Packaged product has taken on new importance during the pandemic for craft brewers, and cans have become the preferred packaged format for beer makers. According to this Brewers Association (BA) report, cans currently make up around 60 percent of independent craft packaged volume. That’s resulted in a concerning supply chain issue for beer makers. Here’s an example…
The Ball Corp., definite article required, is the world’s biggest manufacturer of aluminum beverage cans. Last November, The Ball Corp. sent a letter to its non-contracted customer base explaining that its new minimum order requirement for aluminum packaging was five truckloads per SKU for printed cans for non-contracted customers. That’s a minimum order of one million cans, folks. Plus, Ball announced it would no longer warehouse inventory on behalf of customers.
What does that all mean?
It will quintuple the minimum number of beer cans for non-contracted brewers. Required orders — at one time from Ball — will jump from 200,000 cans to one million cans. Even if craft brewers could order one million cans, where would they put them? From our previous post on the subject:
Only 3% of craft breweries are regional craft breweries (producing about 15,000 barrels per year). Even most regionals do not have the brand size or storage space for those minimums.
This new mandate will force non-contracted craft breweries to go through a middleman distributor. That will cost a lot more money. This quote from Westworld on the subject is enlightening:
“It triples our expenses,” says Denver Beer Co. co-founder Patrick Crawford. “It would be cheaper to buy five truckloads of cans and send four of them back to the recycling plant. … And it means that breweries are going to have to raise the price of a six-pack by 30 percent just to be able to stay in business.”
These third-party distributors will result in increased costs and could require the use of shrink-sleeve labels, “which are less recyclable and less popular among consumers,” noted this letter from U.S. Senator Ron Wyden of Oregon to The Ball Corp. on the matter.
That same letter urged Ball to at least pump the brakes. The initial deadline was Jan. 1, 2022, and six weeks was just not enough time for craft brewers to source alternative packaging for products. Well, now that deadline has been pushed back three more months. Thanks? According to this BA post:
Throughout the last month Brewers Association staff has been in contact with Ball and members of Congress to discuss ways to mitigate some of these changes and help ensure that they do not have an overwhelmingly negative impact on small and independent craft breweries. At the end of December, Chairman of the Senate Finance Committee Ron Wyden (Democrat-Oregon), sent a letter to Ball Corporation asking that, among other things, Ball consider a delay of implementation on direct orders from non-contracted customers.
Ball notified the Senator’s office and the Brewers Association that it will postpone until March 1, 2022 the implementation of their minimum order requirements for customers that do not have supply contracts with the company, with the caveat that they will not be able to provide those customers with delivery date assurances. Ball also stated that they are open to further engaging with brewers on the distributor supply option to offer additional sources of aluminum beverage packaging. Sen. Wyden issued a statement on Jan. 4 welcoming Ball’s decision to postpone.
Though we know that this does not fully solve the supply chain issues, this is a positive step forward and opens the door to continued dialogue with Ball. The Brewers Association will continue to look for ways to work with our elected offices in an effort to help our members who have been impacted by this and other supply chain issues.