THANKS VERY MUCH.
>> THANK YOU VERY MUCH.
>> IN OTHER NEWS, SUPPLY CHAIN
DYSFUNCTION, WHICH BEGAN WITH
THE COVID-19 PANDEMIC AND GOT
WORSE WITH THE RUSSIAN
INNOVATION OF UKRAINE CONTINUES
TO CHALLENGE WISCONSIN
MANUFACTURERS.
UNPREDICTABLE DEMAND, MATERIALS
SHORTAGES AND DISAPPOINTING CROP
HARVESTS HAVE ALL PLAYED A ROLE
IN SENDING PRICES SOARING.
"HERE AND NOW" REPORTER WILL
CUSHMAN HAS THE STORY OF ONE
WISCONSIN BUSINESS IN DANE
COUNTY.
>> THE PANDEMIC HAS BEEN --
WHAT'S THE RIGHT WORD, LIKE VERY
INTERESTING AND VERY VOLATILE IN
OUR BUSINESS.
>> WHEN ISACC SHOWAKI OPENED
OCTOPI BREWING IN WAUNAKEE IN
2014, HE EXPECTED SOME
CHALLENGES.
HE NEVER IMAGINED THE DIZZYING
BUSINESS DISRUPTIONS THAT
ACCOMPANY A LONG, DEADLY
PANDEMIC.
THE TROUBLE BEGAN IN EARLY 2020.
>> WHEN IT HIT IN MARCH, ALL OF
US WITHIN 48 HOURS, ABOUT 60% OF
OUR ORDERS GOT CANCELED.
>> OCTOPI'S CORE BUSINESS IS
PRODUCING DRINKS ON CONTRACTS.
PRIMARILY FOR BRANDS THAT SELL
IN SUPERMARKETS.
AFTER ONLY A COUPLE WEEKS OF
LOCKDOWNS, IT BECAME CLEAR THAT
DEMAND FOR SUPERMARKET PRODUCTS
WAS ABOUT TO GO INTO OVERDRIVE.
>> ORDERS STARTED COMING IN FAST
AND FURIOUS AND WE GOT REALLY
BUSY REALLY FAST BECAUSE THE
DEMAND FOR JUST CONSUMER PRODUCT
GOODS, ESPECIALLY IN THE OFF
PREMISE AND SUPERMARKET CHAINS
WENT THROUGH THE ROOF.
SO 2020 WAS A VERY SCARY TIME,
BUT THEN IT WAS LIKE A REALLY
GOOD TIME FOR US.
>> THOSE GOOD TIMES RELIED ON A
GLOBAL SUPPLY CHAIN THAT HAD
NEVER BEEN SUBJECTED TO A STRESS
TEST LIKE A MULTIYEAR PANDEMIC.
OCTOPI'S SUPPLY CHAIN FATHERED
RELATIVELY WELL IN 2020.
>> AT THAT POINT I DIDN'T THINK
THERE WERE ANY ISSUES KEEPING UP
WITH DEMAND, BUT THAT BEGAN TO
CHANGE.
AT THE END OF 2020, BEGINNING OF
2021, I STARTED SEEING --
TARIFFS ON ALUMINUM SENT THE
PRICE OF CANS HIGHER.
WE CAN'T SUPPLY ALL THE ITEMS,
ALL THE CANS THAT YOU NEED.
THEN IT WAS GLASS.
BY THE END OF 2021, SUPPLY CHAIN
SNAGS SNOWBALLED INTO A GLOBAL
MESS.
A FALL 2021 SURVEY OF WISCONSIN
MANUFACTURERS FOUND THE TWO MOST
PRESSING ISSUES THEY FACED WERE
UNRELIABLE SUPPLY AND
SKYROCKETING PRICES OF
MATERIALS.
SHOWAKI SAYS THIS YEAR IS
SHAPING UP TO BE EVEN MORE
CHALLENGING.
>> IT WAS JUST NOT ONE THING, IT
WAS EVERYTHING STARTED GETTING
AFFECTED.
EVERY SINGLE PIECE IN THE SUPPLY
CHAIN FROM RAW MATERIALS TO
PACKAGING MATERIALS, WE STARTED
HAVING ISSUES LIKE NOT BEING
ABLE TO GET THE PRODUCT OR
SIGNIFICANT PRICE INCREASES THAT
WERE UNPRECEDENTED, YOU KNOW,
LIKE I THINK THE SMALLEST PRICE
INCREASE WAS ABOUT 15%, BUT ON
AVERAGE, IT'S BEEN BETWEEN 20
AND 25% OVER THE LAST SIX
MONTHS.
>> WE BUILT A SUPPLY CHAIN
SYSTEM THAT INCLUDED FACTORIES,
TRANSPORTATION METHODS, ALL THAT
STUFF.
WE BUILT THAT TO HANDLE A
CERTAIN CAPACITY THAT WE THOUGHT
WAS COMING AT US.
