Its Black and Red for Owen-Illinois While the World Goes Green - Analyst Blog

While green, yellow and blue are the dominating colors of the FIFA World Cup in full flow in Brazil, Owens-Illinois, Inc. ( OI ) has decided to go black and red instead. Owens-Illinois is now beefing up its black-glass production capabilities worldwide and will also showcase its newly developed red glass to the world's largest food and beverage producers.

According to Owens-Illinois, black glass projects a premium image while ensuring that light won't penetrate the bottle and degrade its contents. SABMiller plc (SAB.L) has already used Owens-Illinois' jet black bottles for its new Miller Fortune premium beer. The company has facilities in Brazil and Australia, New York and Atlanta, and Ottawa and Scotland to manufacture these bottles.

On June 13, Owens-Illinois announced the official opening of its $35 million Innovation Center in Perrysburg, OH. This will allow the company to experiment with new products and processes in a controlled production environment without affecting its regular production lines for testing. What would have otherwise taken months or even years can now be done in days or weeks, thanks to the brand new Innovation Center.

The combined R&D and pilot plant facility became operational in Sep 2013 and has already churned out more than 40 sample bottles for customers and internal development purposes. The line has also worked with four colors of glass. Previously, simple design changes on a bottle took weeks to be run. Now with the help of streamlined processes, powerful modeling capabilities, 3-D printer and the help of the Innovation Center, Owens-Illinois can run multiple design changes in a single day.

The facility spanning 24,000 square feet consists of a 20 metric tonne oxy-fueled furnace, two production lines and inspection equipment. While one line produces sample bottles and trials for new products, the other is solely dedicated to R&D and is being used to develop new technologies and processes for melting and forming glass.

The development of red glass is one of the major triumphs of this Innovation Center. The color red provides even more UV protection than amber glass, which is the industry standard for UV protection. Beer and dairy industries, whose products are susceptible to UV damage, are sure to benefit from red glass. Owens-Illinois' red glass would also be considerably cheaper than conventional red glass made with gold.

Owens-Illinois' second-quarter results are expected to get a boost from the World Cup, which will see demand reaching peak levels. Moreover, new concepts in glass production and technologies could bring a radical change in the process of melting and forming glass at this premier glass bottle maker. Currently, no other manufacturer has the capability to produce red glass, giving Owens-Illinois a distinct competitive advantage.

Their black bottles too will see increasing traction. The market for distilled spirits is growing rapidly in the U.S. and new and interesting bottle types are more than welcome for the marketing of spirits. The huge demand for these bottles will help the company to recover the higher manufacturing cost associated with it.

Owens-Illinois currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the retail sector include Crown Holdings Inc. ( CCK ), Sealed Air Corporation ( SEE ) and Graphic Packaging Holding Co. ( GPK ). While Crown Holdings carries a Zacks Rank #1 (Strong Buy), Sealed Air and Graphic Packaging hold a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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