Metal Cans
SIC 3410
NAICS 332431
This industry consists of companies that manufacture, typically from purchased materials, metal cans, metal shipping barrels, drums, kegs, and pails.
The world metal can industry—a major component of the US$345.93 billion global packaging industry—represented a growing, multibillion-dollar market in the early and mid-2000s. In 2003, the U.S. market alone was valued at more than US$13 billion. According to the Aluminum Association, Inc., there were 100.5 billion cans produced in the U.S. in 2004. Industry firms produced billions of aluminum cans alone, but intense competition, threats from new packaging technologies, and the enormous costs of metal can manufacture compelled industry firms to develop new can designs and improved manufacturing processes while looking to overseas markets for new sources of revenue.
By far, Americans manufactured the most metal cans for soft drinks, producing more than 57 billion cans in 2004 alone. Production of beer cans was nearly 28.8 billion units. Beverage cans held the highest rate of recycling as well; 51.5 billion cans were recycled in 2004.
The growing popularity of premium beverage packaging solutions by glass and plastic beverage packaging producers was fueled by the explosion of microbreweries and boutique beverage brands, which though more expensive than cans, offered beverage makers a way to differentiate their products with consumers. For instance, the so-called aluminum "bottle can" introduced to the U.S. market in 2004 allowed the containers to be filled on pre-existing bottling lines for glass bottles. Can makers emphasized metal cans' low cost and superior graphics and pressed harder to develop ways to make the "one style fits all" metal can stand out on store shelves. In less developed economies—where beverages sit longer on store shelves and refrigeration is less reliable—can industry firms viewed their prospects for protecting market share more confidently.
By 2004, several new developments stood to help the metal can industry grow, particularly in the area of packaging, which was driven by the market and consumer preferences. Differentiation in packaging's "look" did more to boost the industry than anything else. Pop-top cans have more than half the shelf space in some markets. Unusually shaped (square, barrel, kettle), embossed, and other standout cans have begun appearing on shelves worldwide for some time, and are expected to increase in abundance. Some companies were experimenting with the viability of manufacturing cans that could be resealed. According to Brand Packaging, companies were seeing enormous upswings in revenue by offering their products in differentiated cans.
Historically, can making has been a mature, slow-growth, and capital-intensive business that relies on economies of scale and high-volume production efficiencies to squeeze profit from the fraction of revenue not spent on purchasing materials, installing new equipment, product marketing, equipment maintenance, labor, depreciation, and taxes. In contrast to cyclical industries like automobile manufacturing, can making is relatively resistant to boom-and-bust cycles in the economy. In fact, sales of soft drinks, beer, and certain canned food staples often increase during economic downturns as consumers switch from up-market, glass-packaged products to low-cost canned goods.
The metal can industry has been difficult for new entrants to break into because of the enormous capital outlays required to establish high-tech production facilities and distribution networks—in the late 1990s a modern beverage manufacturing line in Europe cost ECU30 million (US$32 million) or more to install. In industrialized nations like the United States, France, and Germany, the can industry has been dominated by a relatively small number of firms. In the European market as a whole, metal can making is relatively concentrated and has traditionally been divided between large firms that manufacture standardized, mass-produced can products such as beverage and food cans and small- to medium-sized firms that specialize in customized cans with irregular shapes or unique label designs.
The price of materials is the controlling factor in the cost of can manufacture. Can makers negotiate supply contracts with metal producers like Alcoa Aluminum, which are heavily reliant on can industry purchases for their sales. To reduce transportation costs, can makers often locate their plants near or in their primary customer's plants. In the United States, the metal can industry has been characterized by periodic flurries of can plant openings and closings as industry firms respond to changing demographics or new conditions in the canned products industry while also attempting to dissuade canners from establishing facilities for the manufacture of their own cans. Historically, major can buyers have not purchased their cans from a single manufacturer but have instead signed contracts with one of the major can makers and divided remaining purchases among the smaller producers. Because canned product firms usually require that their can orders be filled according to uniform specifications, the large can makers have been forced to sell their can line technology to smaller competitors handling the remainder of the customer's order. In the U.S. packaging industry, the ratio of customers to suppliers was seven to one in the mid-1990s.
The expansion of can manufacturing internationally has been affected by the supply of raw materials such as finished metal plate. In less-developed nations can makers may be forced to absorb prohibitive duties and shipping costs to import needed materials and also may be aided by lack of water resources, which prevents packaging competitors in the bottling industry from maintaining essential bottle washing plants. Because shipping costs for metal cans are generally high, direct international trade in the metal can industry has been centered on business between contiguous markets such as the United States and Canada.
Acute price competition, overcapacity in the face of diminishing demand, loss of market share to new packaging methods, and the vagaries of consumer taste in packaged goods are among the perennial hurdles confronted by industry firms. To fortify themselves against such threats, can makers looked to overseas markets in developing countries and to diversification, through mergers and acquisitions or other means, into rival packaging markets or entirely new industries. However, for all the difficulties inherent in can manufacturing, the U.S. metal can industry—the world's largest—has outpaced U.S. manufacturing in general in new product and facilities investment, productivity, and wages.
The products of the larger metal container industry can be divided into two broad categories: metal cans and metal barrels, drums, and pails. The three major product groups are (1) aluminum cans, (2) steel cans and tinware products, and (3) steel shipping barrels and drums larger than 12 gallons. The remaining 5 percent of industry output is divided among miscellaneous metal cans, 1- to 12-gallon steel pails, and other metal barrel types.
The invention of canning is usually credited to the Frenchman Nicolas Appert, who in 1795 began experimenting with food preservation techniques in response to a call by the French government for the development of a method for preserving food for transport over long distances. Appert discovered that by sealing food tightly in containers covered with wire and sealing wax and then boiling them to destroy contaminating organisms, a wide range of foods could be preserved for extended periods of time. Using the prize money awarded him by Napoleon Bonaparte, Appert established the world's first commercial cannery in Massy, France, in 1812.
Working from Appert's experiments the Englishman Peter Durand was awarded a patent for a cylindrical, tin-coated iron can capable of preserving foods without metal corrosion in 1810, and three years later two Englishmen founded a food processing plant for canned meats, vegetables, and soups for the British navy and army. The first U.S. cannery was established in 1820; and shortly before the U.S. Civil War, it was discovered that the can production process could be shortened by adding calcium chloride to the water in which cans were boiled. Annual production by the emerging U.S. can industry grew from 5 million cans before the Civil War to 30 million in the postwar years and higher still when in 1870 mechanization and factory methods of manufacture were adopted by the nation's can producers.
As scientific understanding of the principles of food preservation improved at the end of the nineteenth century, the quality of the food canned by industry firms greatly increased, just as mass production was transforming canned goods into a common household item. In 1900, so-called sanitary metal food can methods were invented, and can makers were able to market cans with folded airtight double seams, manufactured at greatly improved speeds. A year later, American Can was formed in the United States through the merger of 123 of the nation's 175 can manufacturers, creating a conglomerate that held 90 percent of the industry's market share.
In 1912, a forerunner of can-making giant Toyo Seikan Kaisha began operation in Japan with can line equipment purchased from American Can; and in 1919 the...
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