Amcor Considers Sale of North American Beverage Business

AmcorPeter Konieczny, CEO and Director, gave a candid assessment of the company's North American beverage business during the packaging giant's earnings call on August 14. "Listen, I'm going to say it very loud and clear. We are not satisfied with the performance of the North American beverage business in the fourth quarter," Konieczny said. Given the poor performance, he added that Amcor is considering selling this part of its business. The company is also considering closing sites that are not aligned with its core portfolio.

Amcor announced that it willIn November, an $8.4 billion premium transaction was completed to acquire Berry Global. Konieczny stated during a conference call that at the beginning of this year, during the integration of these assets, the company conducted a strategic review of the combined portfolio, primarily focusing on "defining our core portfolio."

Focus on the core investment portfolio

"Looking ahead, Amcor will become the global leader in packaging and distribution solutions for nutrition and health consumer products. As part of this review, we have also identified businesses that are less aligned with our core portfolio," Konieczny said. "For these, we will explore alternative options to maximize value."

Disappointing financial performance—the combined sales of the two businesses declined by 1.7% year-on-year—attributed to several factors of Amcor.

Konieczny stated: "Firstly, consistent with the broader market data, our consumer and customer volumes in the flexible and rigid packaging sectors were weak quarter-on-quarter, particularly in North America."

Konieczny added that in addition to declining sales, earnings in the North American beverage business were also affected by operational challenges at several high-volume sites, resulting in increased costs. Konieczny explained that as the fourth quarter—historically the busiest season for this business—approached, the company encountered service issues. “This was related to out-of-region supply, which led to higher waste levels and increased labor costs for the business. That’s what happened. We are not proud of this,” Konieczny said.

Addressing Challenges in the Beverage Business

To address performance issues, "North American Beverages now operates as a standalone dedicated beverage business unit with new centralized management," Konieczny explained. "We are tackling operational challenges and will improve the efficiency of the entire network. Amcor's traditional specialty container business has now been integrated with the traditional Berry business in North America, confirming excellent product and technology compatibility. In Latin America, the traditional rigid packaging and flexible packaging businesses are being merged to create scale and synergies in the region."

Konieczny stated that in order to reduce costs and eliminate duplicate operations, Amcor has so far cut more than 200 positions and closed one site, approved the closure of four other sites, and "made good progress on further footprint actions."

Eliminate companies that are inconsistent with the "future core investment portfolio."

As part of the portfolio review, we have identified several companies with annual total sales of approximately $2.5 billion that, for one or more reasons, are less aligned with our future core portfolio," Konieczny further explained. "For these companies, we will explore alternative options to maximize value, which may include restructuring, partnership or joint ownership models, cash sales, or a combination thereof."

Konieczny admitted that the North American beverage business, worth $1.5 billion, belongs to the group. He added that the company will seek to strengthen this business over the next few quarters "before exploring alternatives." Konieczny added that there is no clear timeline for completion.