The surge in the use of aluminum cans brought on by changing consumer trends accelerated by the pandemic has led Ball Corporation, one of the largest can manufacturers in the country, to change its ordering procedures. The resulting restrictions could potentially damage the bottom line of many small and medium-sized craft breweries, distillers, and other beverage companies, just when many of them are finally starting to recover from the last two years.
The company began informing breweries across the country that are directly supplied with preprinted cans by the Ball Corp that their minimum order has increased fivefold when supply is available. That means that companies will have to raise their previous minimum order from 204,000 cans to 1,020,000. In perspective, they will need to pay for and store five semi-truck loads of cans, tying up much-needed cash and space that many businesses don’t have.
This is particularly tough on many craft brewers since during the pandemic, when their primary sales platforms disappeared (tasting rooms, bars, and restaurants), they pivoted to packaging their product to bring in much-needed income. Many have moved to install packaging lines since with an eye towards the future.
Ball Corp began informing brewers of their decision this week. “Demand for sustainable aluminum beverage packaging continues to grow at an accelerated pace. 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. To more effectively serve our non-contracted customer base, effective January 1, 2022, where supply is available, we will require a minimum order of five truckloads per SKU for printed cans, and we will no longer be able to warehouse inventory on behalf of our customers.”
One solution the company has put forth is pointing their customers that can’t handle the larger order towards a set of four distributors. While they will take smaller orders, it will add another layer of costs into the already stretched thin aluminum supply chain for brewers and likely push them towards seeking out other solutions such as shrink-wrapped cans.
“Ball’s policy change will put immense pressure on a subset of craft brewers. Current customers who can no longer meet the increased minimums not only have to rapidly find new can supply given the short timeline of this change, but they are likely facing additional costs from sleeving or label costs, not to mention distributor markups and potentially transport costs, says Bart Watson, the chief economist for the Brewers Association. “Those increases may eat into the already tight margins for small brewers on distributed package volume. This comes at a time when many small brewers are seeing additional supply chain cost increases and disruptions, on inputs as varied as CO2 to malt. In addition, there may be ripple effects from existing packaging distributor customers as those distributors see an influx of new customers.”
While the long-term effects of this decision are still unknown, this could potentially send ripples across the entire industry, with craft brewers likely needing to raise prices for consumers. It could also cause issues in the fast-emerging ready-to-drink category, seltzer, and other canned cocktails. Plus, it is yet to be seen if other can producers will follow suit.
As the demand for aluminum cans continues to soar with no end in sight, corporations are forced to reassess their supply chains and make tough decisions. This one by Ball Corp will cause some more pain for a segment that is just getting back on its feet.