- Molson Coors said a can shortage has prompted the beer giant to review its portfolio and consider dropping some SKUs it produces, CEO Gavin Hattersley told analysts.
- Hattersley didn't mention which brands or lines under an existing brand could be susceptible to being cut. "From a complexity point of view, from a brewery point of view, I would expect that we will have less SKUs coming up when we come out of this pandemic than we did coming into the pandemic," Hattersley said.
- The coronavirus pandemic has prompted food and beverage makers to prioritize manufacturing products that are the best selling. Companies such as Coca-Cola, Unilever and PepsiCo are among the largest CPGs to streamline their portfolio during the outbreak.
The explosion in hard seltzers, sparkling waters and a growing push by beverage makers to turn to aluminum because of the recyclability of cans compared to plastic has squeezed the supply of the popular packaging material. Consumers also are drinking more at home with bars, restaurants and other establishments closed or experiencing less business because of the coronavirus, increasing demand for cans. Ball, the world’s largest manufacturer of cans, told investors early last month that the U.S. market is short 10 billion cans in 2020, according to the Washington Post, citing Beer Business Daily.
The can shortage has provided a catalyst for Molson Coors to do what many companies in the food and beverage segment are already doing: streamlining their offerings to better position themselves to come out stronger from the pandemic. Coca-Cola plans to cut its 500 brands by more than half. So far, it has cut or announced plans to end production of Tab, Odwalla and Zico. At PepsiCo's Frito-Lay division, Chief Customer Officer Mike Del Pozzo said in July it could end up trimming 3% to 5% of its pre-pandemic offerings in stores.
For Molson Coors and others companies, a smaller product line allows them to focus on those items that are in highest demand or are the most profitable and have the highest margins. With fewer products being made, manufacturers can spend less time changing production lines while shipping and stocking what they do make more easily. Their marketing dollars also can be directed toward fewer brands.
At the same time, cutting brands, especially those that are redundant — such as a different quantity of the same item or a product that is very similar to others already out there — allows manufacturers and retailers to fill the space with new offerings that could attract shoppers and grow the category much like hard seltzer did in alcohol.
In the case of Molson Coors, the company has been aggressively broadening its portfolio away from beer into beverages that could one day fill these openings. While it has added some new alcoholic beverages — such as through a recent partnership with Yuengling — it has focused largely on rolling out nonalcoholic products, including a full-flavored seltzer with added probiotics and a plant-based diet soda.
While these young brands may require aluminum cans, Molson Coors would most likely be able cover it by ending the production of some of its other brands. And with demand for aluminum cans showing no sign of slowing any time soon, Ball and other can manufacturers will inevitably increase production.