Verallia Latin America includes operations in Argentina, Brazil, and Chile. Whilst the brand ‘Verallia’ is relatively young in age – it was created in 2010 – the company’s heritage goes back generations in South America. Compagnie de Saint-Gobain operated hollow glass production operations from 1918 until 1972, according to Verallia, when the bottles and jars business segment was transferred to Saint-Gobain Emballage; this became the holding company of Saint-Gobain Group’s glass packaging production operations.
“Verallia became an independent group in 2015,” stated Mr Quintin Testa, General Manager for Verallia Latin America and a Member of the Verallia’s Executive Committee. “In October of 2019, Verallia became a listed company on Euronext in Paris.”
Overall, the company reported that it is the third largest producer of glass containers for food and beverages globally. The Latin American operations of Verallia represented 11.38% of worldwide sales of Verallia in 2021. This compared to sales from Verallia’s Latin American operations in 2020 that represented 9.35% of global sales by the company. Revenue was €304.2 million for the Latin American operations of Verallia in 2021 according to the 2021 Annual Report issued by the company on 16 February 2022. That amount compared to €237 million in revenue for the Latin American operations of the firm in 2020. The annual report stated that these changes resulted from “an increase in sales prices in Latin America and a good product mix over the year at Group level also contributed to the growth in revenue.”
Mr Testa indicated that the Latin American operations of Verallia sold 655,000 tonnes of glass products in 2020 as compared to 618,000 tonnes of glass products in 2019. Production increased again in 2021.
“In Latin America, the Group reaped the benefits of having increased capacity in 2020,” the 2021 Annual Report noted. “Revenue shows a strong reported increase of 28.3% and 39.3% organic growth. Annual revenue grew in all product categories except food jars. In addition, previous increases in selling prices in the region – particularly in Argentina in response to local hyperinflation – also contributed to the strong growth in revenue. Sales volumes, on the other hand, fell slightly in Argentina in the second half of the year, impacted by a fire [at the glass manufacturing plant in Mendoza] in the third quarter which temporarily disrupted customer supply over the six-month period.”
Currency exchange rates impacted some of the results in Latin America.
“The impact of exchange rates was -1.3% in 2021 (-€33 million), primarily concentrated in the first half of the year,” detailed the results in the 2021 Annual Report. “It was in large part linked to the depreciation of the Argentine peso and the Brazilian real and, to a lesser extent, the Russian rouble. In the fourth quarter, the impact of exchange rates was positive at +2.2% (+€13 million). At constant exchange rates and scope, revenue grew +6.8% over the year (and +5.0% excluding Argentina), with an acceleration in the fourth quarter leading to organic growth of +10.2% (and +9.4% excluding Argentina). After a volatile 2020, which formed an extremely variable basis for comparison from one quarter to another, Group sales volumes in 2021 recorded growth, returning to their 2019 pre-Covid level.”
Mr Testa has been General Manager for Verallia Latin America and a member of the Verallia’s Executive Committee since 2018. He began his professional life as General Manager of Quality at Nissan Motors in México in 1989. Ten years later, in 1999, Mr Testa joined Nemak in México within Operations. In 2002, he joined Valeo where he held the positions of Vice President of Quality and Project Management for the Group, and from 2015 onwards, assumed the position of Vice President of Powertrain Transmission for the Group. Mr Testa graduated as a Mechanical Engineer from Monterrey Tech, México, and holds a Master’s degree in Quality and Productivity.
Argentina
“The history of Verallia Argentina begins in 1947, when a traditional family from Mendoza founded the Cristalería Rayen Cura,” stated Mr Testa. “In 1998, it was acquired by the Packaging division of the Saint-Gobain Group. As of that year, a series of investments were made that enabled the growth of the company and the incorporation of state-of-the-art technology.”
Expansion continued at this plant in the 21st century. In 2000, the company inaugurated its Furnace 2, and in 2012, Furnace 3 became operational. In 2021 a new production line was inaugurated in Furnace 3.
Mr Testa indicated that “today, Verallia Argentina is a leading company in the region due to the quality of its products and services.”
Verallia Argentina is headquartered in Ciudad de Mendoza in the province of the same name. Approximately 420 employees work at the glass manufacturing plant here. Verallia Argentina produces 500 million glass bottles and jars per year. Glass is produced in three colours: green, dead-leaf, and flint.
