Get craft beer to consumers? Brewers find it’s no can do
A nationwide shortage of cans is the latest threat to craft beer.
Ball Corp., the world’s largest manufacturer of cans, told investors this week that the U.S. market alone is short 10 billion cans in 2020, according to Beer Business Daily, a trade publication.
When demand is this high for cans, only a few beverage producers get priority. The big guys (Pepsi, Coke, Anheuser-busch, Miller-coors) saw a shortage coming early on and began hedging their bets, shoring up contracts with canning giants but also negotiating contracts with smaller distributors.
“In times of shortage, there are no antitrust violations with privileging your largest customers first,” says Bart Watson, chief economist for the Brewers Association. “Most smaller brewers buy indirectly from brokers, and that means they are lower down on the list. It’s nothing nefarious, but it’s one of the challenges small companies face.”
Duclaw Brewing Co., a midsize brewery in Baltimore, has run out of cans every week since late July. It receives can shipments sporadically from its distributor Gamer Packaging, according to Duclaw’s logistics manager Daniel Iman, and has been told there won’t be a steady supply until next August.
Paula Gamer, president of Gamer Packaging, says the shortfall is national and adversely affects can manufacturers, distributors and brewers alike.
“We could sell 200 million more cans between now and the end of the year if we
could get them,” Gamer says. “Unfortunately, we’re having to turn away new customers because we have to take care of existing customers first. And none of our manufacturers are taking new customers through the end of the year.”
Scott Mccarty, director of strategic communications at Ball Beverage Packaging North and Central America, says the shortfall is a confluence of a number of trends.
Hard seltzers experienced explosive growth as a category and specifically in cans. Soft drinks and still and sparkling waters have seen tremendous growth too, he says, with marketers shifting their packaging mix toward cans and away from single-use plastics.
“The peak summer season, with a heat wave in much of the U.S., also contributed to that high demand. And COVID-19 added further to demand, as consumers bought more beverages in aluminum cans for home consumption,” Mccarty added.
Ball has expanded domestic capacity by installing two new lines in existing facilities and building additional plants in Glendale, Ariz., and Pittston, Pa., that will provide at least 6 billion cans by the end of 2021.
According to Can Manufacturers Institute President Robert Budway, can makers are expected to import more than 2 billion cans in 2020 from their overseas facilities to meet customer needs. And can manufacturers overall expect to have to add the capacity to produce 12 billion more cans by the end of 2021, Budway says.
Last year, many beverage categories pivoted to cans, but Lester Jones, chief economist for the National Beer Wholesalers Association, says the pandemic has pushed what was a natural evolution to a crisis point.
By the end of 2019, 60 percent of the beer market was in cans, he says. For years, craft beer makers had preferred bottles, which are perceived as “fancier” and more suited to higher-end restaurants and bottle shops.
“But as soon as craft beer went more mainstream, in grocery stores and convenience stores, cans became the preferred package. They are easier to stack and ship, and they fit into more occasions — going to the beach, or a sporting event or concert,” he says.
So, 60 percent of beer came in cans, 30 percent in bottles and 10 percent was draft sales in breweries, bars and restaurants. It’s that 10 percent that became a problem.
“The lockdown in March took the keg part out of distribution,” Jones says. “That’s one in 10 beers. Brewers naturally found themselves turning to cans, which put pressure on the marketplace.”
Brewers turned to cans in recent years because they are a penny cheaper per container than bottles, they’re lighter empty or full, and they store a bit tighter. But Watson says beer drinkers’ enthusiasm for cans during the pandemic is for another reason: Because people are trying to go to the store less, large-format packaging is more popular and “you can carry a 30-pack of cans, not a 30-pack of bottles.”
The can shortage is set against a backdrop of on-again-off-again aluminum tariffs and quotas, but Watson says the bottleneck is not the aluminum supply but rather can manufacturing capacity.
Some small brewers have adopted a novel strategy of buying up empty cans from other brewers’ seasonal beers that didn’t sell well, misprints, brands that went out of favor or leftovers from a package redesign, then “resleeving” the cans with a new shrink-wrap label over the top of the old one.
With the future so uncertain — a vaccine could mean restaurants and bars refill and draft beers resume — Watson says “making
huge capital investments right now isn’t smart” and that many breweries are on shaky financial ground already.
But for breweries like Duclaw Brewing Co., a pivot back to glass bottles may be a survival strategy.
“We have a bottling line that we were retiring,” Iman says. “Our hope was to sell it, but that piece of equipment will be back in use. We will use a new canning line and old bottling line.”
For a brewery like 3 Daughters Brewing in Florida, producing 16,000 barrels of beer a year — which makes it regional, but not small — installing a bottling line is a pipe dream.
“That’s about a half a million dollar investment,” chief executive Mike Harting says. “That’s just not an option for us.”
During the pandemic, he says, his draft sales fell to zero and his can sales went up 100 percent. He’s been ordering truckloads of 204,000 cans at roughly $22,000 each. For now, the company in Texas from which he buys lids is on an eight-week wait, up from two weeks.
In September, the Beer Institute, the Brewers Association, the National Beer Wholesalers Association and the American Beverage Licensees predicted more than half a million jobs supported by the U.S. beer industry will be lost by the end of the year due to the pandemic, including thousands of brewing and distributing jobs.
The Bureau of Labor Statistics, while showing rapid job growth over the past several years among workers at breweries, wineries, and distilleries, shows a decline of 50,000 jobs between March and April alone.
“Small businesses sit at the back of the line,” Harting says. “It will be a reason some brewers go out of business.”