Crown Cork & Seal In 1989 Case Solution

1. Industry Structure

The metal container industry of US was famed for producing metal cans (steel, aluminum or both), crowns and closures by five dominant firms that made up a market share of almost 61% in 1989. Over the years, the pricing of these products had been becoming overly competitive due to increasing prices of aluminum, rising in-house production by brewers, proclivity towards using glass and plastics, shrinking clientele due to the consolidation of beverage companies, etc. The customer base comprised mainly of packaged beverage companies, soft drink bottlers and brewers. The demand by these customers was elastic mainly due to a relationship with a number of suppliers who could be easily substituted for inefficient services and high process. 

The distribution of these cans was done in a way to cut down transportation costs highlighted by the bulky nature of the product by locating the production facilities near the customers. The industry had been slowly inclining towards aluminum cans instead of steel due to its lighter weight and lower price. The aluminum used for production was supplied by the three largest aluminum producers: Alcoa, Alcan and Reynolds Metals. The metal can industry had been experiencing slumps in growth because of which many of the market leaders had diversified into glass containers, pet foods, food canning and other non-packaging business such as insurance and energy services.