Brewbound Frontlines: Supply Chain Planning for 2022

Justin Kendall [00:05] Hey everyone, welcome back to Brewbound Frontlines. My name is Justin Kendall and I am the editor of Brewbound. And it wouldn't be Brewbound front lines if I didn't have my tag team partner Jess Infante. Jess, what's up? Nothing. How are you? I know it's so weird being in the office. This is our first frontlines that we've actually recorded with live human beings. So here we go.

Speaker 2 [00:27] This is so exciting. Yeah, it's the first time you and I have ever been here together.

Justin Kendall [00:30] And who isn't excited to talk about the supply chain?

Speaker 2 [00:35] I think you know like how excited people feel about the supply chain kind of translates to what their varying array of emotions are as to how their business is being impacted at this moment.

Justin Kendall [00:46] Well, I think it's everybody that's being impacted. The supply chain, as we all know, has created a lot of headaches this year from worker shortages to cans and bottle shortages to pallets to CO2. We could keep going on freight, uh, driver shortages. And as we head into 2022, we wanted to give you all a little glimpse of what's going on now and what y'all should be expecting next year. So to do it, we've got our friends from Aggrogate, we've got. David Van Weis, thanks for being here. Thanks for having us, guys, and we've got Tim Near. Thanks for being here, Tim. Great to be here. So for the folks out there who may not be familiar with what you all do, give us a picture of what aggregate does and, you know, a little bit of your background too, as quick as you can. Yeah,

Speaker 3 [01:34] sure. Well, Tim and I worked for, uh, together on a number of management teams for many years, uh, at ABI. Different countries, different functions. I was always more on the commercial side, uh, sales and marketing, you know, I've done a few things like headed up Stel Artois globally out of Belgium, um, was commercially involved in the group, uh, in the US, and Tim was always on the, uh, the op side. So,

Speaker 4 [01:57] yeah, so, uh, you know, in terms of, uh, the materials and Uh, packaging and everything needed to make beer, that's something I've spent a lot of time with. And also with organizations like, uh, Quaker Oats, PepsiCo, uh, Nielsen's Dairy. So a lot of different types of beverages as well. Beer has always been the one that, uh, I loved, uh, and I still, and I still do. So great to be here to talk about what might be, what is going to be a challenging year coming up in 2022.

Speaker 3 [02:22] Uh, so a little bit of that, you know, our insight to what we do in our company, um, you know, I've worked with a number of craft brewers and, you know, great intelligent folk, hardworking, uh, very strong on the creative side with, uh, liquid development and marketing. And one of the areas that when it comes from our background, we saw as an opportunity is helping them on their, their cost side. So, For most brewers, 65% of their costs are input goods, and yet at the same time, it's not necessarily always the sexiest part of the business to work on, and that's where we come in and and add value.

Speaker 2 [02:56] So like multi-billion dollar question, what's the situation in procurement and supply chain right now?

Speaker 4 [03:02] Well, I'll, I'll take a crack at it. It's, uh, it's a tough situation right now. And I think over the last, well, 1015, maybe more years, we've been fairly comfortable in the supply of agricultural materials, packaging items, all the other things that you need to run your, your beverage and brewery operation. This past year things tightened up and it didn't tighten up in just one category. Across the board we're seeing capacity constraints. We're seeing a high risk type of environment and we're seeing an unpredictability in the supply chain that I haven't seen before and I, I'm sure many haven't either. And what it means is we just need to be a lot better at anticipating what we need. We need to work closely with our suppliers, and we need to make sure we understand those risks so we can de-risk our supply chain and our materials coming into 2022. We're going to have to do that more than we ever have before.

Justin Kendall [03:59] So There are any number of world events going on. We've got trade wars. We've got shipping incidents. We've got environmental challenges. How are these macroeconomic global issues affecting US craft brewers right now?

