Can Do

BROOMFIELD – Often recognized in Boulder County for its aerospace operations, Broomfield-based Ball Corp. (NYSE: BLL) has a much larger and growing international presence in both metal and plastic packaging. The former glass-jar canning company has become one of the world’s largest companies in the packaging sector.

The 126-year-old company has changed with the times, particularly over the past 20 years. In the 1980s, Ball was still best known for its home-canning jars and glass containers. The company spun off the home-canning jar business and sold the glass container business in the 1990s to specialize on the growing metal and plastic packaging markets. While Ball manufactures a variety of containers, its recent focus has been on specialty products.

According to Scott McCarty, director of corporate communications, Ball will continue in this growing segment of the market.

“For example, we have introduced a line of Heat-Tek PET plastic containers that can be filled at higher temperatures, allowing our customers to fill a wider variety of beverages in our plastic packaging,” he said. “In contrast, while we make plenty of standard PET water bottles, we have not invested more capital there because it is a commodity product.”

Over the past two years, Ball has invested more than usual in its metal beverage packaging business to expand its ability to produce specialty cans and to evolve with industry changes, McCarty said.

Customers may have already seen Ball’s latest packaging innovation, the laser-incised tab. The technology entered the market in September with Denver-based Go Fast Sports and Beverage Co. The solid, colored tabs provide space for a small billboard for brand identity, advertising or a promotional message. By using computer and laser technology, Ball can engrave letters, numbers, symbols or drawings on the tab, adding value to the can. The Go Fast! Energy Drink cans feature the company’s logo branding.

Go Fast was also the first company to package its beverage in Ball’s Sleek Can. The can is designed with a slender appearance to provide brand and shelf differentiation.

“Ball has been a great partner in bringing their new, innovative technologies to Go Fast,´ said Heather Hill, vice president of brand communications for Go Fast. “The laser-incised tab complements our new package design, and we’re doing something that no one else is doing. It helps the product stand out on the shelf, and it’s in line with the independent-style company that Go Fast is.”

Research analyst Timothy Thein of Citigroup said Ball’s innovations are one reason the company continues to perform well in the market.

“The market for custom cans has been growing 30 percent year over year,” Thein said. “Ball has been converting capital to capture that market.”

Ball also has been helped by the hot summer here and in Europe, which increased consumption of beer and soft drinks as well as the fact that investors are drawn to steady categories, such as consumer staples, in a softening market.

“I think Ball and others can see 5 to 7 percent earnings growth over time, given the stability of those end markets,” Thein said. “The energy drink and aerospace business growth may push that to the upper end.”

While Ball’s largest customers are Anheuser-Busch, Coca-Cola, MolsonCoors, Pepsi and SABMiller, it continues to add to its mix with producers of energy drinks and enhanced waters. On the food side, customers that bought glass jars from Ball 30 years ago now buy its plastic and metal containers.

While Ball has always been focused on innovation, it has seen greater results since changing its approach to research and development five years ago. The company used to develop packaging innovations and then shop them out to its customers, which was an uphill effort, McCarty said. Ball now works together with customers to understand their needs and uses that knowledge to develop innovations. This process has been more successful.

“At the beginning of the innovation process we work to analyze market trends as well as customer and consumer needs to identify opportunities for, and threats to, our business,´ said Jennifer Hoover, manager of marketing communications. “We use this information to feed our product innovation pipeline and make sure that new packaging ideas receive both proper market evaluation and consumer validation.”

When considering innovations, Ball looks at four factors: whether it drives growth, meets a customer’s needs and package mix, meets the needs of retailers and enhances brand identity.

The company places such an emphasis on innovation that in 2004 it expanded its research and development operations with the Edmund F. Ball Technology and Innovation Center in Westminster. The company added 30,000 square feet to its existing metal packaging R&D building and moved its PET plastic technology center from Georgia to Colorado. The 73,000-square-foot facility centralizes Ball’s innovation, engineering and research capabilities in one location. Resources at the center include a three-dimensional printer that can punch out PET prototypes of concepts within 24 hours, as well as equipment that replicates a manufacturing plant environment to test new containers and processes. Other activities that occur at the center include environmental testing, failure analysis and flavor testing.

“Innovation is important to maintaining our competitive edge and helping our customers maintain theirs,” Hoover said.

When Ball developed its plastic alcoholic beverage bottles, for example, the company increased the places alcoholic beverages can be bought and sold. The bottles are designed to look and feel like glass, preserving brand identity and quality. But because they are made of plastic, they are ideal for travel and outdoor venues where glass is not practical or allowed. Sutter Home Winery launched four of their varieties in a 187 milliliter PET bottle last year.

Ball has become an international company, expanding since 2000 through acquisitions in both Europe and North America. In 2005, Ball recorded $5.75 billion in sales. The company employs 15,600 people worldwide, with roughly 3,100 of them in Colorado. It has more than 60 facilities in 10 countries and Puerto Rico. Ball is ranked 374 in the Fortune 500.

“During the past five years, Ball Corporation has more than doubled sales, and the stock has outperformed the S&P handily,” McCarty said.

According to McCarty, Ball is currently working to integrate two of its newest acquisitions made in March of this year: the U.S. and Argentinean operations of U.S. Can Corp. and certain North American assets of Alcan Packaging. The two acquisitions added to Ball’s aerosol can and plastic food-container industries.

The acquisitions necessitated the addition of a Broomfield annex to its existing packaging R&D building in Westminster. The annex, which houses eight employees, will function as a testing lab and prototype manufacturing line for polypropylene bottles. The annex was necessary because there was not room to house them in the Westminster building.

Moving forward, McCarty said Ball will continue to look for acquisitions and transactions that will benefit its shareholders, as well as continue to introduce new products and innovations to the market.

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