AMI estimates that as many as 200 companies could move out of closure production in Western Europe over the next five years in an already consolidated industry. The leading 10 companies accounted for about 60 per cent of the market in 2004 and the top 25 account for about 75 per cent. Plastic closure production is already highly consolidated, with 465 companies involved in making injection or compression moulding plastic closures in 2004. Companies will exit the business as their larger competitors achieve economies of scale in producing cheaper products, AMI said. The narrowing of choice is exacerbated further by the steep rise in polymer prices during 2004. The cost increases cut profit margins for many in the industry. In response companies are slashing production costs and looking to diversify into custom-made closures as a route to margin improvement, AMI stated. "Whilst there is always likely to be a role for the small independent company meeting specific local needs or carrying out sub-contract work for the leading suppliers, without access to capital to develop new specialist, niche products or the ability to achieve the economies of scale in standard products to meet the pricing demands of the brand owners many are expected to quit the market," AMI stated. About 158 billion plastic closure units were produced in the Western European market last year, making up about 40 per cent all closures. Of these 66 per cent of the plastic closures were for used for beverages. The major trend in this sector is the move from two-piece to one-piece closures driven by the replacement of glass bottles by poly ethylene terephthalate (PET) containers, AMI says. AMI estimates the market for standard beverage closures will grow by 6.2 per cent annually to 2009. . The non-beverage sector, plastic closures have little future growth. The main applications are in packaging for toiletries and cosmetics, household chemicals and liquid food such as milk. Overall the production of plastic caps and closures will grow on average by 5.6 per cent per year, while that for metal will decline by about three per cent per year. As a result plastic closures will account for nearly half of the market by 2009, AMI says. France and Germany are the two largest markets, each producing nearly 36 billion closures in 2004. In France the market is driven by mineral water manufacturers. In Germany the market is driven by the drinks sector and as a location of European production centres for leading brands in the personal care and household cleaning sectors. Polypropylene and polyethylene are the main types of polymers used for plastics closures. Polyethylene use will grow by four per cent per year to 2009, while polypropylene use will increase by two per cent driven mainly by developments in carton openings. The Closures Market In Western Europe 2004 And 2009 % Share 2004 2009 % Change p.a. Metal 57.8 48.1 -2.8 Natural cork 2.4 2.1 -1.3 Plastic 39.8 49.8 5.6 Units (bn) 397.4 415.8 0.9% Source: AMI
While the Western European market for plastic caps and closures may be growing, cosmetics and personal care companies will have to be less choosy when picking their supplier, report Ahmed ElAmin and Simon Pitman.