Nampak looks at canned wine, water
● Wine and water in cans is set to be a new trend as Nampak looks for growth in the can market — of which it already has an 80% share in SA — and takes advantage of the demand for more environmentally friendly packaging.
“It’s an exciting opportunity — we are looking at wine, water and other opportunities and a lot of work has been done with certain of the winemakers,” said Nampak CFO Glenn Fullerton. “The recyclability of aluminium is almost indefinite, and recycling rates north of SA are even higher than they are here.”
Fullerton was speaking after the release of Nampak’s financial results for the year to September, which showed a steep decline in earnings as the packaging group was hit by hyperinflation in Zimbabwe and an adverse tax change in Angola, as well as by a weak domestic market.
The rest of Africa contributes a third of the group’s revenue and 70% of its trading profit, but the attractive margins are countered in part by the high level of risk involved in operating in Africa, with the group’s results having been hit hard in recent years by currency and other setbacks.
The group’s profit is down 10% to R690m for the year to September. This was the last set of results presented by Nampak’s outgoing CEO, Andre de Ruyter, who will join Eskom as its CEO on January 15.
Nampak’s cans business accounts for 73% of its revenue and 88% of its trading profit. A shift to wine and other drinks in cans could help retain a foothold for Nampak in the market for wine packaging once its R1.4bn deal to sell its glass business has been concluded, as well as helping it to hold on to its share of the can market in the face of competition from two new entrants.
Nampak’s Bevcan subsidiary has more than 80% of the market for can manufacture in SA but over the past couple of years has faced competition from two new entrants to the South African market — Golden Era and Nigeria’s G21 — which contributed to the decline in Nampak’s share price.
However, Fullerton said the market was growing by 6% in SA in terms of volume, creating the space for new entrants, and Nampak had the advantage of five can manufacturing lines, giving it flexibility to make eight different can sizes.
New competitors had been good for Nampak, helping to drive efficiency, he said.
In the water market there’s been a move to put water in cartons, which can be resealed and are easy to pack in pantries and have proved particularly popular for school tuck shops, Fullerton said.
The carton business has been a strong cash generator for Nampak for a long time and the group is considering new uses for cartons in packaging dry goods such as Jungle Oats and birdseed, and is particularly keen to grow markets in the rest of Africa.