Market environment offering opportunities and challenges

Increasing momentum in the glass industry

The glass industry traditionally evolves at a rather leisurely pace, as investment cycles are long and the value chain is characterised by tried-and-tested processes and partnerships with customers and suppliers spanning several years. For a few years now, however, its momentum has been increasing, particularly as a result of digitalisation and growing expectations on the part of various stakeholder groups. Then the global pandemic came along in 2020, intensifying some of the existing trends and having a serious impact on sales markets. This demonstrated that Vetropack is in a very stable position and able to respond quickly, even to unexpected developments. To ensure that the company can continue to meet customers’ needs as effectively as possible going forward, Vetropack constantly monitors the market environment to identify opportunities and challenges early on and find ways to deal with them proactively.

Change in demand due to the pandemic

In recent years, the market environment for the glass packaging industry has been extremely favourable and has had a beneficial impact on Vetropack’s successful business development, meaning that the company started the reporting year with optimism. The positive trend also continued unabated in the first quarter of 2020. After the COVID-19 pandemic broke out in Europe, however, the entire glass packaging industry saw a sharp drop in demand, primarily caused by the closure of gastronomy venues (hotels, restaurants, bars and cafés). As “on-premises consumption” comprises up to 30% of overall demand in normal fiscal years, this fall was a particularly heavy blow, and was coupled with the restrictions on tourism, which also had a negative impact on unit sales.

At the same time, consumption shifted to people’s homes, triggering increased demand for example from supermarkets, especially for food. Vetropack was able to benefit from this shift thanks to its highly flexible production and the breadth of its product range, however, the decline in catering could not be fully offset. In spite of the challenging overall economic situation, Vetropack Group has proved itself to be in a very resilient position and well equipped to weather crises with its eight production sites, dedicated workforce and long-standing partnerships with customers and suppliers.

Flexibility and individual design still in demand

For several years now, Vetropack has been observing a move towards flexibility and customisation amongst its customers, which is linked to the fact that customers increasingly want to use their individually designed packaging to stand out. They also require plenty of flexibility in production as batch sizes are often small. The COVID-19 pandemic further intensified the trend towards flexibility because value chains and flows of goods (raw materials and finished products) had to be adapted or reorganised at short notice. This gave Vetropack the opportunity to critically examine well-established processes and practices and revise them where it made sense.

To further boost the flexibility of production, Vetropack invested in renovating and expanding a furnace, along with all the necessary equipment, in the Croatian town of Straža, despite stringent cost control measures. The new furnace is due to be put into operation in early 2021 and will allow Vetropack to serve the local market even more effectively in future. The construction of the new production plant in the Northern-Italian municipality of Boffalora sopra Ticino also went ahead at full speed.

Innovation and digitalisation as driving forces of change

As well as expanding production capacity, technical measures also help to boost the flexibility and efficiency of production. That is why Vetropack developed a digitalisation roadmap back in 2019 as part of its strategy and has since implemented a wide range of projects to optimise the efficiency of production processes and operational workflows. In the year under review, Vetropack migrated its production planning tool to the latest SAP system, further increasing speed and adjustment options in production planning. The move to Group-wide, fully digitalised production planning will be tackled in 2021.

Vetropack wants to make greater use of the opportunities offered by innovation and digitalisation throughout the company and has therefore defined this area in the course of its strategy development as one of five strategic directions that will shape how the company evolves in the next ten years.

Regulatory pressure to achieve a circular economy

Although the glass packaging collection rate in the EU already totals over 75%, the EU has decided to up recycling quotas again as part of the revision of the Packaging Waste Directive. As a result, 70% of glass packaging must be recycled in each country by 2025, rising to at least 75% by 2030. These targets no longer apply to collection rates alone. Instead, they refer to the actual recycling of glass packaging waste.

Container glass collection for recycling in Europe (as of November 2019); Source: Fédération Européenne du Verre d'Emballage (Feve), 2020.

There are also voluntary industry initiatives such as “Close the Glass Loop”. This initiative is aiming to achieve an EU-wide collection rate of 90% by 2030. It is supported by various industry associations such as the Fédération Européenne du Verre d'Emballage (Feve), of which Vetropack is also a member. The developments in the EU and Vetropack’s plans to increase the proportion of used glass in production therefore go hand in hand. Only a larger supply of high-quality used glass will make it possible to use a higher proportion of it in production, thus improving sustainability.

With this in mind, and in the context of Strategy 2030, Vetropack has set itself the target of achieving a proportion of used glass in production of at least 70% Group-wide by 2030. This number stood at 53% at the end of 2020.

In view of the ever-growing trend towards multi-trip glass, Vetropack is also working on new methods of increasing the traceability of glass containers. For example, at its new innovation centre in Austria, Vetropack began implementing a procedure for placing QR codes on each individual glass container. In future, these could be crucial to organising reverse logistics or tracing how often a bottle has been in circulation.