Washington State Hop Growers Are Losing Their Edge

Washington State hop growers have long enjoyed an unfair advantage over hop growers around the world. More often than not, however, it has been more of a curse than a blessing. That advantage has been the ability to plant and produce a crop in the same year. It may sound like a great advantage. In fact, it has been a double-edged sword that has allowed them to quickly take advantage of, and destroy, hop markets. Those days, at least for the foreseeable future, seem to be gone. No, it’s not climate change or even the changing of the varietal mix. It’s simply because Washington State growers have to plan for the next crop or the crop after that rather than the crop that is immediately before them.

If you’re saying to yourself, “Oh God, not another crazy article about how everybody’s at capacity and how much it’s going to cost to fix that problem”, read on because It’s not about that. You are in for a treat. What does this all have to do with production you may ask. Of course, growers can still plant and harvest a crop in the same year. That hasn’t changed. True, it is still possible to plant and harvest a crop in one year in Washington State. The weather hasn’t changed THAT much. Without surplus infrastructure to harvest and process any new crop, the machine that was once able to quickly respond to events is forced to think more long term. Maybe that’s a good thing! Producing hops is about so much more than just growing them. Sure, that’s the sexy part and hop growers are rock stars again. That’s great. There’s a lot that happens after those pretty hop vines leave the field. With the Washington State industry at or near capacity, the ability to expand acreage (i.e., plant and harvest a crop in one year) disappears.

If you’re a brewer, you need hops all year round. You usually need more hops during the warmer months but you may have seasonal beers that need a lot of hops even during winter. Typically brewers have been used to balancing their needs on a monthly basis. All that is changing with the surge in demand for hops produced by craft beer. Agriculture is a seasonal business with natural cycles into which the orders must flow. In the past, hop merchants have been the buffer between shortage and surplus. Through speculation they were able to overcome the discrepancy between brewer and farmer cycles. As long-term prices to hop growers increase and the margins between merchant and brewer remain largely the same, the profit that can be made by the merchant does not warrant the same level of speculation. That is one reason why the hop industry is closer to equilibrium than ever before.

Let’s say it’s spring, you’re a brewer and you need some hops. When can you place an order for those hops and expect to get them? In the good old days, a merchant might have some extra hops lying around that weren’t sold. He probably bought some “overs” from a grower at a pretty low price just in case a brewer needed some extra hops. No problem … whenever you call, you’d get the hops you needed. If you’ve tried to do that lately, you know that’s not a good strategy. Unless your beer is named “RANDOM”, that will not work out so well anymore.

Here’s how it works today. You’re a brewer again and it’s still spring. If the merchant needs to find those hops and they know a grower with empty trellis (also not happening a lot these days) you can wait as late as the February before harvest in Washington State, but November of the previous year would be better. Already, you may have missed the boat. Merchants do still speculate to some degree, but it’s not pure speculation like in the old days. It’s a reserve they use to buffer against shortages. That may only be an extra 5-10%. As the year progresses and if it looks like it will be a good crop a merchant can free up some of that reserve to sell. That’s how hops become available after harvest when everybody is saying that the crop has been sold out forever. You may still find a merchant who can sell you hops or who is willing to borrow from their reserve to sell hops to you prior to harvest, but that’s risky for everybody.

Because the hop industry can’t keep up with demand, brewers, merchants and growers must now think out beyond the horizon. Most common today is that the grower will need to buy ground, build trellis and perhaps even invest in additional picking infrastructure. Those are the factors driving prices ever higher. Even a doubting Thomas cannot deny that fact. Those prices mean that the merchant is less likely to buy too much extra just to have a nice fat reserve because that reserve if not sold quickly eats away any potential profit. It is easier to tighten up the reserve and just claim Force Majeure if there is a crop failure. We know of at least one hop merchant that has that as their business plan. I believe we will see a lot more reserve tightening during the next couple years. That strategy passes risk on to the brewer. Without adequate planning in advance and plenty of communication, the hops that are needed will not be produced.

