CLOUD COMPUTING: HOW CRAFT BEVERAGE COMPANIES BENEFIT FROM HAVING DATA AT THEIR FINGERTIPS

By: Wade Huseth, Baker Tilly

As a craft beverage manufacturer and business leader, you’re probably familiar with the term cloud computing – but may still have questions about the benefits, costs or risks associated with “moving to the cloud”. This article will answer some of those questions and demonstrate how cloud computing can positively transform your business from the inside out.

What is cloud computing …and why does it matter for my business?

In its most simple form, cloud computing is the use of a shared resource on the internet to store, manage and process data. The cloud allows unique users to access the same software application from any device, anywhere, at any time. Information is easily updated and shared between team members without the need to print files, manually input reports or be in the same physical location.

As an example, take a moment to imagine this structure in place for your accounting processes. With data available in the cloud, your accountant can access and adjust your records in real time.

So, why should you care about cloud computing? The threat of being left behind for one. Cloud computing is quickly becoming a new organizational norm. Emerging research on the topic speaks for itself.

  • Nearly 90 percent of all financial decision makers are already aware of cloud computing and the overwhelming majority believe cloud computing brings quantifiable business benefits critical to the success of their organizations.
  • The cloud is the new normal for enterprise applications, with 70 percent of all organizations having at least one application in the cloud today.
  • Wikibon is predicting enterprise cloud spending will grow at a 16 percent compound annual growth (CAGR) run rate between 2016 and 2026.
  • Business/data analytics and data storage (both 43 percent), so critical in the competitive craft beverage industry today, are projected to lead the decision for cloud adoption in 2019 and beyond.

Benefits of Cloud Computing

How can cloud computing improve my business?

We’re glad you asked. Here are a few ways cloud computing can positively impact your operational, financial and organizational goals:

  • Scalability
  • Reduced IT and operational costs
  • Enhanced efficiencies through automation and collaboration
  • Information mobility and accessibility
  • Greater visibility into your competitive advantages
  • Increased productivity
  • Disaster resistance

Scalability: Successful craft brewers are growing at an unprecedented rate and the ability to scale on an as-needed basis is one of the biggest advantages of cloud computing. Accelerated business growth typically leads to growing pains and missed opportunities resulting from the mismanagement of more data, infrastructure and customers. The right cloud computing solution will grow alongside your business to meet market demands and accommodate growth as technology shifts, revenues grow and your business needs evolve.

  Reduced IT and operational costs: When it comes to budgeting for infrastructure, the cloud eliminates hefty upfront costs for computer hardware and licenses. Instead, you pay a monthly software subscription based on usage that can be adjusted over time. Cloud computing allows craft beverage companies to work with business professionals with expertise in areas where your team may be

lacking from a skill set standpoint. It allows you to share information in real time for consultation in areas you would rather outsource such as CFO services, IT, human resource management, sales analytics, accounting, and payroll / performance compensation so you can focus on what you do best which is brewing quality beer. Cloud computing isn’t just good for business – it’s good for the environment, too. In one example, the U.S. General Services Administration reduced server energy consumption by nearly 90 percent and carbon emissions by 85 percent after switching users to a cloud solution.

Enhanced efficiencies through automation and collaboration: Craft business owners are always looking for efficiency savings and implementing a cloud solution means you can say goodbye to manual entries or physical backups to secure data. For example, cloud-based accounting software typically automates processes by importing transaction data on a real-time basis. The cloud computing model empowers team members to collaborate and share information beyond traditional communication methods – allowing multiple facilities and/or taprooms to co-manage production, raw materials, packaging levels and distribution scheduling.

Information mobility and accessibility: Information mobility and accessibility are two major benefits associated with the widespread adoption of smart phones and tablets across the global workforce. Cloud technology gives business owners access to critical data and reports on the go with anytime-anywhere access for quick and more informed decision making. In today’s market as a craft beverage manufacturer, it is critical to maintain ongoing communication via a CRM tool not only within your own sales team but with your distributor partners to ensure opportunities are addressed quickly and everyone is executing as planned. As a business leader, you can customize authorities and grant individual user access through a comprehensive authorization process.

  Greater visibility into your competitive advantages: Taking it one step further, the ability for craft beverage companies to access data in real time also makes that data more useful in identifying trends, comparing results to industry benchmarks, monitoring key performance indicators and, ultimately, being a better business partner to your distributors and retailers. Harvard Business Review Analytic Services reported that 74 percent of cloud computing businesses feel they have a competitive advantage.

 Increased productivity: The blend of increased collaboration, added efficiencies, enterprisewide visibility and more informed decision making can only lead to one thing: more productivity. In fact, a survey by Frost & Sullivan found companies that invest in collaboration technologies increased productivity by as much as 400 percent.7 Cloud solutions allow employees, service providers and senior leadership to devote more time and energy to achieving strategic business goals. In some cases, it can also free up resources for the other ongoing capital investments required from beverage companies such as marketing, point of connection materials, event activation, research and development and employee training.

Disaster resistance: Paper files and hardware systems run the risk of being destroyed by natural disasters like fires, hurricanes and earthquakes. While cybersecurity remains a top concern for potential cloud adapters, losing important data to a disaster can completely devastate your business. Cloud technology recovery methods mitigate this risk by securing a copy of your data in a centralized server location, should a natural disaster occur.

Data Security

What’s the catch? Is security a concern?

Cloud security is a hot topic, and rightfully so. Critics argue the risks of turning your data over to an external provider need to be taken seriously, and data security is the leading concern for IT professionals when it comes to cloud computing.8 Additionally, a mere 23 percent of organizations today completely trust public clouds to keep their data secure9 and many surveyed professionals attribute a delay in cloud adoption to a lack of cybersecurity skills.

