Analysis: Health-conscious Americans hurt aluminum can market
NEW YORK (Reuters) - U.S. aluminum can sales are set to slow in 2013 for a third straight year as more consumers ditch sodas for healthier options such as water and iced teas, traditionally bottled in plastic or glass.
The loss of market share in the fizzy drinks capital of the world, also due to loud anti-obesity campaigns such as those promoted by Walt Disney and New York City Mayor Michael Bloomberg, has forced producers of sheet aluminum for cans, as well as can fabricators, to seek new, more profitable markets abroad.
Novelis Inc, the world's largest flat-rolled aluminum maker, and can producer Ball Corp have both invested in Asia and in Brazil, where they expect to see can sales spike as the 2014 football World Cup and 2016 Olympics approach.
Alcoa, the top U.S. aluminum producer, and Novelis, which produces can sheet for manufacturers of drinks such as Coca Cola, expect can demand to contract as much as 1 percent in North America in 2013.
"This is mainly driven by a more health-conscious public, (which) is consuming more drinks perceived as healthier," Novelis' global director of strategy for can, Michael Demmer, said in a phone interview.
"This trend will likely continue but the soda producers will try to contrast that by producing healthier drinks."
Even so, the United States is a massive soda can market by any comparison. Some 5 percent of global annual aluminum consumption - 1.7 million metric metric tons - is for making U.S. and Canadian cans each year.
The average American drinks about 160 liters of soda a year, the equivalent of a bath tub-full, two-thirds more than in the United Kingdom and far in excess of the emerging economies China and India, where the average annual consumption is less than 5 liters.
To defend this large market, the soda industry is taking steps to block Mayor Michael Bloomberg's ban on large sugary drinks in New York City, due to be implemented in June.
The United States faces an obesity epidemic. Campaigns aimed at curbing consumption of high-calorie foods and drinks have multiplied, ranging from voluntary industry action to government and policy steps.
Disney plans to limit junk food advertising on shows aired on the media and entertainment giant's television channel geared toward children while many school districts across the U.S. have banned sugary drinks from vending machines and cafeterias in schools.
Compared to 2006, half as many adolescents can now buy high-calorie sodas in schools but much more needs to be done according to anti-obesity advocates.
U.S. FIRMS' MIGRATION
Soda consumption in the United States has been shrinking since 2006, dwindling to a 16-year low last year. That contrasts with growing consumption elsewhere. Can use is increasing at double-digit percentage rates in some emerging countries and is growing even in debt-burdened Europe.
Alcoa expects can demand in Europe to grow by 2 percent to 3 percent this year and China to post an 8 percent to 12 percent increase.
Ball ceased production at two of its U.S. beverage packaging plants last year while it invested in can plants it Vietnam, China, Brazil and Italy. [ID:nL4E8JF6KE] Novelis is expanding in South Korea and Brazil, primarily due to the growth it sees in can consumption in those regions.
"Shipping costs are high so it makes more sense to open lines in the countries where you can sell cans locally," said Metal Bulletin Research aluminum analyst Kamil Wlazly.
With anti-soda initiatives likely to support or even accelerate the fall of fizzy-drink consumption in North America, aluminum companies are trying to produce more specialty containers and promote them as an attractive package for healthier and alcoholic drinks too.
"In the last couple of years we have seen the emergence of cans as a package for fruit juices, iced teas and in new categories such as ready-mixed cocktails," said Benjamin Punchard, senior global packaging analyst at Mintel.
Punchard said can producers are also innovating with new sizes and shapes, resealable containers, surface designs and chromatic effects such as matt finishes.
Some of these developments, coupled with the promotion of aluminum cans as being more recyclable than glass and plastic bottles, have pushed some craft breweries to switch to aluminum.
Shipments of alcoholic beverage can grew by more than 2 percent in 2012 in the United States, according to the Can Manufacturers Institute, an industry trade group.
"Breweries are using more aluminum containers as a look or marketing choice as well as for sustainability reasons," Demmer said.
Beer maker Coors Light, for example, is promoting its 'Silver Bullet' aluminum cans and bottles for their "coldness" in a series of TV advertisements.
Can manufacturers hope this trend will offset the decline of soda cans and shield their profits in the Unites States, at least in the medium term.
(Editing by Josephine Mason and Alden Bentley)