The incredible growth of demand for aroma hops has actually removed the amazing advantage that Washington State has over all other hop producing regions in the world. It has taken away the ability to produce hops in response to last minute orders. The hop industry hasn’t been so restrained since the 1930’s, before Washington State became a significant center for hop production. For the past century, merchants and big brewers have used Washington State’s ability to quickly respond as a buffer against shortage. Within one year any problem could be corrected. Furthermore, with the fat brewer inventories of the past, the impact of a shortage could be softened until that next crop could be produced. No more! Inventories are shrinking and the response time for production has drastically increased. That buffer is gone. We are all risk takers now.

Natural-Crystal-Ball-MGB004-

Between merchants and growers, the conversation is already about two crops in the future and beyond. Everything being produced sooner is spoken for. The problem with all of this is that the crystal ball is fuzzy far out into the future. If the industry was growing at a stable 2% every year, we wouldn’t be having this conversation. With craft brewery growth in the double digits every year, however, it’s a different game. You know that kind of growth can’t last forever. When do you apply the brakes on the supply side? That’s literally the million dollar question on the minds of growers and merchants these days in greasy spoons all over the Yakima Valley.

Brewers and merchants cannot often predict what they will need with any certainty, but they have to contract hops to secure what they believe will happen. The roulette wheel is spinning. Where it will land, nobody knows. It can land continued “craft beer growth” and everybody is happy. If it lands on “slowed growth” we all lurch forward as the bus suddenly downshifts. The trick is that we all now must plan ahead much further into the future today for the hops we think we will need tomorrow or we are guaranteed that they will not be there. Those who are willing to take the risk that the trend for growth in the craft industry will win if that growth continues as they will be the only ones with hops to sell. The playing field between Germany and the United States has been leveled. The thing that will make the difference going forward will be who has the appetite for risk. The United States is a country of entrepreneurs and independent thinkers that seem like a natural winner for this type of contest, but I wouldn’t count the German hop production machine out just yet. Game on!

Crafting a Gluten Free Beer Revolution

Brian Kulbacki didn’t know what to expect when he first crossed the Hudson River, and then the East River, from his Hoboken home that blizzard night in early February 2013. His destination was the Alewife, in Long Island City, a bar where craft beer nerds mingle amicably amongst those who simply like IPAs, and Kulbacki, an on and off home brewer since late 2009, had entered his IPA into Homebrew Alley VII, a prestigious competition judged by some of New York’s home brewing elite.

But Kulbacki’s IPA was different than the other entrants that night – it was gluten free. After his best friend was diagnosed with a gluten intolerance some years prior, Kulbacki decided to concentrate on crafting a brew that was both gluten-free and would be attractive to those with and without the allergy. “Creating this type of beer was my focus as soon as I began brewing,” he says. “It has always been my specialty.”

Kulbacki, who is now in his late 20s, was shocked when he learned his GoodbiPA had placed third out of the more than 700 beers entered in Homebrew Alley VII. He admits it was a complete stroke of luck that he won, but he was offered the chance to speak to the home brewer’s guild. “I was honest with them,” he says. “At that time, GoodbiPA was more of a kitchen sink than a fine-tuned beer. I basically went into my box of ingredients and threw stuff in a pot and hoped it came out alright, so I’ve been working backwards from that moment ever since.”

departed-soles-skyline-logo1

Two years later, and Kulbacki is ready to introduce that IPA, and several other gluten and non-gluten free offerings, to the general public, soft opening his brewery Departed Soles in Jersey City’s industrial and emerging Powerhouse Arts District. “I first looked at this property in 2012, but the landlord wasn’t comfortable leasing such a big space to me,” he says, but it took a collaboration with an also recently opened gelato shop to access the thousand or so square feet Kulbacki needed for the brewery. “We have a shared entrance way, but we are sort of hidden in the back of the gelato shop,” says Kulbacki. “It’s like we are a speakeasy.”

