Carbon dioxide shortage could threaten beer, soda and seltzers

  • A drop in carbon dioxide supplies is creating concerns among beer, soda and seltzer water companies who use the gas to create fizz in their products, according to Reuters.

 

  • Ethanol producers are a major contributor of the gas to food and beverage companies. They collect the gas as a byproduct when making the renewable fuel. But the market for ethanol has been cut as consumers drive less, forcing many U.S. ethanol plants that sell carbon dioxide to idle or cut production, the wire service noted. Ethanol is blended into most of the country’s gasoline supply.

 

  • Bob Pease, chief executive officer of the Brewers Association, told Reuters carbon dioxide suppliers have increased prices by about 25% due to reduced supply. “The problem is accelerating. Every day we’re hearing from more of our members about this,” said Pease, who expects some brewers to start cutting production in two to three weeks.

 

  • Rich Gottwald, the CEO of the Compressed Gas Association, told Forbes he expects carbon dioxide production to reach a more than 70% shortfall within the next month. “It continues to get worse,” Gottwald said, adding h30e is hopeful following recent discussions with the federal government. “There will be shortages. The entire food industry understands the challenge now. Everything is so interconnected.”

The longer the coronavirus wears on the deeper its impact on more facets of the U.S. economy becomes. While soda and beer are far more popular than fizzy drinks such as sparkling waters or trendy hard seltzers, they all remain dependent on one signature ingredient to give them their signature mouth feel: carbon dioxide. With billions of dollars in sales annually, a disruption in the supply of the colorless gas could have a far-reaching impact for major companies such as Coca-Cola, PepsiCo, AB InBev and Molson Coors, as well as smaller craft players.

Beverage makers and meat associations have been pressing their case recently to the White House. A coalition including the North American Meat Institute, Brewers Association and Beer Institute wrote in an April 7 letter to Vice President Mike Pence where they expressed a “strong concern” that the ongoing pandemic risks creating a shortage of carbon dioxide.

The trade groups asked for assistance from the federal government to prevent a shortage before it impacts food or beverage production. Meat groups also are heavily dependent on carbon dioxide to process, pack, preserve and ship their products. “A shortage in CO2 would impact the U.S. availability of fresh food, preserved food and beverages, including beer production,” the letter said.

In an earnings call Tuesday, Coca-Cola CEO James Quincey downplayed any impact of a carbon dioxide shortage in the near term. He told analysts that the company was aware “of the challenges … but our team has got a number of contingency plans in place and we don’t foresee an issue in the foreseeable future at this point.”

With prices for carbon dioxide already on the rise, a further increase, or worse yet an outright shortage, could be especially dire for mom-and-pop brewers. Forbes noted that big companies can capture some of the carbon dioxide with expensive equipment, something most craft brewers, for example, can’t do.

The fact that the beer industry and other groups collectively sent a letter to the Trump administration earlier this month is indicative of just how serious of a situation this is given the significant drop in ethanol production.

While the Compressed Gas Association CEO appeared reasonably optimistic following discussions with the administration, and Coca-Cola’s CEO struck an upbeat tone in the near term, any major shortage would have significant ramifications across the beverage industry. It would not only disrupt supply, but it could potentially alter consumption habits if the shortage lasts a while and consumers can’t find their favorite drinks, forcing them to move on to something else they can find on the shelf without the fizz.

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