Last month, the Compressed Gas Association led a coalition that sent a letter to Vice President Mike Pence warning the coronavirus taskforce that the pandemic has led to a decrease in the supply of carbon dioxide (CO2), which is necessary to food and beverage supplies as well as other essential sectors of the U.S. economy.
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“CO2 is critical for the operations of food and beverage manufacturers that provide essential goods and services to Americans,” the letter stated. “It is used in the processing, packaging, preservation, and shipping of many foods. In addition, CO2 in different forms is used in various aspects of the healthcare industry and is also an important component in many municipal water treatment systems.”
When it comes to beverages, CO2 is used to put the fizz in products such as beer, seltzer water, hard seltzer, and soda and, while many lager manufacturers believe they can manage the decrease as most use their own carbon capture programs or major suppliers, the lack of CO2 could have a major impact on smaller beverage companies.
Rich Gottwald, president and CEO of the Compressed Gas Association, told Food Quality & Safety that, since the initial letter, dated April 7, 2020, the supply of CO2 has continued to decline. At the time the coalition submitted the letter the supply was down 20 percent, but as of early May, it’s down 30 to 40 percent.
Gottwald says that the supply is related to ethanol production. “[The CO2] supply continues to dwindle because the ethanol industry has come to a standstill [due to] issues related to COVID-19,” he says. “That continues to get worse as the days go on.”
According to the Renewable Fuels Association, 34 of the 45 U.S. ethanol plants that sell CO2 have idled or cut production since the beginning of March.
Donna Funk, principal of K·Coe Isom, a food and beverage consulting firm, noted that, while ethanol producers are key providers of CO2 to the beverage industry, many are shutting down because the lack of demand for ethanol. “The plants are in an odd position right now; the by-products/co-products of distillers and CO2 are still in high demand, while the demand for ethanol is basically gone in the domestic market,” Funk told FQ&S.
Bob Pease, president & CEO of the Brewers Association, was a signee of the April 7 letter and is worried about what he’s seeing and hearing from his members. “Without CO2, there is no beer,” he says. “We hear from more and more members every day that they are being served with force majeure notifications from their CO2 suppliers, which invokes a clause in the contract that says they don’t have to live up to the contract because there are conditions in the marketplace that are out of their control.”
What’s happening, he notes, is that supplies are being cut by as much as 50 percent and prices are increasing by around 25 percent. “The reason it hasn’t become a full-blown crisis yet is every other food and beverage establishment up and down Main Street has been closed, but that’s changing now as states open up,” Pease adds. “We are working to try and address this issue at the federal level and we have gotten good traction with high-ups at the USDA. We’ve also developed a best-practice resource on how to conserve CO2 at the brewery and pushing that out to all of our members.”
Gottwald also notes that the demand for CO2 has leveled off recently as many large meat processing plants have shut down, so the CO2 that regularly would go to those facilities are being shifted to companies like those in the beverage industry. “But, we fully expect those plants to be up and running again soon, especially with the President’s executive order [designating meat processors as essential businesses], and that, coupled with states beginning to open up and loosen restrictions around restaurants and bars to open up will only increase the demand,” he said. “So, demand will continue to increase but supply will continue to decrease.”
Beverages represent 14 percent of all CO2 utilized in the U.S., and among those expected to suffer the most from the decrease are those in the craft beer industry, which don’t have the resources that the big brands have. “The smaller guys, which are craft brewers, water companies, and other small beverage companies, won’t have enough of a supply,” Gottwald said. “We would like to see ethanol plants incentivized to run by the government, which would help.”