Vitro: packaging business under pressure from former clients

Vitro“s packaging business faces ever greater competition from its former customers such as brewers Modelo and FEMSA, which have expanded into bottle manufacturing.
Modelo, for example, is building …

Vitro“s packaging business faces ever greater competition from its former customers such as brewers Modelo and FEMSA, which have expanded into bottle manufacturing. Modelo, for example, is building a complex in Piedras Negras, Coahuila, which includes a glassworks, while FEMSA is investing USD 117 million in a plant at Meoqui, Chihuahua, which also includes a packaging unit. This glass bottle factory will have a total capacity of up to 400 million bottles per year, higher than the capacity of Vidriera Monterrey, the largest Vitro packaging plant. When the plant comes on stream, expected by 2010, FEMSA will double its packaging output. The Modelo plant in Coahuila state is also expected to start up in two years, and investment in the first phase will be USD 250 million. It will have two furnaces to process approximately 400 tons of glass and produce about 3.2 million items of packaging a day. “They continue with their business model but it doesn“t affect us,” David Gonzalez, director of business Vitro Packaging said in an interview. According to reports, Vitro, still ranks first in the domestic market, with 41.3% of glass containers. However, excluding companies that manufacture their containers for their own consumption, such as FEMSA and Model, and Vitro“s share rises to 74.4 percent. Thanks to other sectors, where it is the leader in packaging, such as food, wines and spirits, soft drinks and cosmetics and pharmaceuticals, Vitro“s business has been growing for the last four years and now exceeds USD 1 billion a year. Glass packaging suffered a loss of market share with the arrival of plastic in the first half of the 90s, particularly in soft drinks, although since year 2000 it has been recovering, Mr. Gonzalez noted. “Plastic came and took what it had to take, but the glass container is now growing again”. “Over the past five years the average growth rate of container glass has exceeded 6%,” the manager said. He added that Vitro Envases has invested about USD 320 million over the past 2 years, which has increased its production capacity by 17%. In addition, it has moved its “Mexico” glass plant to Toluca.