More new hop varieties! Why now?

It’s fun to see so much excitement and passion around new hop varieties! 47Hops sells open source proprietary varieties, like Pekko™ and Azacca® for example, but we haven’t created any ourselves yet. A new variety, in and of itself, is a great thing. With all the interest in and passion for hop aroma, we live in an amazing time to be involved in the hop industry. It seems though that we’re at a point where a selection of amazing varieties is not what the industry is lacking.

Recently, a few of the guys who own the proprietary varieties that are constantly in short supply recently announced they’re coming out with NEW varieties! That’s great news, isn’t it!?! … wait … WTF?!! … Hang on a minute. How do they have the acreage and resources to produce something that nobody knows if anybody wants when they can’t even manage to grow the stuff everybody is screaming for? Does anybody else here see a bit of irony in this situation?

 
 
One of the reasons prices are so high for some popular proprietary varieties is because the company that owns and controls them supposedly just can’t keep up with demand … at least that has been the story the past few years. They keep tight control over the varieties from production to sales in the interest of keeping “quality” high. I’m sure you’ve heard the claims. That’s a well-designed story with a good plausible deniability … because, after all, it’s agriculture we are talking about. Somehow, magically, it is now possible to introduce new varieties. Wait a minute … Doesn’t that take land, resources and all the other things those guys claimed they didn’t have a minute ago for the varieties brewers want? This is where things start to get a little fishy IMHO.
 
fs1
 
When a company is unable to supply customers with popular products already in their portfolio, they’ve got a problem. The solution to that problem, if a company values its customers, is not offering a wider variety of products. Business 101. Kudos to the German hop industry for figuring this out. They reportedly had developed Callista and Ariana a couple years ago but sat on them to give Mandarina Bavaria, Hull Melon and Hallertau Blanc time to develop in the market and on farms around Germany. Smart play!  
 
Pro Tip: A hop company claiming it is unable to satisfy demand for proprietary varieties only it controls should not continue to introduce new proprietary varieties to the market unless the resulting shortage is the ultimate goal.
Maybe, in a very primal way, they think that if they have a bigger list of varieties than their competitors, it makes them better … Or maybe they’re overcompensating for something else? When a variety is short, prices skyrocket. That’s just Hops 101. You know the varieties that have been consistently short for a while now. What if those varieties are being purposely shorted to drive up prices? What if a few people are manipulating the hop market and making millions at the expense of craft brewers? The principle of Occam’s razor says that the simplest and most obvious explanation for something also tends to be the most accurate.  Or, in simpler terms:  If it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck.  Quack!
 
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Is your hop bill too high? Avoid these 8 common mistakes & keep it down.

There are a lot more people buying hops these days than ever before. Not everybody has the benefit of years of experience. With this blog, we hope to help speed up the learning curve. There is a certain mystery about buying hops and how the hop market works. It’s complicated since there’s no exchange that determines prices like there is for corn and wheat. You can’t just look online to find what’s available and order some like you can with just about anything nowadays on Amazon. Below is a list of some of the mistakes some people make when buying hops. If you have to buy hops, hopefully you can learn from these mistakes made by others to your advantage.

 
 
 
1) Buying Too Many Hops
If you’re a brewer and you buy extra hops so you can guarantee that you have enough for your needs, most people think that’s great. After all, it’s better to have too many than too few when it comes time to make the beer, right?  Some brewers go a little too far. They anticipate 100% growth for a few years in a row and they want to contract all those hops now. It’s great to be enthusiastic and optimistic about your success, but a dose of realism is also a good idea. Buy what you know you’ll need. If you need an extra 10% or so to feel comfortable with your position, that’s great. It’s hard to predict the future. Sometimes our crystal ball doesn’t even show us anything. Imagine you lose a little weight … not that you’re looking fat today. If you lose a little weight, you’d be happy to go buy yourself a new pair of jeans. Likewise, if you’re having success with a beer and need more hops, you’ll be happier dealing with the challenges of finding those hops then. The grief associated with finding more hops will be less than trying to unload a bunch of hops you don’t really need.Chances are the merchant you’re working with will be happy to help you grow too. There are always hops out there if you really need them. If you buy extra hops, you should consider extra hops as an insurance policy and part of the cost of the beer you produce. Large volumes of hops are not something a brewer can easily trade on a secondary market. It’s tempting to think that you can sell excess hops and recoup your investment, but it doesn’t happen often. Some brewers take a hit on those hops when they try to sell them again and you should assume you will too, but if you’ve guaranteed the production you wanted, maybe that’s an acceptable price to pay.
 
