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Challenges and Consumer Demands Influencing the U.S. Packaging Market

Can Manufacturers Institute Packaging Trends Report 2005 2

Letter from the President

Think the metal food can is stagnant? Think again. We’re in the midst of a revolution in metal packaging design. Breakthroughs in metal packaging are beginning to gain consumer acceptance across the U.S. These innovations represent a new and exciting chapter in the life of the venerable 200-year-old metal food can.

What’s driving this change? Consumers. Food can makers foresee significant technological advances ahead, which will make the can even more attractive. Grocery shoppers will be able to select from an array of easy-to-use and convenient metal packages, including:  Containers with twist-top resealable lids  Easy-open cans with pull-tab lids made with steel, aluminum or plastic  Distinctive easy-to-grasp metal cans shaped like bowls, kettles and even squares  Self-heating and self-cooling cans to deliver a piping hot can of coffee or a cold drink  Microwaveable cans

It’s with great pleasure that I present the inaugural Can Manufacturers Institute Packaging Trends Report 2005. This compendium of information will provide you with the latest trends affecting the metal food packaging industry. The data inside will also provide you with insight that underscores how the metal food can is leading the way with new and exciting packaging innovations and has remained the most economical, environmentally friendly, and above all, safest packaging form. Consider the following:  Production costs for metal cans used in food packaging are 10 to 50 percent less than similar costs for retort pouches, a factor that greatly impacts the economic landscape for food processors.  Metal food and beverage cans are 100 percent recyclable, making them the most recycled form of packaging. Metal can recycling rates are more than two and one-half times higher than the rate of their competitors, and for the last decade, cans have maintained a consistent recycling rate above 50 percent.  With its tamper-evident packaging, the metal food can has an unparalleled track record for safety. The integrity of the metal food can extends product shelf life, its safety and the long-term quality of the food contained within.

The message is and remains clear: You can count on the can. We’re in a new age of canned convenience, and the industry is rising to create new and exciting packaging innovations.

Best Regards,

Robert Budway President 3

Challenges and Consumer Demands Influencing the Packaging Market

I. The Packaging Revolution: Innovation Meets Changing Consumer Lifestyles

Consumer demand for on-the-go convenience and easy-to-use products is sparking a packaging revolution. In this revolution, consumers are clearly winning.

“We continue to see strong While food and beverage containers utilizing such new concepts demand for steel food cans. as plastic pouches and “Tetrapaks,” small glass jugs, plastic Our focus remains consistent: bottles and cans with straws are populating grocery shelves, develop innovative and brand- consumers say they prefer traditional packaging in metal, building packages to help our customers grow, and manufacture more value- orientated packaging that meets and exceeds consumer expectations.”

Brian Cardno President of Food Division Ball Corporation 4

glass and plastic.1 They just want packaging that helps them do things faster and easier, and cans are rising to the challenge with new-age options for today’s busy consumers.

“Innovations in the metal packaging sector are revolutionizing the packaging industry, from an array of easy-to-use and convenient containers with twist-tops, resealable metal lids, easy- open cans with pull-tab lids and rectangular cans with a convenient peelable opening system,” reported Packaging Digest. 2

While the U.S. openly has adopted easy-to-use packaging, Europe and Asia have taken the lead. A majority of canned foods on the shelves in parts of Europe sport easy-open lids rather than lids that require a can opener. EZO cans are found on only one-third of food cans sold in the U.S.; however, this figure is predicted to rise to more than two-thirds by 2008, according to the Can Manufacturers Institute.3

Specific examples of recent innovations with the metal food can include:

 Self-heating cans: In the United Kingdom, Nestlé has test marketed a self-heating 33cl steel can to heat its Nescafé coffee.4  Peelable lids that strip right off without a can opener: Saupiquet has begun marketing canned fish products with a peelable lid to provide convenience for consumers while keeping tuna fresh and flavorful.5 William Saurin, a French packager of high-end salads, has begun using metal bowls with peelable aluminum lids that help guarantee portability and product production; the lid has a tab allowing for easy access to the salad.6  EZO cans that can be opened by consumers of all ages: Hirzel Canning Co. & Farms is using a new steel food can to package Dei Fratelli® Presto! tomato-based Pizza Sauce and Italian Dip in an easily opened, reclosable, 12-ounce can with what’s called Dot-Top technology. This can has a pressure-release lid, making it easy to use, with a rolled edge preventing sharp edges. It opens when the user peels back a tabbed dot on the center of the lid, which easily can be snapped back on.7 This can was named one of the top three food division Steel Packaging Effectiveness Award winners at the Fourth International Steel Packaging Congress in Rheinterrasse.8 Crown Holdings Inc. has discovered the drive for easy opening packaging can pay off on the bottom line. Crown uses EZO innovations on cans used for soup, which has resulted in a “significant increase in sales and market share.”9 Crown’s “Lift Off” technology involves a can- end pull-tab from a strip of steel that enters the press from the side. Crown is the only supplier in the industry using double reduced (DR) steel for large scale EZO manufacturing: DR steel offers the pressure-resistance and strength to stand up to retorting and steaming during the packing process and to endure the stresses encountered in customer transportation and handling.

