Crown

Cork & Seal

Brand - Building Packaging

Tako Phakadze Tornike Berianidze

Salome Ghudumidze Lado Petriashvili
Ana Kukhalashvili Giorgi Makharadze
Mariam Zaldastanishvili Dato Nakashidze
Crown Cork & Seal / CCS Today
o Crown Holdings Incorporated
o American Company
o Producer of Metal Packaging
(metal beverage and food cans, metal aerosol
containers, metal closures and specialty packing)

CCS Data as of Today

Number of Plants 149
Country Operations 41
Revenue (2016) 8 Billion USD
Net Income (2016) 500 Million USD
Number of Employees > 20,000
Manufactures Beverage Can = 1/5 * World Market
Food Can = 1/3 * (North America + Europe)
CCS History (1891 – 1956)
o 1891 Invention of Bottle Cap - Patent
o 1892 CCS was Founded
o 1920‘s Patent Expiration
o 1927 – Charles McManus acquired CCS
o Diversification in can making (beer can)
o McManus‘s Leadership
o Increasing Expenses and CapEx
o CCS near to bankruptcy
CCS History (1956 – 1980’s)
“(CCS) Climbed out of coffin and was sprinting”
John Connelly
o From paperbox factory worker to CCS CEO (1959)
Average Growth % Rate
Sales 15.5%
ROE 14%

o Results were achieved due to:

1. Pare Down the Organization
2. Concept of Accountability – ‘Owner – Operator‘
3. CCS Financial Statements (debt)
o Connelly‘s Leadership
Metal Container Industry - Introduction COGS of Metal Can

Other OH
16%
Transportation
o 1958 – Steel losing battle against Aluminium 8%

Labor Raw
o Advantages of Aluminium Can: 12% Materials
65%
1. Weight advantage over glass and steel
2. Quality
3. Ease of handling;
4. Wider variety of graphics options Metal Can Market 1970 Metal Can Market 1989
5. Consumer preference Other Metal Cans
12%
6. Flat Bottoms
Steel Cans
7. Avoid affecting taste 29%

8.Vending Machines

Steel Cans
88%

Other Metal Cans

71%
Metal Container Industry - Introduction
o After 1958, Metal cans were made of
aluminum / steel / combination of both
o Three-piece cans / Two-piece cans

o
o Three-piece can – Steel - food and general
packaging industries
o Two-piece cans – Aluminum, Steel -
beverage industry
o Two-piece cans are more efficiant to
produce
 Treat of new entrants

5 Market Forces

Bargaining power of Rivalry among Bargaining power of

suppliers Existing buyers
Competitors

Treat of Substitutes
1. Bargaining power of suppliers High

oFew suppliers / Low suppliers’ competition

oConcentrated suppliers Price Setters
oFew substitutes
oThreat of Vertical Integration

Supply Chain
(Aluminum)
2. Bargaining power of buyers High

o1980’s there are few and big buyers

oStandardized products
oFew switching costs
oBuyers have full information about supplier’s costs

Demand
Chain
3. Threat of new Entrants Low / Medium

oEntry barriers are High, while Exhibit

Barriers are Low
oLow Switching Costs
oNumber of In house manufacturers
Increase
o Diversified Companies
4. Threat Of Substitutes High
oNumber of substitute products available
oPrice performance of substitutes

VS VS
Plastic Glass
Advantage: Lack of :
o Light weight & convenient handling o filling speeds, lighter weight,
Challenges: compactness for inventory, and
o Need to produce a material that transportation efficiency
simultaneously retained carbonation Advantage:
and prevented infiltration of oxygen
o Flat Bottom o Beer - love affaire with“long neck”
o Environment
5. Rivalry among Competitors High

oA lot of companies of the

same size and power Low Margins
oProduct differentiation is low Increasing Costs

oIndustry slow growth rate à

Diversification and consolidation
1. American National Can
2. Continental Can
3. Reynolds Metal
Packaging Industry Other Industries 4. CCS
5. Ball Corporation
oIn house Manufacturers 6. Van dorn
7. Heekin Can
 Treat of new entrants

Low / Medium

High
High
Bargaining power of Rivalry among Bargaining power of
suppliers Existing buyers
Competitors High

