| Andrew Marshall
The containers and packaging is a sector characterised by a few large players and a number of smaller niche companies. The sector is highly competitive, with price being the largest determinant of revenue volume growth amongst the bigger players. Therefore profitability is driven through efficiencies and economies of scale. Demand for products is driven indirectly through growth in non-durable product demand by consumers especially within the food packaging and drink packaging businesses. The two biggest costs that the industry faces is raw materials; including the oil price, steel, tinplate, aluminium as well as paper and pulp prices; and unit labour costs. Labour costs and disruptions have been a big concern in recent months due to strike action by employees resulting in lost capacity and reductions in volumes produced. Labour costs and the escalation of which has posed the biggest concern to mining and manufacturing industries, resulting in the awarding of above-inflation wage increases, which, for a highly competitive industry such as this one will result in margin erosion due to the inability to pass higher costs onto customers. The ability of businesses to interact effectively with their respective unions as well as improve working conditions for workers is becoming increasingly important and management’s ability to improve labour relations is imperative to margin growth or the prevention of margin erosion. The strong players in this market improve profitability through greater scale and efficiencies or for the smaller players through production of specialised niche products that offer larger margins but lower volumes. This review will concentrate on the larger listed market players that are more comparable to Nampak’s operations as opposed to the smaller niche operators with whom Nampak rarely competes with. Competitor Overview
Astrapak specialises in the production and supply of plastic packaging materials. It operates nationally through two divisions; Flexibles and Rigids. These businesses supply specialised plastic packaging to the food, beverage, confectionary, fruit, petrochemical, industrial and general merchandise markets. The operations are focused on specific areas from high volume, low cost producers to high tech specialised companies. Products produced:
* In-mould, wrap-around and canning labels.
* Multilayer barrier films for meat, cheese and related products. * Refuse bags, shrink films, shrouds and heavy duty industrial bags. * Modified Atmosphere Packaging (MAP) for perishable products and frozen food. * Shade cloth for consumer, industrial and agricultural markets. * Stand-up pouches for confectionary, baking powder, pet food, pool chemicals, fabric softeners and wine. * Pallet-stabilising cling-wrap.
* PET containers for soft drinks, mineral water bottles and general cosmetics bottles. * Niche producer of jars and tubes for the personal care industry. * Plastic container closures. (e.g.: Aromat)
* Tubs, containers and lids for the dairy industry.
* Plastic containers for the healthcare, home and personal care, beverage and industrial markets. * Thermoformed tubs and trays primarily for the dairy and food-related markets. * Rigid plastic components.
* Environmentally friendly PET packaging.
Mpact is a leading Southern African producer of paper and plastic packaging. In 2011, approximately 90% of total revenue was derived from products of which Mpact is the largest producer in Southern Africa. The group operates within two businesses; Paper Business and Plastics Business. The group has 29 operating sites, 22 of which are manufacturing operations based in South Africa, Namibia, Mozambique and Zimbabwe. Paper Business:
The paper business consists of three divisions:
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