School milk carton shortage may last until end of school year, unbranded packaging eases supply pressure

The widespread packaging shortage of 2023 is carrying over into the new year. Domestic dairies, schools, and other institutions are still dealing with a shortage of half-pint cartons that has lasted for months. Although predictions suggest the issue may not be resolved before the end of the school year, some assistance has already arrived. Some sources indicate that one possible cause of the supply disruption is Pactiv Evergreen's closure last year of its converting plant in Olmsted Falls, Ohio, which produced these 8-ounce cartons.

While some observers initially speculated that a cardboard shortage caused the supply chain disruption, this theory has largely been set aside. It is understood that the closed Olmsted Falls plant produced a significant portion of the nation's 8-ounce cartons, which are especially used by dairies serving schools, healthcare facilities, and other institutions. The shortage has also affected other beverage suppliers using containers of this size, such as juice or iced tea.

"That plant in Ohio, a lot of us were getting our supply from there. Once it closed, things took a sharp turn for the worse," said Scott Stoner, Vice President of Operations at Cream-O-Land Dairy in New Jersey. "We are still in the midst of the shortage."

A former employee of the Olmsted Falls plant, who requested anonymity because they were not authorized to speak publicly, stated that the disruption in the 8-ounce carton supply chain is directly linked to the plant's closure. The employee held various positions on the carton production line until last year and, based on their knowledge of production volumes across lines, estimated that Olmsted Falls produced approximately 18 million 8-ounce cartons per week.

The former employee said that around the time of Olmsted Falls' closure in June, employees at other Pactiv Evergreen carton manufacturing plants were "already stretched thin" due to apparent internal issues such as labor or hiring problems. "Some people were already working six days a week, some even seven," the former employee said.

Pactiv Evergreen did not respond to inquiries about the Olmsted Falls plant and the causes of the carton supply disruption.

Saying goodbye to brand logos

Pactiv Evergreen stated in an email on Wednesday that it has increased carton production to maximum capacity. Although shipments are higher than during the worst of the shortage, they still have not met initial demand, Stoner confirmed. And there is a catch with the additional supply of 8-ounce cartons: they are generic, without any brand markings.

"They're shipping these cartons all over the country. It's the same container for all of us, without our logo," he said. "Right now, 1% chocolate milk and 1% white milk are going out in unbranded packaging. They're also adding a nonfat half-pint package, which will also be unbranded, and we just signed off on that this week."

Pactiv Evergreen said in a statement that the generic containers are part of its response to "simplify supply chain complexity." The company also stated that it has allowed customers to "build inventory even during the school break" and thanked customers for their patience.

"We will continue to work with those closest to milk consumption—dairies and dairy processors that directly serve schools—to support forecast accuracy and encourage them to build inventory over the summer to prevent a recurrence of this situation," the statement said.

The generic cartons have brought Cream-O-Land its first relief since first encountering supply issues in September and beginning to explore solutions. Stoner had considered sourcing from domestic and international packaging suppliers, putting half-pint milk into larger containers, using large milk dispensers instead of cartons, and reallocating supply within its service area, which covers much of the East Coast and parts of the Caribbean. These approaches were both labor-intensive and costly.

Cream-O-Land's multi-year exclusive supply contract with Pactiv Evergreen expired in December. The packaging company did not request renewal or negotiation due to uncertainties in its carton supply, Cream-O-Land was told, and instead would operate on an as-needed basis indefinitely. Additionally, "they lowered our prices, which is incredible," Stoner said.

Although no other company can fully fill the half-pint supply gap left by Pactiv Evergreen, the dairy has had successful discussions with several companies. Elopak, in particular, has been helpful in providing additional cartons, which arrived at Cream-O-Land this week, Stoner said. Other packaging suppliers are testing the dairy's product packaging, and Cream-O-Land hopes to add more suppliers by the end of the month—though shipping delays are widespread across suppliers.

"We're surviving... we're operating week to week," he said. "In December, we were operating day to day. In the last week or two of December, we finally got enough packaging that we no longer needed to operate day to day."

Tetra Pak is another major domestic carton producer, and since the shortage began last year, it has received many requests for assistance—from both existing and potential customers. Seth Teply, President and CEO of Tetra Pak U.S. and Canada, said via email on Wednesday that the company has limited capacity to take on new customers.

"Our existing customer base saw increased demand for gable-top cartons in 2023. Therefore, we have been focused on fulfilling contractual orders for our existing customers," Teply said.

He noted that demand for Tetra Pak's half-pint gable-top cartons remains strong. Additionally, the company is seeing growing interest in its shelf-stable milk cartons.

Schools have been particularly affected by the 8-ounce carton supply issue because they must offer milk at breakfast and lunch to meet federal requirements, and the industry heavily uses half-pint packaging. Currently, "the situation is still evolving," but milk shortages in schools—caused entirely by packaging rather than milk supply—appear to be "sporadic and localized," said Matt Herrick, Senior Vice President of Public Affairs and Communications at the International Dairy Foods Association. "Therefore, we are reminding all stakeholders who contact us not to panic."

