Ardagh Group to close glass facility in response to US mass beer market decline

By Jenny Eagle

- Last updated on GMT

Related tags North america United states

Ardagh to focus on wine, spirits & food. Picture: Ardagh Group.
Ardagh to focus on wine, spirits & food. Picture: Ardagh Group.
Ardagh Group will close a glass container production facility in Milford, Massachusetts, in March in response to a decline in the US mass beer market.

The closure will effect approximately 250 employees and customer orders will be transferred to Ardagh’s other Glass North America facilities.

Wine, spirits & food

The announcement forms part of the Glass North America review announced in October 2017.

Speaking about the closure Paul Coulson said, in the company’s Q3 Earnings Call on October 27, that since it acquired Verallia North America in 2014, it has significantly offset persistent weakness in the US mass beer sector by migrating its business towards higher-growth end markets.

“However, the decline in mass beer shows no sign of abating, and as you know, Johan Gorter took over as CEO of our global glass division in September, and Johan, together with the new CEO of our glass business in North America, Bertrand Paulet, have instigated a comprehensive review of our capacity, transportation, logistics and supply chain to ensure that the business once again performs in line with our expectations for it and that it successfully meets the challenges posed by changed conditions in the US glass market.”

Despite a reduction in capacity for the mass beer market (all beer excluding craft), the Group said it will continue to pursue growth opportunities in stronger performing end markets, including wine, spirits and food.

In a statement it said: ‘This will entail the conversion of some mass beer capacity to serve these alternative end markets.

‘In addition, targeted investments in Ardagh’s Glass North America network, including state of the art inspection equipment, will enhance Ardagh’s competitive position and enable differentiation through a focus on innovation, quality and service.’

Full year 2017 results

The Group will update the conclusions of its Glass North America review at the time of its full year 2017 results on February 22, 2018.

“Our issues are really that we have too much capacity for beer and too little capacity for wine and food, and that’s why we’re carrying out this review to see how we best recalibrate our production capacity,” ​added Coulson.

Ardagh acquired the Milford glass plant, which began operations in 1973 and has been producing beer bottles since 1987, as part of its $1.7 bn (€1.4bn) purchase of Verallia North America in April 2014 from French group Saint Gobain.

Aside from a depressed US beer market, the firm also blamed a weakness in the dollar against the euro, when it scaled back its 2017 earnings forecast in October for the second time in three months. 

It expects to post earnings before interest, tax, depreciation and amortisation (ebitda) of €1.34bn, having originally predicted at the time of its flotation on the New York Stock Exchange last March that it would turn in €1.4bn. 

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