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2) Ignoring Excess Hop Inventory
You can’t afford to bury your head in the sand when it comes to your inventory. You don’t want to be in the position where you have to ask to renegotiate contracts after the crop year has passed and the next crop year is approaching. It’s best to be proactive and honest with your expectations and needs as soon as you know them. Unless you’re talking about a very high-demand variety, expect to take a hit when getting out of any contract … if you’re able to get out at all.  if it’s May of 2016 (for example) and you are only now starting a dialogue with the merchant with whom you have a contract for 2015 hops you don’t need, you don’t have a strong position from which to bargain and rely completely on the good graces of the merchant holding that contract. 

 
3) Relying on Hard-To-Find Proprietary Varieties
Did you really just make that awesome flagship beer with a variety that’s really hard to find and owned by one or two guys you’ve probably never met?  When creating beer recipes take a moment to consider the availability of the hops. Don’t link your brand’s growth and possibly the success of your brewery to somebody else’s decision-making process. Consider that you might not be able to get those proprietary varieties you need on a regular basis. To counter that, why not create a recipe that uses multiple hop varieties. If one needs to be replaced or substituted, the change will not be noticed as easily. Using hard-to-find hops can be OK if you can get them, but you should always be ready to go with substitutes you can more easily find on the market. A lot of life is about Plan B.
 
 
4) Buying Spot Hops in a Contract World
Back in 2004-2005, relying on the spot market was a good strategy. Back then, there was a surplus of hops. Hops were everywhere and you could hardly give some varieties away. Brewers who were around back then remember Cascades going for $2.00 per pound. A lot of brewers still don’t contract forward for their hops thinking that this whole trend of higher hop prices is temporary. Technically, that’s true … As John Meynard Keynes said, “In the long run, we’re all dead.”  If you wait long enough, prices may someday be $2.00 per pound again, but that’s not the case in the foreseeable future. With so much growth in the craft market and demand for hops higher than ever, buying hops on the spot market is risky at best … unless you really don’t care about the varieties you get. If you only buy spot hops and need a certain variety, you can get burned and not get the hops you need unless you’re ready to pay $20 or more per pound. Contracting, even for a portion of what you think you need, at the right time of the year will go a long way toward lowering your hop bill.
 
 
keynes
 
In the Long Run, We’re All Dead
– John Meynard Keynes
 
 
5) Buying at the Wrong Time
So, when is the right time to buy? First rule of thumb is never buy hops as a knee-jerk reaction to an increasing market price. Brewers often pay too much by buying at the wrong time of year. Sure, you can call up your friendly neighborhood hop merchant any time and try to buy hops, but then you take what the market has to offer. There are times when prices are likely to be much higher and other times when the market is naturally lower. On the farm side of things, the agricultural cycle determines the times during the year that are best, and worst, times to buy. Directly after harvest, if there is a poor or average crop, you’re likely to pay higher prices, particularly for high-demand varieties … if you can get them at all. Popular varieties are sold quickly and are often to favorite accounts of merchants or those who are on waiting lists. After April or May for popular varieties, you’re also likely to pay higher prices. In the late spring, the hops are already planted, roots are dug long ago and idle ground is hard to come by. It’s a bit too soon for growers to feel confident about how the year will turn out so they don’t feel comfortable yet selling into their reserve unless you’re really good friends. All that affects the price to the brewer.
 
 
6) Not Buying Enough Hops
Some brewers have contracted for the hops they need to keep their costs down, but then realize that they’ve underestimated demand, or have growth they couldn’t anticipate. What do you do? You could go into the market ready to pay any prices for aroma hops, but really, who wants to do that? You could also change up the way you’re using your aroma hops to make them last longer. If you want to make your aroma hop supply last longer, you could substitute and use alpha hops for your bittering during the boil and finish off with aroma hops or even dry hop to maximize the benefits of the different hop flavors. Something like a German Magnum or Herkules will have much less harshness than an American CTZ should some of the flavor creep into your beer. Granted, this is a basic idea, but it seems to have gone largely unnoticed by smaller brewers.
 