Speaker 3 [04:12] Absolutely. Well, one of the things Tim and I, we have a roster of senior advisers in our group and. Uh, a fellow by the name of Mark Matthews, who was with with Louis-Dreyfus for a number of years doing commodity reviews, works with us to produce a macroeconomic view to say, OK, let's, let's step back beyond the beer industry and look at what's, what's happening in the world. So, of course, there's gonna be the Suez Canal and, and, and incidents along the road, but it's what are long sustainable factors that are going to affect the cost structure, and one of which is the growth of the middle class in China. And that is literally adding multiple United States of America at one time, and that group is consuming more protein. So if you consume more protein, you need You need grains to feed the livestock. They're also building infrastructure like housing and roads, so you need aluminum for that. So those are all macroeconomic factors that then drive up the overall macroeconomy affecting the individual categories. So there's a lot of big events going on in the world that would suggest that inflationary factors are, it's going to be a longer term. This is not a blip.

Speaker 2 [05:23] So how much of the issues that we're seeing right now outside of what you just mentioned are COVID-related, particularly here in our country, and when do you anticipate that that's gonna normalize?

Speaker 4 [05:31] Yeah, so this is a question I, I hear all the time, and I think it's important to note that a lot of the trends that we're seeing, they were in place before COVID, and they'll be in place after COVID. Hopefully that'll resolve itself soon. By the way, great to be here in person. Uh, it's such a nice change. But I think a lot of what has happened with COVID is actually not isolated to that. For example, in transportation, there was a driver shortage in trucks in North America before COVID. There still is now. The average age of a truck driver 57 years old. It's just not. Um, uh, you know, there's just not the supply of the labor force for driving trucks, and that affects everything that we use in a brewery, you know, uh, that, so those sorts of factors, they're happening anyway. So I don't know if it's ever gonna normalize, Jessica. It may, it may, you know, slow down a little bit. It may calm a little bit, but these trends are long term and they're gonna continue.

Justin Kendall [06:34] One thing you mentioned was aluminum and we've seen tariffs imposed and during the Trump presidency way back in March 2018, so you're right, you know, there's an issue that came in ahead of COVID and it's proven sticky and as Jess and I both know, we were just at the Beer Institute meeting that was a major issue that was brought up. One thing that they seem to be pushing is the Apex ax, so, uh. Where do you guys sort of see relief coming? Is it only through legislation on some of those issues like aluminum, or are there other factors that could come into play that would sort of ease those constraints?

Speaker 4 [07:18] Well, let me take a crack at this day. So I think, uh, with regards to aluminum specifically, I mean, there's a global marketplace on aluminum, and then there's a North American market, marketplace. So globally. If you look at the London Metal Exchange, aluminum, uh, prices, they, they've gone up. You know, that's a global, that's a global factor. Um, the total cost of aluminum, including the North American premium, which is sometimes called the Platts Midwest premium, you may hear that from time to time, and global aluminum has gone up from a low in the 80s at the beginning of 2020. Right when COVID was hitting and that's

Speaker 3 [07:52] $1 per pound,

Speaker 4 [07:54] dollars per pound, yeah, uh, US dollars per pound to um. The 140s. Now, that's a huge inflationary pressure on, on aluminum. I think part of, um, you know, to your specific question, I think part of what might be helpful is more transparency about how aluminum is flowing through the system, what are the sources of supply, how that's working, some certainty around tariffs and taxes and imports. Um, you know, there are often threats and concerns and, you know, from a lot of different countries about how that might, how that might transpire. I recall just last year. Um, the night before Canada was to put a retaliatory tariff on US aluminum, um, coming from the US to Canada because the US had put a tariff on Canadian import of aluminum. Um, those tariffs were, uh, you know, abandoned. So there's a lot of like brinksmanship and last-minute discussions around aluminum that creates a lot of anxiety in the aluminum supply chain. Which probably doesn't need to be there if we had a little bit more transparency and cooperation on the supply,

Speaker 3 [08:55] but I think it's important to note beverage cans are about 10% of aluminum consumption. So you have other much bigger categories that are driving demand. So electric cars, for example, take a lot of aluminum construction, infrastructure bills. Those are all big demands on aluminum. So it's, yes, there are areas where there should be better transparency. But at the end of the day, there is an upward trend of demand and it's very expensive to create a new aluminum smelter, so it takes time to put that into play. So it's kind of one of those slow moving big industries that don't respond overnight to a demand increase.

Speaker 2 [09:32] So we've talked a lot about aluminum in the past like what year and a half, but what are other problems that people aren't maybe aren't aware of yet or some that are on the horizon, and how should we be prepping for them?

