Ball Corporation, the world’s leading manufacturer of aluminum beverage cans, is “keeping a close eye” on domestic beer and energy drinks as it plots its next few years, executives said during an investor day Tuesday.
“I’m keeping a close eye on domestic beer, and how that’s tethered to the end consumer and the energy category because we’ve benefited greatly,” chairman and CEO Dan Fisher said. “We’ve got an outsize position there. It’s great that it’s only flat to slightly up.”
The company aims to increase its market capitalization to $30 billion by 2030, up $9 billion from its existing $21 billion market cap. Ball plans to get there through +2% to +3% organic volume growth, operating earnings growth with “2X operating leverage,” and driving capital allocation with a 1:1 net earnings to free cash flow ratio, EVP and chief financial officer Howard Yu said.
Half of Ball’s net sales come from its North and Central Americas business unit, where it has 40% penetration in the can market for beer, carbonated soft drinks and energy drinks, according to the investor day presentation.
The last few years have been tumultuous for Ball. When the COVID-19 pandemic shut down the on-premise in 2020, consumers shifted their beverage purchasing to the off-premise, which put a strain on the can supply chain. Ball pivoted and added several new facilities.
The company threw a wrench into craft brewers’ plans in late 2021 when it announced it would raise the minimum order quantity (MOQ) for printed cans to more than 1 million per SKU, which it later walked back. Then, the conservative-led boycott of Bud Light that began in April 2023 caused a “share shift” of 2 billion units away from Ball to other producers, the company said during its Q1 2024 earnings call.
Additionally, the energy drink segment “for the first time in 10 years, 15 years in North America, is flat,” Fisher said.
“That’s a component that’s grown at 8-10% in perpetuity,” he continued. “Now there’s been a share shift. There’s Celsius that’s come online, Alani Nu. But Rockstar almost doesn’t exist anymore.”
In addition to those moves, the company also navigated widespread employee turnover in the last few years, which slowed efficiency as new workers were trained.
“COVID was strange for everyone, but there was a multifaceted issue that showed up for us,” Fisher said. “We had this staggering amount of retirees at the same time we were standing up new facilities, and then we had a 2X turnover rate at the same time. Ball historically has operated in the 4% or 5% or 6% turnover rate, and that was ratcheted up to 10.”
During the pandemic, other can providers entered the market to serve beverage producers, but Ball only sees one manufacturer in Poland as “a viable competitor,” Fisher said, adding that the majority of new entrants in North America likely don’t have sticking power.
“The others are not having any fun whatsoever, and they’re not making any cans,” he said. “And so, I would say they’re probably not long for the program.”
SVP and chief growth officer Carey Causey discussed the importance of product mix as Ball works to meet the needs of producers who toggle between premiumization, what Ball calls “super speciality,” and standard offerings, or in Ball parlance, “standard speciality.”
“We need to make sure that we’re allocating the resources needed to that super specialty, even though it’s a smaller part of our business,” she said. “It’s a much higher margin part of our business, so we need to give it air to breathe, and that will continue to help solve our customers’ problems with the specialty in our beverage business.”
Ball’s North and Central America beverage packaging division reported earnings of $192 million on sales of $1.4 billion in Q1. Compared to the same quarter last year, the division’s earnings increased +4.9%, from $183 million, but sales declined -6.6%, from $1.5 billion, which Ball attributed to “lower shipments and the contractual pass through of lower aluminum costs favorably offset by the annual pass-through of inflationary costs.”
The company will report its Q2 earnings on August 1.