There’s rarely a day goes by that you don’t see an item in your social media feeds as a craft beer fan about hop shortages & how they will/are/could hurt craft brewers. And sure, craft breweries that have skin in the game long enough are getting bigger, & as a result they contract a colossal amount of hops up to three or four years into the future when much smaller beer producers can’t even say if they’ll be around in 12 months. For example, BrewDog contracts something ridiculous like 80% (I’m open to correction here) of the hop harvest for Nelson Sauvin hops from New Zealand for its production of its flagship Punk IPA beer. So how in the hell can small producers innovate when the bigger craft producers are like the bigger hungry pigs at the hop trough?
As fraternal as the craft beer industry is, there is rarely discussed ultra-competitive streak in it. A large part of it is survival instincts whether that’s to meet tax burdens throughout the year, pay salaries and or keep beer on the shelf to meet demand so they can grow & reinvest in expansion. As someone who founded a business, believe me I get it. I probably get it more than most beer writers having been in the position of building a business from zero.
The problem facing small businesses is cost versus scale. And at small-scale, those costs per unit are extreme. The hope is you get a revenue stream that grows to help drive the costs per unit down, & profit per unit up, which when it scales helps provide finances to reinvest & grow, or to develop the product lines to gain more efficiencies to help drive a capital investment programme, or simply make sure everyone in the business gets paid, as often business owners don’t pay themselves while they fulfil their dream with their business.
However, breweries that share a reasonable close geography could help themselves more by forming Co-Ops when it comes to buying to get their costs down & being able to engage in hop contracts. And even when you say that, the big question starts rolling in:
What if one or more of the breweries goes bust & future commitments on hop contracts go with them?
The answer to this is staring breweries in the face; the same market place many of them source their hops from is where they sell the excess hops. If anything, this helps also provide a distributed revenue stream to the Co-Op members. Yes, this requires distribution but if you already sell merchandise from your brewery website, it makes sense to pool the merchandise also at the Co-Op designated depot, & centrally manage merchandise distribution.
The question also begs from the other side – how does a new brewery establish a relationship to buy materials for their beers when they’re at the lowest point on the trust scale as a new customer to the suppliers. A fantastic article by CraftBrewingBusiness.com last year addresses this issue beautifully:
The value of the co-op, from the vendors perspective, isn’t just in negotiating a discounting for volume, but in being a preferred vendor to a substantial group of outstanding, trustworthy companies.
Even co-op buying things like gases from companies like BOC saves money. And before the ‘co-ops don’t work’ crowd jump in. In 2006 I was working for petrochemical giant, Total in the UK. Very often small farmers in areas were co-op buying. So too were community co-ops to get the price per litre on home heating fuel down to make quite substantial savings. And their haggling power when you’re dealing with the volumes was compelling. Your typical home heating tank is approx.1,200 litres.
When you’re buying for twenty to thirty houses, that becomes anywhere between 24,000 litres to 36,000 litres. The haggling power on that alone would make your eyes water. The deal goes from being around £850 to £24,000 for the business development exec handling the account. And co-ops like this only grew & got more power as they pro-actively went around recruiting new members. A great example of one I came across a lot in my time was The Fuel Co-Op.
Given the rise of craft breweries in Ireland, their survival is even more perilous than their predecessors. Their predecessors were facing into a market that was completely ignorant of their products. The market is now much better educated, & there are established paths these brewers have made to get their product into domestic & some international markets, which has grown alongside their brand recognition.
New brewers for sure will have some goodwill, but if you’re coming to the market with beers that were not out-of-place five years ago you’re in trouble. Getting access to interesting ingredients such as highly desirable hops without a co-op is prohibitively expensive, as is access to higher end yeasts other than Safale US05 for example. Whatever about hops, when so many breweries use this yeast, there’s too much of a sameness about the beers & I know that unless you’re brewing daily, yeast washing & culturing your own house yeast is not worth the effort.
With elevated levels of interactivity between microbreweries in Ireland, it makes sense now more than ever for many of them in a region to start a Co-Op, & to make it their business to have new start-ups in their region join the co-op. It can also help with distribution power as well, which is how Stone Brewing in California became the biggest distributor of craft beers on the west coast of America; there were none who would help them or others, so they took it upon themselves to distribute for themselves & neighboring San Diego breweries.
Co-operation shouldn’t be a dirty word. If anything, it should be a goal to help each other in the beer arms-race currently underway by macros as they swallow up microbreweries, which will inevitably hamper their ability to obtain top-shelf desirable ingredients at a fair price.
original image used created & owned by Taylor S. Smith. The original image has been edited for this article.