By Eric Peterson / CompanyWeek | Aug 19, 2020
The aluminum can has been on a roll for a decade as it became the preferred packaging of craft breweries nationwide.
In 2020, COVID-19 hasn't changed the trendlines. It has accelerated them.
Since mid-April, sales of canning systems have spiked at Cask Global Canning Solutions in Calgary, Alberta. President Russell Love forecasts year-over-year growth of 15 to 25 percent.
The company shut down for a spell in March, but the phone has been ringing off the hook since April. "Our orders have been at least double what they were last year," says Love. "The pandemic is actually helping our business, not hurting it."
At first, it was taprooms ordering tabletop systems. "It's a double whammy because taproom sales are their highest margins," says Love.
Since May, the trend has shifted with orders for lines that can fill 20 to 40 cans a minute, he adds, leading to "a huge backlog of orders." Lead times are now at 10 weeks, but Love expects to have them back down to the standard six sometime in September.
New hires will help in that regard. "We've got 10 job postings," says Love, noting that the employee count has already grown from 50 to about 70 in the last year.
Many of Cask's recent customers had relied on mobile canning services, but those operations are increasingly overbooked during the pandemic. "They already know cans and need to bring it in-house," says Love.
The pivot to packaging has been a lifeline to many breweries. "By and large, what we hear and see is people are able to stay alive," he says. "They're probably not going to write a letter to investors about their profitability, but they're able to stay alive."
Brewery bankruptcies are up, but not by an overwhelming number, he says. Winter is a looming test, when the weather won't allow for patio drinking.
"It's definitely upended that taproom model that's been dominant the last five years," says Love. "Diversification of revenue is really important."
E-stores and beer trucks for home delivery have emerged where regulations allow. "I hope this sticks around when this is all over, if it is ever over," says Love.
It all adds up to a big boom for aluminum beverage packaging. "It's a page in history for the aluminum can," says Love.
The Can Manufacturers Institute backed that up in an August 11 press release titled "Unprecedented Demand for U.S. Aluminum Beverage Cans." According to data from the National Beer Wholesalers Association and Fintech OneSource, cans have gained seven market share points in the beer market due to COVID-19-related taproom shutdowns.
The forecast: U.S. aluminum can manufacturers will import 2 billion cans from their overseas facilities to keep pace with the market, and are expected to add capacity to make an additional 12 billion cans a year domestically by the end of 2021.
Brandon Capps, founder and owner of Colorado-based New Image Brewing, with its first taproom and restaurant in Arvada and a production brewery in Wheat Ridge, says the tight summer market isn't abnormal, but it's being exacerbated by the pandemic. "There's not a shortage, but now everybody's ordering like there is," he says. "It's caused a toilet paper situation with cans."
New Image is in good shape, says Capps. "We always carry an eight-week supply of aluminum, because we know it's going to happen once a year."
That inventory is critical for summer 2020. Draft, which accounted for about 30-percent of pre-pandemic production, is down about 40 percent, but cans are up about 15 percent.
Special releases are especially off when it comes to draft sales. "Bars are trying to not buy expensive kegs right now because they don't want to get stuck with book inventory," says Capps. "Since we were a packaging brewery before, it's just a matter of changing our allocation."
The brewery offered delivery during the stay-at-home order in Colorado, but has since moved to taproom pickup for direct sales. "People have been itching to get out of the house," says Capps.
Capps says production and wholesale revenue are similar to 2019, but taproom and draft sales are down by a "significant amount."
The pandemic has also impacted longer-term planning. A brewhouse expansion has been pushed to 2021. "Let's hold off a year before putting that capital into growth," says Capps.
But allocation changes and capital investments are nothing compared to other challenges Capps highlights. "The amount of red tape and bureaucracy this year has been astounding," he says. "Landlords are remaining just as obstinate and irrational as they always have been."
Thirdly, reopening for on-premise consumption with patio seating only has led to pushback on policies that don't allow dogs and kids. "Seating capacity is 100 percent our bottleneck right now," he says. "You know, it's not an ideal world right now, but we're doing the best we can."
It's a common refrain. "Our overall revenue is down significantly, our volume is down, and our mix is completely different," says Ken Hehir, CEO of Tivoli Brewing Company in Denver.
Tivoli's revenue breakdown has changed "dramatically" from one-third cans and two-thirds draft to one-third draft and two-thirds cans. "Our draft business went away overnight, as did our taproom business," says Hehir. Cans "became 100 percent of revenue."
The company utilizes a Cask system the company donated to Metropolitan State University of Denver, Tivoli's home campus, that was upgraded in the spring. "It was pivoting, but it was pivoting within an existing format," says Hehir.
"We've probably grown our can business by about 60 percent," says Hehir. "It still doesn't account for what we lost in draft. It's allowed us to survive."
The taproom has since reopened, he adds, but it has been "pretty quiet -- as expected."
That means the aluminum can will be critical for Tivoli for the foreseeable future -- if the brewery can get them. Hehir says Tivoli sources from Ball Corp. and another supplier, and lead times have jumped from two to four weeks to 10 weeks.
While there's a temptation to stockpile, the strategy could backfire, he notes. "You don't want to tie up all your revenue in can inventory. It's a tightrope."
Eric Peterson is editor of BreweryWeek and CompanyWeek. Contact him at firstname.lastname@example.org.