North American 2011 Glass Packaging Outlook

A Smaller Footprint and a Greater Appeal to Green- and Health-Conscious Consumers

Leaving a smaller environmental footprint and appealing to the health-conscious consumer were major areas of focus for the North American glass container industry in 2010 and will continue to be in 2011.

In the United States, the glass container industry operates 48 glass-manufacturing plants in 22 states. In terms of market segments, 59 percent of glass containers manufactured domestically are for the beer industry, followed by food (18%), non-alcoholic beverages (8%), wine (6%), liquor (4%), ready to drink (4%), and cosmetics, fragrances and pharmaceuticals (1%).

The North American glass container industry worked diligently in 2010 to create more recycling awareness and improve recycled glass collection for bottle-to-bottle recycling, helping to reduce greenhouse gas emissions and use of raw materials, extend the life of glass manufacturing furnaces, save energy, and meet the industry’s 50 percent recycled content goal by 2013.

Doubling the U.S. glass container recycling rate (28% in 2008) would allow manufacturers to use 50 percent recycled glass or “cullet” to make new glass containers, saving enough energy to power 21,978 homes for one year and removing 181,550 tons of waste from landfills every month or remove the equivalent auto CO2 emissions of 400,000 from our roads each day.

The importance of the industry’s goal of using 50 percent cullet in the manufacture of new glass containers by 2013 was also highlighted by the North American industry’s release of its first and highly comprehensive life cycle assessment (LCA), which was able to enumerate the benefits of the increased use of cullet in reducing the industry’s environmental footprint. The findings of the LCA will help lay the foundation for the industry’s efforts in 2011 and beyond.

Member Overview/Glass Shipment

The glass container industry demonstrated strong increases in shipment and production in the wine segment, helping to offset declining shipments in other categories. Overall, glass container shipments were down slightly 4.8 percent from January - October, 2010 (168,603) vs. January - October, 2009 (177,217), according to GPI data. Production of glass containers decreased 6.1 percent from January - October, 2010 (168,085) vs. January-October, 2009 (179,154).¹

Consumer Trends

Making a Difference through Packaging Choices

Characteristics of wine, alcoholic beverages and certain acidic foods may have an important effect on the package integrity. Glass containers are preferred for bottling wine, spirits and certain food products because they are the only material with a high impermeability to gases and vapors, prove stable over time, are transparent, and are readily recycled. Unlike plastic, cans and multi-layered or bag-in-box cartons, glass does not need any plastic layers or other additives to preserve the taste of wine, beer and foods. A fact not lost on consumers.

In fact:²

• Most Americans (91%) believe glass best preserves the shelf life of alcoholic beverages.
• Consumers think plastic bottles (82%) and aluminum or metal cans (54%) are more likely to leach or seep chemicals than glass bottles or jars (7%).
• A majority of American consumers (69%) believe glass containers are safest to use in a microwave.
• Consumers know glass is best for preserving the shelf life of products (76.1%) compared to plastic (6.2%) or metal (17.7%).

Made from nontoxic raw materials—sand, soda ash, limestone, and up to 70 percent recycled glass or “cullet”—glass is the only packaging material accepted by the U.S. Food & Drug Administration as “generally recognized as safe”. Glass has an almost zero rate of chemical interaction, ensuring that the products inside a glass bottle keep their strength, aroma, and flavor. Glass does not deteriorate, corrode, stain or fade, so products inside a glass container remain as fresh as when they were bottled.

Packaging Trends

Lighter in Weight, More Recycled Content, Innovative Designs

As consumers increasingly demand reduced packaging that is also fully recyclable, the glass container industry is responding. They are expanding their capacity to use less to create the same top-quality, 100 percent pure and recyclable glass bottles and jars. At the same time, the industry is light-weighting many of its container offerings while using more recycled content in those containers. And to remain competitive, the industry is introducing leading edge designs for fresh and innovative packaging options.

In May of 2010, glass container manufacturer Owens-Illinois (O-I) announced the launch of its lightest ever North American wine bottle, which is up to 27 percent lighter than similar wine bottles. Manufactured at O-I’s California facilities, the new bottles weigh in at just 11.6 ounces. O-I also launched a 13-ounce 750 mL claret bottle. The bottles are part of O-I’s global Lean+Green(R) initiative to create strong, durable, yet lighter bottles using advanced manufacturing techniques.

Also in May, Vitro Packaging launched the Vino Lite Collection of reduced weight glass wine bottles to support the wine industry’s demand for light-weight stock wine molds and fill a marketplace need for more sustainable wine bottle offerings. Vitro created a collection of bottles that are 20 percent lighter, on average, than its current stock bottles. The Vino Lite bottles also offer a similar look to current stock bottles, so there is no sacrificing appearance for a greener bottle.

