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Crown Cork & market share
Five firms dominated the $12.2 billion U.S. metal can industry in 1989, with an aggregate 61% market share
Pricing is very competitive.
To lower costs, managers sought long runs of standard items and
offer volume discounts.
15% increase in aluminum can
sheet price after guaranteed
Can industry operating margins fell from
7% to 4% between 1986-1989 because of
7% increase in beverage can production
capacity between 1987-1989
Increase number of the major brewers
producing containers in house
The consolidation of soft drink
bottlers throughout the decade
Top U.S. Users of Containers, 1989
Anheuser-Busch Companies Inc.
The Seagram Company, Ltd.
Manufacturers located their plants close to customers to minimize transportation costs
The primary cost components of the metal can include
RM 65 %
Foreign markets were served by
joint ventures, foreign
subsidiaries, affiliates of U.S.
firms and local overseas firms.
Beverage can producers preferred
aluminum to steel because of lighter
weight and lower shipping costs
Beverage segment used two-piece cans
: The two-piece can line with the peripheral equipment
cost about $20-25 million per line
Food and general packaging segment used three-piece cans:
The three-piece can line with the equipment cost about
$8.5-9 million per line
Most plants had 12 to 15 lines for the increased flexibility of handling more
than one type of can at once
In 1970, steel accounted for 88% of metal cans, but dropped to 29% in 1989
Being lighter, more consistent quality and more economical to recycle, by 1989
aluminum accounted for 99% of the beer and 94% of the soft drink metal can
The country’s three largest aluminum producers were
Compara ve Sale Performance of Major Aluminum
Suppliers, 1988 (dollars in millions)
The metal container industry trend
Soft drinks &
• Producing cans for their own company use—accounted for
approximately 25% of the total can output in 1989.
• Much of the expansion in in-house manufactured cans, occurred at
plants owned by the nation’s major food producers and brewers.
• Brewers found it advantageous to invest in captive manufacture because
of high-volume, single-label production runs.
• Soft drink bottlers were also geared to low-volume, multilabel
output, which was not as economically suitable for the in-house can
Plastics was the growth leader
in the container industry.
• Share 9%
• Share 18%
Plastics could retain carbonation and
prevent infiltration of oxygen less than 4
months while aluminum cans held
carbonation for more than 16 months
U.S. brewers expected beer containers to
have at least a 90-day shelf-life.
Glass bottles accounted
for only 14% of domestic
soft drink sales
Soft drink bottlers
preferred the metal can
to glass because of a
variety of logistical and
faster filling speeds
compactness for inventory
Soft drinks &
The soft drink industry of metal
cans shipped accounted for
29% in 1980
42% in 1989
Aluminum’s penetration could be
traced to several factors:
(1) weight advantage over glass and steel
(2) ease of handling
(3) a wider variety of graphics options
provided by multipack can containers
(4) consumer preference
Aluminum’s growth was also
supported by the vending
Low profit margins, excess capacity, and rising material
and labor costs prompted a number of corporate diversifications and
subsequent consolidations throughout the 1970s and 1980s.
For example, American Can reduced its dependence on domestic
can manufacturing, moving into totally unrelated fields, such as
Crown Cork & Seal Company
Patent ran out, competitive became serve and nearly
bankrupted the company
1927 : Crown was brought by Charles McManus
1930 : Crown prospered, selling more than half of the United States
and world supply of the bottle cap --- McManus anticipated the
success of the beer can and diversified into can making
1946 : McManus died, the company ran on momentum
Try to expand into plastic and ludicrous diversification into metal
1955 : Partnership with Connelly Container, Inc.
1956 : Connelly began buying stock and was asked to be an outside
1957 : Crown teetered on the Verge of bankruptcy John Connelly took
over the president.
His recue plan was simply -- just common sense--
John Connelly’s action
To pare down
Reduce HQ staff
by half to reach
a lean force of 80.
to simply functional
To institute the
by 24% and
eliminated 1,647 jobs.
Focused on the
Paid off the bank
with new product
and inventory control.
“Climbed out of the
for plant profitability coffin and was sprinting”
Research and Development (R&D)
Crown’s technology strategy focused on enhancing the existing product line. We
do have tremendous skills in die forming and metal fabrication.
Marketing and customer service
Crown’s manufacturing emphasis on flexibility and quick response to customer’s
needs supported its marketing emphasis on putting the customer first.
Connelly then steadily reduced the debt/equity ratio from 42% in 1956 to 18.2% in
1976 and 5% in 1986.
Between 1955 and 1960, Crown received what were called “pioneer rights” from
many foreign governments aiming to build up the industrial sectors of their countries.
Connelly’s strategy met with substantial success throughout his tenure at Crown.
Growing opportunities in plastic closures and
Acquisition of Continental Can Canada
Entrance into the plastic container industry
•Market gap in the container
• Portion of metal can more than
• Decreasing shipping cost
• Not completed loop of recycle
because of lightweight
• Not core competency
• Developed in various pattern
•Allowed carbonation to escape in
•Made of natural resources
less than 4 months
Acquire the Continental can company
•Getting more market share
•Getting plastic container line
manufacturing from Continental
• Acquiring conflict in culture
• Strong competition
• Increasing trend of in-house
•Increasing bargaining power
against from supplier and
•Expansion in world wide
• Lack of product diversity
• Short of R&D
• Chance to consolidation
• Globalization /Pioneer
Slow growth rate
Emerging plastic market
Five Forces Analysis
Threat of New
Five Forces Analysis
Rivalry among Existing Firms (High)
5-6 big competitors
Also be supplier => Reynolds Metals
New production technology => Reynolds Metals
New product design => Ball Corporation
Bargaining Power of Buyers (High)
- Top 5 soft drinks (Coca- Cola Company , Anheuser-Busch
Companies Inc., Pepsi co Inc., and Coca-Cola Enterprises
Five Forces Analysis
Bargaining Power of Suppliers (High)
- Big 3 aluminum packaging producer => Alcoa, Alcan and
- Only one aluminum can producer => Reynolds Metals
Threat of Substitute Products and Services (High)
Plastic and glass
Plastic => 18% growth in 1989 (from 9% in
1980), lightweight and more convenient
Threat of New Entrants (Low)
- Vertical and horizontal integration
Crown Cork’s Value Chain
existing product line
1.reduced (payroll by
24%) 1,647 jobs.
2. Change Divisional
Line to “Owner
Sale Forecasting +
1.closing down the
2. new and
response to customer needs
and quick response
to customer’s needs
Expanding more market share.
Product and market are rarely change.
Changes in consumer behavior.
New material packaging
(Plastic and glass)
Product & Services
Quality, Flexibility, and
Innovation on customer
Focus on metal forming
Good Relationship with