Half-Pint Carton Shortage Persists Through School Year; Generic Packaging Offers Interim Relief

The packaging supply disruption that plagued the dairy industry in 2023 is extending into the new year, with domestic dairies, schools, and other institutions still grappling with a months-long shortage of half-pint cartons. While some forecasts suggest the issue may not be fully resolved before the end of the current school year, interim relief is emerging through the distribution of generic, unbranded packaging.

Industry observers have pointed to a likely catalyst for the ongoing disruption: Pactiv Evergreen's decision last year to shutter its Olmsted Falls, Ohio, converting facility, which produced a significant volume of the nation's 8-ounce cartons. These cartons are predominantly used by dairies servicing schools, healthcare facilities, and other institutional clients, but the shortage also affects suppliers of other beverages, such as juice and iced tea.

Scott Stoner, vice president of operations at New Jersey-based Cream-O-Land Dairy, told Packaging Dive, "That plant in Ohio, that's where a lot of us were getting our product from. And when that closed, it kind of went downhill. We're still in [the shortage]."

A former employee at the Olmsted Falls plant, who requested anonymity due to lack of authorization to speak publicly, corroborated that the supply chain disruption is directly tied to the facility's closure. The former employee, who worked on carton lines until last year, estimated that Olmsted Falls produced approximately 18 million 8-ounce cartons per week. They also noted that around the time of the closure in June, employees at other Pactiv Evergreen carton manufacturing facilities were already struggling with internal issues such as labor shortages or recruitment challenges, with some working six or even seven days a week.

Pactiv Evergreen did not respond to requests for information regarding the Olmsted Falls plant or the causation of the carton supply disruption.

Bye-Bye, Branding

In an emailed statement to Packaging Dive, Pactiv Evergreen said it has increased carton production to maximum capacity. While shipped volumes have surpassed the depths of the shortage, they still fall short of original demand, according to Stoner. A notable caveat accompanies the additional 8-ounce cartons: they are generic, devoid of any identifying branding.

"They're shipping that all over the United States. It's the same container for all of us. It doesn't have our logos," Stoner said. "Right now, 1% chocolate and 1% white [milk] is coming out in generics. And they're just adding a skim half-pint that's going to be generic that we're just signing off on this week."

Pactiv Evergreen stated that the generic containers are part of its response "to minimize supply chain complexity." The company also noted it continued producing cartons at maximum capacity even "while schools were closed for the holidays to allow our customers to build inventory," and thanked customers for their patience. The statement added, "We will continue to work with those closest to milk consumption — the dairies and dairy food processors that directly service schools — to support their forecasting accuracy and encourage them to build inventory during the summer months to prevent this situation from reoccurring."

The generic cartons have provided initial relief for Cream-O-Land, which first experienced supply snags in September and has since explored various solutions. Stoner has considered purchasing from domestic and foreign packaging suppliers, shifting half-pint portions into larger containers, using bulk milk dispensers, and reallocating supply across its service area, which spans much of the East Coast and parts of the Caribbean. These measures have proven arduous and costly.

Cream-O-Land's multiyear sole-supplier contract with Pactiv Evergreen expired in December. The packaging company did not seek renewal or negotiations due to supply uncertainty, and instead will operate on an as-needed basis indefinitely. Surprisingly, Stoner noted, "they lowered our price, which is hard to believe."

While no single company could fully replace Pactiv Evergreen's volume, Cream-O-Land has had productive discussions with multiple suppliers. Elopak, in particular, has been helpful, with additional cartons arriving this week. Other packaging suppliers are testing the dairy's product, and Cream-O-Land hopes to onboard additional suppliers by the end of the month, though shipment delays remain pervasive.

"We're surviving. ... We're running week-to-week," Stoner said. "In December, we were running day-to-day. The last week, maybe the last two weeks, in December we finally got enough packaging to where we weren't running day-to-day."

Tetra Pak, another leading domestic carton producer, has received numerous requests for assistance from existing and potential customers since the shortage began. Seth Teply, president and CEO of Tetra Pak U.S. and Canada, indicated via email that the company's capacity to take on new customers is limited. "Our existing customer base demonstrated an increased demand for carton gable top packaging in 2023. As a result, we have remained focused on fulfilling our existing customers’ contracted orders," Teply said. He added that Tetra Pak continues to see elevated demand for half-pint gable top cartons and growing interest in shelf-stable milk cartons.

