CROWN CORK & SEAL IN 1989

- Metal container industry

- The moves by both suppliers and customer of can makers to integrate into a can
manufacturing themselves had profoundly redefined the metal can industry since John
Connelly’s arrival
- Metal container industry represents 61% of all packaged products in the US

INDUSTRY STRUCTURE
- Five firms dominated the U.S. metal can industry in 1989
- Pricing in the can industry was very competitive
- Lower costs to increasf capacity utilizaion
- Operating margins fell
- Shrinking customer base
- Customers include Coca-Cola Comapny, Pepsico Inc.
- Poor service and uncompeititve prices could be punished by cuts in order size
- Due to the bulky nature of cans, manufacturers located their plants close to minimize
transportation costs
- While two-pieve can lines achieved quick and persistent popularity, they did not
completely replace their antecedents - the three-priece can lines
- Production required expensive seaming, end-making, and finishing equipment
- Some firms shipped their old lines overseas to their foreign operations where
growth potential was great, there were few entrenched firms, and canning
rehcnology was not well understood
- Steel had fought a losing battle against aluminum

INDUSTRY TRENDS
- Hte major trends characterizing the metal container industry during the 1980s included
- The continuing threat of in-house manufacture
- The emergence of plastics as a viable packaging material
- Steady competition from glass as a substitute for aluminum in the beer market
- The emergence of the soft drink industry as the largest end-user of packing, with
aluminum as the primary beneficiary
- The diversification of, and consolidation amon, packaging producers

MAJOR COMPETITORS IN 1989

- American Can
- Served the major beverage, food, pharmaceuticals, and cosmetics markets
- Continental Can
- Packaging operations, which included Contiential Can USA, Europe, and
Canada, as well as metal packaging operation in Latin America, Asia, and the
Middle East
- Reynolds Metals
- Only domestic company integrated from aluminum ingot through aluminum cans
- One of the industries leading can makers
 - Instrumental in establishing new uses for the aluminum can and was a world
leader in can-making technology
- Developments included high-speed can-forming machinery, faster inspection
equipment, spun aluminum tops which contained less material
- Ball Corporation
- Can-ball making technology and manufacturing flexibility allowed the company to
make shooter runs in the production of customized, higher-margin products
designed to meet customers specifications and needs
- Thinking of purchasing in acquisition of a joint venture, Ball Packaging Canada,
Inc. → would make Ball the number two producer of metal beverage and food
containers in the Canadian market
- Van Dorn Company
- Combined market of Van Dorn Company and Heekin Can, Inc.
- Two product liens: containers and plastic injection molding equipment
- One of the worlds largest producers of drawn aluminum containers for processed
foods, and a major manufacturer of metal, plastic and composite containers for
the paint, petroleum, chemical, automotive, food, and pharmaceutical industries
- Also a leading manufacturer of injection molding equipment for the plastics
industry
- Heekin Can
- As a way to package their own products
- Primarily manufactured steel cans for processors, packagers, and distributors of
food and pet food
- Represented the countries largest regional can maker in Cincinnati (started as a
coffee merchant)

COMPANY HISTORY
- New idea for a better bottle cap
- Disastrous attemp to expand into plastics and a ludicrous diversification into metal bird
chage, Crown reorganized along the lines of the much larger Continential Can, incurring
additional personnel and expense that again brought the company near to bankruptcy
- Teetered on the verge of bankruptcy in 1957
- Pared down the organization, whereby reduced headquarters staff
- Disbanded central research and development facility
- Accountability and instill a pride of workmanship by establishing managers as
“owner-operators” of their individual businesses, made them responsible for
profitability
- Focused on debt concerns, introduced sales forecasting deovetailed with new
production and inventory controls → managers would now be unable to avoid
layoffs by dumping excess products into inventory
- Connelly also held planet managers responsible for quality and customer service

CONNELLY’S STRATEGY
- Structured the company to be successful
- While he was continually looking for new ways of controlling costs, he was equally
hell-bent on improving quality
- Products and Markets
- Recognizing Crown was a small producer in the industry, sought to develop a
product line buil around Crowns traditional strengths in metal forming and
fabrication
- Chose to emhpaze tin-plated cans and crowns and to concentrate on specialized
uses and international marketers
- Decided to exit from the oil can market
- Singled out two specific applications in the domestic market: beverage cans and
the growing aerosol market
- Recognizing the potential, started innovating nad designing equipment for
these products
- Strategy was to expand to national distribution in the U.S. and invest heavily
abroad
- Did not set up planets to service a single customer → concentrated on providing
product for a numbe rof customers near their plants
- Manufacturing
- Used to be outmoded and inefficient production facilities in the industry
- Invested in new and geographically dispersed plants
- Operated planets 24 hours a day with unique 12-hour shifts
- Emphasized quality, flexibility, and quick response to customer needs
- Some plants kept more thna a months inventory on hand
- Also instituted a total quality improvement process to refine its manufacturing
processes and gain greater control
- Recycling
- Formed a recycling subsidiary for aluminim can recyclers
- Research and Development (R&D)
- Crowns technology strategy focused on enhancing the existing product line
- Worked closely with large breweries in the development of the two-piece
drawn-and-ironed cans for the beverage industry
- Made an explicit decision to stay away from basic research
- Worked closely with customers on specific customer requests
- Marketing and Customer Service
- “You cant just increase efficiency to succeed; you must at the same time improve
quality”
- Companies sales force maintained close ties with customers and emphaszied
ability to provide technical assistance and specific problem solving at the
customers plant
- Manufacturing emphasis on flexibility and quick response to customers needs
supported its marketing emphasis on putting the customer first
- Competing cans were all identical so Connelly was an amazing salesman
- Financing
 - Applied the first receipts from the sale of inventory to get out from under Crowns
short-term bank obligations
- Steadily reduced the debt/equity ratio
- International
- Focused on international growth, particularly in developing countries
- “Pioneer rights”
- Emphasized national management, understood the local marketplace
- Their older equipment met the needs of what was still a developing industry
overseas
- Performance
- Substantial success in restructuring
- In early 1980s met declining sales revenue due to flat industry, strong dollar
overseas, plastics etc.
- In 1985 sales rebounded
- “Back-to-basic” except they never left the basics

JOHN CONNELLY’S CONTRIBUTION TO SUCCESS

- Unique leadership
- Very loyal employees
- Difficult man to please

AVERY’S CHALLENGE IN 1989

- Growth opportuntiites in plastic clorsures and containers, as well as glass containers
- Possibility of diversifying beying the manufacture of containers altogether had some
appeal
- Decide if they wanted to get involved in the bidding for Continental Can
- Knows most mergers in this industry dont turn out well
- Found himself challenging Crowns traditional strategies and thought seriously of drafting
a new blueprint for the future