Who sets hop prices – Part 1

Events unfolding in 2017 will determine the course for hop prices for the next generation. In the past growers, merchants and brewers always traveled a well-worn path. When standing at a similar crossroads, they followed the animal spirit. That path leads to boom and bust cycles. It is a path that brings shortage causing skyrocketing hop prices. This is the one time when that cycle can be interrupted and at no time in history has it appeared more likely to happen. It will determine whether craft brewers are different from the big multinational brewers against which they rebel and who have dominated the scene for generations. Now, it is the craft brewers’ turn at bat. The hop industry is eager to see how craft brewers will play their cards differently.

 

All the world is a stage,

And all the men and women merely players”.

   – William Shakespeare, As You Like It, 1599

 

If, brewers perceive an oversupply and move to exploit the market to their advantage, it guarantees the next cycle will resemble previous cycles. By buying only on the spot market instead of contracting forward for their hops, and by relentlessly driving prices lower, craft brewers will virtually ensure the future direction of the market. When we see that happening, we will know they are following a well-established path of events, and there is good reason to fear it. At that point, growers would be powerless to stop the cycle.

Without contracts, growers don’t know what demand exists. They cannot know what to produce. They will remove acreage more slowly than necessary hoping to sell their hops on a spot market that may or may not exist. When they produce too many hops they will sell them at a discount to push them into the market. After a few years of doing that, family farms will go out of business. Equity will slowly drain from the hop industry. True, brewers will save some money on hops, but at what cost? Companies will go bankrupt. Growers will remove more acreage. Annual production deficits emerge and grow eventually leading to shortage. It’s a transfer of wealth from farms to breweries. 

That’s not the end of the world by any means. Life goes on if the cycle continues, as will the volatility in the hop market. By the time the next hop shortage occurs, the hop industry will be so drained physically, financially and mentally, growers have no choice but to recover as quickly as possible. Prices will skyrocket. Brewers will feel they’re getting screwed. The whole process is unpleasant for everybody. We all like to save money wherever we can. I get that. If you could know with absolute certainty you would pay as much as 40 times more in the future for something you need every year, would you still try to save 30-40% today? If you can save $1-2 per pound for the next few years, will you be equally as happy when you have to pay $20 more per pound. That’s where this road leads.

How can I be so sure that this can be the path for the future? Each cycle is slightly different, but basically this is how every cycle played out for most of the 20th century when the multinational brewers dominated the industry. The beer market is different now, that’s true. Will the fact that craft breweries dominate today’s market make any difference?

We already see a few craft brewers foregoing contracting in favor of buying hops on the spot market. We already hear their perception of oversupply as a justification for the low prices they expect. What else should anybody expect? Can anybody do anything differently to avoid repeating the mistakes of the past? We’ll provide some more insights and options in our next blog.

 

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The crisis that can destroy the hop industry

The March 1 Hop Stocks report collected by the United States Department of Agriculture National Agricultural Statistical Service (USDA NASS) is typically not fully appreciated by anybody and therefore only given a cursory glance. In 2017, however, this is very likely the most significant report you will read until harvest numbers are released. Hidden in the numbers is evidence of a trend, which, if it continues, will turn into a crisis of massive proportions with the potential to forever change and even destroy the hop industry as we know it today. Let’s take a deeper look.

Figure 1: The data from the most recent March 1Hop Stocks report

Figure 2: A graph of the 2007-2017 March 1 Hop Stocks data:

Less than a decade ago, brewers held more stocks than growers and merchants combined. That all changed in 2009 with the growth in popularity of the craft beer industry. Craft brewers clearly love their hops and they don’t mind contracting for them either. At first, that trend seemed to be great news for hop growers everywhere. Unfortunately, the way craft brewers are expressing their love lately has shifted the burden of financing the crop for an additional year before being paid. Some financing is traditionally built into hop prices, but not that much. Two things are troubling about the current trend:

  1. The gap of stocks and who is holding them is widening in the direction of growers and merchants, and
  2. The cost of and risk associated with that gap is growing.  

