May/June 1995
While aluminum dominates the North American beverage can market, steel and aluminum both have a strong pull in the international can scene. Here’s a look at what to expect as this contest plays out.
By Eileen Zagone
Eileen Zagone is editorial associate of Scrap Processing and Recycling
More than 20 years ago, the US. aluminum industry began inching its way into territory historically dominated by steel: the beverage can market. Thanks to technological developments in the production of thin aluminum sheet, the industry was able to introduce a thin, lightweight can to compete with steel cans.
Since then, aluminum has virtually cornered the American beverage can market. In fact, aluminum now accounts for nearly 100 percent of the beer and soft drink cans consumed in North America --a market believed to be larger than the rest of the world combined.
Yet, while you would be hard-pressed to locate a soft drink or beer in a steel can in North America today, such is not the case the world over, where steel and aluminum are competing head-to-head for dominance of this valuable and burgeoning market. And both sides have made it clear that they will not back down without a fight for the lion's share of the international beverage can market.
On the Front Lines
Aluminum currently accounts for approximately 76 percent of beverage can manufacture worldwide, according to Nick Mason, research manager of Commodities Research Unit International Ltd. (London). Looking specifically at various regions, Mason reports that the Middle Eastern and African can markets are split about equally between aluminum and steel, while aluminum accounts for around 80 percent of the Latin and South American markets, and close to 100 percent in China, Australia, Scandinavia, and, of course, North America. Steel, meanwhile, dominates in Japan and much of central Europe.
But there are few constants in the universe, and the status of steel and aluminum in any given beverage can market is certainly subject to change. This is especially true anytime can makers are contemplating equipment upgrades and alterations-seemingly the most logical time to make a raw material change. Some less-developed countries, for instance, which had been using hand-me-down steel can-making equipment garnered from the U.S. shift to aluminum can lines, have been replacing that old steel can equipment, primarily with aluminum manufacturing lines, says Stewart Spector, head of Spector Reporting (Boynton Beach, Ha.) and an aluminum industry analyst. And in the next few years, as more older machinery requires replacement, can makers and fillers everywhere will be faced with substantial capital investment decisions that could favor one material over the other.
For another example of the potential for can material shifts, look to the United Kingdom, which accounts for about a third of the European beverage can market. Currently, about 80 percent of these cans are made of aluminum, but just six years ago this figure was about 40 percent, with steel holding the majority of the market, according to Robin Davis, director of the Metal Packaging Manufacturers Association (London).
This rapid shift was driven by the country's prominent soft drink makers, Davis says, noting that they opted to switch to aluminum cans in response to a public perception that aluminum is a "greener," more recyclable material than steel.
While part of this public sentiment can be traced to considerable publicity on the part of the aluminum industry, it apparently was also helped by the endeavors of the Aluminum Can Recycling Association (ACRA) (Birmingham, England), a European coalition of aluminum can makers that helped to create an ambitious U.K. aluminum can public buyback infrastructure that today includes nearly 400 aluminum can collection sites. In addition, the building of the United Kingdom 's first dedicated aluminum recycling plant in 1991 likely served to reinforce the public perception, however inaccurate, that aluminum cans are more recyclable than steel cans.
Given its triumph in the United Kingdom , it is tempting to assume that the aluminum can will meet with equal success in other regions of Europe and the world. But such is not necessarily the case. Aside from the fact that the steel packaging industry has no plans to retreat from the beverage market, there are many factors affecting world can markets that could influence which metal--if either—will emerge the big winner.
Attitude Is Everything
As the U.K. experience demonstrates, society's attitudes and opinions are perhaps the most significant factor affecting the beverage can competition, and also perhaps the most difficult to gauge and alter. The U.K. example also makes evident that in these times of ever-growing environmental awareness, the issue of recyclability—or, rather, public perception of it—is likely to be a significant factor in the beverage can battle as it plays out around the world.
In those parts of the world such as the United Kingdom where individuals collect aluminum cans for recycling and where steel cans, in contrast, are salvaged from the waste stream by magnets, the public may not be aware of steel’s recyclability. Add to this the fact that individuals are more likely to receive payment for aluminum cans than steel ones, and the perception of aluminum’s superior “greenness” can be that much stronger. The result is a round in favor of the nonferrous metal.
Public perception also affects the battle in terms of perceived can quality and aesthetics. The aluminum can industry, and some drink makers, assert that aluminum cans are brighter, shinier, and more receptive to the eye-catching, colorful, and instantly recognizable graphics that have become critical in the fiercely competitive beverage market. Furthermore, Davis points out that the recent fashion in can adornment is to incorporate the natural metal into the can’s design and that aluminum is preferred in such strategies.
On the other side, steel proponents denounce aluminum’s decorative superiority as mere conjecture and argue that a steel can’s surface is also exemplary for decorative purposes. Plus, the steel industry has a few tricks up its sleeve in the decorative can arena. The “ecotop” and “ultimate” cans are all-steel easy-open competitors in the beverage can race, and although not widely used now, industry analysts expect them to be a force to be reckoned with in the next few years. The can tops have two buttons that are pressed down to open the cans, which are described as easier to open (and kinder to arthritic hands and long fingernails) than the pull-tabs used on aluminum beverage cans. Other steel can developments include enhanced graphics and decoration as well as shaped cans.
As far as quality goes, the aluminum industry has positioned itself well to be the can material of choice in Latin and South America and Asia, where public perception of steel quality tends to be low and the beverage market is growing at a fast pace.
