Industry Becoming Truly Global As Glass Gets Quality Passport

Since the introduction of the float process in glass making, improvements in product pricing, quality, safety, versatility, and service levels have been of historic proportions. Whether glass is being produced by manufacturers in mature regions like Europe or America, or newly emerging and growing countries like Hungary, India, or Thailand, the casual consumer cannot detect a difference.

With the assistance of ISO 9000 standards, the days of requesting a "Belgian" mirror or "Japanese" quality have dissipated. Glass has exchanged its partisan citizenship and become a product with a worldwide passport. As a result, the past several years have brought new awareness and heightened sophistication to major purchasers of products made by the world's glassmakers.

Big manufacturers have met their match with the big buyers at many links in the glass making supply chain. Hence industry practices have trended toward looking like an auction of commodities. While this moment in time is merely part of a cycle, this sorting of the deck of players is but a true test of competitiveness.
Depending on the point of view, we are witnessing the proverbial glass that is "half full or half empty."

Will this be visualized as a problem or an opportunity? Will the industry strive to retain the comfort of turgid continuity or embrace the potential found within turbulent change? While business books and case histories are written retrospectively about how these questions are answered, we must live with our choices and decisions in real time.

For the first time, emerging markets constitute 50 percent of the world's economy. Economic strength is shifting to the Asian region, especially China and India. These economies are in transition to a more balanced position as understood in the West with their infrastructure investments and agrarian reforms beginning to take and hold shape. At this point, capital markets are emerging and intensifying, which will enable smoother adjustments over time. At a pace of 8 percent growth per year, China's per capita income in 2031 will be the same as the USA is currently, which makes it useful to take a closer look, especially when it comes to glass making.

In recent years much attention has been focused on the evolution of the Chinese glass industry. While the concept of return on capital has yet to be embraced by the Chinese, consolidation, elimination, obsolescence, and merger of their many independent players has already started and will continue to accelerate. Eventually we will witness the emergence of a global player from that region.

On a larger scale, the change in ownership of global glass players has not run its full course. Excluding the Chinese, the near future will see three to four well-established world-renown glassmakers departing.
Simultaneously, regional players will be acquired even as new ones emerge. While these particular events are unique to our industry, this should not be surprising when we look at the fact that of the leading companies listed in the original Fortune 500, only 3 percent are in existence today. While this may be merely a transitional phase (nearly 70 percent of all mergers and acquisitions fail to create long-term shareholder value) it is one more example of the dynamic change that we are undergoing today.

Those changes are global in nature. In our own backyard, North American glassmakers are in turmoil with nearly 50 percent of the industry's float lines and nearly 6 percent of the automotive capacity having recently or about to change ownership.

For those reasons as well as the erosion of normal profit margins from Pacific Rim competition, the merger and acquisition prediction of the past remains relevant today.

On a broader but smaller and less visible scale, secondary industries in developing countries will grow exponentially as pure distributors continue to fade in importance while processors will continue to emerge and flourish.

We see this more each year with our customer profiles throughout Asia and the Middle East. We also see the second-generation phenomenon in these regions where the next generation of younger, business-school trained descendants of the founders assume new responsibilities, bringing a desire for new business models, new products, systems, and offerings.

In Europe and North America, these fabrication trends will shift east and south respectively. Unfortunately, many of the recent changes in our downstream industries have been caused by financially driven acquisition and consolidation strategies, especially in the window and fabrication businesses. For some, the concept was merely to amass purchasing power. Sadly, they are missing the challenge of implementing a line of attack that uses this newfound critical mass to create value-added products and services for customers.