There is a widespread misconception that keeping IT operations in house is safer when, in reality, a third-party firm may be more capable of looking after your data. Unlike the IT management process a typical craft beverage company has in place, third-party providers offer devoted cybersecurity professionals with relevant technical credentials and a business model focused predominately around data security. As a result, they bring the expertise required to handle (and alert clients to) threats that include data breaches, insecure interfaces, system vulnerabilities, account hijacking and malicious insiders. Third party providers also keep up with the latest technology and industry developments, bring best practices forward based on interactions with other similar businesses, don’t require a benefits package including vacation and remove the threat of leaving with critical intellectual property such as recipes or brewing process insights.

Cloud Computing: Next steps

Okay, I’ve bought in to the benefits of cloud computing. Now what?

The majority of businesses hire an external consulting firm to help implement a cloud strategy.Working with an outside service provider gives you access to A) the latest and greatest technologies, B) industry specialists with an objective opinion and C) a reduction in both risk and cost.

Look for a firm that will work collaboratively with you to demystify the cloud to help your business thrive while making you a more informed and – as a result – more successful business leader throughout the process. Though the main focus may center on how cloud computing integrates with your financial reporting, cloud computing extends across many areas and is not limited to accounting functions.

Going beyond the basics, your chosen firm should assist you in understanding your data and leveraging it to make better business decisions. Every beverage company is different, so you should handpick a cloud solution customized to your unique needs and use that platform to transform what was once static accounting data and boring operational and sales statistics into a robust business management dashboard.

Business intelligence through analytics – dashboards – help identify trends, benchmarking comparisons, investment choices, planning opportunities and, most importantly, what your next business move should be. The beverage business is becoming less predictable with fewer loyal consumers. Staying a step ahead of your peers in this rapidly changing environment is critical to maintain a competitive advantage and realize long term success.

Cloud computing is more than just a technological fad. It represents the future of business and can transform your data whether it be sales, marketing, inventory/production or accounting records into a useful business tool.

  Wade Huseth is a partner with Baker Tilly and has more than 26 years of experience in providing financial accounting advisory services to companies in a variety of industries. Wade also leads the Advantage practice firmwide and specializes in leveraging best-in-class technologies and industry expertise to deliver customized accounting, finance and operational assistance to clients of all sizes

KNOCK, KNOCK! LIQUOR STORE AT YOUR DOOR IN 60 MINUTES OR LESS

By: April Ingram

Don’t want to leave the party to pick up the missing ingredients to make your signature cocktail or to try a new recipe? Wish you had options to save time, or you don’t want to head out into the elements to go pick up your favorite alcoholic beverages? Canadians can now enjoy greater options for their alcoholic beverage home delivery, including a wider selection of craft beverage products with Drizly.

In Canada, liquor laws are regulated by each province individually, and some have permitted home delivery of wine beer and spirits for decades. The original alcohol delivery service, Dial a Bottle, was taking orders by phone and delivering bottles before apps or even the internet existed. Today, the home delivery marketplace is flooded with options that make home delivery of alcohol nearly as easy as Uber Eats, and the competition is fierce, leading to lower delivery fees and extra service perks. E-Commerce companies are working with the complete inventory of local, leading liquor retailers and delivering them within 60 minutes to adults of legal drinking age at their homes and even to their offices.

Amazon for Liquor

Drizly, a pioneer and the world’s first and largest alcohol e-commerce marketplace is now launching their services in the city of Vancouver, the province of Alberta, and throughout 26 U.S. states. They’ve been called the “Amazon for Liquor” or “Uber Liquor,” and their approval to operate in Vancouver has been noted as quite the accomplishment, considering that legislative regulation has so far prevented the actual Uber from being allowed within the entire province. Drizly has already been serving consumers in parts of the neighboring province of Alberta for over two years.

Drizly works with local retailers, including Liquor Depot, to bring adults of legal drinking age a wide selection of beer, wine and spirits, with delivery in under 60 minutes through Drizly.com and the Drizly app.

By providing access to inventories from local retailers in each market, the service gives customers a wide selection of beer, wine and spirits at reasonable market prices. In addition to a wide variety of adult beverages, Liquor Depot’s range of popular soft drinks, juices, ice and other mixers, are also be available on the Drizly platform. Customers schedule a delivery or in-store pickup. The Drizly’s mobile app and website are deep wells of information, offering cocktail recipes, pro tips and popular adult beverage trends.

Delivery in Vancouver is a flat $4.99, and customers have to purchase a minimum of $20 worth of products from Liquor Depot and Liquor Barn to qualify for delivery.

Simplified Age Verification

Alcanna, formally known as Liquor Stores N.A. Ltd., is North America’s largest publicly traded alcoholic beverage retailer and includes a chain of more than 240 stores operating in Alberta, British Columbia, Kentucky and Alaska, with both Liquor Depot and Liquor Barn under its banner. They carry a vast selection of craft beers, ciders and spirits, some of which are not available in provincially run liquor stores.

Although other liquor delivery services exist in the area, Drizly’s verification software ensures that liquor is kept out of the hands of minors. Age verification made the service even more appealing to Alcanna when it was looking for a platform to sell its products on demand.

“Vancouver has been thirsting for everything that Drizly facilitates, not least online access to our vast inventory, an intuitive shopping experience and the convenience of delivery in under an hour. It’s a win-win in every sense of the term,” Fran Coons, Vice President of Operations at Alcanna said in a press release.

By equipping retailers with technology that can verify age and identification, Drizly helps business owners protect their liquor licenses. Their retail partners are provided with a device to scan barcodes on official forms of identification. Drizly’s proprietary ID verification technology enables delivery personnel to verify IDs with accuracy that goes well beyond a manual review. The scans collect the customer’s name, date of birth and the ID expiry date, and the device can determine whether the ID is authentic. Once age and identity are confirmed, the scanned information is deleted from Drizly’s records, so there is no concern about collection or storage of personal information. Retailers aren’t required to use the device and can choose to use the scanner for every delivery or only when employees suspect the customer is underage.