Speaker 4 [09:42] Well, there's there's a couple of major themes here, Jessica. So, first of all, Uh, you know, another major cost for breweries is the cost of, cost of grains. All right. So we've seen, you know, very good acreage increases in the North American barley crop this year, uh, which should have helped. However, we actually saw, um, during the summer, scorching heat and not enough water in the main growing regions for barley here in North America, particularly in Canada, in the Upper Midwest of, of the United States, drought conditions. So, right now, uh, Let me put some numbers up for you. There was about a million incremental acres of barley planted in North America. That's a lot. It's a 10% increase in plantings. Even with that, the Canadian government has said that they expect a 27% reduction. In the tonnage of barley produced versus last year, that's a very significant change, and the barley that is going to be produced. Um, you know, for malting, it's under a lot of stress. You know, had too much heat, not enough water, so it's gonna be a tough year next year with the barleys coming into the, the, the, the malts coming into the brewery to manage the quality of that. We're gonna have to really pay attention and make sure, like we haven't had to in quite a long time, that uh the barley is acting the way we need it to in, in the breweries, and we're gonna have to really watch that closely. So it's gonna be a tough year for grains.

Speaker 2 [11:08] Yeah, so on top of an unprecedented, seemingly never ending pandemic, we also have climate change making things a lot harder. Well,

Speaker 4 [11:15] I, I, I don't know exactly what the cause of the drought is because the last 10 years have been bumper crops actually. But you know, sometimes you get unlucky, and this year we just had too much heat and not enough rain that affected a lot of things beyond, you know, just the barley crop. All the other crops are affected as well, and of course we know about the fires, um. The other thing I want to add though is with regards to grain, any grain that's coming into North America from outside is affected by, you know, significant, tremendously significant service deterioration and cost increases due to the ocean freight involved with that, which has been a very challenging situation over the past year, you know, just unloading. Boats at ports, and we've all seen the pictures of the long lines of boats waiting off of New York or, or Los Angeles or Long Beach. Um, that affects all the imported, uh, barley. Uh, some of them very specialty, very important, um, grains for the, for the brewers. So that's one that they need to be aware of. The second one, Jessica, is I would actually encourage us to look one or two steps upstream. versus what we've done before. So, that example, the barley, if you're getting barley in, in bags from overseas, you need to understand what's the exposure of lead times and costs and other consequences of that increased ocean freight time. Upstream, if you're looking at um any of your other categories, there are components there might be paper being imported, might be aluminum being imported from other places that are also exposed to those disruptions in the supply chain which might not be evident. We haven't had to look that way in the, in the beverage industry for a long time. We've always had enough capacity, enough freight. Um, this year we found that that's not necessarily the case, and some of the items have surprised us a little bit of where the shortages are coming, are coming from. CO2, great example. You know, at, at times there's been certain parts of the country, you know, chronic issues on the supply of CO2. That's not something we've had to worry about. It's a very small piece of the cost of a brew, but you can't run your beer without it. So there's gonna be more and more of that type of disruption.

Justin Kendall [13:24] So when we look at what's on the horizon as far as those issues, you've laid out a few of them. What are the biggest headwinds that we're going to be facing heading into 2022?

Speaker 4 [13:35] Well, I think there's a, there's a few really big ones. So this, this issue with the agricultural products, that, that's, that's a serious, serious problem both in terms of quality and it's exacerbated by the problem we have with freight. Freight is going to affect everything. Um, you know, unless you happen to be located right beside a manufacturing location of your, um, your items you need, everybody needs to ship something. And we've seen a very significant increase in cost and a very significant decrease in service levels of all the modes of freight, ocean particularly, but even even even transportation. So that's something I would counsel people to be very aware of and build in some buffer, build in some extra lead time, maybe build in some resiliency into your supply chain, alternative sources of supply, maybe a little extra inventory on some of those items that you hadn't thought you needed it before. That's all up for evaluation this year. And I would really counsel people to watch, uh, watch closely the way they're going to order, the way they're going to hold inventory of raw materials and packaging and, and brewing items versus the way they have over the past 5 or 1010 years.

