Coronavirus Is Causing a Can Shortage

Date: Wednesday, August 26, 2020
Source: The Wall Street Journal

The pandemic has accelerated demand for food and drink cans, a trend can makers are betting will last amid sustainability concerns

Demand for cans is booming during the coronavirus pandemic, propelling can makers to boost manufacturing capacity to prevent shortages and capitalize on a trend they bet will stick.

As bars and restaurants closed across the U.S., consumers rushed to buy large packs of drinks—typically sold in cans—in supermarkets, say executives. Sales of canned food also jumped.

That is accelerating a continuing shift in favor of aluminum drinking cans, which were already taking share from glass and plastic bottles. Manufacturers attribute their growing popularity to cans being lighter and more robust than glass, and having higher recycling rates than glass and plastic. The growing popularity of hard seltzers, usually packaged in cans, has been another factor.

Miller Lite owner Molson Coors Beverage Co. TAP.A -4.60% last month said it had lost market share in the U.S., partly because it had to suspend production of some canned beers. It said it was struggling to find enough tall cans for Coors Light and expects shortages of 12-ounce cans to persist in the third quarter.

“Every company that makes anything in the 12-ounce can has been challenged to some degree by the global can shortage,”’ said Chief Executive Gavin Hattersley on an investor call. He flagged demand in the U.S. as being especially strong after restaurants and bars closed. “Demand for kegs in the U.S. went to zero and conversely demand for cans went through the roof.”

Coca-Cola Co. said products like Minute Maid Zero Sugar Lemonade, Cherry Coke Zero and Pibb Extra may be difficult to find in cans because of tight supplies. A spokeswoman said the company had added capacity but “demand is so high it’s still outpacing supply at times.”

U.S. retail sales of aluminum drink cans, which make up nearly all cans for drinks, rocketed nearly 24% by volume in March, according to research firm IRI, and have continued to grow strongly since.

Cans’ share of the U.S. beer and hard-seltzer market rose from 60% to 67% in the first quarter, according to the National Beer Wholesalers Association, and remained elevated at 65% in the second quarter even as some bars and restaurants reopened.

“Demand is just kind of crazy,” said Kathleen Pitre, chief commercial and sustainability officer at Ball Corp., the world’s largest maker of aluminum drink cans. Demand has risen sharply not only for standard 12-ounce cans but also tall, sleek cans used for drinks like hard seltzer, she said in an interview.

Ball plans to begin running two new production lines in the coming weeks in Fort Worth, Texas, and Rome, Ga., both of which have capacity to make a billion cans a year. Despite this, the company estimates it will still import two billion cans this year to meet demand in North America, from places like Europe, India and Brazil.

Crown Holdings Inc., CCK +2.14% another big U.S. can maker, said it was initially able to meet surging North American demand by importing cans from Latin America, where demand slumped after Covid-19 hit. But now demand is rising there too, and while Crown is accelerating investments in two U.S. can lines, it expects a shortfall.

“From now until the end of the year, and in almost every market where we produce, cans will be in short supply,” Crown CEO Timothy Donahue told investors last month. “We do not have the ability to make up months of demand in a shorter time period,” he added.

Outside the U.S., demand has varied. Sales of canned drinks in Southern Europe have dropped because of fewer tourists but jumped in Germany and the U.K., driven by purchases of beer in supermarkets.

Not all companies are struggling with shortages. Budweiser brewer Anheuser Busch InBev SA said it anticipated the can shortage after Covid-19 hit. “We have been preparing for a can uptick for quite some time,” Chief Executive Carlos Brito said.

Sam Adams owner Boston Beer Co. SAM +0.38% also says it has been largely shielded by building up inventory for Truly Hard Seltzer and Twisted Tea, although those stockpiles are now running low.

Some companies are betting higher demand is here to stay, for canned drinks but also canned food. Previously falling out of favor, canned food sales soared 23.5% in the six months to June, according to research firm Nielsen.

Ball plans to open two new plants in the U.S. next year, while Boston Beer aims to double its canning capacity over the next 12 months. Overall, the Can Manufacturers Institute, a trade body, says U.S. manufacturers expect to have new capacity to produce 12 billion more cans by the end of next year.

Mr. Allott said on an investor call that Silgan was now “spending more on marketing the value of the can,” which he said has long been the cheapest and most sustainable way to sell some foods.

“What our European food customers believe is that there’s a more permanent return to eating food cans at home because of the pandemic,” said Crown’s Mr. Donahue. “I think we’re going to see more of that in North America as well.”

 

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