“We know from market research that consumers want the convenience of EZO cans. Our job is to demonstrate to food processors how to meet that demand with reliable technology based on science, not assumption or opinion,” said Ray McGowan, president of Crown Food Packaging USA.

1 Can Manufacturers Institute (CMI) Omnibus study, July 2005. 2 Packaging Digest, Feb. 2005. 3 Mohan, Anne Marie. “Lifting the lid on EZO can-end production.” Packaging Digest, July 2005. 4 “Pan European Consumer Survey on Beverage, Containers, and Test of Steel Packaging Concepts.” Association of European Producers of Steel for Packaging (APEAL). 5 “Canned tuna dresses up with peelable lid.” Packaging Digest, Feb. 10, 2005. 6 “Salad travels in metal bowl, peel lid.” Food and Drug Packaging, Sept. 1, 2004. 7 Hartman, Lauren R. “Canning sauces the Hirzel way.” Packaging Digest, June 2005. 8 Ibid. 9 9 Mohan, Anne Marie. “Lifting the lid on EZO can-end production.” Packaging Digest, July 2005Ibid. 5

The Shape of Things to Come. Innovations in Package “Crown continues to focus on Shapes and Materials. distinguishing itself in the marketplace with leading innovations that enable our Innovative designs also are broadening markets for customers’ products to stand out on containers with new shapes, materials and uses. Metal the retail shelves while enhancing cans, for instance, are going where no cans have gone consumer’s ease of use. For before. The Niebaum-Coppola Winery is putting its example, our industry-leading can “Sofia” sparkling wine in 187ml cans instead of in shaping technology and easy-open traditional wine bottles. “We realized we could make a ends are garnering increased can very cool and very elegant,” said Erle Martin, customer attention.” president of the Niebaum-Coppola Winery.10 Ray McGowan President These single-serving pink cans cater to a customer’s Crown Food Packaging USA need for convenience, and they include a matching pink straw.11 The cans have already been distributed in Miami and Las Vegas and have now launched nationwide.12 The wine is named after Sofia Coppola, director of the movie “Lost in Translation” and daughter of filmmaker Francis Ford Coppola.

Meanwhile, “bottle cans,” a seeming contradiction in terms, are turning up across the beverage spectrum, allowing for convenience and a new look to spice up markets for beer, soda and energy drinks. WINFUEL is using its new aluminum “bottle can” to reflect the personality of its multi-vitamin and mineral drinks. The cans have the “hand appeal and tactile feel of a free weight” and come in many colors to appeal to both genders.13 JOLT cola now uses a resealable, 23.5-ounce aluminum bottle to combine the appeal of a bottle with the benefits of aluminum packaging – freshness, recyclability, shelf stability and chilling quickly.14

Beer companies also are getting a buzz from aluminum bottles. These bottles are unbreakable and can keep beer cool for up to 50 minutes, which are both advantages over glass.15 The new bottles are also generating a rise in beer sales.16 Pittsburgh Brewing Company launched a new 12-ounce aluminum bottle that “has revived flagging sales and posed a problem it hasn’t had in years: keeping up with demand.”17

The campaign has demonstrated broader implications by making the bottle the message – especially with Pittsburgh Steelers supporters who can drink it to display hometown pride.18 And other companies have seen similar positive consumer response. The stylish, 16-ounce aluminum bottles designed for Michelob, Michelob Light and Anheuser World Select have touched a chord with “cool packaging to complement their image and style,” according to Anheuser-Busch, Inc.

Looking Ahead: More packaging innovations are on the horizon. In a consumer survey ordered by the Association of European Producers of Steel for Packaging to test attitudes toward containers and packaging concepts, convenience features such as pouring devices and a self-chilling capability rated high in consumer preferences. 19

In response to consumers’ desire for convenience, five new types of containers were tested recently in Europe, which can offer a preview of what’s to come in the U.S. These included: an ergonomically shaped can, a self-chilling can, a re-closable can, a widget can for improved foam quality and a pouring device. 20

II. Safety First: Still a Top Packaging Requirement

10 Interview, MSNBC.COM July 5, 2005. 11 “A Box of Wine, a Loaf of Bread.” Business Week Online, July 11, 2005. 12 GMA SmartBrief Special Report, Apr. 7, 2005. 6

While consumers want product packaging that is easier to use, their top concern is that it keeps the product safe to eat or drink. This is where metal cans have a leg up in the packaging battles.

