USA: Beer industry worried over spiking freight costs and lack of commercial drivers

Spiking freight costs and the lack of commercial drivers are cutting into profits of nationwide-distributing US beer companies, according to a recent article by Brewbound. All of the publicly traded beer manufacturers like AB InBev, Molson Coors, Boston Beer Co., Constellation Brands and Craft Brew Alliance reported in their quarterly earnings calls that their profits were negatively affected by rising logistics costs.

“Trucking supply tightness has been a growing concern for many industries recently, as qualified commercial drivers have been in short supply,” Beer Institute Chief Economist Michael Uhrich wrote in a monthly update to members in June. Also, the American Trucking Associations (ATA) reported earlier this year that about 51,000 more drivers are needed across the country. Especially companies like Amazon and Walmart are shipping more and more goods across the country. The Washington Post reported in May that many trucking companies are so desperate for drivers that they are already offering signing bonuses and pay raises.

207.4 million barrels of beer – equivalent to more than 2.9 billion cases of beer – were shipped throughout the nation according to the National Beer Wholesalers Association. The beer industry is disproportionately affected by increased transportation costs and a shortage of long-haul truck drivers because most of the beer produced in the US is shipped by truck.

Culprit of the trucking capacity shortage is a surging US economy. Rising consumer spendings are followed by higher freight volumes. The problem is aggravated by a new federal rule requiring drivers to electronically track their hours behind the wheel and a low unemployment rate. The tight labor market gives skilled people other job opportunities and worsens the severe shortage of qualified commercial drivers.

MillerCoors’senior director of transportation and logistics Holly Pixler, noted that “there are 10 truckloads waiting to be moved for every driver available right now,” she says. “So not only is this a bottom-line issue, it’s an availability issue. If I can’t secure a driver to go to a site, I’m literally not going to be able to deliver beer. We haven’t gotten to that point yet, but it’s something every shipper is concerned about right now.”

However, also other industries are affected. Tyson Foods, a large meat seller, and John Deere, a farm and construction equipment, amongst many others announced this year price increases, blaming higher shipping costs.

Other countries have similar problems: In April, four leading Japanese breweries agreed to distribute their products across the country by using the same long-distance truck and train transportation. Superficially announced as a measure to combat air pollution, the real reason seems to be a shortage of long-haul truck drivers and rising costs incurred by long-distance shipping. (inside.beer, 19.4.2018)

The industry is now betting on new ways to deliver the goods. Anheuser-Busch tested in 2016 together with Otto, the self-driving truck subsidiary of Uber, the long distance transportation of beer on highways without a driver. In October 2016 the first ever self-driving truck delivered 45,000 cans of Budweiser beer from Fort Collins, Colorado, to Colorado Springs. (inside.beer, 26.10.2016)

 

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