In October, O-I introduced a new patent-pending Vortex(R) bottle, designed to differentiate the product on the shelf. It debuted in North America with MillerCoors’ Miller Lite beer. The innovation is seen as one of the most significant changes to the long-neck bottle since the introduction of the twist-off cap.

Finally, Verallia, the new brand for Saint-Gobain Container’s glass packaging business, won the U.S. Environmental Protection Agency’s (EPA) ENERGY STAR Partner of the Year Award for the second straight year in 2010. Through a wide range of energy-awareness programs, process improvements, and energy management practices in 2009, Verallia businesses in North America were able to reduce their energy intensity by 2.2 percent—equivalent to the amount of energy needed to make nearly 486 million glass bottles or enough fiber glass insulation for more than 100,000 typical U.S. homes. In line with its environmentally conscious efforts, Verallia also announced in 2010 that it has sold more than 200 million beer and wine ECO Series(TM) bottles which are the result of the company’s efforts with eco-conception, a process to maintain high quality and enhance customer appeal all the while lessening the overall impact on the environment (energy demand, transportation impact, and CO2 emissions).

For 2011, North America’s glass container manufacturers plan to continue to meet and exceed the expectations of consumers.

Emerging Market Segments

Appealing to Green- and Health-Conscious Consumers

Consumers increasingly prefer to purchase products from companies that are environmentally responsible and working to reduce their carbon footprint. Companies and industries that can “close the loop”, or put as much as possible back into the production cycle, reducing raw material use, energy, and emissions, are those that will benefit in the long run.

According the 2009 BBMG (a branding firm) Conscious Consumer Report, a national survey of 2,000 adults found 77 percent of Americans agree that they “can make a positive difference by purchasing products from socially or environmentally responsible companies” and the majority of Americans (9 out of 10) consider themselves “conscious consumers.”

In 2010, the North American glass container industry also produced the first complete and thorough cradle-to-cradle life cycle assessment (LCA) ever conducted for the industry. The LCA, coordinated by the Glass Packaging Institute (GPI), reaffirmed the benefits of glass container recycling for the environment. The use of recycled glass (cullet) in manufacturing results in a decrease in primary energy demand and reduces carbon emissions. A “cradle-to-cradle” LCA includes the entire cradle-to-grave life cycle of a product while factoring in the recycling of the used product back to its original purpose.

While other industries claim that the transportation of glass bottles has more of an environmental impact because of the weight of the containers, a key finding of the LCA dismisses this claim. The transportation of raw materials and cullet used in glass production represents less than 4 to 5 percent of the total energy used in the production of container glass.

While each glass container has its own carbon profile, on average, existing recycle rates offset the CO2 burden when shipping foods and beverages across America. The 50 percent content rate, which is a goal for the industry, will only serve to further reduce carbon emissions. Therefore, when examining the entire life cycle of a packaging material, one must also consider the environmental impact of raw material extraction, production, transportation and end use treatment. The conclusion: when looked at it in its entirety, the environmental benefits stemming from the recycling of glass containers more than offset any increased impact generated by slightly heavier containers.

A leading sustainability consulting firm, PE Americas, conducted the study examining each step from raw material extraction to end-use. The closed-looped cradle-to-cradle LCA collected data from 105 furnaces representing 75 percent of North American glass container production.

LCA participating companies in North America included Gallo Glass; Leone Industries; Owens-Illinois, Inc. (O-I); Saint-Gobain Containers, Inc.; and Vitro Packaging, LLC. The study was conducted in parallel with a study for the European Container Glass Federation (FEVE) and its member companies. The methods employed in developing the life cycle impacts are comparable between the two studies, and life cycle assessment and glass experts conducted both studies according to strict ISO 14040/44 guidelines. Both studies also underwent a rigorous critical independent peer review.

Increasing recycling rates and reducing carbon footprint will continue to be a priority for the industry in 2011.

Recycling

A Need for More, and Better, Ways to Recycle

A Newton Marketing Research survey of 750 households conducted July 2009 found that of those households that recycle, 82 percent recycle their glass bottles. The majority (69%) of those surveyed recycle through a curbside collection program. Another 23 percent recycle glass through drop-off collection sites.

From a positive perspective, there is growing interest in recycling glass in the United States. Currently, there are 76 cullet processors in 31 states. A full 28 percent of all glass is recycled. Just over a third (35.6%) of glass being recycled consists of beer and soft drink bottles, followed by wine and liquor bottles (15%) and food containers (15%).

However, while there is more interest in recycling, the fact is many curbside recycling programs rely on less expensive single stream services, where all recyclables are collected together and much of the glass may still end up in landfills instead of being turned into cullet. To expand beyond the curb and reach the glass industry goal of 50 percent recycled content by 2013, glass container manufacturers are looking to new partnerships and initiatives for recovering more high-quality glass.

