State of the Industry Presentation
Andres Lopez
April 2015
Agenda
 Macro-economic overview
 Packaging market performance
 Glass segment performance
 Industry challenges
• Alternative packaging
• Disruptive technologies, innovations and trends
Economic Tailwinds & Headwinds for Glass
2015 = The year of the consumer
Headwinds
• Normalization of
U.S. interest rates
• U.S. Dollar
appreciation
• Weak global
economy (outside
U.S.)
• Geopolitical risks
Tailwinds
• Lower
gasoline/energy
costs
• Employment growth
• Housing price
recovery
• Consumer
confidence in
broad-based
recovery
Economic recovery could prove to be tailwind for
glass demand if positive momentum continues
Packaging Market Overview
On a consumption basis, glass share remains steady
(U.S. decline offset by import growth)
Packaging Type
Flexible Packaging (total)
Stand-Up Pouches
Share
2011 2014
29.7 29.4
Share Change
2011-2014
-0.3
1.9
2.2
0.3
Metal
21.4
20.6
-0.8
Liquid Cartons
12.9
12.5
-0.4
8.0
8.0
0.0
28.3
29.8
1.5
Glass
Rigid Plastic
Rigid plastic and pouches benefiting from consumer
trends toward healthy options and convenience
U.S. Glass Segment Shipments (Historical)
U.S. Glass Segment Shipments 2004-2014: Domestic and Imports (MM of Gross)
300
250
200
150
100
50
2004
2005
2006
2007
2008
2009
Domestic
2010
2011
2012
2013
2014
Import
Glass segment shipments continue steady decline
Glass Segment Volume Share
Volume Share: Domestic Empty Containers versus Empty and
2014 (Source GPI, U.S. Census and Trade Associations)
kT
Imports- Filled,
21%
Imports- Empty,
11%
Domestic- Empty,
68%
Domestic
Unfilled
Imports
Filled
Imports
Total glass
segment
2014
CAGR
2011-14
6,900
-1%
1,100
+5%
2,200
+1%
10,200
-0.1%
Source: GPI as reported: domestic shipments, U.S. census for unfilled
imports, trade association and industry sources for filled imports. Note
filled imports includes beer, wines and spirits only
Empty and filled imported glass containers now
account for one third of glass volume in U.S.
Domestic Beer Glass versus Metal Share
Domestic Beer Glass versus Can Share (excludes imported filled beer,
draft not shown, Source Beer Institute)
65
60
55
55.7
56.1
34.7
34.2
57.9
57.7
32.0
32.0
58.7
59.2
60.2
30.9
30.4
29.4
50
45
40
35
30
25
20
2008
2009
2010
2011
Glass
2012
2013
2014
Metal
Glass losing share to cans: major beer using cans to drive growth;
Craft embracing cans for new usage occasions; specialty beer cans
Industry Challenges
Alternative Packaging – Disruptive Technologies
Next Generation
Pouches
Rigid plastic:
technological
advances; UV
protection
specialty
liquid cartons
Evercan:
90-100%
recycled cans
Industry Challenges – New Consumption
Experiences
Wine kegs: New onpremise consumption
experience
K-Cups: new home
consumption
experience
Mass
customization
Evolution of Metal Beverage Cans
 “Specialty” cans now firmly in the mainstream
 Suppliers developing selling story to customers/consumers
 Evercan: the next specialty can?
2004: Specialty
metal can and
bottle launched
2013/14:
Specialty proliferation,
reclosability, & print /
decoration capability
improvement
What’s Next:
• Sustainability
• Leveraging print
capabilities &
functional benefits
Next Generation Pouches
 Pouch suppliers further driving sustainability selling story
 Increased functionality / usability
PET – UV protection technology for beer
 Technology advancements allow new end use categories
 UV blockers
 Shaping technologies
 Thermal stability (hot fill)
 PET manufacturing flexibility
 Liquiform technology
Liquid cartons – specialty and slim line cartons
 Aseptic cartons developing “specialty”
packaging to target premium segments
 TetraPak (USA), IPI (Germany)
driving category innovation
Wine bar/ Wine Kegs
“In 2014, Free Flow shipped 160,000 nine-liter case equivalents in kegs.
The company has doubled its sales volume in each of the past three
years, and it expects similar growth this year.”
- Shanken News Daily 01/27/2015
Disruptive Technologies: Keurig® KOLD™
Potential threat to single serve glass packaging
The Keurig® KOLD™ Drinkmaker is a revolutionary new way to
make your favorite cold drinks at home. Imagine…sodas and sports
drinks along with iced teas, craft sodas, flavored seltzers and waters.
All made fresh by you, at the push of a button.
- Keurig website
Disruptive Technologies: 3D Food Printing
Potential to reduce process/packaged food demand
Supermarkets are already testing to 3D print customized cakes, restaurants are
offering printed desserts. Some even claim that there will be a 3D food printer
in every home in just two years. One thing is certain: this rapidly developing
market has huge potential.
-3D Food Printing Conference
Thank You
Economy- Unemployment
 Unemployment rate projected to decline driving growth in disposable income and consumption
expenditures
 Consumption expenditures projected to average +3% in 2015 and 2016 versus +2% in prior years
U.S. Unemployment Rates Forecast (Source Goldman Sachs)
10
9
8.9
8.1
8
7.4
7
6.2
6
5.6
5.2
4.8
5
4.6
4
3
2
1
0
2011
2012
2013
2014 (P)
2015 (P)
U.S.
