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Archive for the ‘Closed-loop supply chain’ Category

Much like Tom T. Hall, I like beer. And much like other industries, brewers have had to adjust as consumers habits and tastes have changed as bars and restaurants closed. As the Wall Street Journal reported a few weeks ago, this has largely meant a shift from smaller craft beers to the watery, American lagers your grandfather drank (Coronavirus Brings Beer Drinkers Back to Bud Light, May 18).

Beer drinkers have turned to box stores and grocery stores, and they are buying beer in 24- and 30-packs so they can make fewer trips. Shoppers are experimenting less, gravitating to brands they trust and looking for healthier, lower-calorie beers. Some people, out of work or watching their budgets, are trading down to cheaper options. And distributors and retailers, looking to simplify their supply chain, are trimming the number of products they carry.

All of those factors are hurting small craft brewers, which make most of their sales in their own tap rooms. Many craft beer brands aren’t distributed in retail stores. For most craft breweries, on-site sales were down by more than 70% in early April, and sales of craft beer to bars and restaurants had evaporated, according to a survey by the Brewers Association, an industry group.

So craft brewers are in many ways like lots of other firms during the pandemic. They had a business model built around sending kegs out to bars and when that demand dried up, they had limited ability to switch to other channels. Even if they could switch to bottling beer, they did not necessarily have the distributional muscle to get their beer into supermarkets and convenience stores.

But that also raises the question about what happens to the kegs. It turns out the breweries own the kegs. When a keg leaves your local craft brewer for a bar, it is supposed to go back to the brewery eventually. This video from Brewbound (a trade publication covering “the beer space“) gives a bit of background.

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You might not think much about the humble beverage can. You drink your beer or soda and never really worry where the can goes next. As the Wall Street Journal tells it, however, there is an interesting supply chain story behind that can (The Aluminum Can Wars Begin, Sep 25).

The first thing to realize is that the numbers involved are kind of crazy. The US  uses around 90 billion aluminum cans a year (see the graphic at right). A large fraction of those get recycled, so the aluminum you use today may be melted down and back in your hand by December. Using old cans to make new ones is slightly cheaper but notably has huge energy savings.

Used beverage cans usually trade at around 20% less—currently at about 81.5 cents a pound versus $1.04 a pound—than the value of primary aluminum.

The costs of cleaning and processing make cans only marginally cheaper.

Those prices have stayed consistent over the last five years.

Novelis [an Atlanta-based unit of India’s Hindalco Industries] says it believes using more cans will allow it to increase sales in places where lower carbon footprints have a marketing value, and to set itself up to minimize carbon taxes if they are implemented. “It’s a long view, but this helps protect our business from the impact of regulatory changes,” says Derek Prichett, Novelis’s vice president for global recycling.

In a world in which retailers like Wal-Mart want to slap some kind of green-index on all products its sells, sodas in cans from recycled aluminum could be at a real advantage.

That gets to the supply chain question: How does an aluminum producer get used cans? (more…)

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Here’s an interesting video on a closed-loop supply chain.

Vodpod videos no longer available.

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A closed-loop supply chain approaches being a Platonic ideal for those interested in sustainable operations. In a perfect world, anything a firm sells would be taken back and somehow recycled. It may take energy and effort, but it would still be more efficient in terms of cost and waste output than starting from scratch. Wal-Mart has started taking steps in this direction, recycling cardboard boxes to make boxes for their bake at home pizzas:

Vodpod videos no longer available.

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