Whalesbook
Cola Giants Face Can Scarcity
India's cola market is feeling the impact of global supply chain issues, with major players like Coca-Cola and PepsiCo seeing their aluminium can stocks dwindle. Their heavy reliance on imports from West Asian countries such as the UAE, Bahrain, and Qatar has been severely hampered by rising geopolitical tensions in the region. Companies like Coca-Cola, which previously sourced from facilities like CANPACK, are now facing shortages. This dependence on a single, volatile import source has created significant gaps on retail shelves and quick-commerce platforms for popular drinks, pushing consumers toward alternatives like Coca-Cola Zero Sugar.
Beer Makers Better Shielded
In contrast, India's brewing industry, a large user of aluminium cans, has managed these disruptions more effectively. This resilience comes from its strategic sourcing. About 80% of the 500ml cans used by brewers are made domestically, reducing import dependence. For the rest, the brewing sector has actively diversified its supply chain, securing cans from countries like Thailand and Indonesia. This approach has protected them from the immediate, sharp impact hitting the non-alcoholic beverage sector.
Domestic Production Challenges and Costs Rise
Even with the government easing import quality control rules in January, domestic production has faced hurdles. These include LPG shortages and ongoing supply constraints. Industry watchers expect domestic 500ml can production to increase, partly due to Hindalco Industries expanding its output of specialized sheet metal needed for cans. However, global aluminium prices have jumped significantly year-on-year, by an estimated 47-50% to around $3,600 per tonne. This sharply increases import costs for India, which is increasingly buying from abroad. Prices are forecast to stay high, possibly reaching $3,000 per tonne in 2026. This is due to a projected market deficit driven by production caps in China and higher demand from electric vehicles and infrastructure projects. These rising raw material costs add to existing supply chain problems.
Over-Reliance on Imports Fuels Crisis
The current crisis highlights the significant vulnerability of major beverage companies to geopolitical instability. Their deep reliance on a narrow range of import sources leaves them exposed to supply chain shocks, as seen with the West Asia conflict. This reliance has historically led to sourcing difficulties due to import restrictions and quality control rules. While Hindalco is boosting its domestic aluminium production, especially for specialized sheets, these expansions are still being rolled out and may not fully resolve immediate import pressures. Furthermore, the financial strain from higher import costs and potential production slowdowns could hurt profits. For example, PepsiCo and Coca-Cola, trading at P/E ratios around 24-26, are valued typically for consumer staples, but prolonged supply issues could challenge these valuations if they cause major market share loss or force costly shifts to less popular packaging like PET bottles. Both companies filed recent SEC reports in February and April 2026 addressing financial performance and operational guidance, though these did not detail the depth of the current can supply crisis.
Packaging Strategy May Shift
The ongoing aluminium can shortage might speed up a move towards alternative packaging. PET bottles are common in India for many cola products, but cans are often preferred for specific brands or premium offerings. India's beverage packaging market is set for significant growth, with plastic holding a majority share, and could see increased demand for non-can formats. Companies like CANPACK are expanding their presence in India with new beverage can plants, but current geopolitical disruptions show how fragile even localized supply chains can be. This crisis could push companies to strategically re-evaluate their packaging options and diversify supply chains beyond regional dependencies.