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LIBATION FRUSTRATIONS: HOLIDAY SUPPLY CHAIN PROBLEMS HIT THE BEVERAGE INDUSTRY


SHORTAGES OF BOTTLES AND CANS, MISSING INGREDIENTS AND TRUCKING SNARLS THREATEN
COMPANIES’ ‘LIQUID ASSETS’

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7 min

An employee surveys inventory in a Giant Food supermarket on Nov. 22 in D.C.
(Anna Moneymaker/Getty Images)
By Laura Reiley
December 8, 2021 at 6:00 a.m. EST
By Laura Reiley
December 8, 2021 at 6:00 a.m. EST
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The holidays tend to make Americans very, very thirsty. And that’s a problem
this year, with supply chain snarls hitting the beverage industry — from soda to
energy drinks, booze to beer — especially hard. Things could get even tougher in
the next couple months.

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While typical grocery categories are experiencing 5 to 10 percent of products
out of stock right now, beverage shortages are higher, with around 13 percent
missing from shelves. Shortages have been showing up in waters, iced teas and
soft drinks, as well as beer, hard seltzer and canned cocktails.

“All the talk around the holidays is about what might be under the Christmas
tree, but not enough attention is paid to what consumers are already dealing
with,” said Geoff Freeman, chief executive of the Consumer Brands Association,
the national trade association for consumer packaged goods.

Oh, Christmas tree, not you, too: Supply chain problems come to the fir trade

A shortage of bottles and cans is responsible for much of it, but trucking and
shipping snarls, missing ingredients, labor woes and even freak weather are all
contributing to shortages, leaving grocers scrambling to fill in the gaps. It’s
just the latest example of ongoing food supply problems that have shown up in a
variety of sectors, wreaking havoc on prices and contributing to the highest
inflation in three decades.

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Freeman said the empty shelves reflect “demand unlike what we’ve seen in recent
history running headfirst into problems with access to ingredients and
materials.”

The problems are certainly true for the world’s largest beverage company,
Coca-Cola, whose chief executive James Quincey has said repeatedly that
consumers will see sporadic shortages on grocery shelves through 2022.

The company is seeing strong sales, but Quincey said supply chain problems are
“a bit like whack-a-mole” during a recent third quarter earnings call. He
described shipping, freight and labor problems; ingredient shortages; as well as
freak and unexpected challenges — a plastics factory in Brazil bursting into
flames or the rising cost of natural gas causing a global shortage of CO2, which
gives soda its bubbles.

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Many major beverage brands have reported similarly significant problems,
according to Howard Telford, head of soft drinks research at Euromonitor
International, a market research firm. Monster Beverage, which makes a line of
energy drinks, reported shortages in aluminum cans in the United States and
Europe last quarter, along with higher prices and delays from importing
materials. PepsiCo has also been facing shortages in terms of packaging, Telford
said, including running out-of-stock, particularly in Gatorade over the summer.
Telford said a shortage of resin used in plastic packaging could be one of
several issues contributing to this shortage.

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How climate change and extreme weather are crimping America’s pie supply

Beverage companies have faced a different slate of obstacles compared to other
food categories. The pandemic has changed the way people buy and drink
everything from bubbly water to Diet Coke, which has proved challenging for
beverage companies, especially when it comes to packaging.

When restaurants and bars shut down last year, bottlers got through it by moving
away from fountain and single-serve drinks and focusing instead on multipacks
and larger-format packages like 2-liter bottles, things people loaded up on at
the grocery store to drink at home.

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Beverage companies focused on core brands and flavors, cutting back on the total
number of drinks they produced, so they could meet a surge in customers stocking
up at grocery stores. But when Americans stopped staying home so much,
re-engaging with the wider world in the summer months — and faster than expected
in some areas — those changes prompted a huge rise in demand for “immediate
consumption” packaging, Telford said. Fountain drinks and single-serve
containers were red hot again.