Speaker 3 [14:37] Yeah, so I think Justin, if, if, you know, the craft brewing industry, the craft beverage industry has been, you know, energetic, creative, and, you know, always find a way forward, I think it'll be a mindset change for those, those brewers and operators to think differently, uh, and maybe push them. to drive some of their resources and their intellect and their creativity towards planning, resiliency, you know, building up stockpiles when they can, more accurate forecasting, things like that, they're going to have to take up their game in order to be prepared for those bumps in the road.

Justin Kendall [15:18] So if you're building an action plan for a brewery right now, what would that look like?

Speaker 4 [15:24] So I, I'll take a crack at it, David, and you could build on it. So I, I would focus on three things. Number 1, really understand how you're interfacing with your suppliers and how you're communicating with your suppliers, particularly with regard to your forecast needs. We've always been able to get that extra rush load of things or, you know, there's always always inventory of something. We're not as likely to have that going into next year. So if you can communicate that as far as advance to your suppliers, that's really, that's really important. So that interface and the planning piece. Number 2 is really understand what are the critical areas of risk within your supply chain, which may not be your biggest items, but that you need to run the operation. Things like uh adhesives and lubrications and uh brewing aids, CO2. You know, these are things that often are taken for granted and there isn't a lot of attention paid to them. This year we're gonna have to watch those things. So if there's anything you need as a brewery that's unique to your operation that you can't run without it, make sure you've got that a plan on how to address that. And the third piece is really trying to understand what is the consequence of these cost increases to my operation, communicate that well with your sales and marketing and financial team so everybody understands the way that the money is going to flow through the business. It might be a choppy year. You might see freight might go up 5 or 10% in a month like it did last spring, and the rest of your business needs to know that so they can make the right decisions. Uh, uh, more broadly running the operation. So this is a year where the supply chain people are going to have to be ever more close to the commercial, uh, organization and the breweries to really communicate that effectively. Boy, the last thing you want to do is run a promotion on something where the cost just went up, uh, because of a component or you're not sure you can guarantee the supply. Those are big mistakes that people may make that if they don't watch these things, um, you know, they'll fall victim to.

Speaker 3 [17:19] And I think it's also just really being pragmatic and saying the industry is facing this. So, so prices are going to go up. So how do we manage that together with our, our wholesaler partners and our retail partners, um, and how do we do it better than the next guy? So you were at the CBC, there were a lot of new analytic tools that really helped both the upstream and the, and the downstream information. So making sure you fill those, uh, you know, distributor out of stocks and make sure then the, the operations team is aware. Of, of the production they need to do. So I think it's operating a little, little, a little smarter and a little better, uh, than, than perhaps we have in the past.

Speaker 4 [17:57] Yeah, I'm gonna say one last point on this. It's the idea and the concept of resilience. So everything that Dave and I are talking about is about building more resilience into the system. We haven't had to carry a lot of extra inventory. We've always been able to get that rush load. Going forward, it's gonna be, I'm, I'm sure we've all seen it in our various operations. It's gonna be harder to do that next, uh, next, next, uh, next year, even now. So build in some extra buffer into your supply chain versus what you have had over the last 5 to 10 years. Maybe a little extra inventory. Expect a little longer lead times. Expect that you're gonna have, you know, for new product launches, you're gonna have to get those graphics out a little sooner than you did before. All those details build that extra resilience in your supply chain. Watch out for single sources of supply too. Might not be a bad idea to have a backup built in and maybe pre-qualify some of those now so you don't have to do it from a point of. Panic or urgency you can get ahead of that so if something does happen you're ready to push the button and go if you don't understand your key risks throughout the supply chain, you won't be able to get ahead of it and plan for, uh, those, uh, incidences you'll have to react, which is often high risk high cost, and, uh, you know, it takes your attention away from what you really wanna do, which is make, make and, and sell beautiful, beautiful products, beautiful beer.

Justin Kendall [19:17] So how can they stay on top of it? What do they need to do ahead of time? What do they need to be watching or do they just need to be working with somebody like you?

