Garage Project co-founder Jos Ruffell says CO2 supply is squeezing production and margins at the Wellington brewery. Photo / Supplied
Garage Project co-founder Jos Ruffell says CO2 supply is squeezing production and margins at the Wellington brewery. Photo / Supplied
CO2 prices are “through the roof” for local food and drink producers as the ongoing shortage continues to squeeze production.
Garage Project co-founder Jos Ruffell said the shortage had put immense pressure on the Wellington craft brewery.
“We’ve had periods throughout this year where we have completely run out and have had to pause production until we receive more CO2,” Ruffell said.
He said the business needs a “decent supply” of CO2: “We use it to carbonate or top up the carbonation of the beer, we use it to purge the cans or bottles or the kegs and the filling process as well.
“The cost has just gone through the roof. It’s now a significant material line-item cost for us whereas previously it was a negligible part of our production,” Ruffell said.
CO2 shortages have impacted food processing and production across the country after Todd Energy’s Kapuni gas plant shut down in December 2022 over safety concerns.
The Kapuni liquid carbon dioxide plant in Taranaki has been New Zealand’s only domestic producer of food-grade CO2 since the Marsden Point refinery was decommissioned last year.
CO2 supply in New Zealand is having to be rationed due to shortages following the closure of the country’s sole food grade production facility two weeks before Christmas.
A spokeswoman for the Ministry of Business, Innovation and Employment (MBIE) said: “CO2 suppliers are limiting supply for non-critical customers” to deal with the shortage.
She said MBIE estimates CO2 supply has dropped by at least 25 per cent even with the current level of CO2 imports from overseas.
The spokeswoman said it had been in contact with Todd Energy: “We understand that Todd Energy is well on track to meeting this target.”
Ruffell said rising CO2 costs have hit the business as costs across production continue to grow.
“It’s a meaningful cost increase coming at the time when we are getting hit with cost increases across the board like many other industries at the moment.”
He said the company is doing what it can to absorb costs for its customers which might not be sustainable if current conditions persist.
“We want to keep our beer priced in a competitive place, but there comes a point where we have to pass on costs, you know, to our end customers unfortunately,” Ruffell said.
The decommissioning of the Marsden Point refinery, south of Whangārei, left Kapuni as the sole domestic liquid CO2 supplier. Photo / Michael Cunningham
“We’re in a pretty fortunate position but it certainly does put pressure on margins - it’s definitely a challenging time to be an independent craft brewery.
“For customers supporting independently owned breweries, now is a really critical time,” Ruffell said.
“It highlights our fragile reliance as an economy, as a country on certain key resources.”
The MBIE spokeswoman said the restrictions had led to higher prices “which some sectors may choose to pass on to consumers and others may choose to absorb into their costs”.
She said CO2 manufacturers were prioritising areas of critical use, such as medical and water treatment facilities: “There is no expectation of a shortage in these areas.”
“There are alternatives to relying on domestically supplied CO2 from Kapuni and many businesses are already making good use of these. For example, some are importing CO2 directly or switching to other gases.
“Others are employing existing technologies to capture and re-use CO2 from other processes, such as fermentation from food waste or during beer production,” she added.
Inghams Australia chief executive Andrew Reeves said in a meeting with investors: “To address the general CO2 shortage that has been a feature of the New Zealand market, we converted the Auckland processing plant to nitrogen in November.”
To monitor the impact of Kapuni’s closure, the MBIE spokeswoman said the government agency had set up a webpage “to provide information and help affected businesses identify what options may be available to them”.
“In some instances, affected businesses might be eligible to apply for financial support from government agencies,” the spokeswoman said.
“The Government is committed to improving supply chain resilience in New Zealand and is exploring potential longer-term Government actions that could strengthen our domestic CO2 position.
“The Government does not have a regulatory role in the CO2 market. Industry is leading the response to the ongoing domestic supply shortage.”
Two of NZ’s largest CO2 suppliers are British industrial gas company BOC and French company Air Liquide.
A spokeswoman from BOC said the company had increased the availability of CO2 since January using larger overseas CO2 shipments and increased availability of CO2 from the company’s local third-party supplier.
“We are still actively working to find a suitable alternate supply of CO2 feed gas that could allow for the relocation of the Marsden Point CO2 plant,” she said.
She said BOC’s priority was to maintain security of supply for its customers: “We continue to operate a mixed supply model with continuous investment in our CO2 import supply chain.”
The BOC spokeswoman added, “We will regularly review our supply model based on the availability and reliability of local CO2 supply which we expect to increase over time.”
Air Liquide did not respond to requests for comment.
