Handling Hop Contracts in a Saturated Market
Hop production is at an all time high, with over 100 million pounds of hops being produced in 2018. Previously the market has seen issues in the hop industry. A dry season in 2015 had breweries over estimating and signing large hop contracts in order to secure their needs. With today’s saturation of the market, breweries are now wondering what to do with their hop contracts and how to properly plan for the future.
Contracting in an Over Saturated Hop Market
With hop yields up 14% in 2017 and have stayed steady according to Hop Growers of America, and craft sales slowing, it is easy for breweries to begin questioning their hop contracts. The market is ever-changing, with a shortage just a short time ago and now with a surplus, it is almost impossible to predict the future of the market. Outside forces come into play on how the hop crop turns out, including weather.
The question is, what commitment should a brewer be making in an over saturated market? It’s important for brewers to lock in on pricing when it comes to needed hops, knowing exactly what you plan on using for the year, not what you hope to be using by year’s end. Hop production is in a surplus, gone are the days of over ordering hops in order to secure that Cascade or Centennial hop. Instead brewers are needing to accurately predict what they will need, and not ordering every hop they need within their hop contract.
Negotiating the Right Contract
The amount of hops needed can vary for a number of reasons from brewery to brewery. With that variation it’s important to remember that hop contracts are necessary in order to efficiently coordinate supply and demand for both hop farmers and breweries. Yes, the production is currently at a surplus, yet the state of that market is bound to change. How do you stay ahead and negotiate the right contract? One way is to accurately predict what you will need with brewery management software.
Our software, OrchestratedBeer allows you to forecast future needs, and helps you better negotiate the appropriate hop contract for your brewery. Regardless if you’re already an OBeer customer or looking for a way to make your brewery more efficient, OBeer has the tools to ensure your brewery is best utilizing hop contracts.
Hop Contracts and Forecasting within Orchestrated
So how do you predict what hops you’ll need, and how do you forecast properly for the timing and delivery of your contracted hops? OrchestratedBEEReer
The urgency for hop contracts has changed, and gone are the days of over buying hops in fear of not being able to obtain the hops you need. Almost everything is available on the spot market, and with the surplus they tend to come at a lower price than previously seen. However, there’s still a large value in hop contracts, as they deliver the hops you need at a low price, with guaranteed delivery.
Blanket Purchase Agreement
With 90% of breweries under some form of hop contract, it’s important to account for that agreement. The Blanket Purchase Agreement in OBeer is a simplified procurement method that breweries can use to fill anticipated repetitive needs for supplies or services, or in this case, hops.
BPAs are essentially charge accounts, set up with trusted suppliers. BPAs in OBeer allow you to track:
- Hop types
- How many have been released
- Next scheduled delivery
- Recurring payments
Blanket Agreements Included in Planning Scenarios
With hop contracts now, you must be more strategic in the planning stage and know what you brewery needs. OBeer takes into consideration when hop releases are scheduled. It can in turn make recommendations if you might need to release more, depending on the demand of what’s currently in the system.
So you’re halfway through the year and wondering what hops are still scheduled to be delivered based on your contract. OBeer allows you to quickly see what is left in your hop contract, allowing easy access to a brewer or anyone that finds the information valuable.
With the market the way it is, hop contracts are changing, making it more important than ever to better predict and monitor them. Learn more about how OBeer can handle your blanket agreement and how contracts can make your brewery more efficient by downloading our brochure and contracting us.