Speaker 3 [19:24] No, obviously, um, you know, they're running their business, and I think what we're getting at is, is things like planning and forecasting and then being on top of your business probably to much greater detail than you have in the past. If you're growing at 20% and, and you have plenty of suppliers willing to give you last minute loads on things, you know, you don't have to worry about that. Now you, you really have to plan and, and drive down. And of course some of the things that we do, of course. Uh, have, have really helped folk we work with, whether it's doing value engineering projects to figure out, OK, how can we take costs out of the business, uh, benchmarking to know what areas I should work on, resiliency, how do I get backup supply? Uh, we do group purchasing, so we would be the largest, um, group purchasing in, in craft beverage. So we have, if we were, if the folk we do purchasing together was one brewery, it would be a top 10 brewer in the US. So that triggers a scale issue, not only scale volumetrically, but geographic scale. We help the suppliers access different markets as we help our manufacturers and brewers access different suppliers, so It's, it's taking, it's, it's the craft brewing industry has been descaled on the supply side, both for the, the brewers and for the suppliers, and what we're doing is, is reducing that descaling and bringing the folk together.

Speaker 4 [20:51] And Dave brings up a good point with regards to suppliers. We've got a great set of suppliers to the, to the brewing industry. We really do, and they, they wanna sell stuff. They want to make it as seamless as possible, and a lot of them are really doing. You know, they're best in a tough situation to continue to, to keep, you know, the industry in a, in a great situation. So that's a set of resources I would encourage brewers to continue to, or if you don't collaborate as much with suppliers, continue to do that or, or maybe raise that up a little bit. Suppliers, they're, they're waiting to be collaborated with. They wanna help us through these, through these issues, and if we solve it, that allows them to sell more too. So there's a mutual interest in, in doing that. That's a set of resources that, you know, we should, we should work together with, uh, as a brewing industry more effectively than, than, than we do. Um, what I say is, you know, try not to put an extra burden on your supplier. If, if you don't have to do that rush load, if you could plan a little more, but please do that. Um, if you can get the graphics out a little sooner, please, please do that. It'll help them serve the brewing industry more, more effectively. Um, and it's, it's, it's gonna be a tough year. And,

Speaker 3 [21:56] and 11 thing I would say too though is, uh, another positive thing, uh, that would have come out of COVID, if, you know, you find the positive elements is overall the consumer is spending more and they're buying up and they're looking for premiumness. So, uh, a strategy on the commercial side. would be to attack or to confidently move forward with regards to higher margin products and creativity that will yield consumers to reward you with a higher dollar ring. So I think there's a commercial side to how you address this challenge as well.

Justin Kendall [22:28] Do you think a lot of folks are living on the edge though?

Speaker 3 [22:31] You mean consumers?

Justin Kendall [22:32] No, uh, breweries, brewery owners, do you think a lot of them are living on the edge? Do you think that they're paying as much attention to these issues as they need to be?

Speaker 3 [22:43] Well, like I said before, when you're growing at 20, 25%, and you're, you're, especially if you're selling a lot in a taproom, um, and, and you have every supplier, you know, willing to service you. You don't have to worry about stuff like that. I think what we're throwing up as a caution is you probably need to refocus some of your energies and creativity as a, as a craft brewer, because if you act that, you know, way in the future, it's, it's not gonna, not gonna pan out well

Justin Kendall [23:13] for

Speaker 3 [23:13] you.

Justin Kendall [23:13] Yeah, I mean that growth isn't always gonna be there and let's. Be honest, you know, not everybody's growing at 20%, and with 8000 plus operations out there, you know, they're going to be winners and losers.

Speaker 3 [23:26] Well, and as well as, as when beer has to inflate its price, our inflation in the beer category will be, will have higher inflation pressure than the spirits category. So, and the spirits companies have been very creative with regards to not only their base products, but their ready to drink products. So, I think there's going to be a, a, a greater marketplace challenge as well.

Justin Kendall [23:49] And that's where the equivalence fight comes in, of

Speaker 3 [23:52] course, yeah, yeah, that, that's not our expertise, so I, I bow out of that one. Hey Justin,

