US beverage can shortage worsened by coronavirus lockdowns

The impact of coronavirus lockdowns has made a shortage of cans for beer and soft drinks in the US more acute.

Beverage can manufacturers were already building new capacity to meet rising demand at the beginning of the year, but the projects have been interrupted by travel restrictions as consumption of canned drinks at home has surged, all putting additional strain on supply chains that were already stretched.

Demand for cans has been accentuated by breweries increasingly switching to cans as the shuttering of bars and restaurants choked sales of kegged beers, their biggest sales channel.

Consumers have been going online to report shortages of their favourite canned drinks.

As a result, Coca-Cola, Molson Coors and other beverage brands have faced online complaints. Additionally, a beer-market analyst said dwindling supplies of cans could constrain expansion of the US alcoholic drinks market.

“Like many companies, we are seeing greater demand for products consumed at home, and we are taking measures to adapt to the demand,” Coca-Cola tweeted in response to a comment about consumers’ inability to buy its branded drinks. “We are working closely with our customers and our suppliers to mitigate the challenge during this unprecedented time.”

Growing demand for canned beverages spurred by a recovery in beer sales and increasing popularity of new products such as canned coffees, ready-to-drink cocktails and hard seltzers left a supply gap at the end of last year.

At the height of the worldwide lockdowns, alcoholic drink sales soared in the US. In the four weeks to 16 May beer, flavoured malt beverage and cider volumes were up 20.4 per cent on the previous four-week period, and 4.7 per cent higher than a year earlier, according to market researcher Nielsen. Volumes of carbonated soft drinks rose 13.8 per cent – 1.5 per cent for the year – and those of energy drinks climbed 7.3 per cent and 10.8 per cent, respectively.

The four leading canmakers – Ardagh, Ball, Canpack and Crown – have committed millions of dollars to increasing capacity by building new plants and additional production lines. Progress has however been delayed by travel restrictions.

“We are aggressively expanding our US can manufacturing production by installing two new lines in existing facilities and building two state-of-the-art plants,” a Ball spokesman said. However, the planned new capacity is unlikely to be available soon enough to meet demand in the short-term, a situation exacerbated by the coronavirus lockdown.

“Sixteen ounce [473ml] cans are going to be a problem this summer,” said David Racino, co-founder and chief executive of Austin, Texas-based American Canning, which is a wholesale trader in beverage cans as well as providing mobile canning services. “There is just such a strain on the supply chain right now.” The shortage will disproportionately affect craft breweries, Racino told Brewbound.

Recognising that it will be some time next year before sufficient new canmaking capacity comes on stream in the US, American Canning turned to an unnamed canmaker in Guadalajara, Mexico, to meet customer demand. Crown’s Envases Generales and Envases Universales both have canmaking plants in Guadalajara.

The Can Manufacturers Institute (CMI), which represents the interests of canmakers, their suppliers and customers, also commented on the reasons behind the shortages.

“The aluminium beverage can manufacturing industry has seen unprecedented demand for this environmentally-friendly container prior to and during the Covid-19 pandemic,” CMI president Robert Budway said.

“Most new beverages are coming to market in cans and other long standing can customers are moving away from plastic bottles because of environmental concerns. These brands are enjoying the benefit of moving to the aluminium can, which has the highest recycling rate among all beverage packaging.”

The shortage of cans was already a problem before the virus outbreak. In an analyst note published in February, Deutsche Bank said plants were operating to capacity and that North American canmakers had been forced to import 500,000 cans last year.

In a separate note that cited intelligence supplied by the Manhattan Beer Distributors chief operating officer Ed Mcbrien, the analysts said Molson Coors had been especially hit by a shortage of packaging.

“The shift in demand away from on-premise already was expected to be a net headwind for Molson-Coors,” given that supermarket and off-trade business account for about 23 per cent of its sales, the analysts wrote. “But now exacerbating the channel shift is also Molson Coors’ inability to source adequate aluminium can supply, which represents the majority of off-premise volume.”