With an annual growth of 18.8 percent in the past five years, craft breweries have been spreading like wildfire recently. As we see new craft beer festivals and local breweries cropping every year, the need for suppliers, distributors, and retailers who can tote their alcoholic wares to the masses has increased by leaps and bounds.
While sipping on a sumptuous local selection, have you ever pondered just how that craft creation found its way to you? The craft brew supply chain requires suppliers and asset management, beer production, inventory control, transportation, and distribution. Craft breweries must also carefully balance their supply and demand to maximize their annual profit and lower costs while keeping their doors open and their customers happy. Here’s a look at the supply chain in the craft beer industry from the acquisition of grains to the pouring of growlers.
Raw Materials
Breweries need raw materials to craft their exquisite brews, and that requires contracts with various suppliers that gather wheat, malt, hops, yeast, and additional spices, fruits, sugars, and flavorings. This can be a much bigger task than it seems.
For example, one of the staple flavors of craft beer is hops; however, with the explosion of craft beer popularity this ingredient has become increasingly expensive and nearly impossible for smaller brewers to obtain. The high-demand of hops—and other extremely sought-after ingredients—has made brewer-supplier relationships more important than ever.
Brewers need to have their contracts hashed out sometimes years in advance, and they need to be sure they’re working with an honest supplier who’s going to do everything in their power to fulfill that contract.
Once the brewer has gathered together all the necessary raw materials, it’s time to get to work on beer production.
Production
Each craft brewer has their own recipe and method of brewing. They diligently research and develop their beers, and brew them on-site in small batches.
Each craft beer is created by an independently-owned, commercial brewery that uses traditional methods to bring out exceptional quality and unique flavors.
According to the Brewers Association, a craft brew must meet the following criteria:
- Annual production of equal to or less than six million barrels of beer
- At least 75 percent owned or controlled by an independent craft brewer
- Consisting, by volume, of at least 50 percent traditional or innovative ingredients
Shipping and Distribution
Distribution and speed to market can be one of the most complicated and important aspects of the craft brew supply chain. Brewers must be able to respond to customer demands and ensure that their product reaches customers quickly and efficiently to maintain freshness and keep supplies consistent.
Once a craft brew batch is ready, breweries package their product in cans, bottles, kegs, or casks, and load it up for shipping on often temperature-controlled transportation.
Once ready to ship, these craft brews make their way to bars and restaurants both locally and throughout the country. Craft brews must be expedient in their travel to preserve freshness between production and consumption.
Over time a beer’s flavor experiences change, and that change begins the moment the beer is packaged. For this reason, many craft beers reach their customers within 30 days of bottling.
In the unfortunate, yet common, event that some of the product is not sold, it is sent back to the brewer to be destroyed.
The reputation of any brewer relies on effective distribution that preserves a consistent and satisfying product at the end of the line. This means that good communication between brewer and distributor is key.
This communication includes discussions and agreements on temperature control, stock rotation, shelf life, and heat and light exposure during product display.
Craft beer has become a new favorite beverage across in America, and the growth observed in the industry has been nothing less than incredible. New local breweries are ever-more popular for those who enjoy a tasty, microbrewed beverage, and the numbers clearly illustrate that popularity.
Between 2008 and 2015, there has been an explosive growth of 1897 new craft breweries nationwide. These breweries are perfecting their craft and catering to the discerning customer’s demand for exceptional quality and unique flavor. Capturing 11 percent of the total beer market, the craft beer supply chain is poised to deliver us into an ever more vibrant era of exciting new craft brews.
Information sourced from Halo and Craft Brewing Business
Author Bio: Dr. Keith Peterson, Ph.D. serves as President and CEO at Halo Business Intelligence, Inc. Dr. Peterson is a senior executive with expertise building data analytics organizations with strong financial and strategic value. In particular, these approaches have focused on predictive and geospatial analytics. His experience includes P&L management of global and U.S. businesses. Dr. Peterson has a doctoral degree from Vanderbilt University in applied social psychology with a focus on quantitative methods and a Bachelor of Science degree from Washington State University.