Speaker 4 [23:57] just on the, the living on the edge idea, I mean from a supply chain perspective, I do think. That many players in the brewing industry, you know, uh, like in many consumer products, uh, industries, we've gotten used to always having supply available. So maybe our inventories were reduced a little bit on, you know, raw materials and packaging items. Maybe we, you know, reduced our lead times. Um, I think, I think that worked over the past 10 or 20 years. I don't think that's gonna work as effectively going forward. So in terms of having razor thin. You know, inventories or just in time or these sorts of things that, that, that's, that's becoming a higher risk strategy, whereas before it was a lower risk. So, uh, in terms of living on the edge, I, I, I think there is a bit more of that happening right now than there, there should be. Um, there's more risk in the supply chain, uh, than there needs to be just because we haven't changed our behavior yet as an industry. We're still trying to reduce inventory. We're still trying to consolidate into, you know, more, you know, single sources of supply and And that just became a lot riskier. So I would, I would, uh, my reaction to your question is I think we've, we've got to continue to de-risk the supply chain in beverage versus where we've been over the past 10 years. If not, we will have some brewers that aren't, aren't able to get what they need to make their, their stuff in the time that they, they need it. We've seen some of that already, and that will continue if, if the behavior doesn't, if that behavior, that business practice doesn't, doesn't, uh, adjust accordingly.

Speaker 2 [25:26] I mean, I feel like we should get a little bit into trucking because I know we referenced at the beginning, but it's something that we hear all the time. So, you know, with issues around driver shortages, you know, something that we've heard recently is that, uh, quite a few drivers are now going to Amazon, um, but you also mentioned an aged trucker workforce. Do we think any of these things are going. Let up anytime soon?

Speaker 3 [25:50] Well, I, I maybe we'll start a step, uh, uh, away from that. Talk about ocean freight for a second. So Q1 to Q4 this year, East Coast ocean freight from Europe to the East Coast US is up 277%. Equivalize that in a case of beer, it's roughly adding $3 a case during one year. So why is that? It's because there's been a surge in demand. There's uh uh challenges with regards to port congestion, um, um, you know, there's, there's a reduced number of suppliers on the ocean freight side. And there's increased costs with regards to fuel and operating costs. So that's, that's kind of ocean freight. Then if you take it to inland and maybe you can talk a little more about inland, you see some similar challenges. So it seems to be across transportation you have similar issues.

Speaker 4 [26:44] Yeah, so with regards to over the road truck transportation. Um, that is something that has also been a long-term trend. And I think back to 2018, there was the EOD mandate which enforced the hours that a driver could spend behind, behind the wheel. Um, all these things have created constraints on the ability of a truck to run miles. Um, so that's not really an Amazon issue. It's, you know, the drivers are gonna go where the, where the work is, uh, of course. But again, this is one of these long-term trends that we've seen that I, um, I, I would say it's not a near to trend. It's not due to any particular player. It's because we have more, uh, freight to ship, then we have drivers to drive them, more trucks to take them. All right. So a couple levers I would suggest there to watch out for is if you are, if you are shipping a truck, make sure it's full. Don't ship 3 quarters or half full, full trucks is, you know, it's gonna be tougher to get the next one. That's gonna take capacity out of the system. Make sure they're as full as possible either by weight. In beverages by weight or, or by, by Cuba if it's a little lighter, lighter product. The other thing is try to avoid the rush and expedited load. That's gonna get really expensive and you might not be able to get the trucks that you needed uh to ship whatever it is you're trying, you're trying to ship back to the planning lever. It works here with transportation as well. And the third bit is, make sure you've got trucking organizations that you can really count on. And however you need. To, you know, what your definition of counting on is, you need to make sure that you're, you've got people you can trust that are gonna ship the product that are gonna take the call and take the load when they accept the, the load. Um, and that's been a bit of an issue over the past year, year and a half is this uncertainty around, can I get the truck or is it gonna come in even, even though the load's been accepted, which has created a lot of um rework and a lot of anxiety there. Again, I don't see that. Mitigating with regards to over the road trucking any time anytime soon,

Speaker 3 [28:39] and I think consumer behaviors changed. So whether it's in general or you know it was pushed by COVID, we've changed you know how much more do you get delivered to your house? How much more do you get from warehouses, so. It's not necessarily that we're consuming more, but we're consuming in a different way. And when you have logistics companies, they work best when it's like a clock that clicks the same way every day. But when you have surges or changes in that, it's highly disruptive. So our consumer patterns have changed, which has changed the way transportation is being consumed, and I think the transportation industry is absorbing that as well.

Justin Kendall [29:19] So let's end this on, well, maybe not a feel good moment, but what's one issue out there that folks maybe think is a supply chain issue that really isn't one?