A quick look back in history reveals the scope of the problem. In March, 2007, growers and merchants held 40% of total stocks. Based on the season average price for the 2007 crop year of $2.99 per pound as reported by the USDA NASS, inventory held by growers and merchants in March 2007 represented approximately $83 million at a time when the entire industry production was valued at just under $180 million. 

Figure 3: A representation of the 2007-2017 March 1 Hop Stock data expressed in percentage of ownership of those stocks.

Fast forward to the most recent hop stocks report from March, 2017. Today, growers and merchants hold 200% more inventory than brewers, which equates to over a year’s worth of inventory. The season average price for 2016 was $5.72 per pound of hops. The increased price compounds the problem facing the industry by drastically increasing the risk associated with holding inventory. The total inventory held by growers and merchants today represents $600 million dollars. That’s represents a 722% increase in the value of stocks growers and merchants finance over the past 10 years alone. You can find the season average price data and do the math for yourself at the Hop Growers of America homepage

Hopefully you can see by now that the USDA March 1 Hop Stocks Reports is much more than a benign report that shows who is storing the inventory regardless of ownership. Typically, inventory does not sit long in the grower or merchant warehouse if the brewer needs it and has paid for it. Some does, but that’s the exception rather than the rule. Therefore, we can infer from the data not only who is storing the hops, but who needs it, who owns it … and more importantly who has not paid for it

Prices for hops surged over the past decade. Today, the USDA estimates the crop is worth roughly $500 million. According to the Brewers Association, the value of the craft beer industry in 2015 by contrast is $22.3 Billion. The natural question that arises in my mind is … Why is the industry worth $500 million financing the industry that generates over 40 times more revenue?  Something has to change or this will come to a bad end.

Hop prices increased to pay for investments in infrastructure incurred as the hop industry quickly ramped up in response to increased demand by craft brewers. Today’s prices do no cover the added responsibility of providing soft financing for brewers. It seems brewers are using growers and merchants as bankers of last resort. The current risk/reward ratio is not high enough for the hop industry to also act as banker. That is one reason we will see little interest in the short term by growers or brewers to soften prices. If the trend of financing continues, prices in the future will increase. Only once the ratio of stocks returns to a more balanced level, or if bankruptcies are imminent, will prices begin to soften.

Some brewers see the surge in hop stocks and hope prices will crash soon. They don’t understand the consequences of what they are wishing for. Hop prices crashing today will cause chaos in the hop industry. It would lead to countless hop farms going out of business. Say goodbye to creative new varieties. Sustainable business practices will take a back seat. Many of the features craft brewers say they appreciate about the industry today will disappear. Those go away when the money to pay for them goes away. Growers too should realize the seriousness of the situation. They cannot act without impunity. Ultimately neither they nor their neighbors will get paid if they continue to plant additional hops in the current environment. Ironically, it could be the craft brewers’ love for hops and their willingness to contract them that causes a catastrophic failure in the hop industry. 

 

Why homebrewers pay more for hops

A comment regarding homebrew shops from a friend on Facebook inspired this blog. I thought rather than answering his question in Facebook it would be worthwhile to share the answer with everybody since it applies not just to homebrew shops, but to everybody who buys hops. Enjoy!
 
…. specifically for home brewers. 3.00/ounce for some varieties in the homebrew shops. What is the shops’ wholesale price from the supplier. How many times do the hops get sold before they reach the end user? I’m working on connections to local growers in upstate ny to source hops, and be free of an inflated market price for hops. Supply and demand.
 

Good question. You are paying for several conveniences that apparently you don’t fully value or appreciate. If you are buying a 3 ounce package of hops, it seems you don’t want to buy any more than you absolutely need at the moment. You are paying extra for packaging and labor to put hops in 3 ounce packages. That’s just one thing that increases the price of the hops as they make their way from the farm to you. You probably have a freezer at home where you could store a pound or two of hops at a time. Are you not willing to use that as your own personal cold storage in order to save a little money?  If you buy in larger volumes, you’ll get a cheaper price. That’s the Costco business model.

