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Rexam strengthens Red Bull bond with new $175m Swiss investment

By Ben Bouckley+

Last updated on 20-Feb-2013 at 12:42 GMT2013-02-20T12:42:25Z

Rexam strengthens Red Bull bond with new $175m Swiss investment

Rexam says it will build on its already strong relationship with Red Bull by building a new £115m ($175m) specialty can plant with a 2.2bn capacity for the energy drinks giant in Switzerland.

CEO Graham Chipchase revealed the news today during Rexam’s full-year 2012 earnings call, and said that the plant in Widnau would eventually comprise three lines, with the first online in 2015.

Rexam’s full-year results revealed sales of £4.312bn upon the basis of continuing operations and pre-tax profit of £450m; 2011 figures (excluding personal care and closures) were £4.232bn and £414m.

As a wall-to-wall plant, the facility would lower freight cost for both Rexam and Red Bull, and help both companies with their environmental footprints.

“It’s something where we’re getting much closer and building on what’s already a very strong relationship with Red Bull,” Chipchase said.

“We’ll make the spend over three years, the first line is not due to come online until 2015…it’s a pretty big investment to support the growth of energy drinks globally and specifically our biggest customer in energy drinks.

‘New Edition’ Red Bull drives growth

One thing that was helping grow Red Bull sales was three flavored varieties, ‘New Edition’, Chipchase added, which was launched in the UK only a couple of weeks ago.

“If market tests are anything to go by, then it’s doing very, very well in the market,” he said.

Rexam also said it plans to invest £35m on a new line for ‘Fusion Contour’ bottles in Ejpovice in the Czech Republic, to build extra capacity that will also come on stream in 2015 (Q1).

CEO Graham Chipchase said the firm had been working on this key project for some time: “This new investment in the Czech Republic will allow us to do higher speed production of both the 250ml bottle and 350ml bottle and also the shaping.

Rexam showcased a prototype version of Fusion Contour at trade show Brau Beviale in Nuremberg last November.

“For the moment we’ve got one [bottle, Fusion] with straight sides, this one has more of a curve, more shaping, which is a pretty important development,” Chipchase said.

“Because we’re going faster with more volume, this line will allow us to lower the unit cost, which is a very important thing again to our customers, so they can start launching it and help develop their brand.”

Specialty can sales soar in North America

Referring to strong specialty can growth in North America, one analyst asked Chipchase whether Rexam or its rivals were adding extra capacity or converting standard can facilities.

Rexam’s CEO said his firm was sold out worldwide, in terms of specialty can utilization rates, and that the firm was adding US capacity (where specialty cans still command a premium, unlike the more mature European market) as were rivals Ball Packaging and Anheuser-Busch Packaging Group/Metal Container.

Such moves could misfire in terms of lower prices for all, Chipchase warned, but he said that the major players had been “pretty disciplined” thus far.

“You have to remember that specialty cans is not one can, its ranges from small 8oz cans right up to the 24oz cans,” he said.

“No more than two of any of the big can producers make the same specialty can size. So we’re very good at the big cans, Crown are particularly good at the very small cans – a couple of us do the ones in the middle,” Chipchase added.

So it’s not a situation where all four people are doing exactly the same size, which reduces the risk a little bit.”

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