The global container glass market was valued at $55+ billion in 2018 and is projected to reach $65 billion by 2022 at a CAGR of 3-4 percent. The growing consumption from end-user industries — especially alcoholic beverages (including beer), which account for nearly 60 percent of the total demand, followed by food and pharmaceutical industries — will drive the market.
Premium food & beverage brands mostly prefer container glass over other packaging options such as plastics, as glass is sustainable, chemically inert, non-porous and impermeable. Various consumer surveys have also indicated container glass to be the most preferred option as it has a long shelf life and doesn't affect the taste of a product. However, some of the entry barriers in this market include volatile prices of energy and raw materials, higher logistics costs, issues of breakage and growing use of alternatives to glass packaging, such as flexible packaging in the form of bags and pouches for certain applications.
Asia-Pacific (APAC) has the largest demand market followed by Europe and the Americas. In terms of production too, APAC, especially China, is a major producer and exporter of glass containers followed by Europe. North America is gradually increasing its reliance on imports from China and Mexico due to the cost advantage and limited capacity additions over the last couple of years. This is despite the U.S. being a net exporter of soda ash, a major raw material used in glass production.
Consolidated Supplier Market
The supplier market remains consolidated on the back of aggressive mergers and acquisitions and multiple closures due to low profitability. Moreover, it becomes challenging for new suppliers to enter the market due to the high capital requirement. Currently, three global players — Ardagh Group, Owens-Illinois Inc. and Verallia — cumulatively account for almost 70 percent of the total market. However, the market remains fragmented in developing regions.
In such a competitive market, suppliers tend to differentiate themselves through proactive capacity expansions, offering innovative packaging solutions such as smaller pack sizes, increasing their focus on producing light-weight containers, and increasingly using cullet and customization services such as embossing, 3D labelling and so on.
For buyers, supply stability, the price associated with raw materials, and energy along with logistics costs are the major decision factors in supplier selection. Other key decision factors for buyers include competitive pricing, product strength, service quality and the ability to cater to demand fluctuations within a short time span. Buyers usually work with regional suppliers that operate near their plant locations to ensure supply stability, service consistency, lower breakage and a reduction in transportation lead time. However, large-scale buyers also select global suppliers due to their geographical reach and because they can help them achieve economies of scale under a single contract with regional sourcing.
Overall, in 2019, container glass prices globally are expected to increase due to anticipated shortages in Europe caused by the high demand and lack of new investments, in addition to a possible increase in raw material costs. The demand surge can be majorly attributed to the large-scale sporting events globally. Moreover, the longer-term outcome of the U.S.-China trade war is still unclear, and with China being a major player in the container glass industry, there will be implications once the situation becomes clearer. Buyers will continue to rely on the movement of silica sand, natural gas, electricity and fuel prices to track the overall glass index and work with their suppliers to hedge their risk.