The Cost Factor
Just as the can material battle is affected by nebulous and subjective public attitudes, so too, is it influenced by the more concrete concerns of can manufacturers and drink makers.
Chief among those considerations, of course, is material price. While the can manufacturing industry guards its data on costs to produce an aluminum can vs. a steel can (reportedly because of antitrust concerns), anyone at all familiar with the commodity prices would probably feel confident betting on steel’s advantage on this point, especially if the price and supply of aluminum continues to fluctuate.
Coca-Cola, in fact, has already threatened its aluminum can supplier with a switch to steel cans in some markets unless the price of aluminum is stabilized. Whether or not the company will follow through on these threats is a matter of some contention, with some industry analysts noting that the soft drink maker could be using threats as a price bargaining tool with its aluminum suppliers. But, in any case, the high price of aluminum relative to steel could mean a boon for the steel beverage can.
To counter this threat, aluminum can makers are continually searching for ways to use less aluminum in their product, generally by lightweighting or reducing the size of can tops and bottoms. According to the can makers, continued advances in this regard, combined with successful recycling, will make aluminum even more economical.
Then again, the steel can industry is also doing its part to lightweight steel can sheet. John May, a marketing manager for British Steel Timplate (Ebbw Vale, Wales), enthusiastically predicts great expansion and competitiveness in the steel can industry die to steel’s exceptional strength, ductility, moderate price, and recyclability, noting the abundant research and development improvements.
Another factor in the price equation lies in regional costs of producing aluminum and steel. For instance, substantial government subsidies have favored the steel industry throughout many countries in central Europe , according to an industry official. The result is that central European can markets—those Germany, the Netherlands, Belgium, and parts of France—are, as Mason puts it, a “steel island” that has historically favored the use of steel in beverage cans because of those nations’ well-established and politically powerful steel industries.
On the other hand, countries with abundant and relatively inexpensive electric power, such as hydroelectric power, are likely to favor the production of aluminum—an energy-intensive process—and thus aluminum cans. A case in point is Scandinavia, where hydroelectric power reigns, as does aluminum in the beverage market.
Clear Competitors
While aluminum and steel are busy battling each other, there are nonmetal threats that both materials face: beverage containers made of polyethylene terephthalate (PET) as well as more-traditional glass bottles. And with these added contenders come more considerations that could decide the beverage can cost.
For one thing, in many parts of the world, the big international soft drink and beer companies must share the market with plenty of regional and local beverage makers, especially breweries. And according to industry analysts, this localized market, generally favors glass bottles over cans, if for no other reason than the fact that until quite recently, cans were more expensive than glass containers in much of the word.
There is also a certain level of prestige associated with bottled beers, and one need look no further than the fashionable micro-brewery trend that continues to sweep the U.S. beer market to find evidence of the distinction of a glass container for beer. What’s more, glass reportedly can be individualized with varied shapes, colors, and specialized decorative labels more readily than metal cans, rendering them more personal and exclusive.
Another factor favoring the use of glass bottles in some areas, particularly European countries, is the existence if regulations requiring the use of refillable or returnable packages for drinks. For example, a law stating that 80 percent of the drink containers sold in Switzerland must be refillable has caused roadblocks to the can industry there, analysts report. This is true, though to a lesser extent, in most other European Countries, except the United Kingdom, says Davis, noting that the U.K. grocery market is dominated by supermarkets rather than smaller grocery stores, and these larger supermarkets don’t want to have to traffic in the return of materials. Smaller grocery markets are prevalent in much of the rest of Europe, he explains, and are accustomed to dealing with refillable containers.
A final glass bottle advantage lies in the perception that bottled drinks taste better than those in metal, with the notion that canned beverages pick up a metallic taste. (This, of course, is ardently denied by metal packagers, who point out that both aluminum cans and steel cans are coated inside to prevent any flavor transfer.)
As for PET, it also can claim a no-metal taste and cost preference over steel and aluminum. And with new recycling technology available that enables the use of up to 100-percent recycled content in any food-contact PET application, as well as the growing number of household recycling programs that include plastics, concerns about the material’s perceived nonrecyclability are being allayed and may hasten the beverage container makers to take a close look at PET.
Then again, a beverage companies are reportedly resistant to the widespread use of PET for single-serving beverages, despite its relative low cost and novelty value, because the container, unlike a can, is re-sealable, which means the consumer is more likely to recap the bottle and drink the rest later, thus presenting the possibility of reduced consumption. Decreased shelf life is also a concern, but drink makers may prefer to take the risks associated with switching to PET rather than pass along can price increases to the public.
To complicate the situation, besides these bottle competitors, the aluminum and steel can industries must also contend with the no-packaging alternative: the bar or restaurant serving beverages “on tap.” Indeed, the average European beverage drinker is more likely to join friends for a drink at a local pub than open the refrigerator at home to reach for a can, and thus is likewise the case in other parts of the globe.
Exporting the Portable Lifestyle
Even with the added competition from glass and plastic bottles, as well as no packaging at all, the international beverage can market seems destined to grow, and shifts in aluminum and steel use will likely come with it.
After all, the convenience-oriented lifestyle that proliferates in North America is being adopted in more and more countries. And analysts are quick to point out that as societies become more consumer-oriented, they have a tendency to drink more packaged beverages.
Of course, given the many factors that have and will continue to affect the market, it’s a toss-up whether steel, aluminum, or another material will reap the benefits of a growing world packaged beverage market. What is clear is that both metals intend to do their best to stay in the match.
While aluminum dominates the North American beverage can market, steel and aluminum both have a strong pull in the international can scene. Here’s a look at what to expect as this contest plays out.