Restructuring

In order to be compliant with international governance best practices adopted by a growing number of companies in the SBF 120 index (the 120 most actively-traded French stocks listed on the Euronext exchange – comprised of France, Belgium, Portugal and the Netherlands) the Verallia board decided to separate the functions of Chairman of the Board of Directors and Chief Executive Officer. Accordingly, on 11 May 2022, Patrice Lucas was appointed Verallia CEO with Michel Giannuzzi, Chairman and CEO of Verallia since 2017, continuing to serve as Chairman of the Board of Directors.

The opportunity to collaborate with his predecessor will “prove extremely fruitful in the years to come,” believes Mr Lucas: “Michel provides us with the benefit of his knowledge of Verallia strategic issues and his recognised experience in the industry, particularly in glass containers, as well as his experience in governance matters."

“As a CEO, my main missions are to continue the profitable growth trajectory initiated by Michel Giannuzzi and to work daily with teams committed to constantly improving operational, financial and environmental performance,” he continues. “To succeed, I can count on the Executive Committee, which is focused on operations, and composed of members in charge of Group functions and members in charge of Business Operations with heads of key regions. The Committee is focused primarily on driving and implementing the Group’s strategy, monitoring performance and coordinating projects in the different countries and regions of the Group."

“Creating a special relationship with each of them is a priority for me,” adds Mr Lucas. “They are the key guys running the operation on the day to day. I trust them, and I am very pleased to be their leader.”

Leadership and management

Managing a multi-national and multi-cultural organisation such as Verallia, which operates 32 glass plants, four decoration plants and nine cullet treatment centres across 11 countries, naturally requires strong leadership qualities. Mr Lucas likens the role of a chief executive officer to being a “conductor”. “Based on teamwork – one of the main Verallia’s values – I encourage all the Group’s employees to take initiatives; I support the expression, sharing and respect of the opinions of each and every one of them, in a global approach of responsibility, while remaining focused on results and activities that create value for the Group. To do so, while being direct, pragmatic and demanding, I consider myself a leader who supports in difficulties [and] challenges comfort zones with positive pressure."

“As for every business and company,” he continues, “one of our main challenges for the coming months is to ensure that all the teams are aligned with the Group fundamentals: mission, values, purpose, strategy. We want every employee [to] understand, at their level, where the Group is going so that everyone can find their place and the meaning of their job in this roadmap.”

One of Verallia’s top priorities is to make people development and engagement a keystone at the company. How? “By promoting Diversity & Inclusion, anticipating and supporting the professional development of our skills and developing our employee branding,” according to Mr Lucas. Verallia’s people-centric values encourage respect for co-workers, empowerment and accountability, fostering an entrepreneurial spirit and encouraging employees to take the initiative, as well as supporting the expression, sharing and respect of each person’s opinions.

Transforming the sector

The process of glass manufacturing has remained the same over the centuries, but our world is constantly changing and faster and faster, observes Mr Lucas. “Being a leader in our industry gives us responsibilities. We want to play a driving role in the transformation of the sector, to go even further and faster by strengthening the circular and virtuous dimension of glass packaging. This is why our purpose – which is the DNA of the group and gives meaning to our action – is to ‘Re-imagine glass to build a sustainable future’.”

Within this framework, Verallia is “constantly working” with its key stakeholders – suppliers of plant equipment, materials and services – to launch new technical innovations, products and concepts.

“In July [2022] we announced a strategic partnership with the industrial engineering group Fives, to reduce carbon emissions towards greener glass production,” says Mr Lucas. The furnace electrification project, based in Cognac, France, includes the design and supply of Fives’ Prium E-Melt cold-top vertical melters to significantly reduce CO2 emissions at the plant level. “With a production capacity of 150–200 metric tonnes of glass per day, [it] will be the largest all-electric furnace for food packaging in the world,” he notes proudly.

The partnership is part of Verallia’s strategy to modernise production capabilities with a view to long-term growth, particularly in France, the historical birthplace of the company. Can Patrice imagine signing similar strategic partnerships with other technology suppliers in the future? “Yes, as long as it makes sense and creates values for both partners.”

