Canadians may soon be paying more for some of their favourite alcoholic beverages.
Shipping delays and backlogs at ports around the world are creating challenges for craft breweries and wineries, which are struggling to get everything from packaging materials, such as cardboard and bottles, to malt and other ingredients for their products.
The supply chain issues, initially prompted and then exacerbated by the COVID-19 pandemic, have resulted in increased costs for the goods and services that go into making their products, and some businesses say they will have to pass those on to customers.
“Supply chains globally are a mess, and the beer and winery supply chains are not exempt from this,” said Fraser Johnson, a supply chain expert from the Richard Ivey Business School at Western University in London, Ont.
For example, Johnson said, the so-called spot price that freight companies charge to move a load from China to the western U.S. has gone from $2,000 US prior to the pandemic to as high as $20,000. According to Freightos Data, it is hovering around $15,000 currently.
Johnson is projecting that, over time, prices for beer, wine and spirits will rise as a result and suspects consumers could see shortages of some products.
I think you can expect that some of your favourite products might not necessarily be readily available all the time.– Fraser Johnson
“It doesn’t mean that … we’re going to run out of beer and wine. But I think you can expect that some of your favourite products might not necessarily be readily available all the time,” Johnson said.
Matthew Atkins is the owner and head brewer at Endeavour Brewery just outside of Edmonton.
The brewery uses some specialty grains that can come from Britain, Belgium or Germany, but Atkins said those deliveries have not been reliable.
“We had to find a different supplier of a similar style and substitute that out,” he said.
Atkins also struggled to find cans in which to package his craft beer because there was such high demand, and when he finally found a supplier, prices had jumped from 18 cents a can to more than 23 cents a can.
It’s a significant impact to us in terms of the cost of our production.– Matthew Atkins
“It’s a significant impact to us in terms of the cost of our production,” he said.
The head brewer said the business has so far been able to absorb the increases, but in the coming weeks, he will need to raise prices.
Atkins said, in the taproom, prices will likely go up by 50 cents to a dollar while a four-pack of beer may be an additional 25 to 50 cents.
“We definitely need to make sure we stay competitive, that we can pay our bills, but that profit we have to pay our bills is getting smaller and smaller,” he said.
Planning far ahead
On the other side of the Rocky Mountains, Quail’s Gate Winery in Kelowna, B.C., said it has been seeing challenges with the timing of its orders for glass bottles, which it gets from overseas.
“We’re seeing delays [of] up to six to eight weeks. And generally, it’s related to timing for shipping,” said owner Tony Stewart.
With that in mind, Stewart said, the winery is planning ahead.
“Basically, in anticipation that there could be delays, we’ve tried to fast track our orders for 2022 to ensure that the glass that we need is reserved and shipped as soon as it’s available so that it’s on site when we need to bottle,” he said.
Stewart anticipates prices for the winery’s products will go up over the next two years so the business can recoup the additional costs brought on by supply chain issues.
A need to think differently
Gal Raz, an associate dean of research at the Richard Ivey Business School, said these issues should be prompting businesses to think differently and innovate.
“Maybe we need to make sure that we actually do have enough inventory on hand,” Raz said.
“We have a problem with packaging. Well, what are the substitutes? … I have raw materials. What can I produce from those raw materials?”
Raz said it will be important to continue to think outside of the box given that the disruptions are not likely to go away.
“I don’t see us necessarily going back to normal,” he said.