Regulations

Provincial regulations alcohol delivery services are required to follow under their licensing agreement do not allow delivery services to store liquor themselves. Instead, they must take orders from a verified adult, then purchase the order from a retailer or general merchandise liquor store licensees such as Liquor Barn or Liquor Depot, and deliver the liquor to the adult who ordered it at a place where it is lawful to store or consume. The delivery service license in Alberta is considered a Class D liquor license and costs $200 annually. In British Columbia, licensed establishments are permitted to sell their products online and deliver them to customers only between 9:00 am and 11:30 pm and orders must be delivered on the same day they were placed.

Additionally, in British Columbia, anyone involved in the selling or serving of alcoholic beverages is required to complete “Serving It Right” training.  Serving It Right is British Columbia’s mandatory self-study course that teaches licensees, managers, sales staff and servers about their legal responsibilities when serving alcohol, and provides practical techniques to prevent problems related to over-service. This training is extended to and required for alcohol delivery personnel as well.  All Drizly delivery drivers are Liquor Depot and Liquor Barn employees, so they go through the same training as in-store staff, knowing how to recognize whether someone should not be served and when a customer may be a minor.

Stop Contamination at the Door With Disinfectant Mats

By: Nelson Jameson

PRESS RELEASE

CONTACT: Melissa Pasciak | Director of Marketing

m.pasciak@nelsonjameson.com | 715-387-1151

FOR IMMEDIATE RELEASE

Stop Contamination at the Door with Disinfectant Mats™ from Nelson-Jameson

MARSHFIELD, WIS., December 19, 2018 – One step beyond the ordinary sanitizing footbath, Disinfectant Mats both clean and sanitize footwear before workers enter any processing areas, or anywhere you want to limit the spread of contamination.

While ordinary footbaths don’t provide any scrubbing action to keep users from tracking sediment back into a clean processing environment, Disinfectant Mats feature hundreds of flexible rubber fingers to clean dirt particles from footwear. Constructed of a heavy-duty rubber that won’t sag or allow solution to run out, Disinfectant Mats allow users to wipe their feet while simultaneously lowering the sole of the footwear into the sanitizing solution. The finger design then lets contaminants settle undisturbed, while the footwear contacts clean solution only, and then steps off the mat clean and sanitary.

To learn more about preventing cross-contamination in your plant with innovative selection of Disinfectant Mats and accessories, visit nelsonjameson.com or call one of our product specialists today!

2400 East Fifth Street, P.O. Box 647 | Marshfield, Wisconsin 54449

Post-Season Hops: Ramp up to Read

By: Kimberly Fontenot

Is there a leading-edge post-season technique to make next year’s hop growing, harvesting and distributing more streamlined and profitable? There are always leaders in the industry who step up, take the risk and invest in the next season with new and improved methods for hop growing.  Their plan of action usually contains strategies they’ve discovered with information not yet widely disseminated, which can bring them and the hop industry prosperity, growth and development.

When leaders within the hop industry concentrate on what needs to change or develop for better crop development, they do so knowing the key to success is ramping up during the post-season to acquire and implement new equipment or processes.

Ziemann Holvrieka, worldwide manufacturers of turnkey breweries, brewhouses and fermentation tanks, developed the Hop Back, a dosing vessel with an integrated sieve unit that provides dynamic hot wort hopping suitable for cone hops. Their Hop Slurry is a stainless-steel vessel that pumps, doses and controls fluid through pellets with the different flow direction.

Left Field Hops

Some growers implement strategies for the upcoming season immediately after harvest. They have learned if you wait, you may no longer be a part of the hop breeders, developers or distributors that are on the precipice of an unlimited future.

Rebecca Kneen of Left Field Hops in Canadian province British Columbia is one of those growers leading the pack in preseason preparation. She said there are plenty of tasks to complete during fall and winter to ensure idea rhizome propagation and hop health and keep growers ahead of the game.

“As a rhizome propagator and seller we make sure we do our fall applications of compost and kelp mean on each plant to allow integration of nutrients and bacteria into the soil,” said Kneen. “Fall planting of green manure crops (in particular fall rye) is done for ground cover over winter and added nutrients in the spring. Fall is also the time to check and tighten trellising. Over winter, consider how to adapt your growth strategies for spring, and make sure you have sufficient supply of anchors, twine, compost and cover crop seed.”

Kneen has a keen eye for what needs to change in the BC hop industry, and how to change it.

“We have a history in BC of over-planting one or two varieties (BC Golding for example), creating both a serious risk of vulnerability to disease and a lack of genetic diversity. We already see some issues with growers finding viruses and mildews in plants propagated in nurseries claiming to be part of the Clean Plant Network and having those plants distributed widely, contaminating a lot of new plantings. What is needed at this point is better oversight of nurseries so that plants being propagated are in fact free of disease, and more encouragement of the growing and use of more varieties.”

Mighty Axe Hops

There are many hop breeders with insights into improving not only their operations but also providing techniques, strategies and lessons learned to other hops breeders, farmers, distributors and entities. Eric Sannerud, farmer and CEO at Mighty Axe Hops is happy to provide advice to other growers for their off-season preparation.

“We make sure they all have a decent blanket of soil covering the crowns as additional winter insurance. We also mow down all the dead material from this growing season, one less thing you gotta do in the spring,” said Sannerud.

Sannerud is a leader in the Minnesota hops industry, encouraging future growth within the industry through partnerships between hop growers and brewers. “Mighty Axe Hops is already vetting for commercial production in the state of Minnesota, and we are leading that charge,” he said.

HAAS/Barth-HAAS Group

HAAS/Barth-HAAS Group takes a different approach to hop growing. As the world’s largest supplier of hops, they have the capabilities and resources to provide the most cutting-edge innovations and methods to their members. In addition to being a hops supplier, HAAS is also a breeder and research brewery with a focus on helping hop growers and brewers be their absolute best.

Roy Johnson, National Sales Manager with HAAS/Barth-HAAS Group, told Beverage Master Magazine that even though methods don’t change, their goals are always moving.

