Specialist
Former senior executive at Anchor Glass
Agenda
- Anchor Glass overview – core strengths and weaknesses
- Demand trends across glass packaging end markets and substrate churn risk
- Import market outlook as freight and ports normalise
- Cost pass-through ability and 2022 outlook
Questions
1.
What 2-3 key secular trends are driving the glass packaging industry? I’ve heard a lot about glass shortages and the shift in beer from glass to cans. Could you discuss those and any other trends worth highlighting?
2.
There’s been news around aluminium shortages and overall supply constraints. I know there have also been similar glass supply constraints, but would aluminium being tighter lead to a shift in glass packaging or is it more of a blip? How do CPGs [consumer packaged goods] react to these shortages and how quickly do they switch substrates when there are shortages?
3.
You mentioned the shift of beer and ready-to-drink into cans. Over the next few years, would you expect that trend to accelerate, decelerate or continue at the pace of the last few years?
4.
What makes Anchor Glass unique? What would you highlight as the firm’s core competencies, competitive advantages or key differentiators vs players such as O-I Glass or Ardagh?
5.
Where might Anchor be weaker? Has it been challenged in any areas historically, or have its competitors been advantaged anywhere?
6.
You mentioned significant turnover at Anchor’s executive level. Why do you think that might be? Is it because glass has been challenged over the years and executives are shifting out of the industry, or is it something specifically related to the company?
7.
What are some advantages and disadvantages of the size difference between Anchor, O-I and Ardagh? You said Anchor isn’t necessarily disadvantaged in terms of scale, but do O-I and Ardagh get any preferential treatment from suppliers at this point in the market cycle, given rising costs? Are there other advantages or disadvantages to their relative sizes?
8.
I’ve heard in previous Interviews [see Ardagh – North American Glass Packaging – 25 April 2019] that Anchor Glass is more likely to reduce price to win volume at all costs due to its small size and complete focus on glass. Do you agree with that?
9.
You mentioned Anchor’s advantage within Indiana and the geographic advantages of being close to customers, given high freight costs and general shipping costs. Does that kind of advantage stick out to you in other markets? Is Anchor well-placed anywhere else, or is it under-serving any markets because it doesn’t have a plant nearby?
10.
Is Anchor weaker in any geographies, hotspots or markets? Is there anywhere it lacks a strong presence? I know you mentioned the West Coast.
11.
Would you highlight any other up-and-coming players as a competitive threat to Anchor or the broader glass packaging market, aside from O-I and Ardagh? Could any regional players be a threat?
12.
How has product mix in glass evolved over the past few years? What material changes would you note as to what’s going into glass bottles vs a few years ago?
13.
What do you think is going to stick with glass vs slowly decline and churn into aluminium? I’ve heard about IPAs or some craft beers being more likely to stick with glass.
14.
Have any products aside from beer and RTD [ready-to-drink] shifted away from glass at a material rate? Do you expect that shift to be prevalent or accelerate anywhere else in the near future?
15.
Are any other products at risk of churn to another substrate? Where are you most concerned?
16.
Where has the shift into glass accelerated or been material over the last few years? What would you say have been relevant growth markets in glass packaging?
17.
Does the margin differ significantly for the up-and-comers entering glass vs an established brand shifting into glass?
18.
Some price increases have been slated by glass suppliers. How would you segment demand between actual demand and customers pre-buying ahead of the slated increases?
19.
Are Anchor or other glass packaging players seeing any interest in glass from customers considering switching away from plastics due to ESG pressures? Plastic producers say they’re more environmentally friendly than glass and there is an argument to be had over which is more sustainable, but plastic does seem to get beaten down the most by these pressures.
20.
How much focus does Anchor put on procuring used bottle feedstock? What’s your outlook for recycled bottle use? Do you expect Anchor to invest to vertically integrate its supply chain?
21.
How would you describe Anchor’s relationship with its key customers? Many of the ESG pressures obviously come from customers. Do you see any risks, challenges or opportunities here?
22.
You said Anchor is advantaged because customers want more than just two suppliers, but does that impact relationships with existing or potential customers when paired with executive churn and the fact the company has gone bankrupt several times? Or is its history left behind now?
23.
How are imports impacting the broader glass market? I saw the US was the largest importer in 2020, and imports increased by 18% in 2021. What are the implications of elevated imports and how might these trend over the near term as port congestion eases and supply chains normalise?
24.
Could you give an overview of Anchor’s cost structure? What’s fixed and variable in glass packaging in general?
25.
Are there material cost differences when it comes to geography? Anchor has plants in Oklahoma, Florida, Georgia, Indiana and New York. Does cost differ significantly around the labour or energy pieces of the equation?
26.
How would you assess labour in glass packaging and within Anchor specifically? Are the players labour-constrained? We’ve heard a lot about tight labour markets recently. Has it been hard to hire and retain talent?
27.
Would you expect significant wage inflation given the labour dynamics you mentioned, or will it remain more or less in line with the rest of the market?
28.
Is Anchor better-placed for recruiting and retaining talent than peers such as O-I or Ardagh?
29.
Where is inflation having the greatest impact on Anchor?
30.
How would you assess Anchor’s ability to pass on the rising material, logistics and labour costs? How often are escalators built in? Is there a significant lag?
31.
What could materially disrupt the glass packaging industry or Anchor specifically? Are any new technologies being implemented or could any substrate shifts cause material disruption?
32.
Are there any other important topics, trends, challenges or opportunities around Anchor that investors should focus on?
33.
Could you share your assessment of Anchor’s asset base? Is there any concern around perhaps sweating assets for too long?
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