2016 (P)
2017 (P)
2018 (P)
120
2014-10-01
2014-07-01
2014-04-01
2014-01-01
2013-10-01
2013-07-01
2013-04-01
2013-01-01
2012-10-01
2012-07-01
2012-04-01
2012-01-01
2011-10-01
2011-07-01
2011-04-01
2011-01-01
2010-10-01
2010-07-01
2010-04-01
2010-01-01
2009-10-01
2009-07-01
2009-04-01
2009-01-01
2008-10-01
2008-07-01
2008-04-01
2008-01-01
2007-10-01
$50,000,000
2007-07-01
$55,000,000
2007-04-01
$60,000,000
2007-01-01
2014-07-01
2014-04-01
2014-01-01
2013-10-01
2013-07-01
2013-04-01
2013-01-01
2012-10-01
2012-07-01
2012-04-01
2012-01-01
2011-10-01
2011-07-01
2011-04-01
2011-01-01
2010-10-01
2010-07-01
2010-04-01
2010-01-01
2009-10-01
2009-07-01
2009-04-01
2009-01-01
2008-10-01
2008-07-01
2008-04-01
2008-01-01
2007-10-01
2007-07-01
2007-04-01
2007-01-01
Economy- Household Net Worth
 Consumers feeling confident as household net worth and housing prices recovers, positive for
consumption expenditures going forward
Household Net Worth Millions of Dollars (Source: Federal Reserve Bank
of St Louis)
$85,000,000
$80,000,000
$75,000,000
$70,000,000
$65,000,000
Housing Prices: S&P/Case-Shiller 20-City Composite Home Price Index©
210
$45,000,000
200
$40,000,000
190
180
170
160
150
140
130
Glass Segment End Use Category Volume Share
Domestic Glass Segment Shipments Volume Share 2014, kT (Source: GPI As
Reported, Exclude Imports)
Wine, 16%
Food, 16%
RTD, 3%
NAB, 9%
Spirits, 8%
Beer, 48%
Packaging Market- Glass
Share
 Packaging Market close to 600 MM units,
sequential improvement in growth rates
 Rigid plastic gaining share at expense of
other packaging types
 Key end use category shares relatively
unchanged
Packaging Type Share, North America
Source: Euromonitor (volume based)
Metal
21%
Flexible
Packaging
29%
Rigid
Plastic
30%
Paper-based /
Liquid Carton
12%
Glass
8%
NA Packaging Market Growth Rates
Packaging Type Share, North America
Source: Euromonitor (volume based)
Source: Euromonitor (volume based)
Tissue and
Hygiene
2%
Home Care
1%
0.5%
Total Packaging
0.4%
Glass
0.4%
0.3%
Tobacco
9%
Beauty and
Personal Care
3%
Alcoholic
Drinks
12%
Hot Drinks
1%
0.3%
0.2%
0.2%
0.1%
0.15%
0.1%
Food
39%
Soft Drinks
31%
0.0%
0.0%
2014 v. PY
-0.1%
0.1%
0.09%
3 Year
CAGR
5 Year
CAGR
10 Year CAGR
Dog and
Cat Food
2%
Packaging Market Overview (PM) in 2014
Share
2014 CAGR
(∆ v 2011) vs PY (3 year)
CAGR
Key Drivers
O-I implications
(5 year)
• Growth in rigid plastic offset by declines in
other packaging types
• Glass share steady at 8, keeping pace with
packaging market growth
• Glass benefiting from growth in high end
alcoholic beverages and premium NAB/food
• Opportunity to grow organically and by
attracting existing non-O-I business
• Organic growth opportunities in craft,
wines and spirits, and premium/private
label food and NAB
-0.0% -0.4% -0.4%
• Growth in food (convenience meals/frozen
foods, baby foods), alcoholic drinks, & pet
food offsetting decline in tobacco,
beauty/personal care, & juices
• Pouches threat to O-I in baby food and
sauces, wine, RTD, categories
traditionally friendly to glass; advances
in pouch technology
20.6
(-0.8)
-0.2% -1.2% -1.0%
• Growth in energy drinks & RTDs unable to
offset conversion in carbonated soft drinks
and food (canned soup, fruit, and sauces)
• Excess can capacity driving can
competitors to target craft and
mainstream beer (screw top cans) for
growth
Paper
Container/
Liquid
Cartons
12.5
(-0.4)
-0.1% -1.0% -0.9%
• Fruit juices, tobacco and personal care drove
decline, offsetting increase in hot coffee drinks
• Tobacco and fruit juices driving decline
Glass
8.0
(0.0)
0.0%
0.0%
0.0%
• Share stabilization
• Consumption growth driven by high end
alcoholic beverages (ciders, craft beer, wines
& spirits) and NAB (RTD Tea & premium soft
drinks)
• Offset conversion in mainstream beer (cans),
NABs (bottled water, juices), & foods
• Leverage pockets of growth in high
end
• Attract existing non-O-I business (ABI,
Diageo, Gallo)
• Import substitution (Safeway, etc.)
29.8
(+1.5)
0.4%
1.8%
1.7%
• NABs (bottled water and RTD tea conversion
& category growth) & yogurt drove growth
• Advances in PET hot fill technology
threat to O-I in sauces, salsa and
pickles, categories traditionally friendly
to glass
Total
Packaging
Market
NA
Flexible
Packaging
29.4
(-0.3)
Metal
Rigid Plastic
0.1%
0.3%
0.0%