“Consumers view plastic, flexible packaging and processable carton packaging as not being as safe for their food products as the metal can. Consumers know that the lighter-weight, squeezable nature of these packages make them vulnerable to damage, leaking and also to a shortness of freshness,” said Jeff DeLiberty, marketing manager for Silgan Containers.21

More than nine in 10 Americans worry about food safety, making it the most reported packaging concern (92 percent). Metal cans alleviate this concern for consumers, as most say that metal is safest. Indeed, 68 percent of consumers say metal cans are tamper-evident.22

Metal packaging is the only type of packaging that provides 100 percent protection from outside contaminants. Metal cans are 100 percent impervious to oxygen. Oxygen can lower the quality of the product and, in some cases, allow for bacterial growth within the package.23 Plastics, flexibles and pouches do not have this protection factor, as they are porous which can allow oxygen and other outside contaminants to reach the food. Some packagers try to prevent this by lining the porous material with aluminum, but this packaging still has a vulnerability as thin aluminum can be subject to flex cracks and pinholing. Canned foods also undergo a process to sterilize any germs that potentially could contaminate the food. This process, combined with the security of the metal packaging, ensures a completely sterile product.24

Counterfeiting food products is another food safety issue that companies and consumers are facing. Again, it’s innovation to the rescue. Radio Frequency Identification technology on labels allows companies to automatically track inventory to help fight against counterfeit products. 25 Labels are becoming technologically savvy as well to help alert consumers when food is past its prime. New high-tech labels will tell when food has gone bad.26

III. Packaging Green: Packagers Focus on Earth-Friendly Products and Practices

More and more consumers want containers that don’t harm the environment. Packagers are turning to more environmentally friendly materials and focusing on recycling in order to benefit the earth. Research points to steel and aluminum as very earth-friendly packages.

A Steel Recycling Institute study showed that “canned foods offer a more energy efficient delivery system than either refrigerated or frozen food.” 27 Hydrochlorofluorocarbons (HCFC), chemical refrigerants that may contribute to global warming, aren’t an issue with canned foods. What’s more, canned foods do not spoil during power outages.28 Steel also is North America’s most recycled material, with a recycling rate of nearly 62 percent. Aluminum follows closely behind with a rate of 50 percent.

“Bottom line, the most efficient, convenient and nutritional delivery system of food to a dinner table is brought to the consumer through metal cans. Now we know that in addition to being

13 Mohan, Anne Marie. “Supplement can gets in shape.” Packaging Digest, May 1, 2005. 14 “Resealable ‘battery bottle’ gives JOLT cola more spark.” Packaging Digest, Mar. 1, 2005. 15 “Fill ‘er up! Aluminum eyes inroads from beer bottles.” Purchasing, Nov. 4, 2004. 16 GMA SmartBrief Special Report, April 7, 2005. 17 Boselovic, Len. “Aluminum beer bottle puts charge in Iron City.” Pittsburgh Post-Gazette, Jan. 23, 2005. 18 Boselovic, Len. “Aluminum beer bottle puts charge in Iron City.” Pittsburgh Post-Gazette, Jan. 23, 2005. 1919 “Pan European Consumer Survey on Beverage, Containers, and Test of Steel Packaging Concepts.” APEAL. 2020 Ibid. 21 Silgan Containers Corporation, July 2005. 22 CMI Omnibus Survey, July 2005. 7

the most recycled food package, cans are also a way for us to reduce greenhouse gases,” said Bill Heenan, Steel Recycling Institute president.

Americans thirsting for beverages in cans are reaching for aluminum beverage cans for a variety of reasons. The aluminum can also is a recycling leader for more than 20 years contributing to a sustainable environment. Demonstrating recycling at its finest, the aluminum can is 100 percent recyclable into new beverage cans, in as little as 60 days limitlessly. Fifty percent of the aluminum can is created from recycled cans - true closed-loop recycling.

By recycling good things happen. The energy savings equaled the equivalent of over 15 million barrels of oil. Reclaimed aluminum requires 95 percent less energy, generates 95 percent less emissions such as greenhouse gases and creates 97 percent less water pollution than producing new metal from ore. Aluminum beverage cans comprise less than one percent (0.5 percent) of discards in the municipal waste stream, but more recycling is needed.

