Silgan goes silver

It’s been 25 years since Greg Horrigan and Phil Silver created the canmaking group Silgan. John Nutting charts their history
Silgan Container, North America’s leading manufacturer of food cans, an increasingly global player in metal closures, and now a player in central and eastern Europe, this month could be celebrating the 25th anniversary of its founding in 1987.
But the canmaker, part of Silgan Holdings based in Stamford, Connecticut, is unlikely to be blowing its trumpet. Says chief executive Tony Allott: “While we are avid champions for the can, we prefer the spotlight on the attributes of the package and not on our own activities.”
 

Not that it doesn’t have a good story to tell. Silgan Holdings, based in Connecticut and with its canmaking operations headquarters in California, has long been the supplier of cans to blue-chip food manufacturers such as Nestlé, Del Monte, Heinz, Hormel and Campbell Soup, and as such is not one to upstage its customers’ marketing activities.

Yet it has been a key driver in the transformation of food can design in North America, through the introduction of convenience features such as full-aperture easy-open ends. And it has resisted the challenges from competing packaging such as cartons for food. Silgan’s cans are behind many of the familiar labels on US supermarket shelves.
Over the 25 years it has grown through acquisition in a period that is notable for the move from self-manufacture of cans by food companies to specialist canmakers that are more capable of controlling costs. Silgan started by acquiring canmaking operations from Nestlé, and was still doing so last year when it signed a deal with the Swiss food group to supply cans for Purina pet food products. It has also diversified into other types of packaging, and it’s a leading supplier of plastics packaging and containers.
Like many canmakers, the most prominent display of corporate chest beating at Silgan is for its financial performance. And rightly so: last year its sales topped US$3.5 billion, of which $2.2bn was from metal containers and $688 million was from metal closures. Despite a weak vegetable pack in North America in 2011, sales growth was 14.3 percent, some of which would have been from metal price inflation, showing that Silgan has managed well to pass increases through to its customers.
This has also been helped by the global spread of Silgan’s manufacturing plants. In North America it has 26 canmaking operations including its R&D centre; in Europe it has 15 of the Vogel+Noot-owned plants acquired in 2010, from Germany to Russia and into the Middle East in Jordan; and its metal closures plants (formerly mostly owned by Continental White Cap) are all over the world, from the US to Brazil and Europe to the Philippines, including China.
Silgan originated from an opportunity that had been identified by two former executives of US-based Continental Can Co, which in the mid-1980s was one of the largest canmakers in the world. Likely uncertainty about Continental’s future ownership prompted its company president Phil Silver to leave in August 1986 to become a consultant to the packaging industry. Greg Horrigan, who had been chief operating officer for three years, left in 1987.
The catalyst was the acquisition by Nestlé of Carnation Milk in the US, a leading manufacturer of canned condensed milk. Carnation had been running its own canmaking operations at 13 plants, one of which was still under construction, and these were to be taken over for $150 million by a new company created by specialists Horrigan and Silver and funded by bond issues.
Hence the name Silgan, which was founded on 6 August 1987. Growth of the new canmaker was key and within ten years Silgan had acquired six food container plants including those of Fort Madison Can Co, Seaboard Carton Co, Northern Can Systems and the larger food can operations of Del Monte, American National Can and Curtis Burns. Rationalisation was also fundamental to the business plan, so that canmaking operations were consolidated. Of the original Carnation plants for example, only seven remain.
By 1996, sales were $1.2bn a year from slightly more than a third share of the North American food can market, of which about 80 percent was in long-term supply agreements with customers in the food industry. Leading customer was Nestlé with 17 percent followed by Del Monte with 12 percent.
The next big move was to acquire the canmaking business of Campbell Soup, which had been planning to withdraw from self-manufacture as part of a restructuring. Funded with an IPO, in March 1998 Silgan acquired four Campbell canmaking operations – Sacramento in California, Maxton in North Carolina, Napoleon in Ohio and Paris in Texas – in a deal worth $125m and linked to another ten-year supply agreement.
As the leading manufacturer of cans for food products with more than half the market, Silgan invested in new technology, initially with Campbell Soup in 1999 for the production of full-aperture easy-open ends for heat-processed products, which were then still in their infancy in the US. Silgan also collaborated with Crown in the development of drawn aluminium cans for Hormel’s Spam luncheon meat.
Innovation with the development of easy-open ends for food cans has enabled Silgan to prevail in the face of competition from other pack types, such as cartons.
When Hormel Foods decided to switch its Stagg chilli brand from cans to Tetra Recart in 2003, Thomas Snyder, sales and marketing chief for North America, said Silgan was disappointed. “Hormel is an innovator. Although [Hormel] opted for the box instead of our consumer-preferred convenience ends, we were very pleased to see that Campbell’s decided to launch its new Chunky Chili line in a Silgan Quick Top container.”
But the logistics of cartons didn’t work out and about two years later Hormel returned to Silgan’s metal cans.
More recently, acquisitions in the US have slowed – the canmaking facility of tomato-packer Pacific Coast Producers in 2003 and the more recent deal to supply Nestlé Purina Pet Care with drawn cans being notable – as Silgan looked abroad. Also in 2003 it bought the remaining two thirds of closure manufacturer Amcor White Cap it didn’t already own to consolidate its international presence.
Expansion hasn’t all been smooth though. In 2011, Silgan tried to merge with US plastics packaging manufacturer Graham Packaging in a $4bn deal but was beaten by a bigger offer from New Zealand-based Reynolds. It means that Silgan still has the financial clout for further expansion, and this could be in any part of the packaging business that fits with the corporate plans of Horrigan and Silver, who remain non-executive co-chairmen.
Which is no doubt why they have recently bought a thermoformed plastics packaging business from Rexam for $250 million. Like Ardagh and its metal and glass packaging, there is plenty of customer overlap at Silgan between plastics and metal.