Can Shortage Update

Overview:

The “candemic,” was a term coined to represent the crippling effect of an aluminum can shortage on the retail beer industry, which coincided with increased demand for packaged beer as a result of the COVID-19 pandemic.  The “candemic” of 2020 rolled over the packaged beer industry leaving breweries without the ability to package their product for consumer sales. Ball Corp. estimated there was a shortage of about 10 billion cans in 2020, enough to cause considerable disruption to the packaged beer industry.With the COVID-19 pandemic shutting-down in person establishments, breweries had to alter their business model from partially can sales and partially on tapin-house beer to relying almost completely on can sales. It was particularly threatening to smaller craft beer operations, who lacked large contracts with can suppliers. As can supplies dwindled, can manufacturers prioritized their contracts with larger brewers leaving the smaller craft operators with plenty of product, but frustratingly few ways to get it to a non-draught market. To be clear, there was no shortage of beer, just a shortage of methods to package the beer for home consumption. Without the all- important access to cans stalled,brewers were left scrambling to find alternatives. Bottles were a possibility, but glass is pricier to ship, more susceptible to the negative effect of light, andfrankly just not as sought after for consumers as are cans. This situation led breweries to dip deep into their cash reserves to place larger can orders in an effort to meet higher prices and new demands for larger shipments, which were required by the can manufacturers.  Brewers also incurred the additional costs of warehouse space in order to store the extra cans, because distributors were not granting as much flexibility with sales or storage of cans anymore.Again, this particularly affected small breweries, who might not have as much free flowing cash, and also don't have big contracts with can distributors,because they normally place smaller can orders through a middle man. The overall cost of cans have gone up 50 to 100% due to the dwindling supply and more expensive shipping costs. The beer industry is not alone in feeling this pressure, since cans have become an increasingly popular method for packaging a variety of beverage recently. Cans are increasingly used to package seltzer and coffee, and these beverage corporations outside of the beer industry have also been affected. Coca Cola, for example, has gotten rid of their 200 lowest selling brands because of the limited supply of cans for packaging. This shortage is becoming the biggest limitation to growth of breweries. During the pandemic, alcohol sales have increased sizably, which means growth for beer companies, but they can’t grow if they don’t have the supplies to package the beer. This may cause some craft breweries to shut down if they can’t find a way to solve this situation. 

 

Update:

Can distribution companies are working on fixes that should alleviate the shortage by late 2021. Robert Budway, the president of Can Manufacturers Institute, says they are working to get 2 billion cans from their overseas facilities. This is a good start, but will not be sufficient to eliminate the shortage, and companies are expected to continue to suffer from longer wait times through 2021. Lead times used to be about 6 weeks and now they are 12 or more weeks. Can manufacturers are also gearing up to produce an extra 12 billion cans by the end of the year, which is great, but this won’t necessarily provide needed supplies in the near term. For the time being, breweries have been resorting to creative ideas. Some are dusting off old boxes of cans printed with old brands that they were storing and labeling over those cans with the new label. Some, like Sun King Brewery, dipped into their cash reserves to purchase about a million units of previously printed cans, bright cans and cans with obsolete designs with a plan to label over these cans.Although this adds extra time and is more difficult to do, it is a smart idea to try to combat the shortage and survive. Sun King rented a warehouse this winter to store these units in their slowest months, in order to have a reserve to tap into in their busy summer months, if needed. Another adjustment companies are making is to use 16 ounce cans rather than 12 ounce ones. Even though 12-ounce cans are preferred, 16 ounce cans are more available currently,and desperate times call for flexibility!  Hopefully, with vaccines now available, we will see a day in the not-too-distant future when tap rooms and breweries reopen for in-person sales, but until then the industry is finding innovative ways to survive the current candemic.

The bright cans breweries are getting to label over due to shortage

 

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