Morningstar | Crown's Growing Presence in Southeast Asia Will Keep Margins Steady Over the Coming Years
Crown is the world's second-largest producer of aluminum beverage cans and is a large producer of steel food cans. Used primarily for carbonated soft drinks and beer, beverage cans are a slow-growth industry, but one with favorable competitive dynamics for incumbents. The merger of the industry's former number-one and -two players, Rexam and Ball, has not materially altered the industry's competitive landscape.Beverage sales make up roughly half of Crown’s revenue and operating income. Of consolidated sales, they’re split 30% in North and South America, 10% in Europe, and an estimated 10% from Asia-Pacific beverages. We expect Crown’s exposure to emerging markets will lead to higher top-line growth in the long run, as discretionary income growth leads to higher consumption of beer and soft drinks. Crown maintains a leading market share in Vietnam, Cambodia, and Singapore, and has strong competitive positions in Thailand, Indonesia, Mexico, and Brazil. We see negative consumption trends for soft drinks and mainstream beer in developed markets being offset in the coming years by a mix shift from bottles to cans among craft beer brewers.Transit packaging, established through the purchase of Signode in 2018, makes up roughly 25% of the business. This segment produces a wide variety of both packaging systems, tools, and components as well as the consumable products used by them. As shipping volumes tick higher, with an emphasis on deepening capital and reducing labor costs, we expect mid-single-digit growth for the segment.Crown also produces food and aerosol containers. The majority of Crown’s food and aerosol operations are located in Western and Central Europe, expanded through the acquisition of Mivisa’s high-margin assets on the Iberian Peninsula. We see almost no growth prospects in canned food or aerosols in these markets, as developed-market consumers are unlikely to increase their consumption of canned products. That said, with some of the most profitable assets in the industry, we expect Crown’s food business to create plenty of cash flow to allocate to more attractive opportunities over time.Crown Holdings is engaged in the design, manufacture and sale of packaging products and equipment for consumer goods and industrial products. The company's packaging for consumer goods include steel and aluminum cans for food, beverage, household and other consumer products, glass bottles for beverage products, metal vacuum closures and steel crowns. The company's packaging for industrial products includes steel and plastic strap consumables and equipment, paper-based protective packaging, and plastic film consumables and equipment. The company's products include the SuperEnd? and 360 End? beverage can ends, its Easylift? aperture steel food can ends, and PeelSeam? and PeelFit? aluminum foil laminated ends.
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