CCL Industries, the global labeling giant, held its Q1 2024 earnings call on May 9th, 2024. CEO Geoff Martin painted a picture of optimism, highlighting the return to volume growth in the consumer products industry and the robust performance of RFID technology in the apparel sector. But amidst the buoyant narrative, there lies a hidden gem, an underappreciated driver of growth that seems to have slipped under the radar of analysts – CCL Container.

While much of the call focused on the performance of CCL Label, Avery, Checkpoint, and Innovia, Martin casually dropped a bombshell: CCL Container, now silently tucked away within the larger CCL Label segment, has ballooned to over $300 million Canadian in revenue with EBITDA margins exceeding the corporate average. This seemingly offhand remark reveals a business quietly outperforming even the company's celebrated RFID growth story.

Here's why this is significant. CCL Container, specializing in aluminum bottles and aerosols, operates in a market experiencing secular growth driven by several powerful trends. Sustainability concerns are pushing brands away from single-use plastics, while consumer demand for premium, durable packaging continues to rise. Aluminum, being infinitely recyclable and possessing a premium aesthetic, finds itself perfectly positioned at the intersection of these trends.

Further, CCL's expansion of its Guanajuato, Mexico plant, specifically to handle the growth of CCL Container, signals the company's internal recognition of this burgeoning opportunity. This investment, capable of housing nine high-speed production lines, is a testament to CCL's commitment to aggressively capture market share in a rapidly expanding sector.

"While the exact EBITDA margins of CCL Container weren't disclosed, we can use some basic deductions to understand the potential magnitude of this hidden gem. CCL Label, the segment housing CCL Container, reported an operating margin of 16.5% in Q1 2024. Assuming the overall CCL Label segment, excluding CCL Container, maintains its historical operating margin of around 15%, we can estimate that CCL Container is likely operating at a margin closer to 20%. This suggests that CCL Container, despite contributing roughly 8% of CCL Label's revenue, could be responsible for almost 15% of the segment's operating income."

Furthermore, the current $300 million revenue figure likely represents just the tip of the iceberg. With the expanded capacity in Mexico coming online, CCL Container is poised for a significant revenue jump in the coming quarters. If we assume a conservative 20% annual growth rate for CCL Container, driven by the aforementioned market tailwinds and CCL's strategic investments, we could see the business reach close to $400 million in revenue by the end of 2025.

Projected CCL Container Revenue Growth

This potent combination of strong margins and robust growth makes CCL Container a formidable force within CCL Industries. While RFID may grab the headlines, investors shouldn't overlook the silent, yet powerful, engine of growth humming away in the form of aluminum bottles and aerosols.

This raises a crucial question: Why is CCL so quiet about CCL Container? Perhaps they see it as a strategic advantage, allowing them to quietly build a dominant position before the market fully recognizes its potential. Or perhaps they simply haven't realized the full narrative power of this compelling growth story. Whatever the reason, one thing is clear: CCL Container is a hidden gem with the potential to significantly contribute to CCL Industries' future success.

"Fun Fact: Did you know CCL Industries' labels can be found on over 20 billion products worldwide? From your favorite beverage to the shampoo you use, chances are a CCL label is somewhere nearby. And perhaps, soon enough, you'll be holding a premium aluminum bottle, crafted by CCL Container, further solidifying the company's presence in your everyday life."