“We don’t change the irrigation or trellis management from one year to the next, but change out poles when needed. We haven’t had to change how we pelletize either for a while as this is consistent with us,” Johnson said. “However, we are seeing a thirty percent increase over last year in our Citra hops, so we are making adjustments to meet that hops growth rate in our post-harvest plans for the 2019 season.” By seeing the future and making plans to challenge themselves, HAAS/Barth-HAAS Group shows why they have consistently conquered and led the market.

Producing crops or products for any industry and taking the lead to help find solutions to current and potential problems, and sharing those solutions, will often lead to a healthier, more supportive industry. When others are aware and can learn from the intelligent, informed decisions made by a grower or developer, it benefits the end user as well.

Hard Work, Innovation and Timing

The post-season harvest has become one of the most critical times of the year for growers. This pivotal time allows growers to address any issues that they faced over the previous season and solve them using proven and innovated techniques.

Hop demand is as high as its ever been going into the 2019 season. The popularity of craft beer is not waining, and the need for hops will continue to grow. However, success is not guaranteed for every grower. Successful hops growers risk trying new things, strategizing and creating innovative developments to improve the crops and the bottom line. Those who never improve, develop or grow creatively, no matter how marketable the industry, will not meet the demands of the industry.

No one can tell the future, and you won’t know what sort of headaches you may face during the 2019 hops season until its here. However, using this post-season to solve what went wrong in 2018 will significantly lessen problems in the future. Invest in yourself by focusing on improving your operations, gaining more experience and create more hop innovations. Strategize, design and implement a unique plan of action. The new and innovative things you try will result in you looking after those who look after you–the customers. Grow for them because, in the end, they are the ones who not only grow your business but the industry as well.

Hop Farming Extends Beyond the Pacific Northwest

By: Robin Dohrn-Simpson

Throughout the U.S., interest in hop farming has expanded beyond the Pacific Northwest. Farming entrepreneurs from California to New York love beer and want to try their hand at growing local hops. They want to discover what varieties will thrive in their soil and withstand regional weather conditions all while creating a local hop source for brewers.

What does it take to grow hops? Growing requires three key components: full sun, access to water for irrigation, and moderate-to-well-draining soil. If this is true in the Pacific Northwest, why can’t regions throughout the country also be prosperous?

That’s precisely what Eric Sannerud and his partner Ben Boo of Mighty Axe Hops in Foley, Minnesota asked themselves.

“There’s really no reason not to grow hops in Minnesota,” Sannerud said. “The cold winters aren’t a challenge for hops. The plant’s perennial structure is deep underground. The plant dies back in the winter. There is nothing necessary to protect it from harsh winters. It springs back to life after the snows melt. The difference in growing in Minnesota is that in Oregon, Washington and Idaho it’s more desert-like. The Pacific Northwest has a longer and hotter growing season, but in Minnesota, there’s more humidity and water.”

Buy Local

In today’s culinary climate the “buy local” movement was also a consideration for them. “We care about where our food and hops come from. It’s important to have local ingredients. We also want to distinguish ourselves from other regions,” Sannerud said.

Eric March and family of Star B Ranch and Hop Farm in Ramona, California, already had a strong buffalo business on 1200 acres. In 2008, Marsh and his wife, Amie, decided to expand and include a hop farm on the property. Since then, they’ve become the largest commercial hop farm in San Diego County.

“I’m an agriculture man at heart,” March said. “I was exploring growing grapes in a newly created wine region outside of San Diego until my wife started researching hops. We discovered that with the growing craft brewing scene in San Diego there is a substantial demand for local hops. We looked at the temperature, soil, sunlight and air needed to grow hops. Although San Diego is coastal, where we live is 30 miles inland. It gets very hot here. We have loose, sandy, loamy soil that is well-drained. We have wells for our water. So we tried it. We currently have three acres planted with Chinook, Cascade, Amalia, Hallertauer and Neomexicanus.”

Challenges

Like so many other growers, March and his employees taught themselves how to plant and grow hops. “In fact, one of our first years I kept seeing hops cones on the ground and thought my crew was wasting valuable hops,” he said. “It turned out the deer were chewing on the plants and spitting out the hops.” They’ve used that to their advantage now. To battle mildew, it’s recommended not to have greenery right on the ground, but three feet up. “The deer get to eat the base leaves, and since they don’t like the hops, they leave it alone.”

Additionally, throughout the years the Star B team learned how to make the task of harvesting easier and more profitable.

“Before, it was very expensive and labor intensive to have a profitable hops business. Hand harvesting and hand processing of hops, while fun, was extremely tedious and time-consuming. This made it hard to provide larger quantities of hops fast enough to our customers. This led us to purchase a Wolf Hop Harvester from Germany,” said March. “We can [now] harvest up to 170 bines an hour.”

Terroir: the Sense of Place

Terroir is a common word in the wine world and now is being used in craft brewing as well. According to Ann Van Holle, Head of Research and Development at De Proefbrouwerij, a Flemish brewery in Belgium: “Terroir in connection to beer refers to the special characteristics of a region for the cultivation of hops, comprising growing conditions (such as soil composition, nitrogen, moisture) and climatologic conditions as well as biotic variables (such as microorganisms, managing practices). Terroir may have a significant influence on regional hop properties including aroma, flavor, bitter substances and longevity, affecting the brewing values of the cultivated hops.”

Mighty Axe Hops’ Sannerud told Beverage Master Magazine, “It’s important for different regions to have something that sets them apart. We think Minnesota soil and climate create a certain flavor of hops.”

For Star B, the water is what makes a difference. “Our hard water here accentuates the ‘hoppiness,’” said March. “Basically, it pops the hops. People also tell us our hops are citrusy.”

Mighty Axe Hops has received a grant to pilot a two-year program with the Department of Food Science at the University of Minnesota in conjunction with Dr. Zata Vickers, a sensory scientist, on hops terroir. “We want to see if terroir in hops is a thing. There’s a lot of interest in this and quite a few studies, but nothing conclusive,” Sannerud said. “By bringing [together] Mighty Axe’s understanding of hops, the world-class researchers at the University of Minnesota, and St. Croix Sensory’s history of sensory analysis, we are well positioned to do it.”