 
7) Paying too Much for Shipping
Most hops you buy do not include shipping in their price. You would not believe the number of brewers who call and need urgent shipments of hops. Sometimes, they have the hops in inventory, but the hops are at our warehouse, not at the brewery and they pay to overnight a 44-pound box of hops across the country. More than a few times, I have seen cases where the shipping is as expensive as the hops being shipped.  A little planning can prevent a lot of shipping expenses.  It’s cheaper to send half a pallet of hops by freight than it is to send one box by express mail.  You could literally buy a chest freezer at Home Depot with the money you save on shipping and store the extra hops you shipped there. 


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8) Putting All Your Hops in One Basket
As the saying goes, “You should never put all your eggs in one basket”. There are plenty of reasons for old sayings. You should never buy all your hops from one merchant! I know.  47Hops is a hop merchant and we’re saying this. Is it a cold day in hell? Are cats and dogs now living together? No … It’s just good advice. Different merchants have different philosophies and strategies when it comes to supplying their customers. Some will sell as much, or even more, hops than they plan to receive that year. They oversell to people who want to overbuy and play the over purchasing of some brewers against the overselling and hope to break even. Other merchants take the safer path of leaving a reserve. Some will tell you in the spring that the previous crop was short and give you two days notice that your contracts will be cut. Others will let you know as soon as they find out during harvest if harvest will be short so that you have time to plan ahead in case you won’t get your full delivery for some reason. Some merchants have certain proprietary varieties available. Others have different proprietary varieties available. You get the idea. The reason to play with multiple merchants is to try to take advantage of all of their strengths and hopefully avoid their weaknesses.
 
 

 

 

 

This list probably does not include all the mistakes that can be avoided when purchasing hops.  It’s a good start though and hopefully it was helpful.  If you’ve survived making some mistakes of your own that you wouldn’t mind sharing, we’d love to see them below in the 

2016 State of the Hop Industry

Despite acreage increases worldwide don’t expect a surplus of hops this year, but that doesn’t mean there will be shortage either. On the surface, that sounds like great news. A closer look reveals massive imbalances and fragility. Barring a crop failure, there should be enough hops to go around, but variety specific shortages, similar to those we saw in 2015, will require that brewers be creative and consider substitutions. There are several reasons this year’s variety specific shortages will be more severe than normal.
 
  1. Stability of Randomness,
  2. The hop cartel, and
  3. Something we’ll call the X factor
We won’t discuss alternative financing, how it affects planting decisions and the varieties available to breweries, but there is a power play happening behind the scenes that is changing the varieties available. We’ll leave that for another time.
 
Stability of Randomness.
With farming, on the other hand, something unpredictable happens every year. In some years, it seems the crop can be threatened in ways not before thought possible. Randomness is the only constant. This year’s long-term weather forecast is for storms in the hop-growing regions of Central Europe this summer. Storms have already lowered yields in Australia and New Zealand in 2016. South America is experiencing a drought. At the time of this writing, hop growers in the Hallertau are concerned that the drought of 2015 is continuing into 2016, as there has been less than average rainfall. Next week, they could complain of flooding. That is the nature of agriculture, managed chaos.
 
Growers are accustomed to dealing with uncertainty. Brewers are accustomed to ordering the ingredients they need and brewing with them when they arrive. A great brewer friend of ours who has won many awards and earned plenty of well-deserved recognition within the industry recently told us, “when you can’t get the hops you want, a good brewer will brew with the hops he can get. If he’s really good, nobody will notice the difference.”
 
High demand for specific varieties at profitable prices has caused growers to stretch harvest beyond its natural limits and beyond their best judgment. Growers will admit that privately, but not often in the company of brewers touring their facilities. The world hop industry is at capacity until prices increase. Being at capacity is the equivalent of walking a tightrope with no safety net. Unfortunately, the randomness of nature doesn’t fit into the timelines and rigid schedules being forced upon it. Storms, drought and mildew, are just some threats to hops every year. Normally, there is a buffer capacity to allow for the randomness of nature. That buffer has disappeared a little bit with each passing year of growth of the craft beer market. Vulnerability to random events is higher now than ever before and the ability to react to avoid its consequences is at its lowest point. Growers say, “you don’t know what you’ve got until it’s in the bale”. That is a saying that will be very true in 2016. Variety shortages don’t mean producing less beer. They just require a different path to reach the goal.
 
The Hop Cartel.
Many believe today’s variety shortages are due to the effects of supply and demand or Mother Nature. They both affect the market. A deeper look reveals a much more captivating reason. A cartel operating behind the scenes, controls several proprietary varieties from end to end. If the thought of a cartel existing in the hop world sounds like fantasy to you, don’t overlook the fact that at today’s market prices the value of the market is well over $1 billion. Several families are vying to control that market.
 
