It’s been an extremely dry summer in hop country this year, which isn’t the best news for hop growers, brewers and consumers. And with hop consumption quadrupling in the past decade, any shortage could slightly alter your brewing plans if you’re not among the 90% of breweries with pre-negotiated hop contracts.
Managing the hop purchasing process goes beyond just developing relationships with your growers and suppliers. These days, the contracts with your suppliers are just as important as the relationship you’ve developed.
A recent article by Jason Morgan of Craft Brewing Business stressed the importance of hop contracts:
“Creating a solid contract is key for any craft brewery. In fact, with no minimum quantity for a hop contract, Hopunion LLC goes as far as encouraging all breweries to contract their basic hop needs at least 12 years out.”
12 years sounds a bit overkill, but Melody Meyer of Hopunion LLC explains how hop growers rely on your hop contracts and forecasts to gauge their future expansion requirements:
“In addition to ensuring supply for future needs, contracts act as an essential communication tool between hop growers and craft brewers. Our growers base acreage expansions on projected hop needs, as indicated through future contracts. Expansion is extremely expensive for hop farmers and, therefore, essential to understand. For this reason, we encourage hop contracts to help facilitate better communication, from farm to kettle.” Source: Craft Brewing Business
Whether you’ve already set up contracts or you’re looking into it for your new brewery, managing it all should be easy – especially the payment schedules. While OBeer helps manage everything from accounting in the back office to production on the brewery floor, managing hop contracts is a crucial part of the production process and it’s included among core features.
How Hop Contracts in OBeer Work:
- Blanket purchase agreement or BPA, is a simplified procurement method breweries use to fill anticipated repetitive needs for supplies or services (like hops). BPAs are like “charge accounts” set up with trusted suppliers. BPAs in OBeer allow you to:
- Hop contracts allow consistent payment methods to vendors
- Scheduled fixed down payments
- Pay with release agreement
- Full upfront payment*
*if you’re purchasing all your hops upfront at the beginning of the year with a lump sum, the benefit of storing a hop contract in OBeer is the traceability and record keeping aspect.
- Report on what’s left in your hop contract – The Blanket Agreement Fulfillment Report (shown below) reports what’s left on the contract. It’s also easy to present to an auditor or brewer when they ask about what’s left in contracts.
- Blanket hop contracts included in planning scenarios: Material Requirements Planning (MRP) in OBeer will take into consideration your blanket agreement for hops contracts, when releases are scheduled and make recommendations if you might need to release more based on demand.
You could manage your contracts on paper, spreadsheets, or web apps, but you’d still be left manually entering data into multiple systems. Learn from Bill’s story and how he was able to reduce the frustrations and eliminate the problem with multiple disconnected systems.