In an effort to further educate consumers about what is and isn’t recyclable, on October 6, 2010, the Federal Trade Commission released proposed revisions to the “Green Guides,” which provide recommendations to help marketers avoid making misleading environmental claims. Proposed changes are designed to make the guidelines easier to understand and use—and ensure claims are clearer for consumers.

Changes include new guidance on claims of degradability, compostability, recyclability, and recycled-content. For example, “recyclable” would be appropriate only if a “substantial majority” of consumers had access to recycling for that product or package. Also targeted are marketers’ use of product certifications and seals of approval, “renewable energy” claims, “renewable materials” claims, and “carbon offset” claims. The final guides will be released sometime in 2011 and are expected to be positive for the glass container manufacturing industry’s recycling efforts.

On the industry front, the Mexican Center for Philanthropy (CEMEFI) awarded Vitro the distinction of being a Socially Responsible Company 2010 in April. A fundamental part of Vitro’s contribution to sustainable development is its recycling program. They were able to collect 152,133 tons of glass to recycle. This translates into natural gas consumption savings of 164,304 million BTU’s, the reduction of carbon dioxide emissions into the atmosphere and the freeing up of 304,266 cubic metric tons in solid waste disposal sites.

In September, to expand the reach of the Captain Cullet and the Little Gob o’ Glass education program, Verallia launched a new website design and a “virtual” glass recycling program at www.CaptainCullet.com. The primary message is the difference one person can make when they recycle their glass bottles and jars.

In October, Anchor Glass Container partnered with the Tampa Museum of Science and Industry (MOSI) to showcase the value of glass bottle recycling. The “recycling exhibit” kicked off during Recycle Glass Week, an event designed to promote glass recycling across the United States, and featured a display of the raw materials that are used in making glass bottles and jars. MOSI is known for elaborate exhibits that draw science enthusiasts. The glass-recycling exhibit is featured in the “Kids in Charge” area along with other recyclable materials.

In November, Ohio Governor Ted Strickland announced an innovative agreement between Rumpke, Inc. and glass container manufacturer Owens-Illinois, Inc. to strengthen Ohio’s glass recycling market. Facilitated by the Ohio Department of Natural Resources’ (ODNR) Division of Recycling and Litter Prevention, the agreement will enable Rumpke to provide recycled glass feedstock to O-I for making new glass containers.

Reducing the environmental footprint of the industry and promoting recycling will continue to be major priorities for glass container manufacturers in 2011.

Federal Legislation

Climate Change Legislation Takes Center Stage

In 2010, Congress moved more cautiously with respect to energy legislation that impacts the glass container industry. Neither chamber passed cap and trade provisions, as the House did in 2009, which would have required a series of “allowances” to be purchased over time to reflect plant emission levels.

Instead, renewed attention was given by the glass container and other industries to pending EPA authority to further reduce energy usage and emissions levels. A major unresolved issue at the agency level involves the EPA’s authority to regulate emissions from stationary sources, including those at glass container and other energy intensive, trade exposed industries. Through a series of proposed rulemakings, the EPA has determined that they have the authority to require additional permitting procedures, reporting and reduction mandates. Much of their rulemaking is currently being challenged in the D.C. Court of Appeals. The Appeals Court’s decision is expected prior to implementation of the EPA rulemaking, set to begin January 2, 2011.

State Legislation

New and Expanded Container Deposit, EPR, Legislation Pushes Forward

California, Hawaii, Iowa, New York, Oregon and Vermont each introduced expansion of their existing bottle deposit programs. Connecticut’s expanded container deposit program for water bottles went into effect this year. New York also passed expansion legislation to raise the container “handling fee” and extend the program to include water containers. After numerous court challenges, the law went in to effect in late October.

While the focus of expansions has been primarily plastic water bottles, non-carbonated beverages, such as tea and juice bottles packaged in glass, were also included in several bills. Florida, Maryland, Massachusetts, New Hampshire, New Mexico, North Carolina, Oklahoma, Pennsylvania, Tennessee, Virginia, Washington, and West Virginia all introduced new container deposit legislation that would include glass containers. Some also proposed studies or analyses of existing programs to help determine the viability of consumer deposit legislation for their states.

State legislatures have increased effort towards implementing “extended producer responsibility” (EPR) for many consumer products. EPR legislation was introduced in 18 states in 2010 and several passed laws placing increased responsibility on the brand owners and manufacturers to ensure that their products are sustainable and have favorable end of life scenarios. While the focus has previously been on items such as paint, electronics, thermostats, carpet and fluorescent lighting, the glass container industry anticipates that EPR initiatives may include their products in 2011.

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1. Glass container shipments and production are reported in thousands gross. One thousand gross = 144,000. ↩
2. A survey of 1000 Americans was conducted by telephone from April 15 - 18, 2010 by Opinion Research, with a margin of error of +/- 5% (survey facts). ↩