Secondly, you’re going to a home-brew shop. The owner of that shop invested their time and money to collect a little bit of everything just for you so you can buy everything in one place … in person at a storefront. That involves rent and somebody’s salary to run the shop. When you go there, you probably like to ask questions from time to time to take advantage of the owner’s experience. That’s a convenience you’re paying for in that price  that it seems you don’t appreciate. That’s also another way price is increased on its way from the farmer to you. 

Yes, that homebrew shop probably bought those hops from at least one hop dealer so there’s an additional layer, or possibly two, of the supply chain adding to the price. Have you ever been to the grocery store? It’s the same situation there. Did you know the grocery store adds 100% margin to most of the goods it sells? I wouldn’t be surprised if your homebrew shop has to do the same. Do you feel the need to contact a carrot grower to buy your carrots or a cattle rancher to buy your steak? That sounds a little ridiculous, doesn’t it? That extra margin doesn’t mean the store is making a mint. There are just a lot of expenses involved in that business model.

If you want to buy at cheaper prices online, you can check out the store on the 47Hops web site.  We sell one pound resealable packages that you can stick in your freezer. If you can figure out a way to make that work, you’ll cut your hop bill way down … but you won’t get that same experience as at your homebrew shop. If enough people do that, the homebrew shops go away forever. That might not be a good thing, but that might be the way of the future. We’re definitely not going to hold your hand or have all your brewing supplies, but the price of your hops will be lower.

You shouldn’t make the mistake of judging everything by price alone without factoring in the value of all the other things you’re getting along the way. Nevertheless, brewers large and small do this all the time. I haven’t even mentioned cold storage, processing, financing and shipping, all things that add to the value of the hops you’re buying. There are a lot of people who have families to feed who touch that little convenient package of hops before it gets to your local homebrew shop.

Sure, growers sell hops for less than you can buy them in a homebrew store. Do you want to, or are you even able to, buy 13 or 130 or 200 pounds of raw hops at a time and pay for them in September? Do you have a freezer big enough at home to handle that?  Do you even use raw hops? If so, what are you doing buying 3 ounces at a time in the first place? Most growers don’t sell pellets. They don’t have storage facilities and they won’t package into 3 ounce packages. Very few growers are set up or are inclined to deal with somebody wanting a retail style product like what you are getting at the homebrew shop. All in all, you’re already getting a pretty good deal at that homebrew shop, but no … It’s NOT the cheapest price.

If you all you are looking for is cheap prices and nothing else matters, there are probably some really nasty old hops floating around out there. I imagine you can probably buy them for less than a $1.00 per pound if you’re lucky. Good luck making good beer with them though.  You should be careful driving your decisions based on price alone … you might actually get what you pay for. 

How to know the weakest hop companies from the strong ones

Now is the time of year when hop growers and merchants are digging roots and planting new hop fields. The past few years brought with them the longest running bull market in the hop industry. That market created strengths and weaknesses in a lot of companies. Unfortunately, that type of money facilitates a lot of careless mistakes and can hide fatal flaws. Brewers, merchants and growers were all shocked when the increase in craft beer sales slowed so drastically in 2016. Most people anticipated the market would continue on its run through 2020 or longer. Many planned accordingly. Obviously, that was not the case. It was confirmation bias at its finest. If you’re a brewer or a hop merchant, of course you want to know which companies will be around for the long term, and which won’t … but how can you know?

 

If everyone thinks one way, it’s likely to be wrong.

     – Jim Rogers

 

The abrupt slowdown of craft sales slowed the flow of money into the hop industry. That caused a wave of contract renegotiations with merchants, but very few at the grower level. Through it all, the worst pain most growers felt was not being able to sell their spot hops. Despite the fact that the talk in the industry is about the craft slowdown, some hop companies are still expanding. They claim their plans are already in motion and cannot be stopped. Expanding in the face of a drastic slowdown … That doesn’t make any sense … or does it? Actually, it makes perfect sense. It’s a tell! You might think the strong companies are expanding because it takes capital to expand or because there is strong demand. The truth is counterintuitive. The companies expanding “because they have to” are very likely the weakest companies. They lack the financial strength to do anything but chase growth and sales on their books. They lack options. Growth looks great on paper and investors expect to see that. 

