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What is Saint-Gobain Containers' business philosophy?We’re the second-largest glass container manufacturer in North America. We’re about a $1.4 billion business, we’ve got 18 plant locations and a number of distribution centers and warehouses, and we supply product to all the appropriate glass customers—markets, if you will—including beer, wine, foods, dressings, portables, etc. Our intent is clearly to become the glass container supplier that’s preferred by the industry.
How has taking on the Saint-Gobain name affected the company’s business?It’s been tremendous. This business, as we know it today, is really a product of two businesses. Back in 1995, two very proud and historically sound businesses—Ball Glass Container Corporation and Foster-Forbes Corporation—were purchased by Saint-Gobain, and the new name became Ball-Foster. We’ve utilized that name because the customer base and our supplier base clearly could relate to both Ball and Foster. But this last September, we changed our corporate name to Saint-Gobain Containers, Inc.
Our parent company, located in Paris, has basically spread the Saint-Gobain name in North America. At this point, there are well over 200 plant operations and a host of businesses in North America that represent about 25% of the revenues of the Saint-Gobain parent, which are approaching $30 billion. So in North America, we’re a sizable entity made up of a host of different company names. Now our attempt is to establish the Saint-Gobain name in all of these businesses, and we in Containers were one of the first to embrace this change last year.
Within the glass industry, Saint-Gobain is obviously well known and has been a part of the industry for nearly 360 years. Our embracing the Saint-Gobain name clearly has telegraphed to our customer base the financial size of our parent company and the long-term stability of that company. And it’s been received very, very well by our customers. They like dealing with a company of this size, along with our history, our commitment to innovation and our financial stability.
What are some of the biggest challenges that SGCI currently faces as a glass container manufacturer, and what steps has the company taken to overcome those challenges?A little over a year ago, there was a dramatic increase in our natural gas costs. Then, of course, that cascaded into increased electrical costs, etc. And we’ve truly suffered as a business because out of our 18 locations, well over 40 of our glass tanks (with the exception of one) are fossil fuel fired. As a result, our costs have been very, very high. That’s been a real challenge in terms of attempting to conserve our use of energy and attempting to recover some of our costs through our customers with surcharges and/or price increases, where applicable. [It’s been] a real challenge for the organization, particularly the sales organization, over the last year. I have to say that we’ve been very thankful and pleased that the overall majority of our customers have, in fact, embraced this need in recognizing the strategic importance of glass in their future. And for us to stay financially healthy, of course, is very important.
In terms of energy conservation, we’ve been looking at how we fire our glass tanks and how we can change the electrical consumption of our lines and fans—cooling fans, cooling wind, etc.—in our plants. When we don’t need the cooling wind or the air, for example, we take those fans off and obviously reduce our energy consumption. It’s a bit difficult with regard to natural gas firing, but we have also looked at changing batch mixtures to go to a lower melt composition, thus reducing the energy required.
Do you anticipate continued growth in the markets served by SGCI? If yes, what will drive that growth?Well, the answer is yes and no. We serve a host of different markets, and we’re definitely seeing growth in the beer and wine industries. We’re the largest supplier of glass containers to Anheuser Busch, as an example. We see that they continue to realize year over year growth, and we’re very much a part of that growth. Likewise, we serve the wine industry, primarily on the West Coast. Each and every year we see growth in the premium wine segment, and we’re obviously a part of that. However, some of the dressings and other food products continue to consider plastic containers as the consumer-preferred package. As a result, over time, we’ve seen a lot of our glass containers converted to plastic. It has, in fact, necessitated our having to take out capacity—not only in terms of lines, but also in terms of closing plants over the last several years.
Our position at this point is that we want to attempt to keep our plants at capacity, producing product that can make a financial contribution to our business. We’ve been very successful this last year in doing that, and I anticipate we’ll continue to do that going forward, at least in the short term. We’ve added capacity on the West Coast to support our good customers in the wine segment that have come to Saint-Gobain as a sole-source supplier, and it’s really helped our business tremendously.