Beverage makers battle glass shortages as holiday celebrations loom

Dive Brief:

• Distillers, beer makers and vintners are dealing with shortages of glass bottles as international shipping delays, labor constraints and higher material costs gum up packaging supply chains ahead of the busy holiday season, CNBC reported. David Ozgo, chief economist of the Distilled Spirits Council, told the publication that even large distillers with multiyear contracts with bottle manufacturers are having to “pick and choose as to which bottle sizes they’re going to get.” Most glass bottles used in the U.S. are manufactured overseas.
• Despite the supply chain constraints and higher costs, production of spirits bottles in the U.S. rose about 3% in the first nine months of 2021, and imports of 750-milliliter bottles used for wine and spirits are up 14%, the Financial Times noted.
• The glass shortage is occurring as demand for alcohol — from wine and beer to spirits — has spiked at different points during the pandemic. It is also hitting in time for the winter holidays, which see two of the biggest days of the year in terms of retail alcohol sales: Christmas Eve and New Year’s Eve.

Dive Insight:

Liquor manufacturers have been dealing with glass shortages since early this spring. With much of the manufacturing of glass containers located overseas, a lack of shipping containers and labor at ports has resulted in shipment delays — and higher costs for manufacturers.

The issue is affecting beverage producers small and large. St. Augustine Distillery, a spirits company based in Florida, has been unable to bottle about 5,000 cases worth of vodka, gin, rum and whiskey that remains in tanks because of glass shortages, the Financial Times reported.

Vintage Wine Estates, manufacturer of wine brands including Layer Cake, Bar Dog and Middle Sister, has seen the glass constraints weigh on its financials. In its most recent quarter, revenue rose only 3% due to $7 million worth of delayed shipments tied to glass shortages, President Terry Wheatley said during the company’s earnings call. Had it not been for those delays, revenue would have jumped 16%, Vintage Wine estimates. 

“We will still ship that volume, and it will be spread over the last nine months of the year,” Wheatley said. “We are confident we’re not losing any business because of these constraints.”

Constellation Brands, manufacturer of Corona, Modelo and Pacifico beers, is in a better position than many thanks to its participation in a joint venture with glass container manufacturer Owens-Illinois that includes partial ownership of a production plant in Mexico.

“We make about 60% of our glass in conjunction with our joint venture with Owens, which again helps to mitigate some of the short-term challenges that other people might have who are buying all their glass externally because we control that,” President and CEO Bill Newlands said at this week’s Morgan Stanley Global Consumer and Retail Conference.

However, Constellation has faced “pressures” on brown glass, much of which it buys to bottle its Pacifico Mexican pilsner and Modelo Negra dark lager brands. “We’ve left some growth on the table in things like Pacifico and Modelo Negra because we weren’t able to access the amount of brown glass that we would like to have seen,” Newlands said.

Because of its preference for glass bottles, Constellation does not use as many cans as some of its beer competitors, but does hedge against aluminum prices as a tool to manage costs, Newlands said. This has proven doubly helpful as demand for the metal has spiked during the pandemic and left can manufacturers scrambling to ramp up production while also introducing new limitations over orders.

In September, Ball Corp. — the world’s largest manufacturer of cans — announced it was investing $290 million in a new can manufacturing plant, slated to begin production in late 2022. More recently, Ball has raised the minimum order required for printed cans for customers not under a contract in an effort to recover costs. The Brewers Association has warned about the impact of this policy shift on small beer manufacturers, many who it said will be forced to source their cans from distributors and potentially pay higher costs.