Prediction One of our 2016 Predictions for Industry and Global Supply Chains called for another year of more uncertainty and continuous challenges related to supply chain activity. Risk factors are growing and so are business challenges.  To serve as reinforcement, Supply Chain Matters amplifies one specific example brought to light by an article published in the New York Times. (Metered complimentary view or paid subscription)

The Times reports that craft brewers of specialty beers have been generally growing at a double-digit for the past six years. Consumers have opted for regional beer tastes along with variety in quality beers. Now they face the challenge for having to compete for a limited supply of aluminum beer cans. According to the article: “While the craft beer boom has benefitted small breweries around the country, it has also left some scrambling for cans.”  Even though glass bottles provide a distinct brand presence, many of these niche brewers have figured out that millennials and hip beer enthusiasts prefer unique can designs that are collected after consumption. In order to present a unique value proposition, many craft brewers have elected a 16 ounce can vs. the standard 12 ounce can that is the norm provided by national and global brands. The cans lend themselves to more unique and colorful designs which can be collectable.

Many craft brewers source their relatively smaller lot orders with can supplier Crown which once required smaller minimum lot orders than its two competitors. But, the report indicates that the current surge compelled Crown to raise its order minimum to a trailerload, which equates to upwards of 200,000 cans. Most specialty brewers do not have the working capital or desire to inventory such a large quantity.  The can shortage itself has spread since summer, and what orders can be placed are taking for more weeks for delivery. Consider that industry goliath AB-InBev reportedly consumes 1.5 billion cans a year.

Compounding the can supply shortage is an industry trend focused on consolidation.  Global brands continue acquiring popular micro-brew brands to exploit the preferences of consumers for such unique beers.  Then there is the announced industry blockbuster acquisition of SABMiller by AB-InBev announced in November for a reported $107 billion that combines the globe’s biggest brewers into a company controlling about half the industry’s profit. While such a deal will most likely mandate regional divestitures, the implication for buyer influence on supply or seller influence on distributors is significant. The squeeze comes when a goliath like AB-InBev can offer beer distributors monetary incentives for exclusive regional distribution, locking out smaller competitors.

Thus in a time interval of a year, microbrewers have to deal with a rapidly changing business landscape on product demand, supply and distribution fronts.

No doubt, creativity and innovation will lead specialty microbrewers to come up with alternative approaches in supply and distribution strategy, but this served as just one example of today’s uncertainties and rapidly changing industry landscapes.