Industry innovation has made the can more economical to produce, fill and transport. The can industry has light-weighted the can and reduced the diameter of the ends. Since the 1970s, aluminum can weight has dropped from 55 pounds per thousand to 29.5 pounds per thousand today. Engineering has created exciting new features like geometric optimization of the metal in the can walls allowing the container to deliver its product using the least amount of materials. This also has lead to improved cost competitiveness and enhanced unit market growth opportunities.

Renewing Recycling

New efforts are underway in the U.S. and abroad to revive and expand the popularity of recycling as an energy saver. And there are signs of progress.

Steel recycling has held steady in the U.S. One reason for this is that most steel products are consumed in the home.29 Steel recycling has the advantage of steel’s magnetic properties, allowing it to be easily recovered from household waste for recycling.30 “Each ton of recycled steel saves resources by preventing the use of energy as well as 1.5 tons of iron ore, 565kg of coal and 191kg of limestone.” 31 More than 55 percent of the world production of steel is made from the steel industry's number one raw material: steel scrap.32

“With the capacity to be recycled time and time again to make new steel products with no deterioration, and the fact that its magnetic properties make it the easiest packaging material to recover from household waste, steel offers considerable environmental advantages as a packaging material,” said John May, manager at Corus Steel Packaging Recycling.33 “Metal food cans remain a cornerstone of our business. IV. Economics: Packagers Face New Challenges We operate with a singular focus: help our customers achieve their business goals while creating unique and 23 Silgan Containers Corporation, July 2005. exciting product innovations 24 Ibid. that create consumer interest 25 FoodProductionDaily.com, Feb. 2 & 16, 2005 and demand.” 26 GMA SmartBrief, April 5 & 7, 2005. Thomas J. Snyder 27 “Study reveals that Steel Cans are the Most Energy Efficient Food Delivery System Available.” Vice President - Sales & Dbusinessnews.com, July 5, 2005. Marketing 28 Ibid. Silgan Holdings 29 “U.S. aluminum can recycling down on infrastructure woes.” Platts Commodity News, Mar. 7, 2005. 30 “Study reveals that Steel Cans are the Most Energy Efficient Food Delivery System Available.” Dbusinessnews.com, July 5, 2005. 31 “Pan European Consumer Survey on Beverage, Containers, and Test of Steel Packaging Concepts.” APEAL. 32 Ibid. 8

The push for products to meet consumer needs is swimming against a current of rising prices. Generally, packaging companies are facing higher raw material costs and new competition. These same innovative products highlighted in the report could help give the steel packaging industry and other packagers the cost-effective boost they need to overcome cost challenges.

With more than 25 billion cans containing food products shipped annually in the U.S., what economic ramifications might ensue if food processors turn to alternate packaging? A study by Business Research Group, Inc. examined the economics behind food packaging and found that production costs for metal cans used in food packaging are about 10 percent to 50 percent less than similar costs for retort pouches, a factor that greatly impacts the economic landscape for food processors.

Consider the following:

 Line speeds for pouch and brik paks are 50 percent to 80 percent slower than canning lines that can reach 800 to 900 cans-per-minute with minimal downtime.  Can filling and sealing lines include in-line quality control inspection for all cans.  In the case of the pouch, off-line quality-control inspection is often used, a labor-intensive process that limits the percentage of packages that can be inspected.  In both 10-ounce and 16-ounce package sizes, production costs associated with filling and sealing retort packages typically are 45 percent to 65 percent higher than metal cans, costs that are often passed on to consumers.  While metal cans are fully recyclable, the laminated structure of pouches and brik paks have very limited recycling potential.  Aluminum can recycling saves about 95 percent of the energy required to produce aluminum from ore.  Making steel from recycled cans uses 75 percent less energy than when producing steel from virgin raw materials, thus conserving natural resources and landfill space as well as saving energy.

V. Summary

The packaging industry is in the midst of a dynamic change. The can is leading the way while at the same time enhancing features that consumers traditionally rely upon. This compelling story of innovation is shaped by the changing demands of consumers for products that they use every day. Increasingly convenient packaging methods and rising recycling rates have highlighted the new focus of the can industry: improving the ease of consumers’ lives and protecting the environment around them.

Please contact us with questions:

Sean Reilly Vice President, Public Relations & Research Can Manufacturers Institute (202) 232-4677

33 Packaging Magazine, Feb. 3, 2005. 9 10

Can Manufacturers Institute 1730 Rhode Island Avenue Suite 1000 Washington, D.C. 20036 (202) 232-4677 www.cancentral.com

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