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Drinks and supply chain issues hit the US

25 August 2021 By Jessica Mason

Drinks and raw material shortages are beginning to impact the US with out-of-stock products becoming increasingly prevalent across all tiers of the industry.

As post-Covid mandates were lifted and heightened demand for drinks ensued, bars and restaurants have struggled to fill shelves with alcohol for the summer season, straining supply, according to Supply Chain Dive.

“Easing Covid-19 restrictions has resulted in an explosive comeback in the on premise industry,” said The North Carolina Spirits Association and Mecklenburg County Alcoholic Beverage Control Board in a statement, but warned that the supply chain conditions are not unique to a single place and hinted that they are far-reaching and have started to shape how the drinks industry plans for the rest of the year into fiscal year 2022.

In Constellation Brands 2021 Q1 Earnings Conference Call, CEO William Newlands described how the siutation had been amplified by “robust consumer demand” and said that “global supply chain logistics issues, including shipping delays and transport interruptions, have also created out-of-stocks,” noting how certain items imported from New Zealand and Italy in particular were facing distribution challenges.

Transportation and logistics disruptions have also hit Brown-Forman, the maker of Jack Daniel’s and Woodford Reserve, which revealed its distributor and retail inventories have become reduced due to a mix of transportation and logistics disruptions including faltering service from rail and ocean carriers as well as a lack of capacity in trucking markets and shipping containers. All of which are reportedly said to be impacting inventory levels for many drinks companies across the U.S. and abroad.

The drinks industry is “at the mercy of the supply chain somewhat in this as things work out,” said Brown-Forman CFO Jane Morreau in the company’s June 2021 earnings conference call. CEO Lawson Whiting lamented that this has had a knock on effect as “so many bars and restaurants had to reduce their inventories over the last year.”

Brown-Forman has also reportedly experienced shortages with the steel it uses to create hoops around its barrels as well as reduced glass supply. “The key ingredient that we’ve had some disruptions on is our glass supply,” said Morreau, adding that “this is certainly something that is really important to us and something that we are working closely with our supplier now to get that resolved.”

Material shortages and cost increases are on the rise, with issues with moving drinks products from distilleries to warehouses before delivering to retailers and venue owners. As such, he number of obstacles that need to be overcome for companies selling drinks, or simply fulfilling stock orders, continues to increase.

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