Stakeholders have a “key role to play in our ecosystem,” he observes. “I invite them to be much more proactive looking for breakthrough solutions… I am sure that we could take the opportunity together to do much better for the benefit of the overall glass industry.”

Mr Lucas also cites the example of the Verallia Design Awards which, since 2009, have encouraged packaging and design students and young graduates to come up with an innovative project for bottles or glass jars based on a defined theme, with the possibility of having the concept brought to market. “The competition is held in most of the countries where the Verallia Group is located, and each edition brings together several hundred participants,” he reports. Nurturing and bringing to life fresh ideas, “The Group positions itself as a lab and incubator for creation,” he explains.

Investment strategy

Across the Group, Verallia’s investment strategy is channelled into maintaining the sustainability of its manufacturing operations and funding continuous innovation so that customers and employees can benefit from state-of-the-art technologies and modernised production capabilities with a view to long-term growth.

A successful customer relationship is a long-term partnership, based on a qualitative service, providing competitive and innovative product, believes Mr Lucas. “Care for customers is one of [Verallia’s] crucial values. We seek to anticipate their needs and keep our promise to them: design, quality and logistics service that meet their expectations.”

“We have already started to use digital tools in our factories to help our teams to optimise their performance, in particular on the furnaces,” he continues. “We are now focusing on developing tools for our forming lines, to help our teams to improve performance through enhanced multi-parameters analysis and simulation.”

At Verallia’s largest plant in Chalon sur Saône, €60 million (conditional on achieving the industrial performance objectives set out in the Growth and Competitiveness Pact approved in June 2021 by the Group’s employees) is being used to rebuild the site’s three furnaces, equipping them with the latest glass melting technologies whilst improving working conditions and safety for employees. An additional €5 million is funding demand for increased production capacity and a programme to lighten the weight of certain bottles. In 2022 Verallia extended its support to customers making a commitment to decarbonisation by light-weighing bottles for clients such as Telmont Champagne (which counts actor Leonardo DiCaprio as an environmentally-conscious investor) and organic winemaker Chateau Anthonic.

“We are also committed to supporting our customers in all their growth projects,” adds Mr Lucas. “To do this, we are upgrading our production facilities with the construction of new furnaces in Brazil (Jacutinga and Campo Bom) and Italy (Pescia) over the 2022–2024 period.”

Verallia will also expand its Northern European manufacturing footprint with UK presence and reinforce its position in premium glass bottles for the spirits market, having signed a binding agreement in November 2022 with an affiliate of Sun European Partners LLP for the acquisition of Allied Glass, a market leader in the UK premium glass packaging segment with a focus on the premium spirits end market. This acquisition will enable Verallia to benefit from Allied’s expertise in premium glass bottles, specifically in the Scotch Whisky and Gin sectors, and from its established position on the UK market.

With this transaction, Allied Glass will integrate an international group [and] European leader in the glass containers for the food and beverage sector, which will allow it to take advantage of its expertise and its long-term vision.

Sustainability targets

As a major sustainable player, Verallia is on a mission to “redefine the way glass is manufactured, re-used and recycled, to make it the most sustainable packaging material in the world, in order to contribute to the CO2 emission reduction plan[s] of our customers,” states Mr Lucas.

Ambitious environmental targets have been set at Group level, including a 46% reduction in Scope 1 and 2 emissions between 2019 and 2030; keeping Scope 3 emissions below 40% of total emissions by 2030; achieving carbon neutrality in 2050 for Scope 1 and 2 emissions; and implementing a re-use pilot project in France by 2025.

“Already positioned as the most ambitious player in its sector in terms of environmental policy, we become the first glass packaging producer to commit to the most ambitious target of limiting global warming to +1.5°C compared to pre-industrial temperatures, in line with the recommendations of the Intergovernmental Panel on Climate Change (IPCC) and the Paris Climate Agreement,” notes Mr Lucas.

