Karsten Fuchs, who has been serving as the Chief Sales and Marketing Officer at Verallia Deutschland AG since 2018, provides insights into the leading role played by Verallia Deutschland AG, one of the world's largest and most prominent glass manufacturers.
Challenges in the production of lightweight glass
Mr. Fuchs, let's start with something recent: Your company has just introduced a new lightweight glass bottle, the Bordeaux Air 300G. Is this intended to become the new standard bottle for Verallia, or is it a special model?
Of course, we aim for everything we do to eventually yield significant sales volumes. The bottle is intended to become a new standard in the Bordeaux segment.
How much weight have you saved compared to the lightest bottle so far?
For this shape, the average weight has long been about 450g. The large standard models then evolved towards 400g, and there are also bottles weighing 360g. However, as far as I know, a weight of 300 grams is new. There have been attempts to achieve this, but the results didn't look visually satisfying.
What did these attempts look like?
The ideal stable shape is a sphere. To ensure stability while reducing weight, the compromise was to change the height of the bottle. However, if the bottle is made too short, it no longer resembles the classic Bordeaux bottle.
We are now ready for mass production.
And how has it been received?
It's still a bit early. It's now fully developed, and we have a certain stock, so we can provide samples at any time. In principle, we are now ready for mass production.
Converting from single to multi-use
Another current topic is reusable packaging, which is also on your agenda.
I consider us to be the market leader in reusables. We have a standard bottle that's even conditionally suitable for sparkling wine, as it can withstand up to four grams of CO₂. Why do we, as glass manufacturers, do this? Of course, that's a question we can be asked. Because if a wine bottle is refilled multiple times, I can sell less new glass, that's true. But if it makes long-term sense and is ecological, it will prevail, with or without us.
Reusables is a new business model for us, closely linked to what we do best – designing, developing, and producing bottles.
So, you want to take the lead?
We believe that reusables will eventually become widespread in the wine segment. It makes sense and it's a new business model for us, closely linked to what we do best – designing, developing, and producing bottles.
The addition of cleaning and logistics services is new for us. The cleaning will take place both at service providers with whom we've just made agreements and at our own site, where we still need to set up the system. Where the new bottles are produced, they will be cleaned in the future, so we can maintain and even expand employment.
What happens to the bottles when they can no longer be used?
First, we must consider additional synergistic effects: For instance, we can utilize the waste heat from bottle production to operate our cleaning facility. When a bottle reaches the end of its life after being refilled up to 50 times or more, it's already at the point where it can be turned into a new bottle. Additionally, it's already clean and sorted by type, so no extra effort is required. The bottles can be washed, sorted out, and melted down again.
Will the reusable bottle lead to CO₂ neutrality for your company?
Providing concrete facts in this context is challenging, as quantifying the impact requires a life cycle assessment, a complex process due to various regulations. However, with our customers increasingly inquiring about CO₂ reduction, it becomes beneficial to have an informed response. It's important to note that CO₂ emissions occur not only during production but also in transportation, as reusable bottles need to be transported from point A to B. Studies indicate that reusable bottles are ecologically more advantageous than single-use ones after just three uses. Nonetheless, we have not yet achieved CO₂ neutrality.
Do you see any government measures that could help establish reusability – should it be mandated?
I want to stress that while government support can facilitate the process and assist where there are implementation challenges, the ultimate decision depends on consumer demand. I'm not inclined to impose a reusable system on anyone, and that's not necessary. Our preliminary market research has shown that consumers are indeed interested in a reusable system in the wine sector. Now, it's up to us and other stakeholders in the supply chain to fulfill this demand.
Are there already partners in the German food retail and producer sectors?
Yes, there are.
And who are they?
I can't name them at this point. However, we have been able to secure important partners in the food retail sector who have committed to participating.
Disrupted supply chains
Let's shift to another topic: Is there still a shortage of glass?
I mean no offense, but my belief is that there hasn't actually been a genuine shortage of glass. Roughly nine months ago, a German brewery again claimed significant glass shortages. It seems to be a recurring theme. To claim a shortage in a market economy suggests a malfunction in the market dynamics, which can attract attention.
But didn't the war in Ukraine affect the glass market?
It's no secret that supply chains from Eastern Europe were disrupted, affecting the delivery routes. Those who relied on supplies from there had to try to compensate elsewhere. Consequently, we experienced a surge in demand. Similar to the previous situation with toilet paper, reports of glass shortages tend to drive up demand. However, there has never been a shortage in long-term supply relationships. There may have been a need to re-plan a few things in the short term.
To claim a shortage in a market economy suggests a malfunction in the market dynamics, which can attract attention.
So, have delivery times increased?
We don't have delivery times in our industry. In the glass industry, we operate on framework contracts and gradually fulfill them. For example, in the wine segment, it's known that demand increases towards the end of the year. Manufacturers anticipate this and build up inventory, which then diminishes. Everything is based on these agreements.
However, if there's an unexpected surge in orders, our ability to be fully flexible is limited. Market disruptions, such as panic buying, can mean that not everything is immediately available. To clarify: We have bottles in all colors and sizes available, but we are simply not able to react quickly to significant fluctuations in demand.
However, at the start of 2022, some of the largest wine producers expressed uncertainty about their ability to sustain production and meet demand throughout the year. Were they wrong?
Last winter, there were concerns about a potential gas shortage, which could have forced us to stop production. It's easy to forget, but there was real fear of an energy shortage. We, as an industry, prepared for this and developed contingency plans. Key questions included whether we could switch to alternative energy sources and whether these sources were sufficiently available.
It's completely understandable for producers to worry about consistent glass supply under such circumstances. Predicting the outcomes in such volatile situations was challenging for everyone. However, in the end, we managed to supply all our clients.
The costs of energy
Many producers were frustrated with the glass industry at the beginning of 2023. Suddenly there were price increases, even though energy costs had decreased. Why?
I prefer not to comment on pricing, but I can speak to the cost aspect. Gas and energy prices soared massively. This increase was so significant that it overshadowed everything else.
But that had already happened at that point.
It depends on when they purchased and fixed their energy and at what price. So, price increases might be felt later, even if the spot market is already declining. In hindsight, there's always someone who says a different purchasing strategy would have been better.
How do you see the consequences in the overall market?
Currently, energy costs are still three to four times higher than they were a few years ago. These costs have to be passed through the supply chains to the end consumer. Nobody can absorb such increases. If this isn't managed, it can quickly lead to significant economic difficulties. Let's be clear: some items will have to become more expensive for consumers. That's an unavoidable reality.
Recently in Italy, investigations into an alleged glass cartel were announced, albeit with rather vague accusations. Are you worried about such an investigation reaching Germany?
I have no such fears. I know our company and our practices well and can assure you that we don’t engage in such activities because we believe in a free market economy. Furthermore, I'd like to refer to our press release on this matter. It emphasizes that in Italy, we are fully cooperating with authorities, denying all accusations, and reminding that the initiation of investigations does not imply any wrongdoing.
The conversation was conducted by Clemens Gerke and Anja Zimmer.
Verallia is an international glass manufacturer headquartered in France. The group operates in twelve countries and produces approximately 17 billion glass bottles and containers annually, ranking it third in the world in terms of volume. It has seven production sites, including four in Germany, two in Russia, and one in Ukraine.
The German branch, Verallia Deutschland AG, with seven production sites, manufactures 5bn glass containers. In 2020, its turnover amounted to approximately €555m (ciraca $610m). Through its subsidiary, Verallia Mehrweg GmbH, the glass manufacturer is actively involved in the reusable wine sector.