The cartel believes they can “manage” the hop market. A market as open and complex as the hop market cannot be so easily managed. As brewers have long speculated in online forums, variety shortages may in fact be contrived to drive prices higher. They could also represent the cartel’s inability to properly read the market … but these are clever people. The result is clear. Squeezing the hop market in one area has ripple effects that are felt worldwide. They manifest themselves in the shortages that persist in nearly every hop variety today.
 
Let’s take a closer look at how the cartel operates. A few individuals own the cartel’s varieties. Varieties are available only to handpicked individuals. They retain ownership of the plants even when they are produced on other growers’ farms. They tell farmers when to harvest. They dictate how much will be produced and to which companies it will be sold. They set the prices paid to growers and the sales price to brewers. The cartel’s members convene privately to determine these things. By imposing draconian controls over every step of the process, they restrict access to their product under the façade of insuring higher quality. Their quality, however, is not higher or lower than other varieties on the market as most growers pride themselves on producing a very high quality product. Their strategy, part of which reportedly includes “keeping supply at about 90% of demand” has created frustration for brewers and great wealth for themselves. Tens of millions of dollars are paid by growers each year on royalties alone.
 
“Money doesn’t change men, it merely unmasks them.”
Henry Ford
 
You won’t see the cartel with a booth at the CBC or at Brau. They prefer to operate behind the scenes and will likely continue to do so for the foreseeable future. If you’re thinking this sounds like fantasy and could not possibly be true, ask yourself who exactly is responsible for policing the industry. The answer is the hop industry is small relative to other industries so there really is nobody looking. Without an insider’s perspective, how would anybody know which stones to turn over and which questions to ask? Not to fear though … Karma has a way of prevailing and the market is fixing the situation. Frustration with variety shortages year after year is quickly driving business toward more widely available open source substitute varieties.  We expect that trend to continue this year.
 
5 Trends We See Coming in 2016:
There are other trends we see emerging as well, but these five, we believe, will have the most significant effects on the average brewer.
 
  1. Variety specific shortages
  2. Mainstream acceptance of newer varieties
  3. Resurgence of legacy varieties
  4. Strengthening of hop prices
  5. Developing alpha crisis
 
The X Factor.
Demand for craft beer is part of a much larger trend we are witnessing in the 21st century that is transforming the way people spend their money. Perceived value, the quality of products and the means by which they are produced is affecting buying habits more than just price alone. For decades Americans in particular embraced globalism in a quest for lower prices. If low prices meant low quality, that was acceptable. That now seems to be changing to the dismay of the multinational companies that have made billions producing for that market. The mantra “Corporate Beer Sucks” espoused by Stone Brewing is a great metaphor that sums up how that trend manifests itself in the beer industry. It can’t be taken literally, as Stone, of course, is a corporation, and they make great beer.
 
The millennial generation in and of itself is not the cause of the disruption we see in the market today despite the flood of articles on the Interwebs to the contrary. New relationships and a dissemination of power are causing the disruption. Today a guy sitting in his pajamas in Bliss, Idaho with 15 followers on Twitter can call out a global company like Heineken or Apple if he thinks they are using unethical practices in their business. His message can be heard around the world overnight and can bring that company to their knees. Successful brands recognize this. They work hard to interact with their customers and carefully curate their image on social media, but you can’t just put lipstick on a pig and take it home to meet your parents.
 
People seem to have become aware about the voting power of their money. More and more, they want to spend their money on brands that behave ethically and deliver a quality product. More people like the idea of keeping their money local or support a brand that does. It’s a trend that is just beginning but it’s happening with the food we eat, the beer we drink and the products we buy and people are sharing their experiences. The Internet and smart phones have given consumers a voice, and a broadcasting network all in their pockets. That is causing the change we see today. The millennial generation is leading the charge because they have a more intimate relationship with technology.
 
As they say, “it’s an ill bird that fouls its own nest”. The openness brought about by more interconnectedness and the relative ease of travel has expanded the size of our nests from the neighborhood in which we live. The world is our neighborhood now. With that is developing a moral consciousness and the understanding that the way one person spends their money can make a difference.
 
