Rev. April 17, 1987
Crown Cork and Seal Company, Inc.
In 1977, Crown Cork and Seal Company was the fourth largest producer of metal cans and crowns1 in the United States. Under John Connelly, chairman and CEO, Crown had raised itself up from near bankruptcy in 1957. After 20 years of consistent growth, the company had emerged as a major force in both the domestic and international metal container markets (see Exhibit 1). During those 20 years, Crown Cork and Seal had concentrated its manufacturing efforts on tin-plated cans for holding beer, soft drinks, and aerosol products. By 1977, however, the ozone controversy and the trend toward legislative regulation of nonreturnable containers was threatening Crown’s domestic business. Was it time for a change in Crown’s formula for success or merely time for a reaffirmation of Connelly’s basic strategic choices? To explore these questions, this case looks at the metal container industry, Crown’s strategy and position within that industry, and the nature of the problems facing the company during mid1977.
The Metal Container Industry in 1977
The metal container industry included 100 firms and a vast number of product lines. This section describes the product segments in which Crown competed, examines the industry’s competitive structure, and looks at three industrywide trends: (1) increasing self-manufacture, (2) new material introductions, and (3) the effect of the “packaging revolution” on the competitive atmosphere.
Metal containers made up almost a third of all packaging products used in the U.S. in 1976. Metal containers included traditional steel and aluminum cans, foil containers, and metal drums and
1 Crowns are flanged bottle caps, originally made with an insert of natural cork— hence the name Crown Cork
and Seal. Karen D. Gordon and John P. Reed, research assistants, prepared this case under the direction of then Assistant Professor Richard Hamermesh as a basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. Copyright © 1977 by the President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685 or write Harvard Business School Publishing, Boston, MA 02163. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Harvard Business School.
Crown Cork and Seal Company, Inc.
pails of all shapes and sizes. Of these, metal cans were the largest segment, reaching a value of $7.1 billion in 1976. Cans were being used in more than three-fourths of all metal-container shipments. Cans were composed of two basic raw materials: aluminum and tin-plated steel. Originally, they were formed by rolling a sheet of metal, soldering it, cutting it to the right size, and attaching two ends, thereby forming a three-piece, seamed can. In the late 1960s, a new process introduced by the aluminum industry made possible a two-piece can. The new can was formed by pushing a flat blank of metal into a deep cup, which eliminated the need for a separate bottom. The product makers adopted the term “drawn and ironed” from the molding procedure. The aluminum companies that developed the process, Alcoa and Reynolds, had done so with the intention of turning the process over to can manufacturers and subsequently increasing raw material sales. However, when the manufacturers were reluctant to incur the large costs involved in line changeovers, the two aluminum companies began building their own two-piece lines and competing directly in the end market. The new can had advantages in weight, labor, and materials costs and was recommended by the Food and Drug Administration, which was worried about lead from soldered...