The Bigger Lesson from the Can Shortage

Unfortunately, the unprecedented shortage of aluminum cans contains a figurative lesson for ambitious young beverage entrepreneurs. The lesson is NOT that you should have picked Tetra-Pak. Instead, this is really an extreme distortion of an aluminum can shortage that already existed for the past few years. If you didn’t hear about it in the press, it’s because the shortage before the pandemic only affected small emerging brands, not the major market leaders. But it was a problem for my clients, I can tell you.

It’s a truism for beverage startups that you have much larger minimum container and production runs in your supply chain than your food counterparts, especially our shelf-stable food peers. The minimums are high enough to dissuade many folks from moving past the artisan glass bottle phase entirely. I get it.

Yet, anyone who has been doing their homework about commercial beverage production already knew that startups were having difficulty getting ANY can production before this pandemic. It’s not news for our end of the industry. I know of founders who literally raised angel capital to cover a large, ‘hedging’ can purchase. To buy enough cans for 2-3 years of sales at your present, trailing revenue might seem absurdly egoistic to an outsider. Do you really think your sales are going to soar that fast, bud? But that’s not the point of overbuying supply early on.

The point is to be ready for exponential growth. This is simply good operational planning for anyone deliberately planning to unleash exponential growth. You have to fund the potential for exponential growth in your supply. Otherwise, if consumers make it happen, your fragile startup supply-chain will cough, sputter, and shut down. And your retailers will not be impressed. You’ve now become an irritant. You’ll probably have to pay them to hold your slots while you scramble. They also may not let you in a pandemic environment when the majors have tons of inventory to fill that space and sell quickly.

Whether you are a beverage or not, you should always be forward buying your supply to be ready for exponential growth, even if you’re currently growing in the double digits. You have to be willing and able to layout this kind of infrastructural capital if you want to enact an exponential growth playbook. It also hedges you against ANY unforeseen supply issues that might appear in the next 12 months. A pandemic is the most extreme global supply chain crisis, yes. But, it’s in the extreme moments that we all learn the broader circumstances tied to similar, less extreme instances of a similar problem the extreme crisis contains.

I scratch my head at any beverage entrepreneur who was ‘shocked’ at the horrible can supply shortage during COVID-19. It suggests they hadn’t done their homework before it hit. But the founders who forward bought 12-18 months of cans due to their vulnerable position in the industry pecking order are still selling and thankful they managed an optimistic supply chain.

If you’re a founder who’d like to learn more lessons like this one, critical to good exponential growth planning, please register HERE to join the next cohort taking my Riding the Ramp training webinar on Dec. 4. I look forward to meeting you there. Only 19 slots left.

And please check out other founder resources elsewhere on my site.

Dr. James Richardson

[email protected]