Your next can of craft beer might be a lot more expensive.
Ball Corp, one of the world’s largest suppliers of aluminium cans, is sending shockwaves throughout the craft beer world after lifting the minimum number of cans certain producers must order and saying it will raise prices. Ball said it will now require that non-contract customers– who include many smaller breweries –order no fewer than five truckloads (roughly 1.02 million cans) per each of their beverages starting on January 1. The previous purchase minimum was one truckload per product.
Additionally, starting in 2022, Ball wrote that it would no longer be able to store excess cans from those non-contract customers in its warehouses and that the price-per-can would increase by nearly 50% for at least some non-contract customers, according to notices sent to breweries.
The news has many small and regional breweries scrambling to secure cans and has spurred fears of heftier costs, reduced variety and higher prices for consumers.
“I do see this as an economic killer for some, and certainly most small brewers are going to have to raise prices significantly or rethink their entire models,” said Garrett Marrero, chief executive officer and co-founder of Maui Brewing Co. in Hawaii.
The tight-knit craft beer industry was already reeling from the pandemic-spurred restaurant and taproom closures, inflationary pressures, can shortages and other supply chain disruptions. Then, a little over a week ago, notices from Ball landed in the inboxes of hundreds of craft brewers across the country, according to the Brewers Association, the trade organization representing small and independent brewers.
The Denver Westword was the first to report about Ball’s purchase minimums. In the letters, copies of which were provided to CNN Business, Ball wrote that demand for aluminium cans continues to outstrip supply.”Ball is making investments to bring additional capacity online, and in the meantime, we remain in a tightly constrained supply environment for the foreseeable future,” according to the letter.
“This environment is making it difficult for us to deliver the quality customer experience our customers expect from Ball, and we are making some adjustments to how we do business to remedy that.
“With fewer than six weeks until the new year, hundreds of craft brewers will no longer be able to buy their pre-printed cans directly from Ball and instead will have to secure one of the most critical components of their business from new sources, said Bob Pease, president and chief executive officer of the Brewers Association.”This is still pretty darn new, so we’re still trying to gather information from our members that are being impacted,” Pease told CNN Business. The Brewers Association is weighing its options and considering reaching out to policymakers, Pease said, and was hoping to talk with executives at Ball, which is a longtime member, he added. On Friday, Pease said he heard back from Ball’s senior leadership, and the two sides are working to set up a meeting in December to discuss the recent changes.
Ball isn’t completely abandoning the craft beer industry, a company spokesperson told CNN Business.”The new model will increase our overall efficiency and allow us to actually produce more cans for our contracted customers, including craft brewers,” Ball spokesperson Scott McCarty wrote in an email.McCarty added that Ball is building five plants in the United States to produce more cans, adding that “each year, we evaluate supply and demand and will continue to invest where it makes sense.”As potential solutions for customers that couldn’t meet the raised minimums, Ball offered up contact information for four distributors that could take smaller orders, provide warehousing, and offer labelling options such as stickers and plastic shrink wrap.
‘It will force us out of business’
When Upslope Brewing Company launched in Boulder, Colorado in 2008, it was one of only a handful of craft brewers to package their beer solely in aluminium cans.” My first phone call for cans was to Ball,” co-founder Matt Cutter told CNN Business. “They said, ‘That’s fine, you can buy a truckload.'”That wasn’t doable then for Upslope, a business whose startup funds came from the second mortgage of Cutter’s house. But a few years later, when Upslope’s snowmelt-based beer was being consumed throughout the Mountain West region, it certainly was possible.
“And Ball kept knocking on our door,” he said. Ball, also a Colorado-based company, had a can-making facility just down the highway, and offered up services such as storage and cheaper shipping. Upslope, which has bought its cans by the truckload from Ball since 2014, now feels left out in the cold.
Cutter fears that the higher costs — including raw material, storage and any added margins from working with new distributors — could ultimately lead to craft six-packs sold at stores being $1 to $2 more expensive by next spring.
Ultimately, he said, these higher costs might not be sustainable for smaller businesses.
“As craft brewers, we’re not rolling in the dough here,” he said. “We can’t absorb this. It’ll force us out of business.”In Pueblo, Colorado, one of the co-founders of Walter Brewing Co. was frantically trying to get up to speed on what Ball’s plans may mean for his brewery.
Walter Brewing has purchased cans for its Walter’s Original Pilsner and Walter’s Pueblo Chile Beer from groups that buy from Ball, as well as directly from Ball.” It would take us more than a year’s time to go through [a truckload],” said Andy Sanchez, one of Walter Brewing’s co-owners.
The newly required five truckloads is out of the question.”With six weeks’ notice, it’s a lot to digest in that short time,” Sanchez said. “It would be crucial for all small breweries if Ball would rethink the path and maybe think of a way to mitigate the short-term impacts.”Walter Brewing Co., in Pueblo, Colorado, packages its beer in Ball Corp. cans. Co-owner Andy Sanchez said he’s trying to determine how his brewery will be affected by higher purchase minimums.
Maui Brewing, because of its scope of operations in Hawaii and close relations with Ball’s plant there, should be relatively insulated from major disruptions, Marrero said. However, he fears that breweries on the Mainland and Maui Brewing’s efforts to expand production there face complications. He’s concerned brewers that can’t float the costs to shift suppliers will be forced to change their operations, close or consolidate. He said he’s also worried this may lead to greater use of less-sustainable materials, such as plastic labels.” This is going to create a paradigm shift in craft beer moving forward,” he said.
Source: CNN
