The Causes of Aluminum Shortages

Dan:
Hey will, how’s it going from the shores of California?

Will:
It’s nice out here. I’ve had some in and out burger got to play a little bit of golf. It’s the boy’s birthday week. So we’ve got to go out on the boat a little bit. Take them to a water park. See shmoo

Dan:
Nice.

Will:
Yeah.

Dan:
Nice little sea. Is that SeaWorld right?

Will:
That that’s SeaWorld.

Dan:
Well, have you noticed in your time in California, any shortages in the beer market,

Will:
You know, I, I have seen some signs saying that things are coming and I think we’re probably gonna talk about that today, right? Yeah.

Dan:
It’s it’s a great segue. So hopefully all you listeners pop up in a can right now and join us as we talk about the beer shortages that are taking place in your new home state, well of California, where the recycling system’s seen a decrease in aluminum, which is being obviously used for the cans, but also what suppliers are doing. Ball Corp, which is the, one of the largest aluminum can manufacturers located in, in Colorado recently increased their truckloads minimums on purchase orders to five, which is the equivalent of 5 million cans per order, which is a lot for some local breweries that wanna get their product out there, but really leads into a interesting segue on is what do you do if your supplier or any of your manufacturing partners increase their MOQs and short notice, and how do you pivot to getting your product out, cuz it can happen. And it does happen as we’re seeing now in the in the beer market.

Will:
Yeah. I think it’s important to know that, you know, in this sense, the demand for, you know, the demand for aluminum cans is at a peak right now, it is continuing to climb. Everybody wants aluminum cans, whether you are a soft drink manufacturer, if you’re producing high Noons, white claws, truly you are competing for, with everybody, the beer market, everybody wants aluminum cans. And so this situation’s interesting.

Dan:
That’s whiskey, there’s whiskey and lemon drinks and cans now.

Will:
Yeah. It’s everywhere mixed drinks and everything is going into a can. It is relatively infinitely recyclable, and

Dan:
Which is a whole different topic of how we’re not maybe doing a great job of recycling cuz that’s where most of these cans come from is

Will:
Recycled. For the most part, the aluminum industry gets a high percentage of the cans they make again from recycling

Dan:
73%.

Will:
Exactly. That’s not happening. Yeah. But the thing to take away here is that if your supplier is pushing, is pushing something on you and forcing you to act quickly. You know, a lot of times you’re like, what, what can I do? What, what, what should I do here? And so in the, you know, in this specific instance, if a supplier is pushing you to make purchase orders for large amounts because of a capacity issue, really, you know, there’s three steps that you need to do. You need to take a quick step back and assess and say, okay, what is the information I’m getting? What am I processing? The second thing that you take a look at is, do I have other sources? Am I boxed into this supplier? Or have you diversified who you can actually go to? And so Dan, in this case, you know, if you’re looking to source and little can, if you’re looking to source a component, hopefully you’ve built some redundancy in your supply chain to where you’re not single source with the supplier.

Will:
So you can actually take a look. And then the last thing after you’ve done that is you have to make your decision. In certain cases, you, you have to be fiscally responsible to your business. And so if the only solution you have is to make purchases for something, well, then you can work with your supplier and say, Hey, if you’re agreeing to purchase this amount, which is past what you normally would do, can you make the purchase for it, but can you have them store it for a per longer period of time? You know, what can you, what can you get knowing that you’re forced into this situation. And hopefully that’s where some of the partnership comes with. You know, when you, we talk about being a good partner with your supplier, it shouldn’t be one way. It was like, Hey, we have the ability to dictate terms to you, take it or leave it.

Dan:
Yeah. Also one thing that I’m actually curious about, and I don’t know if this is done across, like, let’s say like local breweries is okay, 5 million cans is a lot. And most of the time they’re like sleeves that you put on them. So it’s not direct deco.

Will:
Yeah. For the smaller breweries. Can you, can you just

Dan:
Come together maybe as like a coalition order and then distribute across truckloads that way? Just one way to maybe beat it. Obviously you’re putting a lot of trust in, in your local community to do that. But I mean, micro breweries are pretty much everywhere right now. And 5 million cans is a lot. Sure. It’s diverse. They have a huge portfolio and it’s not like they’re just maybe just selling like one IPA or like one Pilsner. But like maybe there is a way that you can group these orders together just cuz it, it’s not like in the beauty industry where everyone’s like miss spray is slightly different. There’s a lot more diversity in that packaging as there is in cans.

Will:
Yeah. It, no, it’s a good point. And I think people like you could, I think you could, if you, you know, if you had a group and you felt like you could get it done, even if you put a bare minimum, you know, legal contract in place, I think that’s something you can do. This is also where you see why people buy things from distributors. Yeah. Knowing that a distributor is going to buy that 5 million, 10 million, 15 million can and they’re gonna hold it and they’re gonna sell it at a premium. And they have a, I know, you know, we know one distributor that works with a lot of these companies they’re in California and they do the same thing they sell to these breweries. And the big, the interesting thing is though, is that, you know, when do they start taking on more inventory? You know, they’re like, Hey, you know, we normally order 20 million. Should we order 30 million knowing that this demand’s gonna go up and up and we can probably get rid of it is the short answer.

Dan:
Yeah. And this is a whole different conversation where sometimes actually distributors on certain products actually could make sense, especially in a situation where like the MOQs are five truckloads.

Will:
Right. And exactly. And in this case, it’s not necessarily that it’s a hard to get item because it’s technically challenging. It’s a hard to get item cuz everybody wants it. Yep. And so, you know, as you’re looking at it from a company, you know, and you’re, you know, ultimately when you’re being dictated something to, by a supplier, you’re always needing to just try to take a look and say, what can I do to mitigate this situation? And at least get something that’s beneficial for us. So in addition to, you know, those times where you’re being asked to purchase more, it’s like, Hey, either you buy it or you lose it. There’s other things that you can do with your suppliers where you can say, okay, I’ve now purchased these goods and now I have to hold onto them. What can we do in the next year?

Will:
Is this something that has some seasonality to it? Is there something where they can help support you on another side of the business that you may be struggling with? There’s, there’s a lot of different things that they can do that you can be creative with to where it’s not necessarily one ended. And this is another reason why we put into place. You know, you have supply agreements that you can work on. You have material supply agreements in terms when it comes to quality and when something should be there, these are all times where they make sense based on what type of good you have.

Dan:
I think ball is just doing this to pay off their stadium rights for the avalanche and nuggets. There’s the hot take that everybody’s looking for?

Will:
Well, the Dan, the, the big thing is that people don’t realize also is that there is a lot of capital that has to go into place to produce these aluminum cans. The aluminum can process in general requires you to make slugs that are really like hockey pucks of aluminum. And then you’re extruding them up into the can. Once these facilities are typically built, the capacity is almost already spoken for. Yeah. Like when you think of Budweiser, you think of Miller cores, name, all the big beer companies, name, all the like coat Pepsi, who doesn’t like aluminum cans. Do

Dan:
You put a straw in your aluminum? Can

Will:
I know the pop tops there for that? The hold it in place.

Dan:
Yeah.

Will:
But I love the feeling of drinking out aluminum

Dan:
Can. Oh, I, I, I second that, so yeah. High probability that all you listeners are probably gonna be drinking outta a can sometime this week. I know I already have not during this recording of course, but I have drink have a can this week. But we hope you guys come back and continue to rate and subscribe on our safety stock on Spotify and apple.

Will:
Yeah. And if you have a good drink that we haven’t tried yet reach out to hello@anvyl.com. That’s a, we’ll talk to you soon.