Long a niche within craft beer, gluten free is steadily becoming a popular option. Since 2012, sales of gluten free food have risen nearly 70 percent, and it is now a roughly $9 billion industry. Macro breweries have quickly followed suit – MillerCoors has begun to roll out Coors Peak Copper Lager the past few months and Anheuser-Busch InBev released Redbridge a few years ago (both beers have an ABV of over four percent).

As an undergrad at Boston College, Kulbacki wasn’t aware of a beer market for those suffering from celiac disease or who are averse to gluten. “At that time, I drank my fill of Busch Light,” he says, laughing. A post-21st birthday tour of the Sam Adams brewery, though, was Kulbacki’s ‘come to craft’ moment, and after a few years in Miami, he moved back to his native New Jersey and started home-brewing. “My first batch was a Belgian wheat style beer,” he says. “I also figured if I could make my own beer, it would save me a few dollars in the long run.”

But evenings at the bar sampling the then-gluten free options with his best friend, Kulbacki realized there was a crucially under-realized need in the market place. “He was my partner in crime,” says Kulbacki, “and I felt I could make something better than he was being forced to drink.” The two intended to open a brewpub to sell those gluten-free brews, which, unfortunately, never came true – as he commuted between his jobs as a teacher and a restaurant employee, Kulbacki’s friend was involved in a one-car accident in 2010 and died.

Grief supplanted Kulbacki’s brewing, and it took a few years for him to reorganize his life. As part of the process, he delved back into the wort. However, he had lot his touch – “I endured those first batches I made” – so he enrolled in the intensive American Brewers Guild brewing school program with the goal of opening a gluten-free brewery. He didn’t want to make a beer for the sake of being gluten-free which, at the majority of breweries with a gluten-free offering in their repertoire, is brewed by adding a chill aged enzyme during the cold crashing stage (the enzyme attaches itself to the gluten protein, so when the beer is filtered out, a good amount of the gluten is also removed).

“When I spoke to people with the allergy, I was told they would settle for those beers, but for the most part, that enzyme isn’t enough,” he says. “I didn’t want to take the lazy way out.”

Kulbacki likened the process to the wild west of craft, the period of the 1960s and 70s when brewing was more about imagination and less about following a set manual. “Some of the five gallon pilot batches I do come out like garbage,” he admits. “But that is because there is no book or guidance like there is for home brewers. There isn’t a kit at brew shops.”

Kulbacki, though, has an advantage – all of his ingredients are already gluten free. And he has a deft touch with them. While experimenting, he found an ingredient that balances out the tanginess of the sorghum in both his GoodbiPA and Black IPA – “If I told you the ingredient, I’d be out of business before I even open my tasting room” – and all of his gluten-free beers are mellow enough to entice non-afflicted drinkers.

“Everyone thinks, ‘Oh, gluten free? That must be disgusting. I don’t want to try it,’” he says. “But when I go into bars and restaurants, I don’t even tell them at first. After they go, ‘Oh this is good,’ that’s when I let them know it is also gluten free. You have to change the perception of it, which will require more breweries making it and making it right.”

Enlightening the public hasn’t been Kulbacki’s only issue – he turned to Kickstarter to fund some of the necessary equipment, and received more than $20,000 (his goal was only $17,500).  See Brian’s Kickstarter Video Here.

Though Departed Soles has been soft opening since late June, the brewery should open full time in the coming weeks, brewing those two gluten free IPAs on Departed Soles’ full scale system. The brewery has also engineered a ten-gallon pilot system for other gluten free offerings, as well as a red ale and a Belgian triple (which will contain gluten).

On that winter night in Long Island City, two judges told Kulbacki that they hoped he converted from home to commercial brewing: “They said the world needs a really good gluten free craft beer.” Like Sam Adams, Anchor Steam, or Dogfish Head, Departed Soles could be the brewery to jump-start another craft movement.