USA: Brewers face severe shortage of 12-ounce cans

When most bars, restaurants and taverns began shuttering by government order in March in response to a global pandemic, draft beer consumption and demand dried up almost overnight. Bottled beer, too, which sells at a higher rate in the on-premise and in smaller package sizes, slowed.

Demand for cans, meanwhile, shot through the roof, as consumers hunkered down in their homes, reduced their shopping trips and stocked up on large packs of 12-ounce (355 ml) cans of trusted brands like Coors Light, Miller Lite, Blue Moon, Bud Light and Modelo.

So much so, in fact, that the entire beverage industry – brewers, soda and water makers – is facing an unprecedented shortage of 12-ounce recyclable aluminum cans and competing to snatch up available supplies in markets worldwide.

“It’s something many of us who have worked in the beer industry for a long time have simply never seen,” says Brian Erhardt, Chief Supply Chain Officer at Molson Coors BeverageCo. Over the past eight weeks, for instance, packaged beer orders have come in at Fourth of July levels – traditionally the industry’s biggest weeks – twice. “And other recent weeks have not been too far behind,” he says.

While Molson Coors’ breweries, distribution centers and shipping partners have more than enough capacity to meet this increased demand, “there are not enough 12-ounce cans in the world to meet this level of demand – for us, for our industry and for consumer packaged goods companies, in general,” Erhardt says.

The company has ordered and acquired millions more cans over this period than originally planned, and it’s been able to source some from other parts of the world. It’s ramped up in-house production of cans, by keeping its can manufacturing lines in Golden, Colo., operating continuously. And it’s suspended production of slower-moving products packaged in 12-ounce cans to focus on faster-moving packs.

“We’re getting far more cans than we planned to get over this period, but not as many as we know we can fill,” he says. “But we’re doing everything we can to get our hands on them. We’re not cutting corners or costs. We’re sourcing all available cans in North America and looking beyond that for more in the future to meet record orders.”

But, in the near-term, it’s still not enough to meet booming demand, and Molson Coors has been forced to adjust orders from wholesalers for certain packages to balance supply levels across the country, Erhardt says.

“This is truly unprecedented,” says Jamie Westfahl, Vice President and Head of Procurement for Molson Coors. “We sell about 11.5 billion cans, on average, every year. So even a 5% swing is material. When demand goes up by 30% over a two-month period, we’re talking hundreds of millions of cans, and there’s just no way suppliers can meet that, and it’s affecting the whole beverage industry.”

Indeed, for the industry, the exploding demand is unprecedented – and wholly unanticipated. In a report to clients published this morning, Consumer Edge Research’s Brett Cooper wrote, “There is no way anyone was planning for what has occurred in 2020 and can supply can't sustain these levels of growth."

Per Cooper’s research, the shift to cans spans across all consumer packaged goods. While beer industry can volume had been on the rise pre-pandemic, finishing up 5.3% in 2019, can sales were up 27.2% over the eight-week period ended May 3, per Consumer Edge Research’s analysis of IRI data. And in carbonated soft drinks, another huge category, the number of cans sold dipped in each of the past three years before skyrocketing 24% over the eight-week period.

The demand has strained suppliers, which already had experienced tightness in supply during peak periods.

Ball Corp., one of the largest can suppliers for North America, came out of the first quarter of 2020 “with some of the lowest inventory levels we’ve ever had … because of the pantry-stocking phenomenon that took place and continued in the first part of April,” said Dan Fisher, the company’s senior vice president and chief operating officer for global beverage, in a May 7 conference call with analysts and investors.

Ball is experiencing “sporadic operational disruptions, as well as tremendous growth, complexity and incredibly tight supply-demand conditions, particularly in North America,” Fisher said, adding that he anticipates outsized demand for aluminum cans to continue even once on-premise locations begin to open. But even then, “I fully expect strong at-home consumption trends across most categories … across North America in 2020 and beyond.”

Molson Coors’ Erhardt, meanwhile, says he expects to see “some level of constraint moving forward,” particularly with 12-ounce cans. “We will continue to take every step possible to keep up with the spike in demand, but we will also have to continue to adjust orders based on the availability of cans.”

Article provided by courtesy of Beer&Beyond.

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