Despite the industry’s strong recovery, rising raw material and energy costs have been almost unbearable for those industries that consume a lot of energy, especially when their margins are already tight. Although Europe is not the only region to be hit, its glass bottle industry has been particularly hard hit, as managers of companies interviewed separately by PremiumBeautyNews confirmed.
The enthusiasm generated by the resurgence in beauty product consumption has overshadowed industry tensions. Production costs around the world have soared in recent months, and they are only slightly down in 2020, caused by rising prices for energy, raw materials and shipping, as well as difficulties in obtaining certain raw materials or expensive raw material prices.
The glass industry, which has a very high energy demand, has been hit hard. Simone Baratta, director of the commercial perfumery and beauty department at Italian glass manufacturer BormioliLuigi, sees a considerable increase in production costs compared to the beginning of 2021, mainly due to the explosion in the cost of gas and energy. He fears that this increase will continue in 2022. This is a situation not seen since the oil crisis of October 1974!
Says étienne Gruyez, CEO of StoelzleMasnièresParfumerie, “Everything has increased! Energy costs, of course, but also all the components necessary for production: raw materials, pallets, cardboard, transport, etc. have all gone up.”
A dramatic rise in production
Thomas Riou, CEO of Verescence, points out that “we are seeing an increase in all kinds of economic activity and a return to the levels that existed before the outbreak of Neoconiosis, however, we think it is important to remain cautious, as this market has been depressed for two years. for two years, but it has not stabilised at this stage.”
In response to the increase in demand, the Pochet group has restarted the furnaces that were shut down during the pandemic, hired and trained some personnel, says éric Lafargue, sales director of the PochetduCourval group, “We are not yet sure that this high level of demand will be maintained in the long term. ”
The question is therefore to know which part of these costs will be absorbed by the profit margins of the different players in the sector, and whether some of them will be passed on to the sales price. The glass manufacturers interviewed by PremiumBeautyNews were unanimous in stating that production volumes have not increased enough to compensate for the rising costs of production and that the industry is currently in danger. As a result, most of them confirmed that they have started negotiations with their customers to adjust the selling prices of their products.
Margins are being eaten up
Today, our margins have been seriously eroded,” stresses étienneGruye. Glass manufacturers lost a lot of money during the crisis and we think that we will be able to recover thanks to the recovery in sales when the recovery comes. We do see a recovery, but not profitability”.
ThomasRiou said, “The situation is very critical after the penalty of fixed costs in 2020.” This analytical situation is the same in Germany or Italy.
Rudolf Wurm, sales director of German glass manufacturer HeinzGlas, said that the industry has now entered “a complex situation where our margins have been severely reduced”.
Simone Baratta of BormioliLuigi said, “The model of increasing volumes to compensate for rising costs is no longer valid. If we want to maintain the same quality of service and product, we need to create margins with the help of the market.”
This sudden and unexpected change in production conditions has led industrialists to largely initiate cost-cutting plans, while also alerting their customers to the sustainability risks in the sector.
Thomas Riou of Verescence. declares, “Our priority is to protect the small businesses that depend on us and that are indispensable in the ecosystem.”
Passing on costs to protect industrial fabrics
If all industry players make their business operations more efficient, given the specificities of the glass industry, this crisis can only be overcome through negotiation. Revising prices, evaluating storage policies, or considering cyclical delays, all together, each supplier has its own priorities, but they have all been negotiated.
éricLafargue says, “We have intensified our communication with our customers in order to optimise our capacity and control our stock. We are also negotiating agreements with our customers to transfer all or part of the sharp rise in energy and raw material costs, among other things.”
A mutually agreed outcome appears to be crucial for the future of the industry.
Pochet’s éricLafargue insists, “We need the support of our customers to sustain the industry as a whole. This crisis shows the place of strategic suppliers in the value chain. It is a complete ecosystem and if any part is missing then the product is not complete.”
Simone Baratta, managing director of BormioliLuigi, said, “This particular situation requires an exceptional response that slows down the rate of innovation and investment by manufacturers.”
Manufacturers insist that the necessary price increase will only be about 10 cents at most, factored into the price of the final product, but this increase could be absorbed by the profit margins of brands, some of which have posted consecutive record profits. Some glass manufacturers see this as a positive development and an indication of a healthy industry, but one that must benefit all participants
Post time: Nov-29-2021