Last Name: Why Prices On Local Beer, Spirits, And Other Craft Beverages Are Going Up
If you enjoy relaxing after work with a cocktail or sipping a can of local craft beer while watching a football game, expect to pay more for the privilege. According to local craft drink suppliers, supply chain issues are eroding margins and making it difficult to turn a profit at existing prices. These economic strains could threaten Traverse City’s status as a leading producer of craft beer, wine, cider and spirits. Alternatively, the crisis could also pave the way for a new era of collaboration and partnership between this niche community of local businesses in northern Michigan.
Bad news first: According to Russell Springsteen – founder and CEO of Right Brain Brewery – sourcing aluminum beer cans domestically has “become almost impossible”. This particular supply chain issue has been a factor since the pandemic began – due to a mix of factory backlogs, breweries switching from glass bottles to cans, the growing popularity of Hartselzer and more.
But things got significantly worse in 2021, when tornadoes in Kentucky damaged one of the few canning plants in the United States, according to Shorts Brewing Company CEO Scott Newman Bale. The loss of a plant has cut the domestic supply of cans even further, and Springsteen says most of what’s left is talked about by big breweries and soda makers.
“The big players distract that [production capacity] and cut us out,” says Springsteen. “So if consumers want to support small breweries, they need to think about how buying a big domestic brand hurts us. We suffered a major blow when last spring, from January to April, we were unable to obtain cans for almost four months. I lost shelf space [at retailers] and it really hurt me. Now we are fighting to get that back.”
With options limited, Springsteen tells The Ticker he’s sourced most of Right Brain’s cans from Asia over the past year. But even that option isn’t ideal: it means 16-20 weeks lead time, “skyrocketed” shipping costs, and the need to buy shipping containers full of cans.
“A full container costs between $15,000 and $18,000, depending on shipping,” Springsteen explains. “So we had to change our entire business model. We used to order on time, that is, when I needed three pallets [of cans], I ordered three pallets – and received them within a week. Now I have to buy 12-25 pallets and that eats up all your money. You sit on inventory, but it doesn’t make you any money for a year.”
The problem can be even worse for breweries that source their cans domestically. Springsteen points to Ball, one of the Big Three US can makers, which told its customers in November that if they wanted decorated cans (or cans with designs and branding already printed on them), they would have to purchase a minimum shipment of five truckloads. A truckload is 25 pallets, with pallets generally holding 60 cases or 72 cases (depending on the size of the cans) with 24 cans per case. If you do the math, a 25-pallet truckload would be about 36,000 cans on the low end and 43,200 on the high end; five truckloads would equal 180,000 or 216,000 cans.
“You see mid-size breweries here that tie up $100,000 in capital for just one brand for a couple of years [of their beer]’ says Springsteen.
Ball’s minimum shipping requirements were originally scheduled to go into effect on January 1st. After reluctance from brewers — plus support from the Senate Finance Committee — Ball agreed to delay implementation until March 1.
According to Springsteen, Right Brain is unique among local breweries as it has a spacious facility capable of storing tens of thousands of cans for long periods of time. But he’s worried the situation could prove unsustainable for smaller players in the region – either with less square footage or less liquidity. It’s an issue that has Springsteen wondering if it’s time to form an alliance where local brewers share the investment in buying cans or other key consumables.
“I’m just wondering if at some point we should all put our heads together and say, ‘Hey, let’s go in and do this together; let’s buy some containers and share them,’” Springsteen explains. “Right now we can do it ourselves. But we’ve talked about buying a few cans and then selling them to local breweries when they need them – especially when I’m forced to buy so many cans and sit on them.”
That idea of finding new ways to collaborate was a topic Springsteen wanted to address with fellow brewers this week at Michigan’s 2022 Great Beer State Conference & Trade Show, held Wednesday through Friday at the Grand Traverse Resorts and Spa.
Meanwhile, due to can shortages — coupled with soaring prices for everything from malted barley to cardboard — Springsteen has forecast a noticeable shift in beer prices: “You’re going to see $1 to $2, a six-pack. And all along the line, right down to your big breweries.”
Newman-Bale agrees, estimating a 6 to 10 per cent price increase for most packaged beers. He even advises beer lovers to stock up on their favorites — not only because prices are going up, but because availability could be impacted. In addition to can shortages, Short’s has struggled to source key ingredients for signature beers such as Soft Parade.
“We’re a fruit-heavy brewery and the fruit growing season has been terrible this year,” says Newman-Bale. “High temperatures in the Pacific Northwest have destroyed much of the summer berry crop. Sometimes we pay five times as much now [for those ingredients] than last year, and a few months ago there was a time when we just couldn’t get fruit, at any price. Due to such issues, there will be delays in manufacturing; You will see empty shelves; and you will see pricing and availability impact. If you have a specific beer that is all you want to drink, I would suggest stocking it up a little more than normal.”
While beer is likely to be hit the hardest by the supply chain disruptions, other local craft drinks could also see price spikes. Take wine and spirits, which could be impacted by global glass sourcing difficulties. Grand Traverse Distillery founder Kent Rabish says almost all specialty distilleries – including his own – source their bottles from Europe because no local producer can match the quality of the glass. But this part of the business has been stalled lately due to the cost of freight.
“It was abysmal to get shipping,” explains Rabish. “We get huge surcharges. Our bottles come over from France and you get over $20,000 extra for a 40ft glass container.”
While there’s a common understanding in the beer world that supply chain issues will require price hikes, Rabish says pricing in the spirits community — particularly for premium vodka — is more of a chicken game.
“Unfortunately, our prices in the market haven’t changed since 2007,” says Rabish. “If you go into the premium vodka section and you see Gray Goose, Belvedere and Chopin, their prices are still hanging at $29.99, which is the same price I started with in 2007. Everyone is afraid of being the first to stick their head up to raise prices. So, over the years, the vodka line’s profits have fallen. But I’m also scared to go up to $33 and have my head cut off because people are going to look at it and say, “Well, the hell with that; I just move on to the next premium brand.”