Pactiv Evergreen's generic cartons have eased supply pressures to some extent in recent weeks, he said.

"This has helped processors at least maintain enough inventory to fulfill immediate orders. However, lead times remain very tight," Herrick said. "We are asking processors to report any ongoing disruptions so we can assist as quickly as possible while seeking short-term solutions until the shortage eventually eases."

Plant issues

Pactiv Evergreen announced restructuring actions on March 6, 2023, including the closure of the Olmsted Falls converting plant and the pulp and paper mill in Canton, North Carolina, both of which were largely shut down in June. Together, they eliminated 1,300 jobs, with about 160 of those in Olmsted Falls. The company also said it would explore "strategic alternatives" for its Pine Bluffs, Arkansas, plant and its Waynesville, North Carolina, extrusion facility, but has not yet announced specific plans.

According to the former Olmsted Falls employee, Pactiv Evergreen told employees the closures were due to declining demand. But some employees doubted this reasoning, especially given the carton disruption months later, and they questioned whether union relations issues led to the closure, the source said.

The United Steelworkers union represents Olmsted Falls, Canton, and several other Pactiv Evergreen plants under the same master contract and negotiates jointly, according to the former employee. In late 2022, they rejected the most recent contract proposal, marking the first time in at least 50 years that Olmsted Falls and Canton had done so, the former employee said. Multiple rounds of bargaining followed, and by the time the closures were announced in March 2023, Pactiv Evergreen had reached an agreement with Olmsted Falls but not with Canton. The USW did not respond to inquiries about the timing of contract negotiations by press time.

Anonymous public comments on Glassdoor, allegedly written by Olmsted Falls and Canton employees, also mention the plant closures, questioning whether union issues existed and whether Pactiv Evergreen closed the plants before employees went on strike. In 2022, the Canton plant filed a "retaliation" case with the National Labor Relations Board, which investigates complaints of unfair labor practices or violations of workers' organizing rights.

Pactiv Evergreen did not respond to inquiries about labor issues.

Addressing the fluid situation

Pactiv Evergreen issued a statement to CNN in November saying it faced "demand that far exceeded expectations," implying this caused the shortage. But some people question whether that explanation holds up.

"Demand is exactly the same," speculated Stoner of Cream-O-Land. "I think someone just messed up."

Although the generic half-pint cartons provide some relief, Stoner expects supply issues will not be fully resolved anytime soon.

"Obviously, things won't return to normal within this school year," he said. "Maybe next school year. Maybe."

This aligns with Tetra Pak's outlook on when a full resolution might occur.

"We expect demand to remain high for the remainder of the current school year, and we have continued to allocate overtime shifts to increase production," Teply said.

But IDFA's Herrick is more optimistic: "All indications point to supply challenges easing in late winter or early spring, provided there are no further disruptions, unexpected supply shocks, or other unforeseen events."

The U.S. Department of Agriculture's Food and Nutrition Service highlighted the carton shortage in an October 25 memo, noting that some schools nationwide were struggling to obtain milk due to packaging supply chain issues. Members of Congress—including Senate Majority Leader Chuck Schumer (D-NY) and Rep. Mark Molinaro (R-NY)—have called on USDA to take action regarding the carton and milk backlog.

A USDA spokesperson confirmed via email on Thursday that the agency's Food and Nutrition Service continues to assist school districts experiencing milk supply disruptions due to carton issues. According to the spokesperson, FNS has communicated with representatives of half-pint milk carton suppliers to help identify solutions and will "continue to address the situation using existing authorities and resources."

FNS last issued guidance on October 25, reiterating that school lunch program operators should meet federal milk requirements "to the extent possible." During "emergency periods," operators may use alternative forms of milk or waive milk when necessary.

The spokesperson also noted that school lunch program operators are eligible for equipment grants, and schools may use these funds to transition to alternative milk distribution methods, such as steel milk dispensers.

Certain state lawmakers and school districts are taking long-term actions in hopes of preventing such issues from recurring. In December, New York State Assemblywoman Marianne Buttenschon and State Senator Joseph Griffo introduced companion legislation in their respective chambers to address the milk carton shortage. The bill would establish a pilot program for Oneida County school districts to purchase self-serve milk dispensers and bulk milk orders, with reimbursement for those purchases.

Buttenschon said via email that each school district is independently addressing milk issues. But if the pilot is successful, she hopes such programs could be adopted across the state.

While proposing one solution, the assemblywoman noted that lawmakers are open to other ideas from stakeholders. "Our children's health must always be a priority, and ensuring they have access to fresh milk during the school day will always be my priority," she said.

As various parts of the supply chain continue to cope with the ongoing carton supply situation, Stoner said he has learned an important lesson.

"I will never rely on just one supplier again," he said. "Never."