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Leslie Van de Walle has a cold. Rexam’s chief executive apologises and purposefully takes a seat at a distance, across the table. The scattered array of Rexam products in front of him is reminiscent of a teenager’s dressing table. He leans forward to discuss the challenges faced by the global metal and plastic packaging manufacturer.

“I think we are living in a very strange world where we are in for at least two years of high input cost environments,” he says, forebodingly.

Paris-born Van de Walle joined Rexam in February 2007, replacing Lars Emilson as chief executive of the firm, which employs 23,500 people in more than 20 countries, and counts Coca-Cola and Red Bull as major customers for its beverage cans. He moved to the position from Royal Dutch Shell, where he was executive vice president of global retail.

However, his first year was marred by a weak dollar and high commodity prices, illustrated this month by the rise of oil prices above the $100-per-barrel mark, and pre-tax profits fell by 3% in 2007 to £260m.

“I used to be in the oil business and I was always being asked when oil prices would fall. My answer at that time was that if I knew what the price of oil would do, I would not be working. I would be a billionaire,” he chortles. He now faces the same situation with aluminium prices.

As a company, Rexam splits oil-related costs between resin (£300m), energy (£120m) and expenses from freight and warehousing (£180m). At the end of 2007, the company tendered 20 freight contracts across its US businesses and saved £1m.

In the US and South America, Rexam passes on all of these cost increases automatically to the customer through price rises, but in Europe this has traditionally only been applied to global players. Consequently, Rexam has been forced to wait until contracts came up for renewal, after three years, before raising prices. Only 35-40% of contracts were up for renewal in 2007. However, in 2007 the company was able to increase automatic pass-through by 50% in Europe for 2008, in line with the rest of the world. The rest was hedged.

But cost is not always the defining issue when making decisions, claims Van de Walle. Rexam has been very proactive in its can business in moving from steel to aluminium. Aluminium costs the company £1.5bn a year, compared with £60m for steel. While the European can market is traditionally 40% steel to 60% aluminium, Rexam uses 20% steel and 80% aluminium.

“The reason we have pushed aluminium, even though it is more expensive than steel, is because it is more environmentally friendly,” says Van de Walle. “It is much more recyclable.” He highlights one of the group’s can manufacturing plants in Brazil, where the time between the manufacture of a can and its recycling into another can is just 60 days. Meanwhile, in the UK, aluminium can recycling rates reached just 48% in 2006. The issue, argues Van de Walle, is that people just throw cans away without thinking.

Taking the lead
Anders Linde, director of external and environmental affairs at Rexam and chairman of the Industry Council for Packaging and the Environment (Incpen), has been given the task of tackling recycling issues at Rexam. He leads a small team of environmental experts that help the UK government with its recycling initiatives. Rexam does the same at European level, through Beverage Can Makers Europe (BCME), and in the US.

“It’s true that the environment is an issue and it’s true that carbon emissions are too high,” says Van de Walle. “I think packaging gets the most visibility, though it is one of the smallest contributors to it.” Emissions from aviation and cars are, in his opinion, much more relevant targets for the environmental debate. “The packaging industry is trying to find the right balance between good corporate citizenship and contributing to the reduction of carbon, while also putting the debate at the right level,” he says.

At plant level, the company is taking pains to reduce CO2 output and oil and aluminium consumption by reviewing its supply chain. Can weight has been reduced by 30% over the past two decades, while the new Fusion aluminium bottle is one sixth of the weight of a standard 33cl glass bottle. Longer term, the firm is looking into biodegradable plastics, but Van de Walle says: “The issue there is you can’t be much ahead of your consumers because if people don’t buy it then it won’t be used.”

Innovation has always been central to the can business. Most recently, the one-litre Baltika beer can has driven sales in Russia, where Rexam finally completed the acquisition of Rostar in January. In emerging markets, Rexam beverage cans has sites in Brazil, Russia, India and China, where it has one plant and 3% of the market share. “We are in China to learn and watch the market,” explains Van de Walle. China is a very difficult market, he says, adding that there is lots of local competition, very low prices, lower quality and an uneven playing field between local and international players.

Innovation is also strong within the burgeoning plastics business, which was boosted by the acquisition of Owens-Illinois Plastics last June, and Van de Walle is strongly championing ‘senior-friendly’ packaging. “I said to my guys, now that I am over 50 I want things that I can open. Things were too small for my big fingers,” he says.

Senior-friendly packaging is not something you would have seen from a traditional manufacturing company, he adds. He likens Rexam’s plastics business to an FMCG business where you need to be good at manufacturing, selling, innovating and marketing all at the same time. “Giving it a more consumer aspect was the intention of the board,” he says, “and I think it was the right time for Rexam.”

Brand allegiance
Despite coming from a background of super brands, such as Danone and United Biscuits, Van de Walle still has time for smaller firms. “We have to have a balance of today’s giants and tomorrow’s giants,” he says.

Arizona Iced Tea, for example, is the fastest-growing brand in the US. Rexam started with the firm when it was very small and has built a long-term strategic partnership as its beverage can manufacturer.

“Good customers tend to remember when you’ve helped them in tough times and these are valuable customers,” says Van de Walle, evidenced by the display of brands on the table in front of him. While Rexam’s executive may have the sniffles, it is clear that the company is as fit as a fiddle.

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FROM BRANDS TO CANS
February 2007 succeeded Lars Emilson as chief executive of Rexam

2000-2006 executive vice president of global retail, Royal Dutch Shell

1994-2000 moved to London and became chief executive of United Biscuits

1984-1993 joined Cadbury Schweppes and held a number of senior international positions in the soft drinks business

1979 graduated from the Hautes Études Commerciales, Paris, and started with Danone

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VAN DE WALLE ON...
Golf “I’ve been playing golf for 40 years, but I do not play as well as I used to. It’s my hobby and, like everybody else, it is my first priority after family and business. I find the time to play once in a while. It’s my way of getting rid of pressure so it’s good for my health.”

Wine in cans “On the one hand at Rexam, we are delighted to put wine [such as Black Tower, right] in cans and cans are great for sparkling wines and wines that you want to keep fresh, especially in hot countries. That’s where my conflict of interest comes in; I’m a conservative Frenchman, so I also like my wine in a glass bottle or a decanter. I think there’s a need for decanted wine when you are at home with friends by the fire, and I think there’s a need for this type of packaging when you are by the beach. I’m sure it will internationalise, because this is a very efficient packaging format to export.”

True Lies “This was the first movie that I saw when I came to the UK. It reminds me of that day with my family. Generally, I like action movies.”

Rexam’s relationship with Red Bull “It took 20 years for Red Bull to get where it is. We started on a small scale and now it is paying back. We are delighted to get the chance to support them and I think they’ve given us back more than our fair share of the success in keeping us as their strategic partner for a long, long period of time.”

The Owens-Illinois Plastics purchase “In the past two years, before its acquisition by Rexam, the O-I business didn’t grow and its margins went down. The major reason behind that was that in 2004 they sold some of their healthcare business to Graham Packaging. Therefore, from the numbers, the analysts were seeing volume decline and margin decline, but we saw that the underlying business was doing better.”

The retirement of Rolf Börjesson, Rexam’s chairman “Rolf has built a very strong legacy. Working with him for these 17 months has given me the opportunity to download his huge knowledge and insights of the industry and of Rexam.”

On a challenging 2007 “2007 was more difficult and challenging than we expected. On top of that, to make it more exciting for me, there was a strike in the US in April for four weeks, in nine plants, so that was an ‘interesting start’ as you say in English.”