High
5 Market Forces Summary
Treat of Substitutes
o Metal Can Market is less attractive
o But…
5 Market Forces Summary

Low High

oMarket Attractiveness – Low

oCompetitive Position - Favorable

Opportunistic Strategy
CCS / Connelly’s Strategy

Pare Down the Concept of CCS Financial

Organization Accountability Statements

Focused Strategy: Sold Inventory

Reduce HQ staff by
o Cost efficiency half Crown Manager as
"Owner-Operators"
oQuality Paid off the bank
Abandoning its
paternalistic culture to
oCustomer service simply functional
organization Sales forecasting and
inventory control
Plant Managers take
responsibility for plant
Reduce Payroll and profitability
eliminated jobs Debt to Equity Ration
2%
 Manufacturing:
CCS / Connelly’s Strategy o closing down Philadelphia plant
o Invest in 26 geographically dispersed plants ( close to
the customerS)
o 1960’s beverage cans and the growing aerosol market -
“hard to hold”
Product & Markets:
o From Soldering to 2 Pieced Can
o Specialized product line built around Crown’s
traditional strengths - tin-plated cans and o Lower costs by reducing mistakes
crowns
o motor oil cans
o 1960’s beverage cans and the growing aerosol
market - “hard to hold”
o From Soldering to 2 Pieced Can
o Equipment (Printers)
o 1980’s conversion to aluminum cans
o two geographic thrusts: United States and
countries abroad
CCS / Connelly’s Strategy
Recycling:
o Nationwide Recyclers, Inc - top aluminum can recyclers in the country

R&D
o “We are not truly pioneers,… we can move to adapt to the customer’s needs
faster than anyone else in the industry”
o Crown’s R&D worked closely with customers on specific customer requests

Customer Service
o close ties with customers – Customer Driven
o provide technical assistance
o specific problem solving at the customer’s plant

International Expansion:
o First mover advantage - “pioneer rights”
o Capabilities based strategy
o National management
o Opportunities to recycle equipment (low exit barrier)
What advantages does a firm the size of CC&S have for
competing with American Can and Continental Can?
o CCS flexibility with customer needs
o Customer service (technical assistance and consulting)
o Small Plants were more flexible
o R&D - ”You try to let others take the risks and make the mistakes. . . .” – no additional CapEx
o Close to Customers
o Inventory in Plants for Just in time and its Control
o International Plans
o Recognition itself as a small producer - develop a product line built around Crown’s traditional strengths

What are the key opportunities and challenges facing competitors in this industry?
Opportunities Challenges
Diversification (packaging industry) – new materials CapEx
Diversification (other industry) New Knowledge
Consolidation Vertical Integration
Merger and Acquisitions
Differentiation
Value Creation by CCS

oQuality
oHigh Customer service
oFlexibility
oSpecial Designed Products
oDistribution (Just-in-Time)
CCS / Avery’s Challenge
In 1989, Avery’s Strategy Options:
1. Consolidation (Acquisition of Continental Can)
2. Diversification
i. Packaging Industry (New Materials: Plastics & Glass)
ii. Other Industry (Divest and exit)

Pros & Cons of Consolidation

Pros Cons
Pros & Cons of Diversification
Increase in market share Difficulties of Merger
(culture, time) Pros Cons
Differentiation No additional New Revenue Sources Lack of Experiance
Competitive advantage New growth Opportunities Capex
International Markets Product Diversification
Lowering bargaining power of
suppliers & buyers
CCS / Our Recommendation

Avery’s Competitive Advantage Options:

1. Differentiation Strategy
2. Low Cost Strategy (Consolidation)
CCS with no ’R&D’:
oCCS doesn’t have First mover advantage
oCCS shall choose Capability based Strategy

Increasing perceived Decreasing costs below

customer value rivals
CCS / Actual Development

CCS did both Consolidation and diversification Strategy:

1. 1990 CCS Acquired Continental Can --> North America’s Can Leader
2. 1992 CCS Acquired Constar International and began serious foray into plastics

Moreover, CCS:
oDeveloped R&D
oDeveloped SuperEnd® Beverage Ends
(reduces metal use by 10%)
Thank You for Your Attention