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Article by Food & Beverage Reporter - Iza Grek 29 August 2014

Nampak CEO set to ramp up African assets

André de Ruyter, newly appointed CEO of Nampak, has outlined further growth opportunities in Africa. This follows the great stride made earlier this year with the purchase of the Alucan aluminium canning facility in Agbara, Lagos Nigeria. “That investment of R3bn is a vote of confidence in Africa. “Once the second line is installed this facility will have the capacity to produce 2.2 billion cans per annum,” De Ruyter says.

Nampak added a second line at its Angolata plant, the sole Angolan manufacturer of beverage cans which has the Castle group as one of its key customers. Nampak has also commissioned a plastics closures line at Nampak Nigeria, in the Ikeja industrial area in Lagos state early in 2014.

Nampak’s investment in any operation is however always much broader than the plant itself. “We also get involved in infrastructure, for example in Angola we go to great lengths to ensure the power generation is reliable and we manage the supply and treatment of water. Setting up an operation in Africa is not plug-and-play - “you have to allow for additional costs.” De Ruyter says.” “Our customers understand that the availability and reliability of local suppliers is very important. For example, fuel is supplied locally. This short-circuits exposure to lengthy supply chains.
 
Challenges

“In spite of challenges we have enjoyed much success and are looking at further growth in Africa to inspire confidence in other multinationals and in our customers so that they can expect first world quality in third world countries. SAB Miller, Unilever, BAT and Heineken are some of our customers and they have also shown an interest in accelerating delivery of product into Africa.” 

There is a big opportunity in Africa for consumers to enjoy products sold in the South African market, he says. “We wish to expand our footprint in Ethiopia with its 90 million consumers as we believe it presents opportunities for high economic growth rates. 

“The packaging spectrum differs throughout Africa and there is a clear demand for smaller unit sizes on the continent to facilitate affordable product pricing. Sachets, for example, are well-established in India and China and we are seeing a similar trend in Africa.”

It is part of Nampak’s strategic plan to nurture and grow its existing footprint in Botswana, Mozambique, Swaziland, Tanzania, Zambia and Zimbabwe.

“In South Africa, volume growth in Nampak in the recent past has been subdued due to low GDP growth rates which is not meeting the expectations of our shareholders. However, the SA operation is still an important source of revenue and we must seek to enhance profitability and remain competitive.”

Aluminium conversion

Nampak Bevcan’s local operation in Springs is leading the conversion from steel to lightweight aluminium for beverage cans. Its first manufacturing line was converted to aluminium in April and it now has the capacity to manufacture 2,500 cans a minute. Three lines at this plant will be running aluminium by August this year. 

In Rosslyn, Pretoria three beverage can lines running steel will be consolidated into one aluminium line; the factory at Epping will also have its packaging lines converted from steel to aluminium in the near future. 
“The cost of running aluminium lines is far less and it is expected to improve our recycling rate. All Bevcan steel will be converted to aluminium – about 50% of our processing machines have already been converted from steel to aluminium and the process will be completed by July 2015. 

“Regarding glass, we have just installed a third furnace at Roodekop, Germiston at a running cost of R1.2bn. This means we have three major glass processing lines. With only two running we were not able to run different colour batches. This has added much-needed capacity to the production facility as it was struggling to keep up with demand. 

“These investments and upgrades demonstrate clearly our intention to expand our operation in SA and especially to play a role in the growth of the manufacturing sector,” De Ruyter says.

Nevertheless there are challenges for the packaging industry as a whole and more so to maintain the position of market leader. One of these challenges is the rising costs of raw materials – specifically polymers, aluminium, tin plate – all of which are based on global pricing. 

“With currency fluctuations, our risk exposure increases as the rand weakens,” De Ruyter says. He cites labour costs and productivity as other challenges, but he says Nampak is blessed with a loyal labour force and wage demands are negotiated amicably.

Innovation

On innovation, De Ruyter says the SA packaging industry does not have the economies of scale that the US has.” Because of this, it has a healthy tradition of innovation – “in the US, much of its packaging has been standardised to some extent, and therefore innovation is a secondary consideration.” 

However, innovation has to be balanced by how it impacts the environment and must address the question of affordability, he says. 
“At Nampak we have R&D facilities comprising 60% science and technical innovation, with the balance focusing on new technology and quality control. This is a differentiating feature of Nampak’s offering – we strive to create a differentiating decision point. We ask: how can we make the consumer offering more attractive?” 

De Ruyter points out that innovation is not always visible: the conversion of steel to aluminium is an example. “The consumer may be unaware of the change but the environmental impact is huge and therefore positive at all levels of society.” 

To make this more visible to the consumer, Nampak developed the CAN DO! campaign. “It portrays cans as ‘cool’, which stimulates consumer demand for the particular packaging medium. It was unusual in that it was a manufacturer-driven campaign, forming a relationship between the manufacturer and the consumer.” 

Easy-opening fruit cans are among the less obvious innovations and at the other end of the spectrum is the highly recognised Castle Lite thermochromic snow temperature indicator.

Food safety

Food safety is taken very seriously in SA and Nampak prides itself on excellent standards, he says. “For example in fish canning, micro-organisms can cause spoilage or food poisoning such as botulism. Nampak R&D helps to ensure the safety of canned fish by employing food scientists and thermal processing specialists on site to avoid any incidents, which could be costly and even fatal. We ensure the highest standards of processing are adhered to as even external corrosion could cause a pin-hole in the can which could result in the contents becoming contaminated at huge costs to the manufacturer. Nampak is a company where global best practice is the standard and we leverage off that to ensure that all levels of the organisation adhere.” 

De Ruyter hails from the oil industry where his focus was chemicals and mining, quite a long way from packaging (although Arcelor Mittal is the main metals supplier to Nampak, [Status]). 

De Ruyter explains his attraction to Nampak: “I am interested in the entire value chain and was attracted to the opportunity to lead the largest packaging company in SA. “Nampak is an iconic brand and represents values I can relate to. I believe you must be able to associate with a company’s values in order to lead it. Nampak is a responsible company - its recycling percentages are impressive. More than 70% of beverage cans are recycled and more than 80% of glass feedstock is recycled.
Nampak’s mantra is to ‘buy better, make better, sell better’. I plan to follow through on that and make it all possible.” Back to top ^