Another kink in the supply chain threatens to reduce availability and increase prices.
Ball Corporation, the massive supplier of aluminum cans to the beer industry, recently began sending out notices to its customers regarding changes to the way it accepts orders. Those changes threaten to increase costs for breweries and therefore impact retail prices for consumers. (Pictured above: Georgetown Brewing’s Bob’s Brown Ale, just one of many beers that, due to the pandemic, found its way into cans for the first time.)
The world’s largest aluminum can producer recently began notifying craft breweries across the nation about drastic changes to non-contracted can orders. According to the Brewers Association, which is tracking this issue closely, breweries that have previously been supplied directly by Ball are being notified that the minimum order, if supply is available, has increased drastically and is now five truckloads per SKU for printed cans. According to reports, this more than quadruples the size of the minimum order requirements for printed cans. In addition, Ball will no longer warehouse inventory on behalf of customers.
Ball Corporation is directing most of the impacted customers to a group of distributors and will move non-contract customers with quantities less than five truckloads to these distributors as well. This basically creates a new tier in the supply chain. More accurately, it greatly increases the size and role of this middle tier.
“For small brewers, this is an additional aluminum supply [chain] challenge coming after a year and a half of many such challenges,” said a statement from the Brewers Association, which represents the interests of the craft beer industry. “Moving a large portion of small brewer aluminum can sales to distributors has the potential to increase prices for small brewers (through increased distributor fees, additional [labelling] costs, and increased transportation cost), increase lead times, and potentially reduce the availability of cans for smaller brewers who can no longer meet minimums.”
Not all of the nation’s small breweries rely on direct orders of pre-printed cans from Ball Corporation, but the impact of these changes would likely trickle down and almost certainly impact the ability of all small breweries to get aluminum cans. In other words, though the direct impact is limited to just some brewers, the negative effect would be widespread.
The change could result in unwanted environmental impacts, explains a statement from the Brewers Association. Breweries that can no longer meet the minimum order requirements may turn to plastic shrink sleeves and pressure-sensitive can labels, both of which reduce the recyclability and value of aluminum. There is also the potential for additional carbon emissions with extra transportation of cans to distributors rather than direct shipment to breweries.
For consumers, the new policy could lead to fewer choices and higher prices. “Depending on how brewers react to increased cost and order sizes, it could potentially lead to lower availability of smaller brands in the marketplace and higher costs for consumers,” says the Brewers Association.
In responding to the pandemic, many breweries began packaging beer in aluminum cans for the first time. This increased demand for cans came at the same time an aluminum can shortage was already threatening to impact the industry.
Time will tell how this whole thing shakes out, but on the surface, it seems apparent that this will lead to an increase in the difficulties that craft breweries are currently dealing with when it comes to supply chain issues. When the cost of production increases, customers should expect to feel the impact at the checkout counter.
“The Brewers Association is committed to continuing supply chain communications to members and acting where possible. We also want to continue hearing from our members as to how this change might affect their business so we can communicate those impacts to policymakers and the media.”
For a comprehensive statement from the Brewers Association, click here.