While paging through Inc. Magazine, I stumbled upon a printed short piece in the September 2008 issue titled “The Great Beer Crisis of 2008”. As a beer drinker and home-brewer; I had to read the piece. Fortunately, it turned out the article was not just about beer, but was related to procurement and sourcing.
As many of you know, the beginning of this year marked a major shortage of hops (a major component of aromatic beers) due to weather related poor crop yields in foreign countries compounded with domestic farmers that have switched to more profitable crops.
Some news outlets briefly reported that major breweries would raise beer prices substantially and that small local and niche breweries may not be able to acquire product at all. On the home-brew market, we saw hop prices triple and the availability of unique and desirable hops disappear. However, the consumers only really saw a small increase in beer prices, and the shortage seemed to be short lived. How did it happen?
According to Inc, it was actually some of the largest brewing companies that helped to bail out many breweries. Boston Beer (the makers of Sam Adams) and its founder Jim Koch, as well as Ken Grossman of the Sierra Nevada brewing company jointly sold over 170,000 lbs of their company’s private reserves to help keep the industry floating.
What is so remarkable about that? Both organizations sold their hops at cost. That’s right, no markup. The demand was still greater than both companies could respond to, but some estimates indicate that their joint contribution helped bring 800 million pints of beer to the market this year.
When asked why he did it, Koch replied “I saw this as a way of reminding people that this isn’t just a business. We’re craftsmen, too, and we help each other”.
So, when prices are up, demand is high, and inventory is low; look to every imaginable source to help satisfy your supply chain needs, even if it means talking to your competitors.