Supply Chain Woes Impact Packaged Beverages

Retailers are seeing increased out-of-stocks for bottled and canned drinks.

December 10, 2021

Beverages in Fridges

ALEXANDRIA, Va.—Supply chain issues are wreaking havoc on many industries, and the beverage industry has not been spared, reports the Washington Post. Bottle and can shortages, trucking and shipping snarls, missing ingredients, labor issues and weather are all to blame for beverage shortages plaguing convenience store and supermarket shelves.

During the holiday season, grocery stores see 5-10% of out-of-stock products, but currently, grocers have about 13% of out-of-stock beverages.

Coca-Cola said that customers will see sporadic shortages on grocery shelves through 2022, but the company is still seeing strong sales. The company’s chief executive James Quincey said supply chain problems are “a bit like whack-a-mole” and cited shipping, freight and labor problems; ingredient shortages; and unexpected problems such as a Brazilian plastics factory catching fire and the rising cost of natural gas causing a global shortage of CO2, which makes soda bubble.

Monster Beverage Company has cited aluminum can shortages, and PepsiCo also has experienced packaging shortages, especially in its Gatorade brand—there’s a resin shortage, which is used in plastic packaging, the Post reports.

According to an analyst report on the aluminum industry, cans are completely sold out in North America over the next 24 to 36 months, and supply may not catch up to demand until 2025 or 2026. Close to three quarters of all new beverages launched this year were packaged in aluminum cans compared with 30-40% of beverages over the past five years, so more companies are fighting for a limited supply, according to the report.

Beverage companies’ business model changed during the pandemic, with consumers shying away from fountain and single-serve drinks—and convenience stores and QSRs forced to turn off dispensed beverage machines due to COVID-19 restrictions. So, companies shifted to multipacks and larger-format packages like two-liter bottles. They also cut back on total production and focused on core brands and flavors to meet the increased demand from consumers stocking up. Then Americans shifted out of lockdown, and it was faster than expected in some areas, so the demand for immediate consumption packaging by beverage companies increased rapidly, and many companies are struggling to keep up.

The COVID-19 vaccine also caused hiccups in the beverage supply chain. Bill Creelman, founder of Spindrift Beverage Co., a sparkling beverage company, said that when the vaccines needed to be moved by refrigerated trucks, overnight refrigerated trucks were not available or were more expensive.

“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,” Creelman told the Washington Post.

Earlier this month, the Federal Trade Commission asked nine companies, including Tyson Foods Inc., McLane Co. and Walmart Inc., to provide the agency with information surrounding their operations as part of a fact-finding effort to understand ongoing supply chain disruptions.

The orders also are being sent to Inc., Kroger Co., C&S Wholesale Grocers Inc., Associated Wholesale Grocers Inc., Procter & Gamble Co. and Kraft Heinz Co. The FTC hasn’t accused the companies of any wrongdoing.