The study will be conducted mostly through sensory perception, championed by St Croix Sensory. According to their website, “St. Croix Sensory is a laboratory dedicated to practicing state-of-the-art sensory evaluation and to advancing the science of sensory perception.”

Chris VanDongen of the University of Minnesota told Beverage Master, “The University of Minnesota’s Department of Food Service has provided information on how to set up a descriptive analysis panel to measure hops aroma and flavor sensory attributes to the lab. Descriptive analysis is a sensory method where the attributes of products are identified and measured precisely by a trained panel. This type of analysis delivers objective and detailed quantitative information about a product’s sensory attributes.”

Subjects participating in the study have been trained as “noses” to taste and smell hops, according to Sannerud. These “noses” will taste and smell hops from a variety of locations and determine if there are distinct differences between soil types, growing regions and temperature variances, to name a few.

“Aroma and scent are subjective,” Sannerud said. “Our premise is that, like grapes and cheese, hops grown in different places have unique characteristics due to where they were grown.”

By early 2019 the initial results will be in and ready for a follow-up. Sannerud and Boo are excited to see how their hops hold up to those from the Pacific Northwest.

Future Vsion

The partners at Mighty Axe Hops hope to create and grow a strong hops industry in Minnesota that will assist Minnesota breweries in making their beer stand out.

“It’s important for us to have something that sets our state apart from other states,” Sannerud said. “Many smart people are sitting back and watching us; waiting to see if we’re successful; waiting to see if there’s a viable industry there. They’re questioning if there is enough demand and if we can make a go of it. For me, this is long term. I dream of creating and growing a new industry here. I want to build a co-op structure where we would have technical assistance and support with marketing. We want to work cooperatively.”

Star B’s March has similar goals and would like to expand his acreage to include several hop varietals. March also wants to gain the experience and knowledge to grow hops and brew beer on his property. The industry is so new that there are no regulations in place for growing and brewing at the same location. March is working directly with county officials to help build a solid agricultural plan. “Just like the wineries that grow grapes, process them, make their wine and sell their wine at the same location. That’s what I want.”

Hop Growers Anticipate Plenty of Product for Brewers This Year

By: Jim Offner

Brewers across North America anticipate plenty of hops, as growers continue a years-long trend of increased production.

Last year, hop production across the U.S. totaled around 104 million pounds, over 55,000 acres.

The Pacific Northwest is the runaway production leader for hops in the U.S., with Washington alone accounting for 53,000 acres.

“Currently, the Pacific Northwest crop looks very good,” said Ann George, executive director of the Yakima, Washington-based Hop Growers of America (HGA).

Irrigation water supplies are adequate this year, and mild temperatures have contributed to good growing conditions, George said.

Roy Johnson, national sales manager with John I. Haas Inc., which is based in Washington, D.C. but grows hops in Yakima, as well as other regions worldwide, agrees.

“I think we’re going to look at an all-time high, as far as yield,” he said. “Right now, the industry is full of hops, depending on variety.”

Johnson estimates hop acreage in the Pacific Northwest region that includes Idaho and Oregon, as well as Washington, will reach about 59,000 this year, which should produce over 110 million pounds. If such is those predictions hold, he adds, they would be record highs.

However, Johnson also cautions that some varieties likely “will be pretty tight.” He did not specify.

Overall, it looks like 2018 will be productive for hop growers, Johnson said. He also notes that some areas could see earlier-than-usual starts to their harvest activities.

“It looks like they’re coming on real strong in Oregon,” Johnson said. He adds that Washington’s Yakima Valley typically gets underway in September.

“They may be processing hops in Oregon really early in August this year; they look really good now,” Johnson said. “The weather has been really good.”

Indeed, there may be an overabundance of hops on the market this year – a description that also applied to 2017, indicates Brian Tennis, president of the Traverse City-based Michigan Hop Alliance (MHA).

“Same,” he said when asked about the upcoming fall hop market. “There are too many hops in the ground already.”

Supplies, acreage trending up

Brewers sometimes have a different take on supply forecasts, said Jaki Brophy, spokeswoman for the Hop Growers of America.Brewers tend to say there is a shortage, often when they have not contracted for that variety,” she said. “Since that is the only formalized way for brewers to communicate their needs – in addition to guaranteeing a certain amount of supply – there may not always be enough acreage of a particular variety if too many people have counted on being supplied through the spot market.”

Thanks to continued, increased demand for hop-forward beers, hop acreage continues to climb worldwide – U.S. acreage has nearly doubled in five years, according to Brophy’s organization. However, that’s a two-sided issue, HGA points out.

If anticipated acreage is actualized, then in five years’ time, hop acreage in the U.S. will have practically doubled, the organization said. “Thanks to increased contracts with breweries and the rapid efficiency of U.S. growers who can respond so quickly to customer demand, hop acreage has risen 95.8 percent in five years,” HGA reports.

The U.S. Department of Agriculture said hop acreage continues to trend upward. According to USDA, total U.S. acreage for hops was 55,339 in 2018, compared to 53,282 a year earlier. Washington continues to dominate production, with 39,273 acres in 2018 – up from 38,438 in 2017. Idaho came in with 8,217 acres in 2018, compared to 6,993 in 2017 – and vaulted past Oregon as the No. 2-producer. Oregon had 7,851 acres this year, just over 7,849 in 2017.

Organic hop acreage in the U.S. is still a tiny part of the business, but it, too, is showing some growth, USDA said, reporting a jump from 315 in 2017 to 431 in 2018.

Since 2012, the U.S. has added 28,465 acres, including the estimated acreage as reported by International Hop Growers’ Convention, and has more than 50 varieties in the ground.

