Our operating context

 

The environment in which we operate impacts the development and evolution of our strategy, as well as our ability to deliver on it and, in so doing, create value in the short, medium and long term. It affects our risks and shapes our opportunities and is linked to the material issues we identify.

 The macro-economic environment,  liquidity restrictions in the Rest of Africa, skills shortages and policy uncertainty were major features of our operating context in 2019. These make up four of our five material issues and are discussed in detail. Within the packaging sector there were numerous notable developments in 2019. They included:

1

A CHANGING COMPETITIVE LANDSCAPE

WHAT IS HAPPENING OUR RESPONSE

COMPETITION IS GROWING IN THE SOUTH AFRICAN BEVERAGE CAN MARKET, WITH A TOTAL OF THREE MANUFACTURERS. NAMPAK'S COMPETITORS HAVE ONE PRODUCTION LINE EACH WHILE NAMPAK OPERATES FIVE HIGH-SPEED LINES.

COMPETITION IS ALSO BECOMING MORE INTENSE IN THE FOOD CAN MARKET IN SOUTH AFRICA.

At Bevcan, we invested in our skills base to enable us to defend our market share, maintain excellent customer service, leverage our assets, reduce complexity and optimise capacity.

We reduced our footprint in anticipation of increased competition thereby reducing complexity and are continuously optimising capacity through operations excellence.

At DivFood, we are optimising inventory levels and refining our price strategy to stimulate consumption. We are also importing components where it is more cost effective to do so.

CONSOLIDATION IS OCCURRING AMONG SOME CUSTOMERS, WHO IN TURN ARE LOOKING TO CONSOLIDATE THEIR SUPPLIERS.

 

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

By pre-empting changing customer requirements, we disposed of businesses that would have declined as a result.

ENVIRONMENTAL PRESSURE IS INCREASING, ESPECIALLY ON PLASTIC.

We are working to diversify into new markets, while leveraging our R&D capabilities to differentiate our offering by making lighter weight products with an increasing percentage of post-consumer recycled material to reduce cost and remain competitive.

2

GREATER INNOVATION, CHANGING DEMAND

WHAT IS HAPPENING OUR RESPONSE

GREATER DEMAND FOR LIGHTER WEIGHT PACKAGING.

Nampak R&D continues to reduce the weight of our products

MORE INTEREST IN RECYCLABLE, RE-USABLE, BIO-BASED AND BIODEGRADABLE PACKAGING.

 

Most Nampak products are recyclable.
Our water bottles are up to 50% rPET and our juice bottles up to 40% rPET

Nampak is a member of industry bodies that promote responsible use of packaging across our substrates

GROWING DEMAND FOR TAMPER-EVIDENT AND EASY-OPENING PACKAGING.

DivFood is the only local manufacturer of easy-open cans. Our Plastics water bottle closures have reliable tamper evidence.

The vacuum buttons on our twist-off food closures make an audible "click" as they are opened

NEED FOR PACKAGING THAT PRESERVES CONTENTS, EXTENDS SHELF LIFE AND REDUCES FOOD WASTE.

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

BEER IS INCREASINGLY SOLD IN LARGER BEVERAGE CANS, WHILE CARBONATED SOFT DRINKS (CSD) ARE MOVING INTO SMALLER CANS.

Bevcan supplies 500ml beer cans and has a variety of slender and slimline can sizes for CSDs

 

DEMAND FOR RIGID PLASTIC PACKAGING AND FOR BEVERAGE CANS IS EXCEEDING GDP GROWTH.

We actively work to secure new customers and create new market segments through innovation, for example developing the water and wine market segments by offering beverage cans and liquid cartons

GROWTH IN UHT MILK, TRADITIONALLY PACKED IN CARTONS, IS OUTSTRIPPING GROWTH IN FRESH MILK SALES.

 

We are in the process of offering packaging in both cartons and PET and are exploring opportunities to develop this market in the Rest of Africa

3

GROWING ENVIRONMENTAL PRESSURES ON PACKAGING

"GREAT PACIFIC GARBAGE PATCH"
RAISED WORLDWIDE ENVIRONMENTAL AWARENESS OF PLASTICS

Five
zones

where floating plastic islands are accumulating and growing

3x

Estimated surface area is 3 times the size of France

Fishing nets comprise 46% of the patches' mass

PACKAGING IS A MODEST PART OF THE WASTE CHALLENGE IN SOUTH AFRICA:

6%

OF WASTE sent to landfill comes from packaging

9%

OF WEIGHT of the packaged product is packaging

8%

OF ENERGY required to produce and deliver products is used by packaging

IN FACT, PACKAGING IS NOT ONLY WASTE –
IT IS PART OF A SOLUTION TO RESOURCE CONSERVATION

30% of all food produced in South Africa is lost or wasted annually
12
million
South Africans go to bed hungry

Packaging reduces food waste going to landfills
It also reduces the waste of resources used in food production:
60% of South Africa's water is used for irrigation
Energy used to produce wasted food could power Johannesburg for four months

By optimising the food supply chain, packaging, if handled properly after use, is part of the solution

BUT MAJOR USERS OF PACKAGING ARE MOVING AWAY FROM PLASTIC

 
  • Committing to offering 100% recyclable or reusable packaging
  • Creating packaging with a greater percentage of recycled material
  • These include Coca-Cola, Woolworths, Kelloggs, McDonalds, Nestle and Spar

Source: CSIR, WWF, Statistics SA, The Ocean Cleanup Foundation, Packaging SA

HOWEVER, THERE IS A PLACE FOR PLASTICS

LIGHTWEIGHT   RECYCLABLE
Weight reduction in 500ml PET bottles, saving 2 900 tonnes of raw materials in 2018   >50% of PET is recycled, 45% plastic recycling rates in SA, better than global rates

AND ALTERNATIVE PACKAGING EXISTS:

ALUMINIUM BEVERAGE CANS

  • Valuable to the informal sector, who collect cans for recycling
  • Infinitely recyclable
    • >90% recycling rates
    • >78% of all aluminium ever produced is still in circulation
    • >95% energy savings compared to primary conversion
  • Lightweight
    • 5% to 6% Bevcan weight reduction on 330ml slender cans and 500ml cans
    • 1 320 tonnes of raw materials conserved>

PAPER CARTONS

  • 87% of content is from renewable sources, mainly trees, which absorb CO2
  • <50% GHG emissions versus PET and HDPE bottles
 

ULTIMATELY, WE MUST USE AND COLLECT END-PACKAGING RESPONSIBLY

REDUCE, REUSE AND RECYCLE

DESIGN

  • Lightweight products with lower environmental impact
  • Reusable packaging

COLLECT

  • Increase collection rates
  • Separate at source

CLOSE THE LOOP

  • Increase recycled content in manufacturers' raw materials input
  • Reduced waste extends the lives of landfill sites
     

 

WE ALL HAVE A ROLE TO PLAY