The millennial generation is emerging as a generation that has decided to forego working countless hours to save money to buy things that traditionally have represented stability. Those seemingly stable things were shown by the crisis of 07-08 to be tools through which banks manipulated markets to generate profits for themselves. The system was rigged against the individual … hence the phrase “Corporate Beer Sucks”. The result is a generation of people who are more interested in spending money on affordable luxuries, like craft beer and Starbucks, where they know they are getting what they pay for. That thing that created the change in priorities away from low price and toward high quality is what we’re calling the X Factor.
 
We believe the X Factor stems from frustration with corrupt government and financial systems. It is fed by frustration from large corporations making billions each quarter while the people who produce their products work in inhumane conditions struggling to survive in third world countries around the globe. Will Donald Trump or Hillary Clinton fix that in four, or even eight, years? Not likely. That leads millennials to spend time and money on things that have inherent value and deliver a benefit immediately. Inadvertently, in doing so they’ve discovered the voting power of their dollars. So long as people continue to perceive value in high quality, locally produced goods, we will see the trend toward craft beer continue. We believe that is a shift in the thinking of an entire generation, which is why we believe craft beer, and the many other products like it in the market today, are here to stay. Drinking craft beer is not just about the beer in the bottle, it’s a way to be the change you wish to see in the world.
 
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Unfortunately, it is not the American way to be content with a bird in your hand when you think you could have two. Ironically, large craft brewers have grown so large they resemble the corporations against which people are rebelling in the first place. We believe growth of the larger breweries will continue albeit at a slower pace. Based on what we see in the market, the next big trend will be at the smaller end of the scale. The neighborhood pub and local Nano brewery will grow in popularity as people continue to crave local community and see the effect of the dollars they spend. Kickstarter and Indiegogo demonstrate that people like being involved in the creation of projects even if they do not have an ownership. That is an exciting trend! In this new world, it will not be easy for large companies interested in minimizing transactional costs to exploit consumers. There will be an evolution in the way that hops are produced and sold, one that is emerging now. The times are changing and we are excited for the changes ahead.
 

 

 

 

 

 

 

Two New Open Source Hop Varieties, Callista & Ariana

Three weeks ago, the people who created Mandarina Bavaria, Hüll Melon and Hallertau Blanc announced that they have done it again with their release of Callista and Ariana.  These two new varieties both have amazing characteristics, but could not be more different from one another. Something for everybody!

 
 
Callista
With low total alpha acids (2-5%) and a low cohumulone (15-21), Callista will appeal to brewers who prefer a classic noble hop variety characteristics with traditionally smooth hoppy notes, but who have been craving a fruity profile to take advantage of current trends. Callista has apricot, blackberry and raspberry notes when in its raw hop form. In brewing trials, some of the flavors it imparts are passion fruit, peach, grapefruit and gooseberry depending upon usage and the type of beer brewed. Only several commercial-scale fields exist at the moment. For growers, Callista appears to be a desirable variety to grow. With large cones and powdery mildew resistance, Callista will be relatively easy to pick.
 
callista-spider-2 callista-spider-graph-1
 
Ariana
At the other end of the scale, with total alpha acids between 10-13% and a much higher cohumulone of 42, Ariana will appeal to brewers looking for very different characteristics from a hop, but one that results in a similar flavor profile.  In Ariana raw hops, you will pick up black currants, peaches, pears and tropical fruit notes.  Depending upon the style of beer brewed and timing of the addition of the hops, brewers have noticed grapefruit, gooseberry, citrus and vanilla flavors. Ariana is said to be ideal for dry hopping, when it imparts its most intense fruity flavors.  With a high yield and late maturity, this variety will fit nicely into growers’ picking schedules. 
 

callista-spider-2 callista-spider-graph-1

If you’re in Philadelphia for the CBC, you can taste the varieties for yourself at the German hospitality suite. They will have single hopped beers brewed with these varieties available and there will be raw hop samples there too. If you won’t be at the CBC, you’ll be able to taste them soon in a beer near you as these German hop varieties are coming to America. 47Hops is excited to announce that we will have most of the available production of these two new varieties beginning in 2017. We’re not reserving them only for big brewers, or for anybody in particular for that matter. Big brewers are welcome to them and so are small brewers.  We’ll even make some available to home brewers.  It’s first come first serve because that’s the only fair way to do it in our opinion. Supply is short though so we don’t expect these to be available for long. If you’re interested in them, send us an email at Callista
[at]

47hops.com or Ariana [at]

47hops.com and we’ll take care of you.