“To put it into perspective, the U.S. acres added in the last five years is larger than the total acreage of any other hop-growing country in the world, outside of our own and Germany, the two largest hop-producing countries,” HGA’s George said. “Further, our estimated 2017 acreage increase (5,185 acres – a 9.8 percent growth) by itself is larger than other individual countries’ total acreage outside of the U.S., Germany, and the Czech Republic.”

A wave of new microbreweries that have sprouted in recent years is a significant driver of that acreage expansion, George notes. “Since about 2012 the acreage increase has been driven largely by the craft sector’s requests for additional aroma hop acreage,” she said.

MHA’s Tennis agrees. “Craft brewers are on the cutting edge and are looking for the next big or interesting hop, so we are constantly looking for new and exciting varieties to plant, or older varieties that brewers may have forgotten about,” he said.

There should be no hop shortfall for the immediate future, Haas Inc.’s Johnson said. “What you’ll see in 2019, you’ll see a decline in acreage. Contracts will come off the books. They’ve got higher inventories and will be using some older hops.”

That’s OK, too, Johnson said. “To be perfectly honest, there’s nothing wrong with a 2- to 5-year-old hop; those are fine. They can use them with confidence. The big thing is the supply has not met demand up to this last year.”

Where is the market predicted to go?

Hops are one of only a few ingredients necessary to make beer. They ignite flavor and aroma and corral runaway sweetness.

Experts point to Cascade as the top variety in 2017, followed by Centennial, although there are more than 60 other varieties available to brewers.

“We use Cascade and Citra; Columbus is the finishing hop, but it’s fairly expensive,” said Tom Williams, owner of St. Pete Brewing Co. in St. Petersburg, Florida. “Grains and hops are an expensive part, but it makes a huge difference on the beer.”

Choosing the right varieties for one’s beer is a crucial step in the process, Williams said. “I think it’s tremendous, the aroma, the bitterness. It’s pretty amazing how the varietals can change. If you need a beer with different varieties, you’d taste a drastic difference in terms of the aroma and the taste. That’s why people are so finicky about which ones they use and when they put them into that beer process.”

The demand for new hop varieties is growing, and brewers likely are moving on from some established varietals, experts say. However, change doesn’t necessarily lead to instability in the hop market, they say.

“We should see some varieties being replaced,” MHA’s Tennis said. “Cascade, Centennial, and Crystal among others are overplanted.”

The market seems poised to accommodate any such changes, HGA’s George said.

“With beer sector growth flattening, most varieties of hops are now adequately supplied,” she said. “While a small increase in Pacific Northwest hop acreage is anticipated this year due to contracting arrangements that were previously in place, acreage is expected to stabilize, with continued ‘rebalancing’ of varieties to reflect changes in contracting.”

Changing varietal preferences could ultimately impact costs, though, said St. Pete Brewing Co.’s Williams.

“For hops, I think it’s going to get more expensive, just because of supply-demand, especially when people try to get into some of these hop profiles,” he said. Even Citra was tough to get a couple of years ago. All it takes is a medium-sized brewery, and they obliterate a crop.”

The varietal choices are part of the fun of the brewing business, but sometimes it’s tough to get ahold of certain hops, Williams said. “I love the different hops,” he said.

For hops that are supply-challenged, costs can escalate in a hurry. “In a 10-barrel batch, we have to pay a premium, but we can go out and get it,” Williams said. “There’s a couple we can’t get, but we can always get them from other breweries.”

The inventory of hops held by growers, dealers, and brewers on March 1, 2018, totaled 169 million pounds, 21 percent more than March 1, 2017, stocks inventory of 140 million pounds, according to USDA. Stocks held at dealer and grower locations on March 1, 2018, totaled 132 million pounds. Hops held by brewers totaled 37 million pounds.

Stocks held by brewers on March 1, 2018, totaled 37 million pounds – which was virtually even with 2015. Inventories held by growers/dealers totaled 142 million March 1, 2018, compared to 46 million in 2015.

While the volume of hop stocks has been increasing every year – the USDA’s 2017 report showed a 9 percent increase – following a 7.5% increase the year prior – the overall production has grown as acreage increases, so the percentage relative to the total U.S. crop has gone down, HGA reports.

In addition to volumes of stocks increasing, there are also developing trends with the stock reports showing a rise in the amount of stocks being held with merchants, and less with brewers. As a perennial plant in which one harvest needs to last a full year of brewing demands, it is typical to have stocks larger than 100% of any given year’s production at this time of year.

“It is important to note that the amount of hop stocks which dealers are holding has increased,” George said. “Merchants are taking on increased risk as the proportion of stocks held in their possession has risen over 10% in the past three years. The stock report is another key signal to the market, and we will continue to monitor these data trends.”

Craft brewers seem to be instigating a wave of new varieties and plantings in general. “While growth in local small brewers has provided opportunities for new hop production across the U.S., this acreage remains small and focused on local brewery use,” George said.

The increase in acreage has generated concern in some corners of the industry about a possible imbalance between “alpha” and “aroma” hop production. Such worry appears to needless, George said.

“While the continued and rapid growth of acreage has some concerned about an imbalance in variety acreage as tastes change and growth in the craft segment begins to slow, growers will be looking to rebalance that over the coming years,” she said. “To note, alpha acreage is projected to be increasing as well in the U.S. after many years of predominate aroma increases.”

More than 60 varieties of hops

HGA’s George points out that there are more than 60 hop varieties grown in the U.S. – “each providing different brewing characteristics.” Each is noted for meandering in a certain aromatic direction. Some are “fruity”; others, “earthy”; others lean “spicy.” The list goes on.

“Every brewery is going to be different, based on their beers,” St. Pete Brewing Co.’s Williams said, discussing variety preference. “Centennial is a big one. Citra is one we like to play around with. There are so many strands of hops, you just never know.”

“What” is one issue where varieties are concerned, but there’s also a question of “when.”