I am sure you are thinking to yourself … “The craft market is still growing, albeit at a slower rate. There’s got to be some legitimate demand out there for new hops?” That’s true. Based on the rate of payment and deliveries to breweries in 2016, however, the overall market appears to be extremely well supplied from the 2016 crop. The USDA collects statistics on hop stocks. They are collecting them now, in fact. The report will likely depict an increase in brewer and merchant stocks over last year. Statistically, that is how the slowdown manifests itself. Still, there are no reports of growers removing acreage. We expect a net increase in production in 2017 over crop year 2016. That is a net increase that is very likely not necessary. So why is it happening?

Strong merchants and growers are pausing now to see what comes next. The industry is nearing a tipping point and they realize it. There’s no incentive to get caught heading in the wrong direction unless you don’t have anything to lose. The weakest companies, on the other hand, aren’t concerned with the long-term effects of their decisions. If they don’t get through the short-term, there is no long-term for them. They lack options. For sure, they can get lucky and survive the next year or two.

Sometimes, the difference between surplus and shortage can be just one bad crop away. That’s the case in 2017. The weakest players can capitalize on that misfortune and potentially make a fortune … or not if there’s a bumper crop. It’s pretty rough when your best chance of making money in your chosen field comes only after a crop failure.

Azacca® Hops – Spotlight

The American Dwarf Hop Association released the Azacca® hop variety several years ago as one of their first forays into the proprietary aroma hop market. Don’t let the word proprietary scare you in this case. Access is not an issue with Azacca®. Supplies are managed responsibly to meet all the demand out there, not intentionally creating shortage to jack up the price. Speaking of price … You also won’t have sticker shock when you see the price. They are much more reasonably priced than some of the other proprietary varieties that have given “proprietary” a bad name. Azacca® popularity grows with each passing year as brewers become more familiar with the exotic flavors it brings to the table, particularly mango and pineapple.

Azacca® is an aroma hop but delivers high alpha 14-16%. It posses a mild bitterness so you won’t find its alpha spoiling the flavors you’re looking for. We see breweries using Azacca® hops in all sorts of ways, from IPAs to sours and every time it seems to delivery amazing flavor. It seems, however, the most positive comments stem from brewers who have used it later in the brewing process, particularly as a dry hopping addition. Azacca® has a lot to offer all through the brewing process though as evidenced by this post from Founders Brewing announcing their Azacca® IPA.

If you’d like to read another perspective … Here are some useful tasting notes from the user yso191 on the homebrewer association forum. Thanks yso191, whoever you are. 

Conclusion:

In a sea of new hop varieties, Azacca® rises above the rest. It is a versatile variety that find a niche in many different beer styles. It offers everything from mango to pineapple to piney resinous flavors depending on how you use it. Azacca’s® fun exotic flavors really shine though when used late in the brewing process, particularly as a dry hopping addition. If you’re looking to blend it with another hop variety or even some fruit additions, this is the hop that will work with you to accomplish your goals. If you haven’t tried Azacca® yet, you should. It’s so flexible, you’ll be sure to use it in at least one of the beer styles you’re brewing.

And now, in honor of International Woman’s Day, March 8, 2017, we will be offering a Yuuuge discount on a limited supply of Azacca®. Starting at 12:01am on March 8th, for 47 hours, we will be offering 47% off our normal spot purchase price. Use the promo code 47WMDAY at checkout. Sound Good? What are you still doing here … Head on over to our web site store to get some while it’s still available.

 

 

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Hopi Luwak™ – The Ridiculous New Hop Innovation

47Hops is pleased to announce the newest and most proprietary product to hit the hop industry … ever … Hopi Luwak™. This revolutionary new product is an all-natural and fully renewable hop pellet sure to create a movement in the brewing industry. We produce Hopi Luwak™ sustainably because we care about the environment.

Hopi Luwak™ comes from the Latin (Paradoxurus hermaphrodites) a process originating high in the mountains of Indonesia. For years we probed and evaluated this ancient, rare and highly selective processing technique known only to a select few. We applied the Luwak™ process to hops to create a pre-fermented product. Hopi Luwak™ is guaranteed to bring an unprecedented new Earthy flavor to any beer.