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“I’ve never seen a year where the overall effort is as high to get product out,”
said Bill Creelman, founder of Spindrift Beverage Co., which makes a national
line of sparkling waters infused with real juice. Creelman admits that in recent
months, grocery stores have run out of some kinds of Spindrift, when demand
outstripped supply. But there are some odd reasons for tight supply.

“When vaccines needed to be moved by refrigerated trucks, overnight refrigerated
trucks were not available or were more expensive,” said Creelman, who transports
fresh fruit from farms in refrigerated trucks as ingredients for his Spindrift
flavors. “Overnight, our truck prices doubled. There’s a trickle-down effect, of
us not always having what we want, and the just-in-time nature of our supply
chain.”

Inside one Georgia school district’s battle to serve healthy, homemade food
despite shortages and soaring prices

Still, one of the biggest headaches for Creelman and many others is the
containers in which beverages are packaged — in this case, cans.

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“Like everyone else, we’re scratching and clawing for as much as we can get,” he
said.



Nearly 75 percent of all new beverages launched this year were packaged in
aluminum cans, compared to 30 to 40 percent of beverages over the last five
years, so more companies are fighting for a limited supply, Credit Suisse equity
analyst Curt Woodworth wrote in an analyst report on the aluminum industry. Cans
are sold out in North America over the next 24 to 36 months, and supply may not
catch up to demand until 2025 or 2026, he wrote.

While beverage producers are struggling with all of these issues, it’s grocery
store owners and workers who have to explain the empty shelves to customers.

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“We are seeing waves of products out of stock, then back in stock, while other
products are just out of stock,” said Cullen Gilchrist, chief executive of Union
Kitchen in Washington, D.C. “Sometimes it’s sizes or formats — bottles versus
cans, glass versus plastic — that are out of stock, or just some flavors.”

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The challenge, Gilchrist said, is how to arrange the shelves and plan the layout
of store aisles when it’s not clear what is going to show up. He said he’s seen
between 25 and 50 percent of orders not coming in, or coming in short, which
forces his staff to hustle to rearrange and close up those gaps.

Prices climbed 6.2 percent in October compared with last year, largest rise in 3
decades, as inflation strains economy

To avoid supply shortages, some companies are trying to get creative. Casamara
Club, a small nonalcoholic “leisure soda” company in Detroit, has been stymied
in getting drinks out the door because of delayed deliveries of glass bottles
from China, said founder Jason LaValla. Now he is in the process of moving some
of his beverages from glass bottles to cans.

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“Our last bottling delay caused us to go out of stock for a full month,” LaValla
said. “That’s a whole month of lost sales, and if you add that up, we are
probably down about 15 percent in revenue because of not being able to fill
orders.”

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Glass shortages and delays, coupled with ingredient shortages and more delays,
have meant that Casamara Club has had to raid their marketing budget to spend
more on stockpiling ingredients like chinotto extract, an Italian citrus, for
fear of running out and not being able to make drinks like their Amaro club
soda.

Tell The Post: What is the best last minute gift you have ever given?

Scott Harris at Catoctin Creek Distilling in Virginia has had a similar
experience. One of his two main rye whiskey bottle types has disappeared. Plus,
it has taken as long as five months to get corks from Portugal, so they’ve had
to make do with an emergency purchase of plastic corks.

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Tonya Donato, co-founder of Mother Kombucha in St. Petersburg, Fla., said she’s
also struggled with the same supply chain problems as other beverage companies
with a lack of bottles and cans, ingredients going missing or needing more lead
time and not enough truckers.



But she also sees an upside in the beverage aisle, for new or smaller companies
like hers. She’s been able to sell more turmeric ginger lemonade kombucha,
seizing on an opportunity to fill “humongous holes” in grocery store shelves.

“I’ve seen smaller beverage brands on LinkedIn saying, ‘Hey, if you’re a grocery
category manager and you have holes on your shelves, call us,’ ” she said.
“Because so many big beverage companies can’t keep product on the shelves — I’m
talking major brands like Topo Chico and Perrier — we’ve gotten more orders and
been able to expand into more stores.”

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