Second booze ban demands a lot of bottle from glass company

Among the suppliers to the liquor industry that have been adversely affected by the unexpected ban on liquor sales is Isanti Glass.

Isanti recently purchased the bottling operations of a division of Nampak for R1.5bn. Isanti is owned by Kwande Capital and SABSA, the holding company of South African Breweries.

The company's clients include SAB, Heineken, Distell and Namibia Breweries, as well as Pioneer Foods and Tiger Brands.

Shakes Matiwaza, the interim MD, said this week that 80%-85% of the glass bottles it produces are for the alcohol industry.

Most glass manufacturers rely on this industry as bottles for the fast-moving consumer goods market make up only about 15% of sales.

The ban on alcohol sales during level 5 and level 4 of the coronavirus lockdown had quite an impact on the business.

Isanti chose to "ride the storm" and spoke to its financiers and banks for facilities to allow it to keep production on schedule and not retrench any staff.

The ban, after all, "wasn't going to last forever", said Matiwaza.

As soon as the alcohol ban was lifted on June 1, Isanti aggressively continued with bottle distribution.

"We were doing well and were looking forward to a recovery," he said.

The subsequent, unexpected ban on alcohol sales, announced last Sunday, "put a spanner in the works".

"I'm saying this in a guarded way, we haven't had to retrench so far," said Matiwaza.

Even so, he has placed 150 of the company's 480 employees on forced leave.

He said the warehouse is full and the business currently has a lot of working capital tied up in products and packaging materials.

"We also have high fixed costs," he said, such as three furnaces that run around the clock and cannot be shut down.

This week Matiwaza slowed production by two-thirds. He said he expects that the business will not be making the 210,000t of bottles it was expecting to this year.

Isanti has reduced its production from nine lines to three, with only one line for each of the three furnaces in operation.

Matiwaza said the business supports the recycling glass industry but "we can't buy from the small guys".

He said he doesn't see options to change the company's business model.

Rather, the company will have to wait for the ban to be lifted before it can recommence production at full capacity.