To achieve its goals, Verallia has initiated numerous projects to collect and process recycled glass (see below) to obtain cullet, which requires less energy to melt and uses fewer raw materials that emit carbon dioxide during melting. Energy consumption in plants is being by innovation projects for new electric or hybrid furnaces in France and abroad, and Verallia continues to prepare its plants for increased use of hydrogen and renewable energies as an alternative to natural gas. Long-term contracts have also been signed for the supply of low-carbon electricity in most of the countries where the Group operates – an interim solution while sustainable renewable fuel sources providing long-term alternatives to natural gas are explored.

Receiving external recognition from bodies such as the Science Based Target initiative (SBTi), which in March 2022 validated Verallia’s CO2 emissions reduction targets – a world-first for a company producing glass packaging for the food market, and EcoVadis – who awarded Verallia the platinum medal for its CSR and responsible purchasing performance in 2021, “is excellent news that once again confirms the legitimacy of our sustainability strategy and the continued relevance of our purpose,” enthuses Mr Lucas.

Championing recycling

Along with the decarbonisation of its industrial sites, Verallia has made the principle of a circular economy a major focus of its sustainability and climate change policy. Its efforts are supported in France by the ‘Anti-Waste and Circular Economy Law’ (Loi AGEC), passed in 2020, that highlights how a circular economy can save natural resources and energy while reducing greenhouse gas emissions.

“Glass recycling is obviously a key area for action,” says Mr Lucas. “As an example, by increasing the volume of external cullet integrated into its production by 11% between 2020 and 2021, the Group has reduced the emission of almost 81,000 tonnes of CO2.” This translates to a commendable 55% cullet rate for production in 2021, compared to 51% in 2020 – and Verallia is aiming for 59% by 2025."

“Reuse of glass containers is also making significant progress,” adds Mr Lucas. “As well as the eco-design of products, which is already a commercial success story.

“In Brazil, where only 25% of glass is collected for recycling (compared to about 80% in Europe), we signed an agreement with the City of Reno to encourage recycling,” he continues. “The Group has committed to setting up 10 collection points in the municipality, mostly near schools. It should be noted that since there are no household glass collection systems in Latin America, Verallia is acting in its own name, launching collection campaigns in partnership with cities near the plants.”

Verallia “actively supports” the goal set by the FEVE – the European Container Glass Federation, of which it is a key member – for 90% cullet collection in Europe to be reused in production. “FEVE is doing a great job to promote the glass container industry to government authorities and end consumers,” states Mr Lucas. “It is a very dynamic and well-run federation, providing a good service and results for members.” Verallia regularly contributes “fact-based data” and brings its experience and resources to support the glass packaging industry. “In return, we benefit from the strong results that FEVE has achieved in promoting glass packaging.”

Glass reimagined

The long-term prospects for glass as a packaging material are good, according to Mr Lucas. “From my point of view, there are many opportunities in the NAB [non-alcoholic beverages] and food sectors. Following an international study, published in the journal Critical Reviews in Food Science and Nutrition last June1, glass is safest among the packaging materials as it has virtually no detected chemicals and therefore is the safest for human health.” Crucial to glass securing an increased market share in the packaging sector is “the CSR roadmap of every player,” he adds.

Verallia doesn’t “aim to be the biggest but the best in class,” underlines Mr Lucas. Under his leadership the company will continue to pursue disciplined growth, increase operational excellence, invest wisely for a sustainable future and anchor a strong entrepreneurial culture.

“Besides the four main lines of action announced above, three top priorities have been identified,” he elaborates: deliver the 2022–2024 strategic plan and the committed objectives (i.e. financials, CO2 emissions reduction); position ESG [environmental, social and governance] at the core of the company: we aim to become a leader in decarbonisation to preserve our planet and to be recognised as a best-in-class player on all aspects of society, including economic and social; and make people development and engagement a keystone through diversity and inclusion, talent development and employee branding.

“I am proud of taking part, with the 10,000 employees of our Group, in our mission: enabling people to enjoy beverages and food with healthy, attractive and sustainable glass packaging,” he concludes.

1. https://www.tandfonline.com/doi/full/10.1080/10408398.2022.2067828