Craft beverage production is growing. Rooted in small batches, unique flavor profiles, and oftentimes local sourcing of ingredients, the challenge of expanding production while keeping true to the movement’s roots is already being felt, even as local supply chains are yet being developed.
The emergence of an integrated local craft beverage industry, from the farm to the bar, makes it possible for craft beverage makers to expand while continuing to source inputs close to home. But the growth of the industry is outpacing the development of these local supply chains.
Attendees at the “Maltster in the Rye” Farmer/Brewer conference, held recently at Hartwick College, in Oneonta, NY, heard industry professionals discuss the challenges of keeping it local, while growing a brewery.
Localized Supply Chain
“Customers are looking for high-quality, regional food today,” June Russell, of Greenmarket/Grow NYC said. “Good wheat can be grown here. There is a flavor difference,” that is unlike the homogeneous commodity grains consumers have been acclimated to expect.
Expanding craft brewers can help to keep this emerging local grain market thriving, Russell said. Bakers at Greenmarket’s farmers markets have made a commitment to devote 15 percent of their grain bills to local sourcing. Brewers, she said, can approach the issue the same way, and determine what percentage of their grain bill will work, both financially and production-wise, if it is devoted to local grains.
Thor Oechsner, who grows 1,200 acres of organic grains for the flour and malting industry in New York State, reminds maltsters and brewers that “the farmer has to make money first and foremost.” A balance is needed, Oechsner said, “between agronomics and profitability all the way through the (supply) chain.”
The beer has to be profitable for the brewery. If the product is priced too high, and consumers won’t purchase it, the brewer won’t be able to stay in business. Keeping the cost of production in line with a price point the end-user will allow, while also providing a fair profit to the maltster, grower and others along the supply chain, is challenging.
As the craft brewing supply chain continues to develop, all of the players are incurring costs. Costs of research and breeding locally-suitable grains; of growing those grains – including proper planting, harvesting, drying and storing equipment; of malting knowledge and infrastructure; and of the brewery itself as production is expanded; will increase, at least initially.
Word from the Brewer
Phil Leinhart, of Brewery Ommegang in Cooperstown, NY, said that the price of local ingredients is currently about three times as much as those on the conventional market, making it “challenging to maintain profit margins. Hopefully as our industry develops and grows, that price will moderate and make it more do-able,” to use local ingredients on a larger scale.
The brewery does use local sourcing, including from their own onsite hops yard, and have financed research into local production of hops. They have made a commitment to use 2,000 lbs. of locally grown hops in 2016. They are not yet sourcing barley or other malted grains locally. They require over 300 million pounds of malt each year, and while they are committed to the use of local ingredients, they don’t yet know how they will be able to source the grains locally.
The brewery sells their beer in 46 states. Recently, they’ve noticed an increase in sales locally, and plan to focus on expanding this market. Doing so may offer more incentive and opportunity to capitalize on consumer demand for local ingredients, positively impacting the local supply chain.
Ben Roesch, of Wormtown Brewery in Massachusetts, whose slogan is “a piece of Mass in every glass,” saw a 500 percent growth rate in 2015. They’ve been able to remain true to their mission of local sourcing as they’ve grown from a small 1,000 barrel annual production level in 2010 to producing over 15,000 barrels/year today.
One challenge for local sourcing as the brewery grows is that “quantity increase is tied directly to growth,” Roesch said. If they grow 100 percent, they need 100 percent more ingredients. The local supply chain is not able to grow that quickly.
Roesch encouraged open, direct communication regarding price, quantity and quality. He strongly advises contracts, to protect both parties and delineate what is expected. There is risk, as the quality needed is not always there. He would like to see a quality standard for ingredients to be developed.
Local ingredients are “all about communication,” Roesch said. “We’ve definitely rejected some locally-grown grains.”
In the Northeast, there is only one chance to get the year’s crop grown. Brewers need to have the supply chain set up ahead of time, as farmers need time to grow the crop. Brewers also need to realize that ingredients are only harvested at certain times. Using local sugar pumpkins, for example, means that their pumpkin brews aren’t on the market as early as they might like them to be.
One aspect of the supply chain logistics that needs to grow along with beer production is the ability to produce and deliver larger quantities of ingredients. The infrastructure to store the grains and malts, for example, needs to be in place. The brewery added a silo to store base malts. For specialty malts, they are now purchasing super sacks, rather than the smaller 50-ton sacks. Buying in quantity has reduced their cost about 25 percent, Roesch said. Another change is the 20 ton dumpster they now use to pick up grain.
Even as the brewery’s production has expanded rapidly, they have been able to keep the percentage of local ingredients steady. Local malt made up 5.8 percent of Wormtown Brewery’s purchases, by weight, in 2012, and 5.2 percent in 2015. Local hops comprised 4 percent of the hops purchased by weight in 2013, and 6.4 percent in 2015, as the local hops acreage has matured. They also use local seaweed, sea salt, and maple syrup.
“The local ingredients here are costing us a lot more than the traditional ones,” Roesch said.
Hops pricing is not going down with the increase in available quantity, however. The cost of the local hops is 11 percent of the total cost of hops purchased in 2015.
“We’re all in this together, or the system is never going to work,” Oechsner concluded, emphasizing the need for everyone along the supply chain to remain profitable, with an end-product price point that the consumer can still afford.
The need to keep costs down while increasing production levels, and crafting brews at a price that the growing base of mainstream customers are able and willing to pay, is challenging. Craft beverage makers have to balance their growing popularity, the realities of the marketplace, and dedication to their mission.