Dark glasses
INDUSTRY GEORGE MICHAEL
The Government, the IRC and certain theoreti- cal economists would do well to cast the oddi glance at United Glass. It would tell them something they seem to have forgotten: that size alone is no guarantee of good performance. A company can have a seemingly invincible hold on a market; it can rely on a steady demand for its products; it can turn them out in great volume; and in the process it can , get dangerously stodgy.
United Glass is fighting hard to rid itself of a sudden onset of premature senility, and one suspects that the cause of the illness was complacency—it thought it was too big to fail.
The company is. and has been for years, by far the biggest in the £70 million-odd glass- packaging market. It provides the bottles for a high proportion of staples—beer, milk, wine and other beverages—it has a useful financial and trading tic-up with Distillers, and in all it supplies about two fifths of the glass con- tainers used in Britain. Even its few big com- petitors were, until recently, only about a third or less of its size, and most were much smaller than that.
It is understandable, if not (to shareholders) forgivable, that a company in that happy position should treat the doings of its little rivals with contempt. United Glass had the Productive capacity and volume that are essential to low-cost glass production, and it had the name; it appeared to be the un- assailable market leader. So when the little men started to branch out with new glass- packaging ideas and production techniques, UG just huffed ponderously and stuck to its con- ventional lines.
Its first big public blunder was three or four years ago when Rockware Glass, with about 12-15 per cent of the market, launched a light- weight milk bottle. The bottle had several virtues—strength, potentials cheapness, weight saving—that are important in dairy economics. UG appeared to dismiss them with a pitying smile—but when it saw that Rockware was making impressive conquests with the bigger dairies the market leader had to rush to catch up.
Much the same thing happened with 'one- trip' (non-returnable) mineral bottles. And the small, flexible companies similarly led the way by devising new packaging styles or new types of glass for cosmetic, toiletry, baby food and other consumer markets. They went in for fancy lightweight shapes, new finishes, aggres- sive marketing and promotion, and uG was left struggling—or even, sadly, not competing. Saddled with a lot of oldish, uneconomic plant, technologically backward, and slow to change to meet new. demands, uG seemed to fare badly at almost everything.
In April 1966 UG sought the help of Owens- Illinois, the top glassmaker in the us. Owens took a one tenth share in uc in return for• advice on productivity and technology, and uq, seemed set for recovery. But before the year was out it faced a new challenge: Rock- ware took over Garston Bottle and Forsters Glass, increased its market share to 25 per cent, bought a lot of valuable technology in the process and gained a near-dominant stake in one-trip mineral bottles, glass-packaging's most promising growth area.
With the help of Owens-Illinois, United began to rationalise production. Seven furnaces were closed down, two new ones brought on stream. And earlier this year Mr W. F. Spbngier, Owens' former vice-president, cor- pbitate planning, was brought in as uG's ntnaging director. He has quite a job on his While United is sorting out its old plant and switching production between works it is losing nioney and sales. In the midst of that disrup- tibn ' it is having to match the prices of its fitter rivals, who are cutting margins pretty fine. And it is having to rally itself in the most detnoralising conditions: it made a pretax loss of £396,000 in 1967, although it hopes to be in tttofit again this year.
New capacity of the right, highly efficient type may improve United's fortunes. But ut may now have to risk losing part of its share of the market to concentrate on the most profitable lines, or those with the most promising future. In the meantime, Rockware has caused United still more discomfort by bidding for Jacksons Brothers, which would put its market share slightly above uG's, and by announcing that a new, £3 million plant due to come on stream in October is to be expanded by another £1.5 million by 1970.
It may be that Rockware is overstretching itself: the industry is already suffering from overcapacity. On the other hand, it will be well set for a huge increase in the early 1970s, which it obviously expects.
The contrast between the two is painful. Rockware is roaring ahead, United is struggling. UG was big, which is something the Government likes; and it produced in mass, which according to current theory is just the right thing to do. But while that worked well for many years, it meant, in the end, that it became inflexible and leaden-footed and resis- tant to change—a vulnerable condition into which any big corporation can drift in time.
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