Alcohol farm

The ball closes beverage can factories as demand for alcohol declines

Diving Brief:

  • Ball Corporation will permanently close two beverage can facilities in the United States amid slowing consumer demand for alcohol, Chairman and CEO Daniel Fisher said on his Call for Q2 results.
  • The plants in Phoenix, Arizona, and St. Paul, Minnesota, are expected to cease production later this year and in the spring of 2023, respectively, Fisher said. The facilities have a combined net capacity of nearly 4 billion units.
  • The announcement comes as Ball works to cut costs by optimizing capacity at large plants, including at a plant in Pittston, Pa., which the company announced in end of 2020. “We control the things we can control,” Fisher said.

Overview of the dive:

In the face of flattening demand, Ball is working to improve the efficiency of its operations. The company aims to improve demand planning by closing two of its old plants and delaying the construction of a new plant in Nevada.

Beverage company orders grew little in volume in the second quarter. Total alcohol orders were down 3%, and despite an 8% increase in energy drinks, overall beverage demand in North America saw a “steady to mild increase through July,” Fisher said. .

“We took a view to optimize the network,” Fisher said on the call. “We strongly believe in the medium to long term, but we have to meet the world where it is now.”

Based on past closures of similarly sized plants by Ball, Fisher said the company expects to save about $30 million in fixed costs for each facility closed.

The decline in production follows a period of record demand for aluminum cans. In 2020, can makers, including ball saw capacity, have “constrained” and ramped up their sourcing and production efforts.

With slower demand and higher cost inflation, Ball reported a net loss of $174 million in Q2. The closures are part of a company-wide cost savings review.

“We go through it, department by department, and figure out the things we really need to spend money on and the things we don’t need to be,” said executive vice president and chief financial officer Scott. Morrison on the call.