On November 18, an announcement rocked the world of craft beer, and it wasn’t another acquisition. Instead, Ball Corporation, the world’s largest manufacturer of beverage cans, announced that they were quintupling the minimum-order quantity for printed cans from 204,000 units (one truckload) to 1,020,000 units—per SKU. Ball also announced that it would no longer store excess cans for non-contracted customers.
As one industry insider put it, it was a sad day for canned craft beer, “and a huge pivot for Ball, who was historically the most craft-friendly of the large producers.”
Ball delivered an aftershock the following day, announcing price increases ranging from 13 to 28 percent. It was a one-two punch to independent brewers, who already were being bombarded with price increases on materials and supply-chain problems.
While the first of Ball’s announcements directly impacts midsize craft brewers, its effects will trickle down to smaller producers. The second announcement is relevant to every brewery using cans, regardless of manufacturer; price increases on cans will affect the whole beverage industry.
Surprising Timing
It wasn’t supposed to be this way. While the global aluminum can shortage has been developing for years, Ball and other manufacturers had announced billions in investments in new capacity. Ball brought two plants online in the second quarter of 2021, in Arizona and Pennsylvania, with more expansion planned for 2022. The hope was that brewers could endure the worst of the can crunch, with brighter days ahead.
Thus, Ball’s announcements were a surprising blow. Making matters worse, little notice was given: The minimum-order quantity and price changes are set to take effect January 1, leaving brewers little time to respond.
Ball is being tight-lipped, allowing its announcements to speak for themselves. (The company did not respond to requests for comment from the Brewing Industry Guide.) However, these significant changes to their business model send a strong signal that Ball doesn’t see an immediate end to supply issues, even as new plants are beginning to come online.
It is an active plan to streamline operations and eliminate their smaller customers. “I haven’t been able to get through to anybody at Ball,” says Andrew Conlon, director of brewing operations of Heretic Brewery in Fairfield, California. Heretic had seven SKUs in printed cans that had been supplied directly by Ball.
Trickle-Down Effects
Many of the country’s 9,000 breweries aren’t in a position to order 204,000 printed cans, let alone a million-plus—yet Ball's announcements will affect all breweries that use cans.
Breweries such as Heretic that are no longer able to order printed cans from Ball will need to find alternate sources, buy from distributors—who themselves have limited warehousing capacity and add a markup on their can prices—or switch to pressure-sensitive labels, shrink sleeves, or digitally printed cans. While these breweries were Ball’s smallest customers, they will be among the largest customers for can distributors and label printers. That has the potential to create supply and pricing pressure down the chain to even smaller breweries.
At what point does it directly affect the price of a beer?
“We’ll know more in the coming weeks,” says Bart Watson, chief economist of the Brewers Association, about the shorter- and longer-term effects of Ball’s announcements. “Brokers are planning to keep supply strong, but there will be availability and pricing effects rippling through the industry. And the big open question is what impact this will have on consumers.”
Beyond the challenges of can cost and supply, some breweries may have the option of consolidating SKUs to meet the new minimum-order requirement. In the short term, regional brewers may have to defer or make other plans for spring seasonal beers that can’t use a million cans, since Ball’s changes take effect so quickly. Longer term, regional breweries may find themselves putting more of their branding eggs into fewer baskets by eliminating more SKUs, effectively reducing variety for customers.
Looking for Solutions
Besides Ball’s network of can distributors, there are other can manufacturers—and they’re also running at capacity. As smaller breweries look for new suppliers, the pricing and supply pressure will continue throughout the industry.
“We’ve reached out to 10 or 12 companies,” Conlon says. In a stroke of luck, Heretic received a shipment of cans just two days before the Ball announcements. Now, however, Conlon says he’s been spending all his time looking at other can suppliers, distributors, warehousing space, and labeling options. It’s all a matrix of costs and assumptions, where a half-cent more per can adds up to large increases at volume.
Besides looking for alternative sources for printed cans, many breweries are also weighing whether to get back to labeling them instead. “My email is blowing up,” says Nicole Giraud, regional sales manager of U.S. Tape & Label, which supplies both pressure-sensitive labels (PSLs) and shrink sleeves.
Obviously, PSLs and shrink sleeves come with their own issues. Beyond the additional costs of labels or sleeves, labeling equipment, and work force, there is growing awareness of the environmental implications. Even if few customers realize it, cans that are labeled or shrink-wrapped are often not recyclable. Cans that are too heavy may be rejected.
“It used to be that breweries wanted to maximize use of the real estate on the can,” Giraud says. “Shrink sleeves can go right up to the seal of the can lid, and breweries using pressure-sensitive labels would debate how much gap to leave between the edges of the can—or even have the label overlap, so there is no brite can showing. ‘Wrap the gap,’ is what we used to say. Now, breweries are choosing to use less real estate, sometimes with just small medallions and back labels.”
As for shrink sleeves, growing consumer awareness of the recycling issue has consumers cutting off the sleeves. Some sleeves have a tear-tab to make this easier, though this is still rare. By forcing greater use of shrink sleeves, Ball’s announcements may have a knock-on effect of getting breweries and suppliers to confront the issue and make easily removeable shrink sleeves more common.
New Can-Printing Tech
Digital can printing is a relatively new technology, but it is growing rapidly.
“My phone is ringing off the hook,” says Becky Tipton, co-owner and VP of sales of DigiCan Printing in St. Charles, Missouri.
DigiCan can take brite cans and print them at 700 dots-per-inch (dpi), all the way around the cans. Another advantage of digital printers is that they can handle small orders.
Tipton says that DigiCan has two printing machines running now, is adding a third shift, and has six more machines on the way. When that expansion is complete, DigiCan will be able to print 260 million cans per year—including for breweries that order as few as three pallets per SKU.
Surviving the Shift
Label, sleeve, and digital-printing companies are set to be benefactors of Ball’s announcements, and they all express optimism that they can help breweries. Can suppliers say they expect supply issues to ease in the second half of 2022. While that’s a tune that brewers have heard frequently over the past couple of years, it may be matter of weathering the storm a bit longer.
“When running a craft brewery, there are always going to be problems,” Conlon says. “This is a big problem. But we’ll figure it out.”