Tag Archives: Booze Brothers Brewery

The Corona “Can”-demic

Back in February, I received a telephone call from Kevin Lynch, a reporter from the Daily Record, a newspaper in Wooster, OH. Kevin was writing a story about the beer can shortage that was the result of the Covid-19 pandemic. We’ll get back to that story in a minute, but let’s say a few words about the history of the beer can.

The world’s first beer can made its debut on January 24, 1935. On that day, the Krueger Brewing Company of Newark, NJ test marketed the beer can in Richmond, VA. Two different beers were available to thirsty Richmonders – Krueger’s Cream Ale and Krueger’s Finest Beer. The initial run was only 2,000 cans, but production increased after beer drinkers provided positive feedback on the new vessel. These first cans were made by the New Jersey-based American Can Company.

The world’s first beer cans contained Krueger’s Cream Ale and Krueger’s Finest Beer.

Compared with today’s cans, the first beer cans were heavy and had to be opened with a churchkey opener. With the passage of time, however, the humble beer can has evolved. In 1935, cone top cans appeared. These were followed by pull-tab cans in 1962, and stay-tab cans in 1975.

In recent years, canned beer has become increasingly popular among craft beer drinkers. This popularity has been driven by a number of factors. Cans can be taken where bottles are prohibited – for example the pool or the beach. They are also lighter than bottles, making them more portable and hence a preferred choice for outdoor activities such as hiking. Aluminum cans are also highly recyclable, more so than glass. According to data from The Aluminum Association, “nearly 75 percent of all aluminum produced in the U.S. is still in use today”. But what about taste? Does a beer in a can taste as good as the same beer in a bottle? A blind taste test conducted in Edinburgh, Scotland in 2016 demonstrated that beer drinkers could not tell the difference between canned and bottled beer.

The recent Covid-19 pandemic has created a demand for canned beer that was both unprecedented and unanticipated. The crux of the problem lies in the fact that Covid-19 forced many craft brewery taprooms to temporarily close. When they reopened, they had to do so at reduced capacities. Bars and restaurants, that sold craft beer, had similar restrictions placed upon them. Unable to sell their beer to taproom customers or to bars and restaurants, craft breweries had to either sell their beer on a to-go basis or via supermarkets and liquor stores. In either case, this meant that beer which was formerly put in kegs now had to be put in cans. The result – a significant surge in demand for aluminum cans.

Earlier this year, I listened to a webinar presentation that Bart Watson, Chief Economist of the Brewers Association, made to the Economic Roundtable of the Ohio Valley. Bart presented a number of interesting statistics during his presentation, one of which was the growing popularity of cans as the preferred packaging for craft beer. In 2016, only 16% of craft beer (measured in dollar value) was sold in cans. By 2019, this percentage had increased to 38%, and by 2020 to 50%. So while Covid-19 created an increase in demand for beer cans among craft breweries, that demand was already rising steadily on a year-by-year basis. Indeed, as far back as 2015, a shortage of cans was already creating challenges for some craft brewers.

Covid-19 demonstrated how quickly demand for aluminum cans can increase. In March 2020, retail sales of canned drinks was up 24%, compared with March 2019. For individual breweries the shift to cans has been dramatic. For example, in 2109, draft beer accounted for two-thirds of sales for Wolf‘s Ridge Brewing in Columbus, OH. As a result of Covid-19, cans now account for two-thirds of Wolf Ridge’s sales. Prior to Covid-19, Booze Brothers Brewery in Vista, CA canned about 35 percent of its beer; that increased to 80% as a result of the pandemic.

Due to insufficient production capacity, it was not easy for suppliers to meet such an uptick in demand. This mismatch between supply and demand meant that the United States market was, according to one estimate, short 10 billion cans in 2020. As a result, some American companies looked to other countries, such as Brazil and Mexico, to import cans. In Brazil, in sharp contrast to the United States, Covid-19 resulted in a drop in demand for cans. This is because canned drinks in Brazil are upscale and are sold almost exclusively in bars and restaurants which, of course, shut down.

Increase in Retail Sales of Cans in First Six Months of 2020 (Compared with Same Month in 2019). Source: IRI-Wall Street Journal

The shortage has been exacerbated by the upsurge in popularity of hard seltzers, most of which are packaged and sold in cans. Add to that growing demand for energy drinks, kombucha, ready-to-drink cocktails etc. and the gap between supply and demand grows. In the United States 380 different beverages are packaged in aluminum cans.

The can shortage created significant challenges for craft breweries across the United States. During a shortage, it is the larger customers (Pepsi, Coke, Anheuser Busch, etc.) whose orders get prioritized. And when demand exceeds supply, prices can go up, which is exactly what many craft breweries, such as Barrel House Z in Weymouth, MA, experienced. And, it was not uncommon for breweries to run out of cans before the next shipment arrived.

Breweries who anticipated the can shortage, and had the necessary cash, stocked up on cans – many did not have the capital (or space) to do so, however. Those that did, were better able to weather the Covid-19 can shortage. Most small brewers purchase their cans through brokers, some of whom changed the terms of business in response to Covid-19. Minimum shipment sizes increased, which was problematic for smaller breweries. Some brokers, who previously provided free storage space for cans, no longer did so. As a result, some breweries had to sublet space to store cans. Sun King Brewing in Indianapolis, IN rented warehouse space four miles from its brewery, while East Brother Beer Co. in Richmond, CA sublet space from a co-tenant in its building. Unanticipated storage were not the only additional costs incurred by breweries who shifted from selling beer on-site to canning beer for to-go sales. Other costs included increased packaging costs and higher wages for former tipped bar staff who now assisted with the canning process. Additionally, canning beer requires a canning machine. Most breweries, including many who can beer, do not own a dedicated canning machine. Instead, they utilize a mobile canning machine which is provided by an independent firm. Mobile canning is used by breweries who do not have the money or space for a dedicated on-site canning machine, or who do not wish to can large volumes of their beer.

When will the can-demic end? One forecast suggests that craft brewers may have to wait until August 2021 for a steady supply of cans to be available. Ball Corporation, the world’s largest manufacturer of aluminum cans, will open new production facilities in Glendale, AZ and Pittson, PA in the spring and summer of 2021 respectively. In the meantime, newly opened breweries, hoping to can their beer, may have to exercise patience as many brokers are not taking on new accounts. The pressure to supply existing accounts is simply too strong. In extreme cases, there was a fear that the can shortage may result in some breweries going out of business. In a can shortage advisory issued to its members in July 2020, the Brewers Association warned that the “can shortage may threaten the ability to survive the pandemic for some craft brewers.” Recent data released by the Brewers Association suggests that the number of breweries that closed due to Covid-19 may not be as high as first anticipated during the early days of the pandemic. This is good news. And as increasing numbers of people get vaccinated and States ease up on capacity restrictions for bars and restaurants, some of the pressure on cans is likely to start to dissipate.