How COVID upended beer packaging for local breweries


Parked outside Galveston Island Brewing Co. are two large box trailers loaded with pallets of cans waiting to be filled with beer. As this makeshift warehouse illustrates, just-in-time orders for cans were another victim of COVID-19.

Uncertainty over aluminum supplies a year ago led Houston’s Saint Arnold Brewing to halt production of an IPA variety pack to ensure there were enough cans on hand for Art Car, Lawnmower and its other top-sellers. The brewery even took unused cans printed for now-discontinued brands out of storage and slapped new labels on them for production.

And at Eureka Heights Brew Co. on a recent Tuesday morning, the packaging crew hustled to replace a worn-out belt on its workhouse labeling machine so it could complete a run of 16-ounce beers called Funnel of Love in time for an event.

Shortages and spiking aluminum prices, pandemic-induced kinks in the supply chain and new minimum-order requirements from a major can producer have complicated what used to be a straightforward ordering routine. Manufacturers have expansions in the works, but demand is expected to continue exceeding supply for perhaps a year or two. Lead times for placing orders have grown from a couple of weeks to two or three months, and deliveries are not always guaranteed.

“Sometimes I have to take half-pallets,” Eureka Heights packaging manager Eric Allen said, describing the multiple rounds of phone calls it can take to make sure he’s fully stocked. Missing a deadline to a supermarket is not an option, given the competition for shelf space on the beer aisle.

Demand for aluminum cans was growing before 2019. Craft beer consumers had come to embrace cans, and the brewers found them cheaper to fill and easier to transport. They also can be recycled more efficiently than bottles or single-use plastics.

But supply really got pinched once COVID began its deadly rampage. As public-health officials ordered bars and taprooms to close, draft sales plummeted and consumers bought more canned beer in stores. Revenue from drive-thru sales kept the lights on for many small brewers. In 2019, 52 percent of the beer sold by Eureka Heights was canned, with the rest going into kegs for draft sales. A year later, cans’ share soared to 72 percent.

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The same thing was happening to other brewers, as well as producers of soda, tea, kombucha and other beverages. Overnight, getting a reliable supply of cans became harder than ever.

“It went from not a stressful thing to a very stressful thing,” said Allen, echoing a common sentiment in the industry.

“There are cans available, but you have to work harder to get that can — and you’re going to pay more,” said Mark Dell’Osso, owner and founder of Galveston Island Brewing.

Procurement got so tricky that Dell’Osso had to clear warehouse space and rent a box trailer the size of an 18-wheeler’s so he could stock up whenever a buying opportunity arose. Then he leased another one. He hadn’t budgeted for those expenses – or for the price hike on cans themselves.

“It’s been tough,” he said, adding that’s he’s hearing that the disruptions could continue until the end of 2023. “It doesn’t seem to be going away.”

Dell’Osso also had to cut ties with his longtime supplier, Ball Corp., after the company announced larger minimum-orders. He is exploring new options, including third-party distributors who buy in bulk and sell to smaller breweries.

Cumulatively, the additional expenses have driven up production costs by about 30 percent per can, Dell’Osso said. Other brewers report similar increases.

Locally, the disruptions contributed to an across-the-board price hike of about 4 percent for packaged suds that hit consumers this January.

On March 1, Ball officially increased the size of minimum orders to five truckloads — about a million cans — from one-truckload. The change had been announced in November, but implementation was delayed.
Spokesman Scott McCarty cited “unprecedented demand” for aluminum cans that began in 2020 and has not let up. Ball is investing more than $1 billion in five new aluminum beverage packaging plants in the U.S., but it will take time for them to come fully online.

“In addition,” McCarty said in an email, “supply chain pressures that began during the global pandemic remain challenging, and the overall inflation in North America that is affecting many industries continues to impact our business, raising costs for virtually all of the materials we buy to make our products.”

The larger minimums pose a particular challenge for craft breweries, which are generally small and have limited room for can storage. Already at Eureka Heights, floorspace set aside for events is now filled with towering pallets of cans for top-sellers Mini Boss and Buckle Bunny. These preprinted cans arrive ready to be filled, sealed and hand-packed in four- or six-packs.

The breweries also produce a number of specialty beers, which are brewed in smaller quantities. These keep consumers happy and, collectively, boost the bottom line. But they don’t require tens of thousands of cans.

To cope with supply problems, Eureka Heights reduced the preprinted cans it buys in bulk to its two best-sellers and a plain white can with a small brewery logo across the top – a generic container that can be used for a variety of brands. These cans are run through a machine that glues a paper label onto the can.

The labeler was purchased to facilitate the smallest runs, like Funnel of Love, part of a carnival-theme series sold exclusively at the brewery. But once it came online in late 2019, the labeler was pressed into service for those and for other beers sold in stores.

As of last week, the machine had already affixed 310,000 labels.

Texans are still drinking beer, pandemic or not. About 12 craft breweries closed statewide during the shutdowns, said Charles Vallhonrat, executive director of the Texas Craft Brewers Guild. It’s not clear how many closed due to COVID, but the total number is slightly higher than usual, he said. The closures were pretty much offset by new openings, he added.

Local production numbers show a continued interest in craft beer. After a dip in 2020, Eureka Heights produced 8,600 barrels last year, said Rob Eichenlaub, co-founder and head of operations. That’s a record for the Houston brewery, up from 7,700 barrels in 2019. Dell’Osso said production volumes rose at Galveston Island Brewing throughout pandemic, even if revenues did not. He, too, expects to surpass his production record this year.

Dell’Osso said he has enough cans on hand to last into the fourth quarter, but that means he soon must begin the ordering odyssey all over again.

As with all major disruptions, this aluminum candemic has birthed new enterprises to meet the changing needs of business. Austin-based American Canning, which provides mobile-canning and other services, announced it will begin manufacturing cans as early as this spring.

“In 2020, we saw that coming out of this, craft producers’ needs would still be overwhelmingly unsupported,” co-founder and CEO David Racino said in a news release. “To continue to service our growing client base, it became clear we needed to create our own supply.”

Also in Austin, a company called Canworks launched in August to provide on-demand printing for beverage producers, two-thirds of them currently craft brewers.

“The customers need this service,” said co-founder Marshall Thompson, who left the commercial real estate business in Houston to join his brother, Ryan, in the effort.

The company orders cans in bulk and stores them in its east Austin warehouse. An expensive digital-printing machine on site is capable of high-quality, ink-jet printing of cans in batches from one to 1 million, with a fairly quick turnaround. One brewery reached out last week explaining that it needed more cans pronto after the beer printed for an earlier order “flew off the shelves,” Thompson said.

Canworks expected to fill the order on an expedited basis in about a week, he said.

Eichenlaub, of Eureka Heights, showed off some of Canworks’ product at his brewery and said he was impressed.

The Thompsons set out to grow at a reasonable rate and not take on more customers than they can handle. They have about 70 clients now, Marshall Thompson said, and the growth is exceeding expectations. He said the company is on track to reach its maximum printing capacity of 2.5 million cans per month in May, running two shifts on weekdays and two or three more on weekends. It is buying new printers and will open a second U.S. location in the fall and a third in early 2023.

Because Canworks orders from a large national supplier, Thompson said he can empathize with the brewers coping with supply issues.

“We’ve never missed a deadline,” he said, “ … but it’s not as easy as just picking up the phone and placing an order.”

Post time: Apr-08-2022