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Published in Food/Agribusiness
Facing widespread can shortages, West Michigan breweries weigh packaging options COURTESY PHOTO

Facing widespread can shortages, West Michigan breweries weigh packaging options

BY Sunday, November 22, 2020 05:15pm

Heading into 2021, Brewery Vivant has worked with its distributor to get three different six-pack placements into Meijer Inc. stores on a statewide basis. 

It’s a move that should be exciting for the Grand Rapids-based brewery, but currently it has CEO Jason Spaulding a little stressed out.

“Meijer has been a great partner and they’re trying to help out local breweries and that’s huge. We’re just hoping we can fulfill,” Spaulding said. “We’re going forward as if we can. I’m sweating a little bit, though.”

Giving Spaulding cause for concern is a nationwide aluminum can shortage sparked by, among other factors, the COVID-19 pandemic, which has drastically cut down on beverage consumption at bars and restaurants as consumers shift their consumption to packaged beers at home.

Local breweries of all sizes are starting to feel the pinch of the diminished can supply, and it has made it tough for establishments like Brewery Vivant to anticipate whether they will have adequate supplies.

“Up until this moment, we’ve been able to locate the cans we need so we haven’t had to cut any orders or anything,” said Spaulding, whose brewery was one of the first in the Midwest to start canning. Brewery Vivant now exclusively uses cans for its beers.

“The big issue we’re having right now is the lead time to get cans is too long,” he said. “Craft beer moves at lightning speed. Brands come in and out of fashion so quickly. We’re looking to launch some new products for 2021 and no one can actually quote you on what the lead time is or if you’ll even get cans.”

Since it opened in 2010, Brewery Vivant has packaged its canned beers exclusively in 16-ounce cans, but the company is planning a major change to coincide with the Meijer shelf placement. The brewery plans to can year-round brews in the traditional 12-ounce size, as it continues to package its speciality beers in 16-ounce cans.

“Moving to 12-ounce cans has been in the works for a year because it takes that much planning, but I don’t 100 percent know if we’ll be able to get those cans by March,” Spaulding said. “We’re banking our entire year on this switchover — I’m spending money on our equipment to accommodate 12-ounce cans. That’s where it really leaves us in a lurch.”

Not going away

Rumblings about an aluminum can shortage have loomed over the industry for years, and intensified as the COVID-19 pandemic took hold and shut down many brewpubs around the country. Along with increased at-home consumption of all different beverages, demand for cans has also gone up because of the increasing popularity of energy drinks and especially in the exploding $3 billion hard seltzer category.

In fact, in mid-summer, MiBiz reached out to a handful of local breweries to gauge whether the shortage was profoundly felt in West Michigan, and all of them reported little to no disruptions in their operations.

This time around, the story is far different as breweries of all sizes begin to scurry to procure cans.

“In the last couple of weeks, I’ve started to see breweries who didn’t think they had any issues and were told they’re not getting any cans until January,” said Scott Newman-Bale, CEO of Bellaire-based Short’s Brewing Co. LLC and past president of the Michigan Brewers Guild.

“In fact, today, I’m out delivering a couple partial pallets of cans to a couple local breweries just to keep them operating,” he told MiBiz when contacted in mid November. “They called up and needed a favor and I said yes.”

Given all the industry intelligence that Newman-Bale has read, he expects the industry is poised to be short 10 to 15 billion cans next year.

A report by financial services company Credit Suisse noted that North America’s can supply is essentially sold out until 2025-26, when it might finally stabilize.

Short’s Brewing Co. had the foresight to stock up on cans, but even while the company remains in a good position now, Newman-Bale said he doesn’t know what lies ahead.

“I’m OK for a period of time — I don’t know how long that period of time is,” he said. “I am depleting my can inventory, but I do have a gut feeling that I should be OK until the middle of next year — quarter two or quarter three — and then I’m in trouble. I’m better than most but not immune.”

Short’s has a history of bottling beers, and with the squeeze on cans, Newman-Bale always has the option to fire up those lines.

“There are a lot of affordable bottling lines — it’s what we used to do,” he said. “We still have our bottling line. The goal of this year was to push heavier into cans. That changed with COVID. We’re still doing it, but we’re not being aggressive about it.”

Weighing options

Grand Rapids-based Founders Brewing Co. packages around 60 percent of its products in cans with the remaining 40 percent split between bottles and kegs. In line with fellow local breweries, Founders COO Brad Stevenson said that the brewery started to finally feel the supply chain squeeze late in the summer.

“We contract multiple years in advance and have rolling forecasts,” he said. “We don’t get immediately affected. The tightening early in the summer, we made it through most of the summer, and started to be impacted in August. If you’re smaller and buying cans one pallet at a time from a reseller, you probably felt the impact much earlier, but we all feel it now.”

“What it meant for us, in the short-term, we’re not able to get everything we need,” he added. “In the long term planning, we’re being told this will carry forward for a while and simultaneously prices are going up. So it has all the impacts.”

Founders sources its cans from Broomfield, Colo.-based Ball Corp. (NYSE: BLL), one of the world’s largest beverage packaging companies. Ball has advised the company that the aluminum can shortage will be an issue through 2021 and 2022, Stevenson said. He noted Founders also has been in contact with glass suppliers, who indicated that breweries are moving quickly back to bottles.

While the shortage has left some breweries pondering alternatives to both cans and bottles, there is no break-through innovation poised to emerge.

“Unfortunately, the first alternative you go to is plastic and no one is excited about that — cranking out more plastic containers,” Stevenson said. “There are people looking at — Nestle I think is one  that is looking at trying to make a plastic bottle out of biodegradable non-plastic. But they’re not at the point where they can put alcohol in it yet.”

If a brewery’s goal is to compete for prime real estate in retail environments, cans are the way to go, according to Steve Smith, a craft beer specialist at Grand Rapids-based beverage distributor Henry A. Fox Sales Co. This makes procurement of cans even more crucial.

“While I personally still love a good (bottled beer), I know in general that the can is king. We’ve been saying that for many years now,” said Smith, who has spent enough time in the industry to witness the mass departure from bottles in favor of cans.

The only remedy for the shortage is to increase the supply, an effort that Ball is aggressively working toward. According to a report in industry publication Inside Beer, Ball is looking to add eight billion more units of capacity in 2021.

The company is also rounding up cans from areas like Southeast Asia, South Korea, Africa and Central America to add to the North American supply, according to a report in Supply Chain Dive.

For the brewers considering taking the leap back into bottles, Smith offered a word of caution. 

“The guys that will potentially be switching back to glass, I don’t think that is going to be a great option for them,” he said. “It’s possibly forcing their hand.”

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