Speaker 4 [29:32] Want me to take that? Sure, yeah, so

Speaker 3 [29:34] I don't have an answer for that right now. So there,

Speaker 4 [29:36] there, I mean, there are, there are certainly a lot of, a lot of issues, but I think one of the things that, you know, I take some comfort on is we're getting better and better at forecasting and anticipating demand and working with our partners out there, um. And what this will teach us is how to be better at that planning piece, how to have less reactive, um, uh, uh, approaches to this. There's some really nice technology out there that's evolving very quickly with regards to digital tools that will help this. So I would suggest we have more tools than ever available to us to manage these types. These types of issues. Um, on the other, on the other side of things, I would say, um, you know, business is, is good, volumes are good. That's why, you know, we're having a lot of these issues in the supply chain is because we're, we're using more, more stuff and getting, getting more things. So that's a, that's a, that's a silver lining to this. But you know, there's not a lot of In an inflationary capacity constrained environment, it's a, it's a tough one to find places where there isn't, um, some capacity constraint, and trucking it's gonna affect everything. So, um, I wish I had better news.

Justin Kendall [30:45] Well, final, final then, uh, are the issues with cans and bottles, uh, and the shortages there as bad as they've been previously reported, or do you think that there's been some relief there as we've seen? Like popular segments such as Hard Seltzer decelerate, does that open up some capacity or does that open up more as, you know, Ball and Crown open up new facilities in Nevada?

Speaker 4 [31:13] That certainly helps. So, so the new capacity that's coming in certainly helps. I, I think, you know, as important is. Last year there was a bit of a shock to the system. OK, there was an explosion of package growth at the expense of on-premise growth because of, you know, the bars closing down of COVID, and that, that swung the system very.

Speaker 3 [31:32] If you, if you looked at the, uh, NBWA stats on that, the, the 12 weeks after the, uh, COVID closed, the 9% of draft business, 100% of that went to cans, plus 2% of bottles. So you had this enormous swing in the marketplace.

Speaker 4 [31:50] So that was a surprise, and it was COVID had a lot of surprises for us. That was, that was one of them. It happened very, very fast, and I think there was a lot of, um, chaos in the system as a result of that. Um, I think there is still capacity constraints, particularly on cans. But I think it's more effectively organized now. So if there is gonna be an issue, people have more time to react to it. If there is gonna be an issue, people can understand decisions that need to be made, whereas last year it was all reaction, all reaction, and that's a very uncomfortable place to be in. It was actually very dangerous for many. Um, suppliers and brewers across the system cause they couldn't get the stuff out that they needed to get, get out, and they didn't know it until the last, the last minute. So, Justin, that's still there, OK? It's still there. I think, uh, uh, you know, our, our system across North America has found ways to handle it a little bit better, but that one's not going away anytime, anytime soon.

Justin Kendall [32:46] Well, We're just bringing people down, I guess. Well, no,

Speaker 3 [32:51] I think it's every time in business you're always gonna have a challenge, right? You're gonna have a new competitor. You're gonna have the unexpected, you know, break of a machine. There's always going to be something in business. So, and business is about problem solving and business is about having energy and passion and commitment for what you do, and I think the craft industry is, is amazing with that. So I have full confidence that there's. to be problem solving and solutions and more premium products that attract consumers. One of the things you asked earlier what people can do, you know, think of when you're in a crisis or there's an issue. The more you start to know about the situation and the more you start to calm down and start to say, OK, I'm going to figure this out, the more you know about it, the better the solutions are you come up with. So. It's going to be tough, but there's always going to be tough things in business because that's, uh, you know, part of the challenge and part of the fun of figuring it out.

Justin Kendall [33:46] That's a pep talk we needed. Yeah, there you go. Thanks, David. Thanks, Tim. We appreciate you being the first ones to come into the office's wonderful.

Speaker 3 [33:53] Thanks for having us, guys. Great to be here. So

Justin Kendall [33:55] if folks want to know how they can get in touch with you, how can they get in touch with you?

Speaker 3 [33:59] So our website aggregate.com is the best place to go to track us down.

Justin Kendall [34:04] Perfect. That's Brewbound Frontlines. Thanks to everyone for watching and if you wanna join us in Santa Monica on November 30th and uh December 1st for Brewbound Live, we'd love to have you there. Details are at Brewbound.com. Again, thanks for watching.