Brazil
“Verallia’s first factory in Brazil was opened in the Água Branca district of São Paulo,” explained Mr Testa. “In 1810, glass began to become more present in Brazil and it was in that same year that the first glass factory appeared, along with the arrival in the country of the Portuguese Royal Family. In 1892, Councilor Antônio da Silva Prado and Dr. Elias Fausto Pacheco Jordão began the exploitation of peat with a primitive kiln in lands that covered approximately 33 thousand m2 from Água Branca to Freguesia do Ó, in the Tietê floodplain, where they had discovered deposits of sand with the ideal colour and quality for the manufacture of white glass. And so, in 1896, the Companhia Vidraria Santa Marina was born in São Paulo, which would later become associated with the Saint-Gobain Group and which gave rise to what is now Verallia.”
“Not every company reaches 125 years,” Mr Testa continued. “The main goal is our solid commitment to society, the environment, investors, our internal public and all stakeholders.”
Verallia is in the process of a number of expansion projects in Brazil, including two new furnaces. A new furnace is scheduled to start operations at the plant in Jacutinga in the State of Minas Gerais by the end of 2022. The second furnace is being installed at the plant in Campo Bom in the State of Rio Grande do Sul; it is anticipated that this furnace will become fully active in the fourth quarter of 2023. A third Brazilian plant is located in Porto Ferreira in the State of São Paulo.
“We have advanced significantly in Brazil,” said Mr Testa. “By adding the two ongoing large investments, Verallia Brazil’s production will gain more than 730 million glass packaging units per year, more than doubling the installed production capacity in Brazil by 2023. In addition to increasing production, it will also bring an increase in the number of employees and more revenue for the cities and surroundings.”
The glass packaging portfolio in Brazil, according to Verallia, serves the food and beverage industries through the production of 197 different types of glass containers, 169 of which are bottles and 28 jars. On average, Mr Testa indicated that 15 new products are launched annually in Brazil.
Verallia Brazil is headquartered in São Paulo in the province of the same name. About 700 employees work at the three glass manufacturing plants in this country. Verallia Brazil produces 900 million glass bottles and jars per year. Glass is produced in four colours, including flint, green, emerald green and amber.
Chile
“Saint-Gobain bought BO Glass from a Chilean investor group in 2007, before it began manufacturing bottles (in May of that year),” explained Mr Testa. “With an attractive business proposition and with the technical support of the international Group that is now Verallia, the Chile operation became an alternative for quality and service for the wineries, in a country that had only two local suppliers (before Verallia).”
“We’ve achieved a solid presence in most of the top 20 wineries in Chile, which buy over 80% of all wine bottles,” Mr Testa continued. “Over the past few years, we’ve significantly diversified our product portfolio to serve the greater value-added segments and smaller wineries. Verallia Chile is currently the third largest manufacturer with a flagship position for the winemaking industry, which accounts for approximately two-thirds of the total glass volume produced in Chile.”
Verallia Chile is headquartered in Rosario in Cachapoal Province. Approximately 195 employees work at the glass manufacturing plant in this country. Verallia Chile produces 330 million glass bottles and jars per year. Glass is produced in four colours, including green, dead-leaf, antique green and flint.
Markets
“In Latin America, our business is mostly still focused on wine and beer,” stated Mr Testa. “Wine market growth in Argentina and Chile is driven by sustained export growth, with local consumption holding up well despite a difficult macro environment. In Brazil, beer and wine are the largest contributors to market growth. Beer is the largest end-market following the one way and localisation trends, and the wine market is driven by the rapid increase in Brazilian consumption.”
Mr Testa indicated that the glass bottles and jars produced in the manufacturing plants of Verallia in South America are sold to clients based in South America: “Verallia’s ‘Glo-Cal’ business model is built on the strength of its international network combined with proximity relationships maintained with its customers locally. The Group offers a diversified product offering including a range of both standard products and specialised products that are designed in collaboration with the Group’s customers and tailored to their specific needs.”
As an example of how glass bottles are designed for specific market segments, consider Verallia’s production of glass containers for still wines. Mr Testa noted that “in order to meet market demands, the Group offers a wide range of bottles offering various shapes and sizes adapted to the different regional markets, in order to address two powerful market trends: the growing appeal of premium products and the development of rosé wine, for which differentiation is mainly based on the packaging used.”