To preserve the sensitive resins and oils, we produce Hopi Luwak™ at a mean temperature of an Asian Livet. This is cooler than average T-90 hop pellet production temperatures, and significantly cooler than other known pelleting operations.

Hopi Luwak™ will enable us as a hop merchant to market hops that would otherwise be difficult to sell. Furthermore, we plan to make it available through companies we like and work with. We will control the entire process. We will decide who has access, and we will decide what prices they will pay. Competition in the industry is really tough right now so we had to do something. We decided a new product would make us look very creative and so much smarter than our competitors. Because we are so smart, we expect our new product to wipe out the competition, but don’t expect us to dump it on the market. It has cost us a load to develop this new exciting new product. They will be hella expensive, probably even double your normal hop bill.  Ka-ching! $$$

Processing via the Luwak™ method is filled with twists and turns. We successfully passed them for YOU, our readers. We are confident it will take a while for the claims that Hopi Luwak™ is just snake oil to appear in the market. If Hopi Luwak™ sounds familiar perhaps you are very well traveled or have an eclectic coffee habit. Yes, we’ve borrowed the name from the infamous, and ridiculously expensive Kopi Luwak coffee beans collected from the poop of the Luwak of Indonesia.

YES … this article is a spoof on some of the ridiculous innovation happening in the hop industry today. Please don’t write us ordering any Hopi Luwak™ … although, if enough of you do … who knows … we might have to go to Indonesia!

Hop merchants today overstate the importance of their innovations that basically result in incremental changes in the form in which the product is sold and slight changes to its performance. They hype them up and play everybody else’s products down. It’s all just lipstick on a pig, and we’re good with that. At the end of the day, the flavor of the other guy’s snake oil doesn’t matter if their customer service sucks. At 47Hops, we’re focusing on great quality, no B.S., amazing customer service … not snake oil.

Is a great shakeout coming?

Last week, CNBC published an article about Boston Beer and the coming great shakeout of the craft industry. It may feel like a great shakeout to the corporate craft breweries at the top of the heap, like Boston Beer. They and the largest craft breweries enjoyed hockey stick growth the past 6-7 years. Today, they more closely resemble the corporate brewers against which they rebelled than our stereotypical image of a craft brewer. That growth slowed last year and continues to slow. Large corporate craft breweries are hardly local anymore. Many aspire to sell to stores around the U.S. Some are busy chasing global distribution.

The insatiable desire for growth is creating battles between corporate craft brewers and multinational brewers for control of shelf space and distribution. Neither group wants to stay in their lane. The craft beer industry probably won’t suffer much from that struggle. It will just be a question of who profits from it. Will the corporation worth hundreds of millions of dollars produce your craft beer, or will it be the corporation worth $186 billion? That struggle attracts a lot of attention. The irony of the situation appears to be lost. There’s another shakeout coming, one that will bring with it even more dire consequences.

If hop acreage growth continues on the current trajectory, there is a shakeout coming in the hop industry. How can that possibly be more important than the shakeout in craft beer? I’m glad you asked! Consider this … Last week, I ran into a Yakima hop grower I don’t normally see. He’s a brilliant guy and has done well over the years. We started talking about the trend of small hop farms starting across the country. He was concerned. We both agreed that they serve a purpose in their local markets but that they don’t understand how bad things can get in the market. Then, he emphasized, “Once they saturate their local markets and start selling outside of their area, they’re playing in my sandbox. If they want to do that, they better be ready to sell Cascades for $2.00 per pound.” 

Nobody wants to sell any hops for $2.00 per pound. Nobody makes money at those prices. Hop growers in the Pacific Northwest are prepared to go to the mattresses to protect their family businesses. If you own a small hop farm anywhere around the country, you should keep that in mind. Many PNW hop growers believe they can survive because they can always produce for less. That is their goto strategy. That doesn’t mean they are looking forward to it.