Schools have been particularly affected by the 8-ounce carton shortage because they must provide milk at breakfast and lunch to meet federal requirements, and the sector heavily relies on half-pints. Matt Herrick, senior vice president of public affairs and communications at the International Dairy Foods Association (IDFA), described the situation as "fluid," but noted that milk shortages in schools — which are solely due to packaging issues, not milk supply — appear to be "sporadic and localized." He advised stakeholders not to panic. Herrick acknowledged that Pactiv Evergreen's generic cartons have helped ease the supply crunch in recent weeks, but cautioned that lead times remain challenging. "We are asking processors to flag any continued disruptions so that we can help to triage the situation as quickly as possible while we look for short-term solutions until the shortage finally eases," he said.

Plant Problems

Pactiv Evergreen announced on March 6, 2023, that it was taking restructuring actions, including closing the Olmsted Falls converting plant and a pulp and paper mill in Canton, North Carolina, both of which largely shuttered in June. A collective 1,300 jobs were eliminated, about 160 of which were in Olmsted Falls. The company also said it would explore "strategic alternatives" for its mill in Pine Bluffs, Arkansas, and an extrusion facility in Waynesville, North Carolina, though no firm plans have been announced.

According to the former Olmsted Falls employee, Pactiv Evergreen attributed the closures to decreased demand. However, some employees doubt this reasoning, especially given the subsequent carton disruption, and question whether union relations issues contributed to the closures. The United Steelworkers union represented the Olmsted Falls, Canton, and other Pactiv Evergreen facilities under the same master contract, negotiating collectively. In late 2022, workers rejected the proposed contract — the first time in at least 50 years for Olmsted Falls and Canton. Several negotiation rounds followed, and Pactiv Evergreen reached a deal with Olmsted Falls but not with Canton by the time closures were announced in March 2023. USW did not respond to a request for comment by publication time.

Anonymous public reviews on Glassdoor, purportedly from Olmsted Falls and Canton employees, also reference the closures, raising questions about possible union issues and whether Pactiv Evergreen closed facilities before employees could strike. Additionally, a "retaliation" case at the Canton facility was filed in 2022 with the National Labor Relations Board, which investigates complaints of unfair labor practices or violations of workers' right to organize. Pactiv Evergreen did not respond to requests for comment regarding labor.

Resolving a Fluid Situation

In November, Pactiv Evergreen released a statement to CNN saying it had faced "significantly higher than projected demand," suggesting that led to the shortage. However, some industry participants question this explanation. "It's exactly the same demand," Stoner speculated. "I think somebody just screwed up."

Despite the relief from generic half-pints, Stoner anticipates the supply problem will not be fully resolved soon. "It's obviously not going to get back to normal this school year," he said. "Maybe for next school year. Maybe."

Tetra Pak's outlook aligns with this timeline. "We expect demand will continue at elevated levels throughout the remainder of the current school year and we have continued to allocate overtime shifts to increase production," Teply said.

IDFA's Herrick offers a more optimistic view: "All signs continue to point to the supply challenge easing by late winter or early spring without any further disruptions, unexpected supply shocks, or other unforeseen events."

The U.S. Department of Agriculture's Food and Nutrition Service (FNS) spotlighted the carton shortage in an Oct. 25 memo, 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 (D-N.Y.) and Rep. Mark Molinaro (R-N.Y.), have called on USDA to take action regarding the carton and milk backups.

A USDA spokesperson confirmed via email that FNS continues to assist school districts experiencing milk supply disruptions due to the carton issue. FNS has communicated with representatives from half-pint milk carton suppliers to help identify solutions and "will continue to address the situation using available authorities and resources." The last FNS guidance, issued Oct. 25, reiterated that school lunch program operators should try to meet federal milk requirements "to the greatest extent possible," allowing alternative forms of milk or foregoing milk during the "emergency period." The spokesperson also noted that equipment grants are available for school lunch program operators, which could be used to shift to alternative milk distribution methods, such as steel milk dispensers.

Some state legislators and school districts are pursuing longer-term measures. In December, New York state Assemblywoman Marianne Buttenschon and state Sen. Joseph Griffo introduced complementary legislation to address the milk carton shortage. The bills would establish a pilot program for Oneida County school districts to purchase self-serve milk dispensers and bulk milk orders, with reimbursements provided. Buttenschon said via email that each school district is independently dealing with milk concerns, but if the pilot succeeds, the hope is for statewide adoption. She emphasized, "Our children’s health must always be a priority and ensuring that they have the option of fresh milk during their school day will always be a priority to me."

Reflecting on the ordeal, Stoner said he has learned a critical lesson: "I will never have [only] one supplier ever again. Never."