“The timing of when [brewers add the hops to the boil] can make the beer taste completely different,” he said. “We may put a hop in at the last five minutes of the boil and turn it off. They lose their taste and smell quickly on the boil.”

“Each brewery has its own ways. Recipes are specific for this amount of pounds at what time. It’s very specific,” said Williams

West Coast Indian Pale Ales (IPAs) are “higher-hopped” than their New England IPA brethren.

“New England IPA styles use very little bittering hops; they charge it up big-time in the whirlpool,” Haas Inc.’s Johnson said. “They’re using a lot of Citra and Mosaic hops—those are very tight.”

Shelf life comes into play with some brews more than others, Johnson notes. “With New England IPAs, you’re lucky to get 60 days out of them; they’re just not set up to hold as long as other styles of beers,” he said. That’s another reason like the Tree Houses and Alchemists are doing well, because they sell right out of their taprooms. It’s kind of an interesting market being developed. The consumers are equating that cloudy beer with flavor.”

Hops are natural preservatives, Johnson notes. “You’re hopping; you’re put aroma hops into the whirlpool. Most craft beers are stored cold, anyway.”

Securing supplies ahead of time

Brewers typically contract at least a year ahead of time to ensure their hop supplies meet their anticipated demand, MHA’s Tennis said. However, he notes times have changed.

“Contracts aren’t critical as they were in years past because there is so much supply out there, but there some varieties that are still scarce,” Tennis said. He also notes brewers should try to lock down contracts for new Neomexicanus varieties, as well as most varieties coming out of Australia and New Zealand.

Brewers looking for tight-volume hops should secure their supply “as soon as possible,” he said.

Craft brewers should look one to three years ahead concerning contracting hop supplies, Tennis said, noting that more massive operations likely should contract for five years.

The reason is security, but contracts also involve a kind of gamble. “Less risk of price hikes, but you can also get locked into some bad contracts, so be careful,” he said.

In general, Tennis said brewers should sign contracts for each variety they need. “Depends on the variety,” he said. “Some are easy, others you have to be on a waiting list.”

Varieties can dictate how far in advance a brewer needs to contract for supplies. “It’s variety-specific,” Tennis said. “Sometimes, years before harvest, while other more common varieties, it’s not uncommon to sign a few months or weeks before harvest.”

There are no “hard deadlines” for signing contracts to secure hops, George notes. “However, if a customer wants to ensure delivery, getting contracts signed in time for new acreage to be planted – or varieties to be changed – would be necessary,” she said. “In that case, contracting no later than January or February would be recommended. Customers need to keep in mind that first year plantings (babies) are likely to yield only 50 to 75% of a mature crop.”

George also recommends five years for contracts. “Five years is preferred, as it will provide the grower additional years to amortize the cost of establishing a new planting.”

Contracts are good for growers as well as brewers, but contract length is probably variable, St. Pete Brewing Co.’s Williams said. The bottom line is don’t run out of hops. “I’m sure the growers would like to have as much runway in forecasting, but I don’t even know when that would be,” he said. “I don’t think there’s a set [deadline for signing a contract]. If we were bringing a bigger beer to market, I’m sure John (St Pete’s brewmaster) would say, ‘I want to make sure we can get that hop for the year.'”

Williams notes the “bigger-volume brewers” likely will sign longer contracts as “a hedge” against possible supply shortfalls or higher prices.

Haas Inc.’s Johnson said it’s probably best to have contacts finalized “by March or April – before they’re starting to move rootstock and changing portfolios, so they grow the appropriate mixture of hops.”

Some brewers contract directly with growers, Johnson said. “By the end of this year by before the first quarter, before farmer decides what to grow – late February and March. They start twining them in April and May.”

Some brewers also will procure hops on the spot market, to “keep it loosey-goosey.” That can be advantageous, Johnson said.

“See where they are, making sure they’re pulling what they have contracted,” he said. “Another brewer may have what you need available. It’s never stagnant, never solid. It’s always moving around, which is interesting. It can be challenging.”

HGA recommends planning whenever possible, Brophy said. “We try to focus on communicating that if something is integral to your brewery, you should lock it in with a contract. If you are willing to make possible substitutions and aren’t willing to honor your agreement if your growth projection turns out to be inaccurate, then spots may be for you.”

St. Pete’s procurement practices have worked well, Williams said. “We haven’t had any issue that wasn’t our problem for planning and forecasting. That’s the challenge for us; we don’t want to commit to overbuying. Some guys are sitting on 500 pounds of hops at the end of their contract, and they try to unload it.”

Extension Helps N.Y. Brewers, Growers Raise a Pint

By: R.J. Anderson, Courtesy of the Cornell Chronicle

The essential ingredients of a pint of locally produced New York state craft beer are quite simple: hops, barley, yeast and water. Much more complex, however, is how the supply chain of those elements comes together to create beverages that adhere to New York’s escalating farm brewery regulations.

It’s a recipe further challenged by the relative infancy of the farm brewery industry and its explosive growth. Since the introduction of the state’s farm brewery license in 2013, which offered tax benefits and relaxed regulations for breweries using New York-grown ingredients, there are now more than 160 farm breweries online. And while the path to startup has been made easier, there exists significant challenges for farm brewers looking to procure New York-produced ingredients. In addition to lending distinctly local flavors to their beverages, Empire State hops and barley satisfy the state’s mandate that farm-brewed beers contain at least 20 percent New York-grown ingredients – a requirement that jumps to 60 percent in 2019 and 90 percent in 2024.

Helping the industry link and grow a more inclusive supply chain are Cornell Cooperative Extension (CCE) specialists. Examples of CCE efforts were recently on display at a pair of Farm-to-Pint tours that brought together more than 70 New York hop and barley producers, maltsters, brewers and state officials with Cornell and industry researchers.

By design and per New York state legislation, our craft beer supply chain is a relatively short one,” said event organizer Cheryl Thayer, an agricultural economic development specialist with CCE’s Harvest New York regional agriculture team. “Because of those limitations, it’s imperative that the supply chain stakeholders not only know one another, but understand the intricacies involved in each node of the supply chain.

