water, with aluminium beverage cans and paperboard cartons as consumer resistance to plastic grows.
The JSE-listed company, which reported interim results on Thursday, has indicated to its shareholders that various innovations are being advanced to grow the pack share of beverage cans and cartons as environmentally responsible alternatives to plastic.
It is estimated that South Africans consume about 600-million plastic water bottles yearly, with most of those containers produced by the beverage firms themselves.
Nampak’s Bevcan unit produces aluminium beverage cans, which are lightweight and “infinitely recyclable”.
Plastic bottles continue to enjoy a pricing advantage over beverage cans, but the aluminium content is higher value, making them more suitable for collection and recycling and more desirable among increasing environmentally aware consumers.
Several large users of packaging have already made commitments to reducing their use of plastic. Woolworths, for instance, has publicly declared its intent to have all its packaging recyclable or reusable by 2022, while Coca Cola plans to offer 100% recyclable packaging by 2025.
Bevcan South Africa is currently achieving high recycling rates, which Nampak believes is creating an opportunity to position beverage cans against plastic, particularly for water.
There are no technical downsides to the use of aluminium cans, which are impermeable and also retain carbonation better than plastic bottles. Serving sizes will be smaller, however, as cans cannot be resealed.
Nampak is also bullish about the future prospects for cartons, noting that paper is re-emerging as a substrate of choice for liquid packaging. “Cartons, which are made from 87% renewable sources, are eco-friendly, have recyclable rates of 66% and are cost competitive.”
Besides water, for which beverage-can and carton alternatives are already being rolled-out for some customers, the company sees significant growth potential in the wine and fruit-juice segments.
Nampak will continue to produce plastic packaging and has no intention of selling its plastics business, as is currently the case for its glass unit, where sale negotiations are ongoing with the preferred bidder.
As a principle, however, it will seek to reduce the use of plastics by substituting it, where feasible, with other substrates. For those applications where plastics continue to make sense for its material advantages, or for cost reasons, Nampak will introduce light-weighting technology, raise the recycled content and ensure that recycling and reuse rates are as high as possible.
Nampak’s move to displace plastic packaging with beverage cans coincides with a rise in domestic competition.
Although the South African beverage can market grew by 2% in the six-month period to the end of March, Bevcan’s volumes fell 9%, as customers began allocating volumes to new entrants, including GZ Industries.
During the interim period, group revenue declined by 4% to R8.5-billion, largely as a result of a decline in volumes in Angola from softer demand, and to a lesser extent the entry of two competitors to Bevcan. This was partly mitigated by double-digit growth in volumes by both Bevcan Nigeria and the general metals business.
Basic earnings of R820-million, representing basic earnings a share of 127.1c, both declined by 2%. Headline earnings a share fell 9% to 119.7c.
The board has decided not to resume dividends until the sustainability of cash transfers from Zimbabwe is assured and the disposal of the glass business is finalised.