Our operating context

The environment in which we operate impacts our ability to deliver on our strategy and create value. In 2017, subdued economic activity, limited foreign exchange in Angola and Zimbabwe, improved conditions in Nigeria and policy uncertainty and skills shortages remained major features of Nampak's macro-environment, making up our material issues in the year. These are discussed in detail under material issues.

Within the packaging sector, and in our markets in particular, the most notable developments in 2017 included:

MARKET TRENDS

Growing demand for:

Lighter weight packaging

Recyclable, reusable,
bio-based and biodegradable packaging

Tamper evidence and easy opening packaging

Packaging that preserves contents, extends shelf life and reduces food waste

Larger beverage cans for beer and energy drinks, smaller cans for CSDs

More rigid plastic packaging, with demand growth exceeding GDP growth

UHT milk, traditionally packed in cartons, rather than fresh milk

Motor vehicle oil in rigid plastic, rather than steel cans

Our response:

Through Nampak R&D’s technology partnerships we work to reduce the weight of our products after significant reductions in recent years.

All Nampak products are recyclable and we support the recycling and re‑use of packaging. We have developed a new design centre at R&D. Our water bottles are 25% rPET, juice bottles up to 40% rPET.

DivFood is the only local manufacturer of easy open cans. Plastics offers a new water closure with reliable tamper evidence. Our twist-off food closures have vacuum buttons with an audible “click” as they are opened.

Nampak R&D’s thermal processing specialists assist customers in ensuring a safe time and temperature combination for the packaging of all food.

Bevcan now supplies 500ml beer cans in SA, and slender cans for CSDs in Angola.

We seek opportunities to provide additional packaging solutions for customers and actively source new customers to diversify our base.

We offer UHT packaging in both cartons and PET and we work with our customers to market the benefits of fresh milk, packaged in HDPE.

We continue to grow our market share, supplying large oil distributors.

Continuing trend of:

Constant innovation in packaging

Returnable glass bottles as the packaging of choice for beer with market growth driven by ongoing float replacements

Glass as the dominant choice of packaging for wine

Declining demand for glass packaging of food products, with tendency to move to PET

Our response:

We have recently completed the recapitalisation and modernisation of our Bevcan and DivFood businesses and continue to invest in state-of-the-art equipment and process enhancements.

We secured a supply contract with a large brewer and continue to develop opportunities to grow.

We have doubled our share of the SA wine market since 2015.

We focus our efforts on the market for bottled beverages.


A CHANGING COMPETITIVE LANDSCAPE

What is happening:

Some customers are backward integrating, making their own plastic packaging

A new beverage can manufacturer has entered the South African market, operating a single line

Consolidation is occurring among some of
our customers

Our response:

We are working to diversify into new markets, including personal, home and laundry care.

We see opportunity to rationalise underutilised assets and defend market share through focusing on operations excellence.

By improving operational efficiency, we are able to ensure a competitive offering.