“We thought a perfect mechanism for this was to bring those stakeholders together and follow the life cycle of a pint of New York state beer,” she added.

Funded by the New York Farm Viability Institute, the bus tours – one held north of Albany in Washington County June 29, the other near Rochester Aug. 4 – each began with a stop at a local hop yard and malting barley field. In addition to hands-on, real-world conversations with the growers, those stops included updates from Cornell College of Agriculture and Life Sciences scientists Gary Bergstrom and David Benscher, who joined CCE crops specialist Mike Stanyard and CCE hops specialist Steve Miller for research-based discussions about ongoing trials and trends.

Each tour also included a visit to a craft malt house. “Malt house owners are a vital middle link in the craft beer production chain,” said Thayer. “But with the recent reintroduction of malting-grade barley to New York agriculture, they are also the newest additions to the supply chain. Because of that, attendees were very interested in seeing a working malt house in action and spent quite a bit of time picking the maltsters’ brains about their trade and preferences when working with growers and brewers.

Wrapping up each event was a tasting at a farm brewery where the groups networked while sampling beers featuring hops and barley from earlier tour stops.

“The attendees were very appreciative of having a forum where they could absorb new information while making those important new connections,” Thayer said. “The exchange of information and candid discussion about challenges and opportunities currently present in the supply chain was probably the most valuable takeaway for them.

“Along with a lot of people across the state, we at CCE think the craft beer industry has the potential to cultivate emerging market opportunities for growers while simultaneously supporting good agricultural economic development initiatives,” Thayer continued.

“That’s why we’re doing all we can to support its continued growth and success. But for those things to happen, the industry needs to develop a strong sense of community and understand the role of each link in the supply chain – and we’ll do everything we can to help make that happen.”

R.J. Anderson is a writer/communications specialist

with Cornell Cooperative Extension.

Petition for a Writ Far-fetched? Nope!

By: Dan Minutillo, APC

If a state regulatory agency with jurisdiction over the craft brew industry makes a decision that appears to be arbitrary and capricious, having a direct effect on your business, then, you have the right to petition a court for relief using a Writ of Administrative Mandamus. An unnecessarily fancy phrase meaning that a court of law reviews the administrative decision and decides if, under applicable law, the decision is not rational. Most times a writ is requested by an association or group of companies that are affected by the agency decision so that a positive result will affect many companies in the association or group.

STATE ADMINISTRATIVE AGENCIES

State administrative agencies with jurisdiction over the craft brew industry create policies that can affect your business. I recently wrote in this magazine about a Tennessee agency which passed a regulation indicating that only people domiciled in Tennessee for a certain time could get a permit to sell alcoholic beverages in the State.

For the purpose of this article, let’s say that an administrative agency in California, like the California Department of Alcohol Beverage Control (ABC), passed a regulation indicating domicile restrictions to get a permit to sell craft beer om the State; that a company had to be in business in the State for ten (10) years and then that company could sell alcoholic beverages. This regulation is then challenged by you as arbitrary and capricious at the agency level, and the agency denies your challenge.  You argue that this domicile restriction is illogical, with no purpose other than to discriminate against out of state craft brew companies. You lose at the agency level, that is, the ABC reviews your challenge and denies it.

THE APPEAL; THE WRIT

That administrative decision (the denial of your challenge) by the ABC can be appealed to a court by “writ”, and you, the appellant, will win and ensure that this decision and underlying regulation is stricken if you can prove that the decision and underlying regulation is arbitrary, that is, without a rational basis.

So, there are a few criteria to get you into court to have the ABC decision (the denial of your challenge) reviewed and to win on your writ:

  1. That the decision/regulation was made by an “administrative agency” of a state (or of the Federal government), like the California ABC;
  2. Normally, that you have exhausted your administrative remedies. This means that if there is a method of appeal at the ABC, then you must first make that appeal and follow all other procedural rules regarding an appeal at the ABC before you bring a writ.
  3. That all of your ABC remedies have been exhausted and denied, and this denial must usually be in writing by the ABC (evidentiary issue).
  4. That you have standing to be heard by a court. Standing means that you are a “party in interest” which usually means that you, that is, your business has been affected by this ABC regulation/decision. You have standing if you will be or have been damaged by the regulation or decision. For example, if I teach math to high school students in a local school, I would not have standing to bring a writ in this circumstance because the ABC regulation/decision does not affect me. But, if you make or sell craft beverages, this regulation/decision does affect you, so, you have standing to bring the writ.
  5. That any applicable statute of limitation has not run. Most actions brought in a court of law must be brought to the court before a certain time period, that is the statute of limitations. Various statutes limit the time in which you can bring certain actions. Some statutes are as short as ninety (90) days from the time of the ABC denial of your challenge.
  6. That you can prove that the decision/regulation was made by the California ABC in an arbitrary and capricious manner, that is, there is no basis in fact or law to support the decision (the denial). It was whimsical and therefore an abuse of discretion by the ABC. The case law language is that a court on a writ will not disturb the ABC’s decision absent an arbitrary, capricious, or patently abusive exercise of discretion by the ABC.

THE STANDARD

Some courts call this a “rationality review”. Is the regulation/decision rational, that is, justified in fact and in law. No matter how you look at this, the key here is that the ABC did something that has damaged you and, after exhausting your administrative remedies, you are able to prove that the ABC’s decision is arbitrary and capricious—and you win.

THE REMEDY

I will discuss remedies, that is, what decision a court could make on a writ and how it could affect you, in a later article for this magazine.

Dan Minutillo has lectured to the World Trade Association, has taught law for UCLA, Santa Clara University Law School and their MBA program, and has lectured to the NPMA at Stanford University. Dan has lectured to various National and regional attorney associations about Government contract and international law matters. Dan has provided input to the US Government regarding the structure of regulations. He has been interviewed by reporters for the Washington Post and other newspapers.