Booze drinkers home consumption steers Nampak aluminium cans demand to peak

Africa's leading packaging manufacturer, Nampak is grooving a surge in demand for its aluminium beverage cans as booze drinkers take-home consumption of their favourite drinks rises.

Nampak the producer of aluminium cans for a range of beverages such as liquor and carbonated soft drinks stated: “Home-consumption demand for the cans has grown sharply in North America and Europe, due to Covid-19 lockdowns. The cans are a particular favourite with beer producers and demand has outstripped supply in those regions.”

In 2020, the group secured two substantial renewed contracts for the export of its beverage cans to multinational companies.

On 9^th February 2021, Erik Smuts, Nampak’s CEO, told investors at its annual general meeting (AGM): “The contracts resulted from the increase in home consumption, especially in North America.”

"At the moment in the US, they are ready to take on the additional capacity to service the long-term trend. But, of course, we are benefiting from the short-term trend," Smuts said.

He added: “In South Africa, the trend had ‘sadly failed’ to take off due to the hard lockdown and the ban on the sale of alcohol, but that could change because consumers appear to be preparing themselves better for more dry days.”

"It appears as if consumers are starting to deploy different strategies against potential alcohol bans. We have seen a trend of people starting to stock more product when they see the [Covid-19] infections rising and we do have a suspicion that we are seeing the benefit of it," Smuts said.

Home consumption of favourite drinks has fuelled an already growing demand for environmentally friendly aluminium cans surpassing plastic packaging and Nampak has been preparing itself for growth in sustainable packaging.  

US-based aluminium packaging company Ball Corporation’s survey research points out global demand for beverage cans to cross 100 billion units by 2025.

However, Nampak is positioning itself to take advantage of the aluminium beverage can boom, as the group is still focused on the balance sheet, which has not been very appreciable. With operations in 11 African countries, including South Africa, Nampak also produces plastic and paper packaging in addition to metal packaging.

Nampak’s performance has been pulled down by macroeconomic volatility in its operations in Africa, especially in Angola, Zimbabwe and Nigeria where it has an assorted R6.2 billion debt pile up from R5.5 billion in 2019.

Smuts said: “Nampak will not be making big investments on the continent until it has secured its balance sheet. In response to a shareholder's question about whether the packaging company is looking at the China and India markets for growth, Smuts said not quite.”

"We have no intention to invest in China; it is a very low-margin environment, none of the cans makers has been successful there," he said.

The CEO added: “China has a large number of small, independent players and Nampak has not seen the big can manufacturers find success in that market.

"India, on the other hand, there have been several cans makers that invested and it's still not a big market," Smuts said.

“India is a difficult market to operate in because of the legislation between all the different areas of the country and Nampak would not consider investing there immediately” he explained.