The great wine can shortage

Is there a shortage of cans for wine? Or is it just speculation? Jeff Siegel unwraps the mystery.

Cans have been skyrocketing in popularity
Cans have been skyrocketing in popularity

Talk to retailers, and they will tell you they’ve heard about a can shortage over the past year but haven’t really experienced it themselves. Talk to wholesalers, and they will tell you they’ve heard about a can shortage, but it’s usually in another part of the country. Talk to canned wine producers, and they’ll tell you they’ve heard about a shortage, but it’s probably affecting other producers. Talk to can suppliers and manufacturers, and they will tell you they’ve heard about a can shortage, but that their customers are getting enough cans.

Welcome to the US aluminium can and bottle shortage, which does seem to be real – despite the abundance of anecdotal evidence and the lack of hard numbers. In this, say retailers, canned wine producers, and suppliers and manufacturers, the shortage is tied to a variety of seemingly unrelated events. Ironically, almost none of them are about an actual supply shortage, in the way there are poor grape harvests and there aren’t enough grapes.

Rather, it’s all about demand. First, pandemic-related supply chain problems, which slowed can deliveries to producers in the spring and still hamper some retail deliveries. Second, the collapse of the restaurant wine business, which devastated keg wines and forced keg producers to switch to cans. Third, booming demand for canned products, be it wine, sparkling water, hard seltzer, or soft drinks.

“It’s really all about demand spiking,” says Joe Marston, the president of Iron Heart Canning, one of the biggest suppliers on the US east coast. “There have been more and more product launches, and it’s just been insane. I’ve never really seen anything like it.”

The shortage has been in the supply chain for years, even for the world’s biggest canned beverage producers. In another irony, manufacturers like Ball saw the shortage developing and moved to expand capacity – but weren’t able to do so in time thanks to the unique confluence of events. They included these five main trends.

Can demand has been increasing for the past couple of years

Can manufacturers began to see increased demand for their product as early as 2018, thanks to the growth of canned wine, hard seltzer, RTD products, says Marston. The shortage lessened by the end of the year, cropped up again in 2019, then seemed to work itself out again, and then became even more widespread last year.

“Prior to COVID, 2020 was already poised for notable aluminium can growth across a variety of categories,” says Scott McCarty, director of strategic communications for Ball Corp., one of the biggest can manufacturers in the world. “For instance, hard seltzers have experienced explosive growth as a category and specifically in cans.”

Can manufacturers have met many of their best customers’ needs by juggling available supply with when their customers needed the cans. If the customer ordered a full year’s worth of cans early in the year, they got it. If they tried to reorder later in the year, they may not have gotten the extra cans.  

Manufacturers also limited increases in orders, so some beverage producers got the same amount they ordered the year before instead of the 10% or 15% more they wanted to increase their production. For example, that might mean getting nine months of cans instead of 12.

“There are a variety of reasons why some producers could have different experiences,” says McCarty. “These include the specific products they need, the time they are needed and where they are needed, distribution channel needs, and steps taken to plan for future demand.”

So canned wine producers that ordered ahead of time have mostly been OK. That’s the case for Union Wine Company, an Oregon producer whose labels include market leader Underwood.

“Fortunately, we have not really been impacted by the can shortage,” says Darin Dougherty, Union’s director of marketing. “Most of our 2021 product is already canned and sitting in the warehouse or has already been ordered. The shortage is an issue in the beer space mostly because products like beer have such a short shelf life (90 days or less) and they are in constant demand, whereas wine is stable for years instead of months.”

Manufacturers like Ball have been trying to increase capacity; it’s working on adding 6 billion units of capacity by expanding current facilities and adding two new ones, in Glendale, Arizona, and Pittston Pennsylvania. 

… and then came the pandemic

A couple of things happened when the world went into lockdown in the spring of 2020. First, the supply chain contracted as the pandemic forced supplies off the road, whether because of the lockdown, a truck driver shortage as drivers got sick and couldn’t work, or slowdowns in plants because employees got sick. Then, consumers stuck at home bought more canned beverages than normal, since they were at home and not at the office.

“For Ball, it is very clearly a sharp growth in demand during the pandemic, as more customers choose sustainable cans and aluminium bottles for their existing and new products,” says McCarty. “Haven’t heard about a shortage of aluminium. The dramatic increase in demand is across multiple categories.”
 
In addition, the collapse of the on-premise drinks trade during the lockdown meant wine and beer producers had to switch from kegs to cans. This was especially noticeable in wine, where kegs had been capturing a bigger share of the restaurant market over the past few years. This added to the increase in demand for cans, says Marston – producers who normally wouldn’t have used cans suddenly needed them to say in business.

Some retailers saw the change.

“We’ve had a few inventory issues over the summer of 2020,” says Chris Keel, who owns a boutique wine shop in Fort Worth, Texas, called Put a Cork in It. “Our distributor had to transfer some in from other markets. I’ve had more trouble keeping RTD cocktails in consistent inventory.  I have heard rumors of a shortage of cans, that’s usually the reason I get when the RTDs were out of stock.”

The same was true for some wine producers.

“I know we experienced a temporary issue securing cans in the fall of 2020, but I believe we're good to go now,” says Drew Baker, whose family runs Old Westminster Winery, in Westminster, Md. “We also haven’t had any issues getting our canned wines where they need to be from a sales standpoint.”

... while consumers and producers were ditching plastic for cans

One of the great environmental debates in the drinks business over the past couple of years focused on aluminium versus plastic, and which was more ecologically friendly. The science isn’t necessarily conclusive, but cans seemed to be winning the debate in 2020.

Both McCarty and Marston say they saw customers opting for aluminium cans and bottles for environmental reasons, which further increased demand at a time the business could least afford it.

“Soft drinks and the still and sparkling water categories have seen it, too, with marketers shifting their packaging mix toward cans and away from single-use plastics,” says McCarty.

And can sizes mattered, too

Beer, soft drinks, and most water come in 12 ounce, or 355 ml cans. Canned wine, thanks to US regulation, couldn’t be sold that way until the beginning of 2021. It had to come in 375 ml cans, which is a non-standard size and which had to be made for wine producers. Ironically, this may not have been the bottleneck it could have been.

“While the 12-ounce beverage industry has recently seen a can shortage, we have been in much the same boat we always are since our format is 375 ml,” says Meredith McGough, Union’s production winemaker.  “Our can size is non-standard, so prices and availability have been about what they always are, which is more expensive and challenging. The struggles those have recently encountered with 12oz cans are pretty similar to those we regularly deal with.”

And what about prices?
Somehow, the three years of supply shortages have not necessarily raised prices. McGough says that other than normal, yearly increases, prices have remained surprisingly stable. This is in sharp contrast to many other products, which skyrocketed in cost when the pandemic started.

But Marston isn’t optimistic that will continue. He cited several years of aluminium tariffs on Chinese and European imports, which have raised raw material costs but have not necessarily been passed along in full by manufacturers. The tariff, he says, has not been a problem in and of itself, but combined with everything else could lead to some higher prices later in 2021. How that will affect the supply chain is anyone’s guess.

Jeff Siegel
 

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