The fundamental changes in everyday life brought on by the COVID-19 pandemic have affected the beer industry’s supply chain in ways both expected and unexpected. With bars and restaurants closed for on-site service for months, the evaporating demand for draft beer forced brewers to package more beer than ever before, creating a shortage of cans.
This was expected — the use of cans has been on the rise as the preferred package for craft beer for years, and reached 50% of craft beer dollar sales for the 13 weeks ending June 13, according to market research firm Nielsen.
An increased demand for packaged beer created an increase in demand for carbon dioxide (CO2) to carbonate beer as it’s canned or bottled. However, CO2, in many cases, is created as a byproduct of the process that creates ethanol for gasoline. With millions of people working from home and no longer commuting, demand for ethanol has plummeted. And so too has the production of CO2.
But there’s another place where CO2 is created: inside breweries themselves. That’s created an increase in demand for a technology called CiCi, short for carbon capture.
Earthly Labs founder and CEO Amy George said nearly 100 breweries have expressed interest in installing CiCi in their facilities since the pandemic began.
“Some prospective clients that were about to purchase anyway had their suppliers call and tell them they were going to have to ration supply or increase prices 30% to 50%,” George told Brewbound.
The first calls to Austin, Texas-basd Earthly Labs came from West Coast breweries, where CO2 shortages were initially felt.
“We hadn’t heard much about it,” George said of the CO2 shortage in the spring. “All of the market is trying to hedge against uncertainty and risk that they can’t control, so we’ve had a lot of global conversations about that.”
Over the last month, Earthly Labs has fielded calls from potential clients in the Midwest and Southeast, as the CO2 supply tightens.
In a survey of current Earthly Labs clients, 56% said their CO2 consumption has increased “due to the requirement to package more final product in cans or bottles.” Nearly half — 44% — said CO2 prices have increased, and 22% said CO2 suppliers are seeking longer-term contracts and their supply has been reduced or will be rationed soon. The majority of respondents said they want to reduce CO2 usage.
CiCi units cost $75,000. With installation and additional parts bring the total investment to $85,000 to $95,000 — a large investment upfront for a typical small brewer.
Earthly Labs recently linked up with Denver, Colorado-based Brewery Finance to offer financing plans to breweries for the purchase of CiCi units.
“It’s a nerve-wracking and tough time to spend money or find funds for buying equipment,” Brewery Finance co-founder Rick Wehner told Brewbound. “But it is also a crucial time for breweries to save money, boost quality, and separate themselves from the pack.”
Unlike traditional banks, Brewery Finance is a risk-based lender with tiers for pricing based on credit, tenure, and amount financed, Wehner said.
“These risk tiers allow us to have a much wider credit window than banks or other traditional lenders,” he said.
Brewery Finance is able to be more flexible and nimble with its clients, who include wineries and distilleries in addition to breweries.
“Banks have tight credit standards and a brewery can spend weeks wrestling with a bank only to receive a ‘no,’” Wehner said. “The only thing worse than a fast ‘no’ is a slow ‘no’ and banks are notorious for that. The opportunity cost to a brewery can be devastating.”
Brewery Finance just processed its first deal for a CiCi unit, stepping up in the nick of time, George said.
“We had a client that was pre-approved by a bank and right on the eve of COVID after three months of working on this loan, they pulled the loan,” she said. “Brewery Finance stepped in within 10 days and with really easy paperwork.”
Because of heightened demand, Earthly Labs ships CiCi units within 14 and 16 weeks from the order date.
Astoria, Oregon-based Buoy Beer Company received its CiCi two weeks ago, co-founder Dave Kroening told Brewbound. Carbon capture had been on the company’s radar for years, but before George founded Earthly Labs, the only available options were for breweries with much larger output than Buoy, which produced 17,212 barrels in 2019, according to data from the Brewers Association (BA). In its current form, George said a CiCi unit works best for breweries producing between 8,000 and 20,000 barrels.
“Once it became available, we started getting more serious about it,” Korening said. “Especially once we started realizing what some of the projected payback schedules were, you can find something that has a real quick payback and is the right sustainable choice, makes it a pretty easy option.”
With its CiCi unit, Kroening said Buoy can recapture about 33% more CO2 than it uses each year. George added that with typical use, the unit pays for itself within three years by allowing breweries to cut their CO2 purchases.
“Our goal is to not have to purchase any,” Kroening said.
In addition to helping breweries cut down on CO2 purchasing, the CO2 captured during fermentation tastes more pure than CO2 produced in other ways, George said.
“That alone as an ingredient innovation is pretty radical,” she said. “But now you have a confluence of events around supply chain disruption that is unpredictable and the desire to eliminate risk well into the future.”
Austin, Texas-based (512) Brewing installed a CiCi unit and founder Kevin Brand said the purer captured CO2 makes for a “far better quality product.”
“I’ve heard people say in their very light lagers that they can tell the difference just by smell from the CO2 purchase versus the CO2 recapture,” Brand said in a video for Earthly Labs. “Typical German old style of brewing is to reclaim as much CO2 too, and to get the beer to be naturally carbonated ,so it’s an aspiration in general for brewing to do that.”