Among the many things beverage entrepreneurs have to worry about right now, there’s potentially one more to add to the list.
Earlier this month, the Compressed Gas Association (CGA) sent a letter to Vice President Mike Pence expressing the group’s concern that the carbon dioxide supply chain is being squeezed dangerously thin. According to the CGA, compressed gas represents a $19 billion industry in the U.S., with applications ranging from manufacturing to electronics to fuel and medical supplies.
A majority of the food-grade carbon dioxide in the U.S. is not manufactured itself, but rather captured as a by-product of other manufacturing, mainly ethanol production. With public health ordinances placing restrictions on movement and certain types of commerce, many plants have truncated manufacturing in the short-term, leaving a hole in the CO2 supply chain that is now threatening to impact brands.
According to a letter from the group, experts predict that CO2 production, already down around 20%, may fall as much as 50% this month in the absence of protective measures, A coalition of CO2-dependent industry leaders, including The Brewers Association, is working with the CGA to get “temporary, emergency federal assistance necessary to prevent shortages in CO2 by providing federal incentives to industrial manufacturers to put manufacturing plants that result in CO2 production back into service.”
“A shortage in CO2 would impact the U.S. availability of fresh food, preserved food and beverages, including beer production,” the CGA said in its letter. “Without stable sources of CO2 across the nation, these food and beverage manufacturers will be unable to operate at capacity, leading to shortages for Americans of the important goods they depend on, especially during the COVID-19 crisis.”
A gap in the CO2 market will affect more than just food and beverage companies. Carbon dioxide is used by municipal regulators to process drinking water for their constituents, and a recent Guardian article revealed that authorities in Washington are concerned about a nationwide drop in available supply.
In the documents cited, the State Emergency Operations Center (SEOC) said it wanted to ask the U.S. Cybersecurity and Infrastructure Security Agency (CISA) if utilities can expect to continue to receive supplies despite the shortage. According to the article, Mike Means, director of Washington’s office of drinking water, said the state’s CO2 supplier, Airgas, informed the state “they would only be able to do 80% of their normal service, but subsequent discussions said to expect more like 33%” due to a Force Majeure clause indemnifying the company from unforeseeable disasters.
In an email, a representative for The Coca-Cola Company said the beverage giant is “aware that the U.S. is currently seeing less production of CO2, but there is also less demand nationally from on-premise customers across major beverage producers. As with all of our ingredients and raw materials, we have business continuity plans in place, and we do not foresee any concerns about supply at this time.”
Todd Gibson, co-founder and CEO of sparkling yerba mate drink maker Yerbae, said he received notice from his West Coast bottler that the facility was changing its CO2 allocation to preserve supply. Yerbae’s production runs are contracted through July, he said, but if the shortage persists through the summer the bottler could potentially run out of CO2 altogether. However, Gibson has not yet received word of a shortage from his East Coast bottlers.
Yerbae recently entered a partnership in the Northeast with The Pepsi Bottling Group and Gibson said he was reassured that his bottlers have the raw materials needed to continue production. If worst comes to worst and manufacturing on the West Coast ceases, he said the company would likely ship cans across the country rather than lose accounts.
“It wouldn’t be ideal, but it would be better than being completely out of stock,” Gibson said.
But the levels of concern are not consistent across the entire industry. Several other beverage brands reached by BevNET indicated they had not yet encountered issues in the CO2 supply chain and that their suppliers or co-packers have reported no concerns as of yet. Many entrepreneurs added that they only became aware of concerns around CO2 supply through media reports, while others had heard nothing at all.
Ali Mohamed, co-founder and CEO of New Jersey-based coffee maker Nitro Beverage Co. said he had placed an order for more CO2 this week and that the company is currently manufacturing product “once or twice a week” to keep up with an influx of demand from online orders. Other brands reached via email, such as sparkling water maker Ugly and sparkling tea brand Sound, similarly said they hadn’t heard any concerns from their suppliers.
Kate Weiler, co-founder and CEO of Drink Simple, said she first learned about the reported shortage from mainstream and industry media but that no one in the brand’s supply chain has raised an alarm yet.
“It doesn’t mean that there isn’t [a shortage], it’s just that’s what is being communicated to the co-packer and to our brand,” Weiler said. “We’re staying really vigilant on the issue and making sure we’re in communication, but as of now there’s been nothing communicated similar to what we’ve been reading that other suppliers have been reporting.”
For Drink Simple, which produces both still and sparkling maple water beverages, Weiler said the company is currently preparing a “Plan B” for if or when a CO2 shortage becomes urgent. While there is not yet a proper solution to a shortage in place, Weiler said the company will likely focus more attention on its core still line until production could be stabilized.
David Belanich, president and co-founder of keg distributor Joyride, said the company uses CO2 for its sparkling water products. However, the company’s sparkling water stock is plentiful, he said, and because the majority of its business has been impacted by the closure of offices and restaurants Joyride has been slow to cycle through its current supply. While a shortage could force the company to temporarily suspend its sparkling water production, Belanich said Joyride is more focused on opening new revenue streams during the COVID crisis.