Covid-19 pandemic
“The glass packaging market has been undergoing a major transformation since 2019,” said Mr Testa. “At the beginning of the pandemic, there was a retraction, but immediately the trend of increasing demand returned with even more intensity. It is undeniable that the pandemic accelerated the process, and with it, demand grew substantially in the second half of 2020 and continues to rise significantly in Latin America."
“The glass market is generally resilient and stable and we have good short-term visibility of our customers’ consumption trends and expect demand to grow by more than 2% in Europe and even more dynamically in Latin America,” Mr Testa continued. “Nevertheless, in 2021, we had to face a significant inflation of energy costs in particular. In order to limit the impact of this inflation, we have covered 85% of our electricity needs.”
Recycling and sustainability
“The circular economy is at the heart of Verallia strategy and we are convinced that glass is one of the most sustainable materials,” explained Mr Testa. “To this end, we start from the purpose of Reimagine glass for a sustainable future, working with all our stakeholders in the following three areas: help increase glass collection by supporting, raising awareness and mobilising the various players involved in this collection to integrate more and more recycled glass into our productions; work on optimising the integration of external cullet by continuing to invest in our dedicated cullet treatment centres, but also in the work of all our cullet specialists so that quality and quantity improve every year, worldwide, taking into account all local characteristics and differences; and finally, make reuse a win-win solution for the planet and the glass packaging we believe in. The goal is to perpetuate local loops offering the reuse of glass packaging whenever it is feasible, and it makes sense.”
Mr Testa indicated that as part of the sustainability efforts of Verallia, “we have identified three macro pillars: significantly reducing CO2 emissions, increase the circularity of glass packaging and provide employees a safe and inclusive workplace. With these three goals, we contribute to six of the 17 goals of the United Nations. We believe that to put this into practice, we need to start from the inside out. Employees are not more than a reflection of society. Therefore, we work internally on environmental education. From the moment employees enter the factory, recycling, all purposes and actions on the subject are addressed."
“To achieve our purpose of Reimagining Glass for a Sustainable Future in Brazil, we have several projects,” Mr Testa continued. “We have just launched the Vidro Vira Vidro project, which consists of the initial installation of 200 containers for recycling glass. This brings one more collection option, in addition to the existing ones – such as, for example, selective collection, which is still underdeveloped in Brazil. After the initial phase, our goal is to install thousands of containers in different regions of Brazil.”
Verallia Argentina has a glass recycling programme called “Vidrio una Acción Transparente.” Mr Testa stated that “this programme consists of putting containers in specific location; then the glass containers are collected and purchased by Verallia.” He explained that an equivalent amount of money is then donated to the Notti Foundation, which uses these funds to aid in the construction of a hydrotherapy centre for the rehabilitation of children. “The aim of this action is to promote the importance of recycling glass.”
In Chile, Mr Testa indicated that Verallia has a partnership with CVGreen and municipality of Rengo to develop a recycling culture in the community through an educational program with KIKLOS to promote the sustainability of the glass. He explained that these efforts focus on area schools (with more than 9,000 students) and a network of recycling bins at area parks that are near the participating schools. The firm also supports a green approach from tree planting at municipal parks so as to create a strong bound amongst education for sustainability, glass recycling, and nature preservation.
Projections for the future
Mr Testa explained that the priorities for Verallia Latin America during 2022 include keeping safety levels, health standards, quality controls and industrial performances at the “best in class levels” as well as meeting the deadlines on the company’s strategic growth projects, including the Jacutinga expansion and Campo Bom expansion in Brazil.
“Despite a volatile and challenging environment, Verallia Latin America is achieving excellent results on all business criteria,” Mr Testa stated. “We need to keep our focus on the realisation of the growth, keeping our commercial spread positive and implementing our productivity action plans in a timely fashion. The potential external factors we closely pay attention to include macroeconomic environmental aspects (GPD, inflation, FX); glass costs; logistics costs; and the impact of the Covid-19 Pandemic.”
In the 2021 Annual Report of Verallia, the company noted in its 2022 Outlook that “Provided that the situation linked to the Covid-19 Pandemic does stabilise, that the inflation in costs and the geopolitical context do not deteriorate further, Verallia is expecting a sharp growth in its annual revenue. In the current environment of accelerating inflation since the second half of 2021, Verallia anticipates a significant increase in its production costs in 2022, of which energy is a major factor.”
Copyright: Richard McDonough 2022