Mexican Vitro S.A.“s American subsidiary Anchor Glass Container Corp. has signed a contract to supply the 11 beverage plants of Stroh Brewing Co. with glass bottles. It is hoped that the 15-year agre…
Mexican Vitro S.A.“s American subsidiary Anchor Glass Container Corp. has signed a contract to supply the 11 beverage plants of Stroh Brewing Co. with glass bottles. It is hoped that the 15-year agreement will help boost the flagging fortunes of the two struggling companies. Anchor Glass is the 3rd-largest US glass manufacturer and Stroh is the 3rd-largest US brewer, but each is having difficulty in maintaining their market share. Stroh had 12% of the beer market in 1985, but only 6% in 1995, while Anchor has posted losses for the last 3 years. In fact, seven months after announcing plans to pump US$ 126 million into the US container company over the next two years, Vitro has begun negotiations to sell Anchor to the French group Saint-Gobain (see page 31). International and domestic growth by Vitro has brought with it considerable problems, compounded by the strong position of competitors like Owens-Illinois Inc. and Ball-Foster Glass. Apart from a US$ 200 million investment in Banca Serfin, Mexico“s third largest bank, which suffered serious losses during the country“s recent financial crisis, Vitro is also having to cope with the poor performance of Anchor Glass Container Corp., which was purchased for US$ 900 million in 1989. As reported in Glass Machinery Plants & Accessories No. 4-96, Vitro“s 1995 sales were 1.2% lower than the previous year, and in the first quarter of this year, operating income totalled US$ 59 million, 51% lower than the same period in 1995. The difficulties at Anchor have been caused by a failure to foresee a decline in the US container market (a 6% reduction last year) as soft-drink firms began using plastic bottles instead of glass. Owens-Illinois and Ball-Foster have launched a price war in which Anchor is the weakest force. Over the past 18 months, the US operation has, in fact, closed four of its plants and, in the first quarter of this year, saw sales fall 19% and contribute to losses of US$ 79 million. Earlier this year (see issue no. 3-96) Anchor was merged into Vitro“s Mexican glass-container business and staff at the Monterrey headquarters was cut by 32%. According to Vitro, this move should save about US$ 45 million a year. Vitro“s director of strategic planning, Carlos Duno, says that the company is now concentrating on boosting margins in Vitro“s strongest activities, chiefly glass making. The company is still the leading force in Mexico, with a 90% share of the country“s flat glass market, and should benefit further as the auto and construction industries pull out of the recession. Exports rose 17.5% last year to US$ 524 million. With the problems facing its US investment, Vitro is, however, starting to give greater consideration to other parts of Latin America, where demand for glass containers is rising steadily. Investments have already been made in Bolivia and Colombia this year, although Vitro is still well behind Owens-Illinois, who has been investing in Latin America for over 20 years. For the moment, Vitro does not have the resources to invest in large plastic-bottle operations, a key sector for its future. And so, to overcome present difficulties, the company“s chief executive, Federico Sada Gonzlez, aims to continue cutting costs, disposing of bad assets (selling businesses which do not achieve returns of 14%), and reducing debt. Vitro has predicted that its 1997 consolidated sales will be about US$ 2 billion. “Anchor Glass represents about a third of the sales of Vitro,” The Mexican company“s corporate finance director Hugo Jaime Garcia said, speaking after the announcement that the Anchor Glass subsidiary will be sold. “We are talking about a company one-third smaller, so our sales could be around US$ 2 billion.”