Half-pint carton shortage may last until end of school year; unbranded packaging eases supply pressure

The widespread packaging supply challenges of 2023 are carrying over into the new year. Domestic dairies, schools, and other institutions continue to be affected by a shortage of half-pint paper cartons that has persisted for months.

Although some predictions suggest the issue may not be fully resolved before the end of the current school year, some relief measures are now in place. Some sources indicate that one potential underlying reason for the ongoing supply disruption is Pactiv Evergreen's decision last year to close its plant in Olmsted Falls, Ohio, which specialized in producing 8-ounce cartons.

While some observers initially speculated that the shortage was caused by insufficient paperboard supply, that theory has largely been set aside. It is understood that the closed Olmsted Falls plant produced a significant share of the nation's 8-ounce cartons, particularly those used by dairies serving schools, healthcare facilities, and other institutions. The shortage also affects other beverage suppliers using containers of this size, such as products for juice or iced tea.

"That plant in Ohio was where many of us used to get our product. Once it closed, things took a sharp turn for the worse," said Scott Stoner, Vice President of Operations at Cream-O-Land Dairy, based in New Jersey, in an interview with Packaging Dive. "We are still deeply entrenched in the shortage."

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

According to the former employee, based on conversations with workers at other plants, around the time the Olmsted Falls plant closed in June, employees at Pactiv Evergreen's other carton manufacturing facilities were "already struggling" with apparent internal issues, such as labor or hiring difficulties. "Some people were already working six days a week, some even seven," the former employee said.

Pactiv Evergreen did not respond to requests for comment regarding the Olmsted Falls plant and the reasons for the carton supply disruption.

Saying goodbye to brand labels

In an email statement to Packaging Dive, Pactiv Evergreen said it has increased carton production to maximum capacity. Stoner confirmed that while shipments have risen compared to the peak of the shortage, they still do not meet initial demand. Moreover, there is a catch with the additional supply of 8-ounce cartons: they are generic, without any brand markings.

"They're sending these cartons all over the country. For all of us, the containers are the same, without our logos," he said. "Right now, 1% chocolate milk and 1% white milk are going out in generic packaging. This week, they also added the generic half-pint non-fat packaging we just received."

In its statement, Pactiv Evergreen said the generic containers are part of its efforts to "minimize supply chain complexity." The company also stated that it continued producing cartons at maximum capacity even during the "school holiday closure period, to allow customers to build inventory," and expressed gratitude for customers' patience.

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

The generic cartons have provided Cream-O-Land with its first relief since encountering supply issues in September and beginning to explore solutions. Stoner had looked into sourcing from domestic and international packaging suppliers, putting half-pint milk into larger containers, using bulk milk dispensers instead of cartons, and reallocating supplies within its service area—which covers much of the U.S. East Coast and parts of the Caribbean—to obtain more available half-pint cartons. These methods proved both labor-intensive and costly.

Cream-O-Land's multi-year exclusive supply contract with Pactiv Evergreen expired in December. According to what Cream-O-Land was told, due to uncertainty in carton supply, the packaging company did not propose renewal or negotiations but instead will supply on an as-needed basis indefinitely. Additionally, "they lowered our price, which is incredible," Stoner said.

Although no other single company can fully fill the half-pint supply gap left by Pactiv Evergreen, the dairy has had productive discussions with several other 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 products in their packaging, and Cream-O-Land hopes to bring in more suppliers by the end of this month—but there are widespread shipping delays across suppliers.

"We're barely managing... We operate on a weekly plan," he said. "In December, we were still planning by the day. It wasn't until the last week of December, maybe the last two weeks, that we finally got enough packaging to stop planning by the day."

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

"In 2023, demand from our existing customers for gable-top cartons increased. Therefore, we have remained 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 hard hit by the 8-ounce carton supply issue because federal requirements mandate that schools offer milk with breakfast and lunch, and the sector heavily uses half-pint packaging. Currently, "the situation is still evolving," but milk shortages in schools—caused entirely by packaging issues 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 advising everyone who contacts us not to panic."

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

"This has helped processors at least maintain enough inventory to fulfill immediate orders. However, lead times remain very challenging," Herrick said. "We are asking processors to report any ongoing supply disruptions so we can assist as quickly as possible, while also 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 processing plant and the pulp and paper mill in Canton, North Carolina, both of which were largely shut down in June. The move eliminated 1,300 jobs, with about 160 at Olmsted Falls. The company also said it would explore "strategic alternatives" for its plant in Pine Bluffs, Arkansas, and an extrusion facility in Waynesville, North Carolina, but has not yet announced specific plans.

According to the former Olmsted Falls employee, Pactiv Evergreen told workers the plant was closing due to declining demand. However, some employees were skeptical of this reasoning, especially given the carton supply disruption that occurred months later; instead, they questioned whether union relations issues led to the plant's closure, the source said.

According to the former employee, the United Steelworkers union represented workers at Olmsted Falls, Canton, and other Pactiv Evergreen plants under the same master contract and negotiated jointly. In late 2022, workers rejected the most recent contract offer, marking the first time in at least 50 years that workers at Olmsted Falls and Canton had rejected a contract. After several rounds of negotiations, Pactiv Evergreen reached an agreement with Olmsted Falls, but as of the March 2023 closure announcement, no agreement had been reached with Canton, the former employee said. As of press time, the USW had not responded to requests for comment on the timing of contract negotiations.

Some anonymous public comments on Glassdoor, purportedly from employees at Olmsted Falls and Canton, also referenced the plant closures, questioning potential union issues and whether Pactiv Evergreen closed the plants before workers went on strike. Additionally, in 2022, a "retaliation" case was filed with the National Labor Relations Board against the Canton plant, which investigates complaints of unfair labor practices or violations of workers' organizing rights.

Pactiv Evergreen did not respond to requests for comment regarding labor issues.

Addressing a dynamic situation

In a statement to CNN in November, Pactiv Evergreen said the company faced "significantly higher-than-expected demand," implying this led to the shortage. However, some have questioned whether this explanation holds up.

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

Despite the relief brought by generic half-pint cartons, Stoner expects the supply issue will not be fully resolved in the short term.

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

This aligns with Tetra Pak's expectations for a full resolution.

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

But IDFA's Herrick is more optimistic: "All indications are that supply challenges will ease by 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 memorandum, noting that some schools nationwide were experiencing difficulties obtaining milk due to packaging supply chain issues. Members of Congress, including Senate Majority Leader Chuck Schumer, a New York Democrat, and Republican Rep. Mark Molinaro of New York, have called on USDA to take action regarding the carton and milk backlog.

A USDA spokesperson confirmed via email 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 find solutions and "will continue to use its existing authorities and resources to address the situation."

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

The spokesperson also noted that school lunch program operators can apply for equipment grants, which schools could use to transition to alternative milk distribution methods, such as stainless steel milk dispensers.

Some state lawmakers and school districts are taking longer-term actions in hopes of preventing a recurrence. In December, New York State Assemblymember Marianne Buttenschon and State Senator Joseph Griffo each introduced companion bills in their respective chambers to address the milk carton shortage. The bills would establish a pilot program allowing school districts in Oneida County to purchase self-serve milk dispensers and bulk milk orders with reimbursement.

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

Despite the proposed solutions, the assemblymember noted that lawmakers are open to other ideas from stakeholders. "The health of our children must always be a priority, and ensuring they have access to fresh milk during the school day will always be my top concern," she said.

As parties across the supply chain continue to navigate the ongoing carton supply situation, Stoner said he has learned a major lesson.

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