These five packaging companies pack a punch with top investors

Nov 30, 2023

They are plugged into some seriously powerful structural growth trends, though you wouldn't always know it from the performance of their shares. At first glance, packaging and containers may not appear a sector to set investors’ pulses racing, but you don't have to look far for potential excitement.

Predominantly producing packaging made from cardboard, plastic or glass, these companies have been exposed to some particularly dynamic forces: from the growth of fast-moving consumer goods transported to supermarkets, retailers and restaurants to shipments of medicines or fragile healthcare products; and even to the explosion in online shopping for home delivery. Everything ordered has to be packaged or wrapped in something.

These businesses have also long been at the heart of moves towards sustainability: some own their own paper mills and recycling operations, others are developing more sustainable plastics, and others still are investing in creating zero-carbon glass.

The five companies on the shortlist for the Emea packaging and containers category in the Citywire Elite Companies Awards range from a UK-headquartered business that produces corrugated cardboard boxes and has its own waste management arm to a France-based manufacturer of glass bottles for food and drinks.

The winner will be unveiled at a gala event at the London Stock Exchange on 21 June.

Source: FactSet. PE = price-earnings ratio. PE and dividend yield based on 12-month forecasts

Find out more: Citywire Elite Companies Awards

DS Smith (GB:SMDS) is one of two companies on the shortlist that is listed in London and a constituent of the FTSE 100 index of blue-chip stocks. The group was founded as a box manufacturer in 1940 by two cousins, both named Smith. Having listed in the 1950s, DS Smith grew rapidly, including through acquisitions, and it now operates in more than 30 countries and employs around 30,000 staff.

The biggest part of the group's businesses lies in producing cardboard packaging for consumer goods, including protective packaging for the delivery of products ordered online through the likes of Amazon. It also makes heavier-duty industrial packaging as well as paper products and display materials for point-of-sale promotions.

It operates its own recycling and waste management business, including for plastics, and offers packaging services. Just over three years ago, it sold its plastics division as part of its drive to concentrate on sustainable packaging.

Headquartered and listed in Switzerland, SIG Group (CH:SIGN) specialises in aseptic packaging, or the cartons, pouches or bags-in-a-box that house pre-sterilised goods, from milks to medicines. As well as the packaging, it also offers to fill them and has a digital printing service to spray paint them.

In the main, SIG makes packaging for food and drinks, including plant-based milk alternatives. The company says its products are produced using 100% renewable electricity and are certified as made using sustainable forestry. The group has been listed since late 2018.

Vidrala (ES:VID) is one of two companies on the shortlist whose specialist market is glass. This means the company, founded in Spain in 1965, is a growing beneficiary of the return to favour of glass bottles as an alternative to plastic. Glass can be endlessly reshaped, is 100% recyclable and can be made using fully recycled raw materials. Historically, demand for glass bottles from pubs, bars and restaurants has also been stable, effectively linked to fluctuations in GDP, although the sector took a beating when lockdowns came into force during the pandemic.

As well as investing in new production capacity and expanding into fresh markets by taking a stake in Brazilian company Vidroporto, Vidrala is pushing hard into sustainability, both by developing a net-zero carbon bottle, and by ploughing capital into energy efficiency. This is in part a necessity because making glass is extremely capital and energy intensive – its furnaces are in permanent operation and have to be heated to very high temperatures.

Having already invested in wind and solar power in order to electrify its glass factories and make them more energy efficient, Vidrala is ramping up its spending on green hydrogen, including building a new hydrogen furnace in Elton, Surrey in the UK. When it comes on stream in 2027, the facility will mark the first scale production of net-zero glass bottles worldwide.

The group says it should be able to cut carbon emissions at the Elton site by 90% using green hydrogen and other renewables. It plans to use carbon capture and storage to suck up the remainder. By 2030, it should be capable of producing 200 million net-zero bottles under a contract with drinks giant Diageo.

Read more: Cheap, green Vidrala's ‘outstanding’ growth

Smurfit Kappa (GB:SKG), another London-listed blue chip, is also quoted on the Irish Stock Exchange. The group was founded in 1934 as a manufacturer of cardboard boxes and other packaging for the Irish market, but was created in its current form in 2005 through the merger of Ireland's Jefferson Smurfit with Kappa Packaging. At the time, Kappa was Europe's biggest maker of corrugated and cardboard packaging.

Like DS Smith, Smurfit Kappa produces packaging for retailers, consumers and industry, including supplying the e-commerce market. Similarly, it also makes point-of-sale displays, as well as filling packages and producing bags-in-boxes.

The group has 355 production sites located in 35 countries, from Europe to the Americas, including 35 paper mills, which help it to better manage its input costs. It employs 48,000 people. Unsurprisingly, Smurfit Kappa is big into sustainability and the circular economy. Not only does it employ sustainable forestry techniques, but the majority of its raw materials are recycled and it has successfully reduced its water use and waste creation.

Making glass bottles is also the speciality of Verallia (FR:VRLA), the France-based business that is the world's third-largest producer of glass packaging for the food and drinks industry. Founded in 1827, the group operates 34 glass-making factories in 12 countries and churns out more than 17 billion bottles and jars each year.

Listed in 2019, Verallia's main market is for drinks. Last year, it bought Allied Glass in the UK for an enterprise value of roughly £315m – Allied makes premium bottles, including for craft gins, for the domestic market.

Like Vidrala, the group is committed to sustainability and in particular is working on increasing the amount of cullet – or externally sourced recycled glass – that it uses in the manufacturing process. Not only does this increase the circularity of the process but it also reduces the energy intensity: Verallia has a target of using 66% cullet by 2030, against 55% in 2021.