Rexam CEO discusses life in the Indian ‘playground’
Reporting its H1 2013 results today, Rexam said its sales rose 1% in the half year to £1.971bn, but underlying operating profit fell 2% to £217m with the firm citing “challenging trading”.
Poor weather in Europe and an economic slowdown in Brazil failed to offset business won back in North America, but Rexam said there had been strong interest in its Healthcare Business, which represents 10% of group sales and was put up for sale last month.
With proceeds from this sale possibly earmarked for “organic investment in new and existing geographies,” Lars Kjellberg, Credit Suisse analyst, asked CEO Graham Chipchase where Rexam might target, in terms of growth areas?
“Southeast Asia is a growing market, but seems to be the playground for Ball Packaging and Crown – they’ve been there for some time,” he said.
Nods to rivals Ball Packaging and Crown
“India on the other hand, that’s your playground. Is that where you can seriously start to expand, given that growth you’ve talked about?”
Chipchase replied: "Over the years global can makers have taken positions in different BRIC economies in particular, and other emerging markets more generally.
“We can’t all be in the same place at the same time. I think we’ve done very well by being in Brazil and Russia when we did, Ball and Crown are beginning to see the benefits of beinf in China, having had quite a tough time for a quite a long time there.
“And I think that Crown have done of good job of being in the Middle East.
“In Southeast Asia, you are right – Ball and Crown, and particularly Crown have done very well in terms of places like Vietnam, Thailand and Cambodia," he added.
Seizing the Indonesian opportunity?
There were still markets in Southeast Asia where Rexam saw opportunities for another large player, Chipchase said, adding that the firm would try to take advantage.
“A few countries – one thinks of Indonesia, Myanmar, some of the countries around India. Not that anything’s happening there immediately, but there are places still to investigate there. And I do think we should be there now…we shouldn’t just leave it to Ball and Crown,” he said.
Turning to India, where Rexam was the first large foreign can maker to enter the market in 2007 (rival Can-Pack has now joined it there), Chipchase said: “Provided we’re not betting lots and lots of money, we should take a stronger position in India, and have already put capacity in ahead of demand.
“Consumers are demanding more and more specialty cans, which is an unusual trait from a market size that’s still under a billion cans. We’re putting these cans into India to try and convert the market.”
People now talked about India as they had of Brazil in the past, Chipchase said, that it would be an emerging market one day.“It could be in five years, it could be in 10. So for me it’s one that is worth taking a longer-term strategic risk on and it will become a huge market one day.”
“Think about can penetration levels. Not that we’ll ever get to US levels of one can per head per day, but when India is less than one can per head per year, there’s a long way to go," he added.
