Glass manufacturers are heavy energy users, so have been hard pressed by the rapidly escalating costs of oil and gas. They are currently having to put up the prices of their products by around 35%, although this may have to rise further. The concern is that passing this cost on to the consumer means prices will have to rise in a way that makes glass packaging, especially for food and drink, too expensive and consumers will demand cheaper alternative packaging, such as wine boxes, plastic bottles and plastic food containers.
Despite this, glass is completely recyclable, so remains one of the greenest choices for storing food and drink. Given the challenges, we are seeing some surprising effects of the energy crisis as companies strive to develop innovative solutions and better opportunities.
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One of the leading glass container manufacturers in Western Europe is Vidrala, operating in Spain, Portugal, Italy, the United Kingdom and Ireland. It produces a full range of glass containers - 35% of its products are for wine, 26% are for beer, and the balance is split between food, spirits and soft drinks - and sells more than eight billion glass containers per year.
Adapting to the challenges, measures Vidrala is taking include increasing its focus on glass recycling - in 2021, 48% of the glass it produced was recycled - and raising the collection rate of used glass to improve manufacturing efficiency and earnings. Currently, the company is cooperating with a non-governmental organisation, which encourages people to recycle, collects the glass and delivers it to Vidrala for melting and recycling.
Looking to the longer term, Vidrala is working together with other companies from the glass industry to investigate hybrid hydrogen furnaces that could be suitable to power the industry in the future.
Other innovations being explored by glass manufacturers include reducing the melting temperature of glass by adding ash, allowing a more ‘imperfect' looking glass with less clarity and more bubbles, plus increasing the use of wind and solar energy at factories.
Already, the luxury end of the glass market is bracing itself for much higher energy costs and the prospects of a total shutdown if gas has to be rationed for essential use only. Many of the Venetian glass workshops on the Italian island of Murano have already closed their doors because the cost of energy has made their decorative items too expensive. Venetian vases and fine crystal glasses may be items with a very long waiting list this winter. The world-famous manufacturer of Riedel glass in Austria and Germany is also contemplating a shutdown. Furnaces can break if they cool, so pausing during periods of rationing is not an option.
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Glass is a stable and inert packaging material that is endlessly recyclable. But it is also heavy to transport and energy intensive to manufacture. There's no doubt that the energy crisis will bring all kinds of innovative new solutions - could we see ‘milkman' style deliveries of wine in re-useable bottles? Or more food and drink in aluminium cans? Will much more food move to recyclable plastic packaging, or paper-based packaging?
Dutch company Corbion is a company at the forefront of innovative packaging solutions. It produces PLA, a biobased and biodegradable plastic packaging, made from renewable resources, which is strong enough to be able to replace conventional plastics and can then be composted, breaking down into CO2, water and biomass.
To tackle the many challenges ahead, innovative thinking is needed alongside a more sustainable, and even more traditional way of doing things - where this is possible. Inspired by the humble soap bar, shampoo is now available in solid bars, packaging free. Could the future see us taking our bottles to local shops and supermarkets for wine and oil refills, as is the norm in many parts of Southern Europe?
Many of the companies facing the challenges brought by the energy crisis are small caps, but that often allows them to be more nimble. They can be in pole position to adapt quickly and create solutions. Challenging times can create opportunities for well-managed, innovative companies. We do know our dependence on fossil-fuel energy has to reduce, the current shortage could be the pressure we need to make dramatic changes.
Tzoulianna Leventi is investment analyst, smaller companies, abrdn