Ardagh Glass Finance plc - Irish Stock Exchange

arise. Ardagh will continue to develop long-term customer partnerships and selectively pursue
business arrangements with customers that will provide it with growth opportunities.
• Careful Evaluation and Pursuit of Strategic Opportunities in the Medium and Long Term. Ardagh
will continue to consider acquiring businesses in the medium and long term in line with its
strategic objectives which include the realization of attractive returns on investment and the
generation of significant free cash flow. In addition, Ardagh may selectively explore business
opportunities for establishing operations in new markets to meet the geographic and other needs
of current and potential customers.
Glass Container Industry Overview
Glass packaging manufacturers supply containers for the food and beverage industries as well as
pharmaceuticals, toiletries and healthcare. While growth in the glass container markets has been
affected by the substitution of plastic and other alternative packaging materials, we believe that glass
containers will continue to maintain a leading position in the high-end beverage and food segments due
primarily to consumer preferences and the premium perception that glass offers. As well as aesthetics,
glass containers also provide stronger oxygen and carbon dioxide barriers for longer shelf life, better
functional qualities and have relative cost advantages in small size containers. Industry surveys
commissioned by Ardagh have shown that consumers associate glass packaging with quality products
and view glass as a hygienic, natural and taste neutral packaging material that is not associated with
hazardous chemicals. Ardagh’s surveys have also shown that consumers consider glass packaging to be
more environmentally responsible due to its high degree of recyclability. In addition, we believe that
manufacturers of food and beverages appreciate glass packaging’s capacity for greater product
differentiation compared with other packaging materials.
Advances in lightweighting technology has been a feature of the industry in recent years, delivering
supply chain benefits as well as decreasing the use of raw materials and reducing the use of energy,
improving the sustainable credentials of the material.
The glass container manufacturing industry is characterized by relatively high barriers to entry.
Operating in the industry requires high levels of investment and fixed costs (approximately 60% of total
costs are fixed). These costs, together with existing operators strong, long-term supply relationships,
make it difficult for potential new market entrants to secure a critical customer base and volume of
business. In addition, the European glass container manufacturing industry has historically been a stable
market associated with low growth and average returns, which is unlikely to attract new entrants. Other
barriers to entry to the glass packaging industry include the significant level of capital expenditure
required and specific manufacturing know-how that is not easily transferable from other industries.
The German Glass Container Market
In 2008, the market for glass containers in Germany is distributed among wine and sparkling wine
26.3%, food 26.0%, beer 23.2%, spirits 10.8%, soft drinks, including water and juice 4.0%, and others,
including the pharmaceutical sector 9.6%.
The German domestic market is driven by large retailers, with sales influenced by the choice of
stock of the retailer. Several German retailers are focusing on non-refillable glass for their beverage
product offerings, presenting a further growth opportunity in the German market. In addition, the
growth of private label sales is driving the growth of the food segment in Germany.
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