CASE ANALYSIS – Crown Cork and Seals

SUPRAJA B
RAJAPPAH
PRASANNA
MUNAVAR
SRIRAM ARAVIND
Industry Analysis
Highlights: Container Industry
• 100 Firms with many product lines
• Produced Metal cans, Crowns(Bottle Caps) and closures Metal Plastic Glass
• Supplied to 135 Industries - Seal/Hold the consumer and
Industrial goods Market Share
• 33% of Packaging products – Metal Containers ($7.1Billion in
18.4
1976) 48
16.6
• Metal cans -> 75% Metal Containers shipment-> Value of 8.7
8.3
$7.1Billion in 1976
• Others included Foil Containers and metal drums
Continental Can American Can National Can

1957 -1977 CC&S Others

CC&S – Mfg: Tin plated cans – Beer, Soft Drinks and Aerosols products
Attractiveness of the metal container
industry over the years (1957-1977)

 Profit Margins declined by 44% – between 1968 & 1975

 Metal Container Industry structure is based on
 Pricing : Very Competitive
 Manufacturing: Expensive – Equipment and Line installations and
Changeover Lines -> Need of High Capacity utilization
 Distribution
 Supplier
 Customer
Growth of container industry over years
 On a whole the industry was not so attractive with the subsidies
  Threat of Suppliers: High
 In 1970, Steel as raw material - 88% of metal cans.

Analyzing  Between 1956 & 1960, Steel suppliers raised prices 5 times -> 15.2%
Metal can manufacturers raised prices by 6 times ->19%
through


 Buyers/ Customers: High

Porter’s Five  Self Manufacture: Backward Integration/ Captive production increased

from 18% to 25.8% between 1970 and 1976.

Forces of  Threat of Substitute: Moderate

 Packaging Revolution: Aluminium can Vs Tin plated can.

Competition  Reynold Metals and ALCOA started producing Aluminum cans in high
proportion.

Framework  Advantage AL cans -> Reduce Problems of Flavoring (Brewing and soft
drink industries)
 R&D investment were on a high from the competitors.

 Threat of a New Entrant: Weak

 For metal, glass and plastic industry the barriers are high - huge
investment
Analyzing through Porter’s Five % of Revenue Generation of
Forces of Competition Framework American Cans

 Internal Rivalry : Competitors Weak

25
 1. American Can - 17% Market Share with diversification -> 40
metal and composite containers, Plastics, Paper and laminated
15
Packaging products 5 15
 2. National Can : 8.7% Market Share with diversification
Household Tissues, cups
 Glass containers, food Canning, pet foods, Bottle Closures, Chemical Subsidiary
Plastics Containers. Focused on Overseas programs for Overseas Operations
Domestic Operations
earnings.
Cans

 3. Continental Can – 18% Market Share with diversification

 Forest Products, Plastics and Paper Packaging materials % of Revenue Generation of
CC&S
 Overseas operations -> 33% of Revenue
 4. CC&S - 8.7% Market Share with no diversification
29
 Profit margin -> 35%
6
 Overseas operations -> Higher sales of crown
 Sales growth increased between 1966 till 1977 65

Tin Plated Cans Crown Bottling

John’s strategies

Manufacturing Marketing International Expansion

Strategic location
Closed Philadelphia plant Focus on underdeveloped
High client involvement
Diverse locations ( from 9 to nations for plant set up to get
Sales by geography than product 10 year tax shield
25)
Solving customer problems based on it 60 plants overseas, The largest
Closer to customer than Raw
( Custom catering) producer of metal cans and
Material
Customer is right! crowns oversas.
John’s strategies
R&D
Dye forming & Metal fabrication – Key strengths
Learning from other’s mistakes
Maximum number of two piece lines
Quick turnovers- minimum changeovers
Enhancing the utility. Ex: Filling machines for
bottles
Finance
Short term borrowings reduced by
liquidating the inventory
Increasing Debt/Equity ratio
Eliminating preferred stock to
reduce cash drain
From -0.01$ in 1956 to 2.84$ in 1976
Strategies available for Avery

DIVERSIFICATION OF LOOK FOR LOOK FOR AVAILABLE INCREASE IN SALES CUSTOMIZE SOLUTIONS
PRODUCT LINE COMPETITORS R&D SUBSTITUTES WHICH ARE VOLUME BY FURTHER TO CUSTOMERS
MORE COST EFFECTIVE INTERNATIONAL
EXPOSURE
 NEWER MARKETS – JOINT ACQUISITION OF MULTIPLE M&A – FRANCE'S
VENTURES CONTINENTAL CAN’S CARNAUDMETALBOX S.A

Avery’s
OVERSEAS PLANT

actions

COST SAVINGS – SHUT 40 REDUCED LABOUR TO REVENUE DOUBLED - $4.5

PLANTS, REORGANIZED 52 6500 BILLION IN 1994