Supply chain issues smash liquor retailers

Supply chain issues could cancel Christmas for Australian liquor retailers and their customers, as stock and pallet shortages threaten to leave shelves empty.

Cellarbrations at Gisborne owner Tony Bongiovanni told Drinks Digest: “On average, 23% of orders placed are out of stocks for numerous reasons that we are told by our suppliers, including shortages of aluminium cans, pallets, containers and COVID cases in warehouses.

“We are all coming out of lockdowns and this should be our chance to catch up with loved ones and friends. It’s supposed to be a time of celebration. However, out of stocks are impacting and affecting retailers ability to trade efficiently during this important trading period. On average we are also seeing delays to deliveries of three to four days past expected delivery dates.”

Empty shelves are already a regular sight in the US and UK due to a shortage of truck drivers and magnesium, the vital ingredient for making aluminum cans.

Aluminium shortage hits canned drinks industry

China produces around 87% of the world’s magnesium, but that has been affected by the country’s recent power crisis. Many magnesium plants have been either shut down or halved their production capacities due to the power cuts.

China supplies 95% of the magnesium to Europe. A dozen industry groups issued a joint statement last week urging their leaders to tackle the issue.

“Supply of magnesium originating from China has either been halted or reduced drastically since September 2021, resulting in an international supply crisis of unprecedented magnitude,” they said.

Although the US is less reliant on China for magnesium, its aluminium producers are facing a similar supply issue due to low stock of magnesium.

Reuters reported this week: “Earlier this month, Corona beer maker Constellation Brands said increased raw material costs in the third quarter were predominantly driven by pallets, cartons and aluminum.

“Coca-Cola said on Wednesday it was facing ‘tight’ supplies of cans, while its rival Pepsico flagged difficulties in securing bottles for its Gatorade sports drink.”

Bongiovanni said the supply chain issues don’t bode well for the festive season “because if this happening now, God help us as we get closer to Christmas.”

Endeavour Group CEO Steve Donohue told the company’s first Supplier Forum as a stand-alone business earlier this month that supply chain constraints were affecting both global and local networks are limiting access to some products.

“There are also some stock constraints on imported liqueurs and certain spirits across the world, with many customers getting into making cocktails at home with bars and venues closed during lockdown,” Donohue said.

“Inevitably there will be some relative minor impacts on sales due to availability, there is just no two ways about it because as much as I would like to think everybody will switch into an alternative product, that is not entirely true.”

It’s a major blow when retailers were hoping to recoup revenue lost due to COVID-19. The ARA-Roy Morgan 2021 pre-Christmas Retail Sales Report recently forecast that overall spending will come in at $58.8 billion, virtually unchanged on last year, but up 11.3% on pre-pandemic conditions. 

Retailers battle “pallet-gate”

Woolworths, Coles, pallet makers and smaller chains have formed a task force to address a pallet shortage in Australia. Without pallets, manufacturers cannot ship goods into warehouses, potentially leading to production stoppages and fewer goods for sale. 

Woolworths CEO Brad Banducci said this week: ”We started by not getting access to shipping capacity. Then there were issues about getting access to containers. And now the big issue is making sure we all get access to pallets.”

On Thursday, Coles CEO Steve Cain dubbed Australia’s supply chain crisis “pallet-gate” while delivering the retailer’s first quarter results for 2022.

Demand for pallets has been elevated by a surge in global consumer spending, while availability of pallets has been put under pressure by two COVID-19-related factors: demand for timber has risen during the pandemic amid a building and renovation boom, meaning fewer new pallets are being made; plus COVID-19 restrictions shut parts of Victoria’s manufacturing sector, meaning pallets were locked up in factories and not circulating.

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Categories: Business