Ball Corporation to close one of its oldest US plants as it admits: ‘We compete against plastic, glass and metal packaging in a highly competitive market’

The plant in Bristol, Virginia,​ opened in 1971 and produces beverage can ends in a variety of sizes, and employs approximately 230 people.

Plant will close in the second quarter of 2016

The beverage packaging end-making plant will close in the second quarter of 2016 with the plant's capacity supplied by other Ball facilities. It has 15 other beverage packaging plants in North America.

Scott McCarty, director, communications and engagement, Ball Corporation's North American Metal Beverage Packaging Division, told FoodProductionDaily, workers will be given benefits in accordance with the effects bargaining process, and will be able to apply for other positions within Ball.          

“Metal cans compete against all beverage packaging types in a marketplace where our customers can choose among a variety of options for their beverage packaging​,” he said.

“Demand for the standard 12oz can has been declining for several years, as demand specialty packaging (other sizes, shapes, additional features) has been growing​.

“Ball has actively managed its manufacturing footprint and costs to serve our customers and to continue to be competitive​.”

Ball expects to record a total after-tax charge of approximately $19m, primarily for employee severance and benefits, facility shut down costs and other actions. The majority of the charge is expected to be recorded in the third quarter of 2015.

'Difficult decision'

Daniel Fisher, president, North American metal beverage packaging, Ball Corporation said closing the plant is a difficult decision.

“We compete against plastic, glass and metal packaging in a highly competitive market, and we will continue to maximize value in our existing operations through optimizing our network, as well as expanding into new and growing products, capabilities and markets,​" he said.

McCarty denied the closure had anything to do with freeing up capital for Ball’s pending acquisition of Rexam. “(The closure) has nothing to do with the ongoing acquisition,” he said.

FPD reported this month Ball’s $6.6bn (£4.3bn) proposed deal for Rexam​ will be investigated by the European Commission after the agency said it had concerns it may reduce competition in the beverage can and aluminium bottle manufacturing industry.

The Commission has until November 25, to investigate the proposed acquisition and determine whether these initial concerns in the European Economic Area (EEA) are founded.

Rexam and Ball are the first and second largest beverage can manufacturers in the EEA. Ball is the largest supplier worldwide while Rexam is the second.

Customers include large and small manufacturers of beer, carbonated soft drinks, energy drinks, juices and water as well as bottlers working under contract with drinks manufacturers.

The Commission said the remaining competitors would not pose a sufficient competitive constraint.

The investigation suggests the ability to compete effectively requires a certain minimum size and a widespread network of production facilities.

European Commission Phase II review

“Moreover, the industry is characterised by high entry barriers because of the need to ensure sufficiently large customer orders and the significant investment required to build a plant,”​ said the European Commission.

“This makes entry and expansion difficult in a relatively short period of time. The combination of the two largest players is therefore likely to result in price increases for customers and ultimately for consumers.”​

Ball Corporation confirmed the European Commission has initiated a Phase II review in connection with the offer to acquire Rexam. 

It said this is a standard step when the European Commission is conducting an in-depth review under merger regulation.

The transaction is still being reviewed by other antitrust agencies, including the US FTC and Brazilian CADE. 

Ball expects all necessary regulatory clearances will be during the first half of 2016. 

Ball Corporation said it was going to acquire Rexam for $6.6bn (£4.3bn) in February this year.

The combined company will have pro forma 2014 revenue of $15bn and 22,500 employees across five continents.

Only Ball is in China, US Northeast, Florida, Benelux, Poland and Serbia. Only Rexam is in India, US Pacific Northwest, Russia and Scandinavia.

Germany and the UK are the only two nations in Europe where Ball and Rexam operate plants.