>> JAKE DEAN STUDIES HOW SUPPLY
CHAINS WORK OR IN THE LAST
COUPLE YEARS, MORE LIKE HOW THEY
COME APART.
>> IT'S BEEN A REALLY FUN JOB TO
BE IN OVER THE LAST COUPLE YEARS
AS AN OBSERVER OF SUPPLY CHAIN
RATHER THAN AS A PRACTITIONER OF
SUPPLY CHAIN.
>> PRACTITIONERS HAVE FACED A
WHIRLWIND OF CHALLENGES.
MATERIAL ALCOHOL ENGS, RISING
LABOR COSTS, SHIPPING INDUSTRY
IN DISARRAY.
PERHAPS THE BIGGEST CHALLENGE
HAS BEEN UNPREDICTABLE AND
HIGHLY VARIABLE DEMAND.
>> WE INVESTED A LOT IN SUPPLY
CHAINS OVER THE YEARS, FIGURING
OUT WHERE DEMAND IS, WHAT WE
NEED TO SATISFY AND THOSE SORTS
OF THINGS.
PART OF THOSE THINGS BEING
ACCURATE REQUIRES SOME BRAIN
POWER, COMPUTATIONAL POWER ON,
TO A CERTAIN EXTENT, PAST
BEHAVIOR.
AND WHEN YOU HAVE NO PAST
BEHAVIOR TO MODEL, YOU DON'T
KNOW WHAT HAPPENS WHEN THE WORLD
ECONOMY GOES SCREWY.
>> ADAPTABILITY OVERALL HAS BEEN
KIND OF THE THEME OF COVID.
>> JOEL YAEGER IS OCTOPI'S CFO.
OVER THE LAST COUPLE YEARS, A
BIG PART OF HIS JOB HAS BEEN
ADAPTING THE GROWING BUSINESS TO
WEATHER SUPPLY CHAIN PROBLEMS.
THIS MEANS FINDING AS MANY
BACKUP SUPPLIERS AS POSSIBLE FOR
KEY MATERIALS.
IT'S NOT ONLY THE PANDEMIC AND
TARIFFS DISRUPTING OCTOPI'S
SUPPLY CHAIN.
MALT IS A KEY BREWING INGREEPPED
YENT DERIVED FROM BARLEY, AND
THE OUTBREAK OF WAR IN EUROPE
HAS AFFECTED ITS SUPPLY.
>> EUROPE IS A HUGE PRODUCER OF
MALT.
NOT SO MUCH OF WHAT GOES INTO
BEER BUT EVEN FOR LIVESTOCK.
>> THE WAR IS COMPOUNDING AN
ALREADY DIFFICULT SITUATION.
THEY HAD A HORRIBLE CROP YEAR
LAST YEAR, SO ABOUT 25, 30% OF
THE CROP WAS LOST SO THEN THERE
WAS A SMALL SUPPLY OF MALT AND
THE PRICE WENT UP 25%,
UNPRECEDENTED.
WE USED TO GET 2, 3% PRICE
CHANGES.
>> THE PANDEMIC ECONOMY HAS ALSO
SCRAMBLED OCTOPI'S EXPANSION
PLANS.
THE PROBLEM, A SEMICONDUCTOR
SHORTAGE MEANT THE HIGH-TECH
CONTROLS WEREN'T READY.
>> IT MIGHT BE TWO PARTS THAT
ARE WAITING TO FINISH THE
MACHINE, BUT WITHOUT THOSE TWO
PARTS, YOU CAN'T MAKE THE
MACHINE.
>> OCTOPI'S SUPPLIER SAID THE
CANNING LINE SHOULD BE READY BY
EARLY FALL.
THAT'S AROUND WHEN SHOWAKI
EXPECTS CONSUMERS WILL FEEL THE
FULL WEIGHT OF PRICE INCREASES
HIS BUSINESS HAS ENCOUNTERED.
>> WE'RE JUST GIVING OUR PRICE
INCREASES TO OUR CLIENTS, WHICH
IS GOING TO TAKE A FEW MONTHS TO
GET TO THE RETAILER WHICH MIGHT
TAKE A FEW MONTHS TO GO TO THE
END CONSUMER.
>> THESE PRICE INCREASES ON
EVERYTHING ARE LIKELY TO
CONTINUE FUELING INFLATION.
THIS SPRING, THE FEDERAL RESERVE
HAS STARTED RATCHETING UP
INTEREST RATES IN A BID TO
TACKLE SOARING PRICES BY COOLING
CONSUMER DEMAND.
>> AS LONG AS CONSUMER BEHAVIOR
IS UNPREDICTABLE, SUPPLY CHAINS
ARE GOING TO BE UNPREDICTABLE.
>> WHILE THERE ARE SIGNS DEMAND
MAY BE NORMALIZING, IT'S NO
SHORT BET.
FOR THE NEAR TERM, GLOBAL
TURMOIL WILL LIKELY CONTINUE TO
KEEP CONSUMERS AND MANUFACTURERS
ON THEIR TOES.
REPORTING FROM WAUNAKEE, I'M