During the years from 2000-2005, PNW hop growers routinely sold hops far below their cost of production to drive out their competition, which at that time was other PNW hop growers. They are ready to use their size and economies of scale against the smaller farmers if necessary. It sounds like a crazy strategy, but it works. It challenges the resolve of the weaker player and to the victor goes the spoils … such as they are. For small hop farms that think this is a bluff … It’s not just hops. Even Amazon.com used the same strategy against diapers.com a few years ago.

To all the brewers excited by the thought of hops for $2.00 per pound … that should be the last thing you hope for. When prices sink below the cost of production everybody cuts corners, quality is a forgotten concept, farms go out of business, and the number of varieties available decreases. In short, you will get what you pay for.

 

 

Why 47 Posts in 47 Days?

During the past 47 days, I wrote these 47 blogs because I believe the hop industry is at an important crossroad. Decisions made now will determine the direction of the hop industry for the balance of this decade and much of the next. The actions of growers and merchants now have never held more consequence and should not be made lightly. They should proceed only after careful analysis of the market and with access to information.

There is obviously a lack of transparency and openness within the hop industry. The hop market is opaque and inefficient. The secrecy and fear of speaking one’s mind is obvious by the lack of comments on these blogs. Thousands have read them each day. I have received hundreds of emails with nice messages of support. There is clearly a shortage of market information. Everybody from the brewer and the grower to the banker is hungry for that information. I may not be able to change the way secrecy permeates the industry so long as the stakes are incredibly high. I don’t expect to. Money doesn’t trust anybody.

My goal with these 47 blogs over the past 47 days has been simply to increase awareness about the times in which we find ourselves by speaking out. We are living through unique and unprecedented times. Today we see sustained increases (albeit at a slowing rate) in the popularity and demand for hops. Customers seem to be sincerely interested in paying a sustainable price, rather than just giving it lip service. The situation requires a fresh perspective and bold new thinking or the industry risks a return to the ways of the past.

No longer is the market an all or nothing game. Growers and merchants don’t need to binge on every opportunity that arises out of fear that the future may bring a vicious down cycle. Binging has been the reason for the down cycles of the past. If another down cycle occurs in the years to come it will be due to a lack of self-restraint. Growers and merchants can afford to say no to bad deals. It is possible to reach a higher plain without jeopardizing everything everybody has worked so hard to achieve.

The hop industry has always reacted to market conditions. Everybody throws their dice simultaneously each spring and nobody knows where they land until harvest. Some of that risk is inherent in agriculture. Part of it though is due to the lack of organization and trust among people who have everything in common. As a result, a feast and famine cycle causes some to find fortune while others dreams are broken. There are great farmers that are out of business today. Success or failure is not a sign of intelligence or goodness. As the dollars grow, the primitive animal spirit keeps growers and merchants fiercely independent. Each player seems convinced they know better than their neighbor. With their determination and stubbornness, the uncertainty grows ever larger.

 

“It is not the strongest or the most intelligent who will survive

but those who can best manage change.     –  Charles Darwin

 

The more things change the more they stay the same. The promise of fortune keeps everybody coming back for more. If growers think they must go full speed ahead in pursuit of the brass ring, the future may resemble the past. That need not be the case.

We’ve reached the end of this challenge, but this is only the beginning. The most interesting times lie ahead. I’d like to thank everybody who read any of the blogs so far. I am honored and humbled that so many of you have tuned in. If a few of you have found them useful, then I consider the effort a success. Going forward (after a short break) I’ll be writing 2-3 blogs every week. The goal for the future will be to continue to increase the dialogue, and to reduce the opacity that embodies the hop market. Subscribe if you want to continue to get an inside view of the hop industry’s most interesting days as they unfold.

Cluster Hops – Spotlight

Cluster is THE O.G. American hop variety. It is a public variety, not proprietary. People didn’t own hop varieties back when this variety came along like they do today. Cluster dates back to the late 19th and early 20th century (and probably even before that) when all beer was craft and local because there wasn’t any alternative. Some speculate the variety traveled over with Dutch or English settlers from Europe yadda yadda yadda … We care more about the future of the Cluster variety than its past. If you want a detailed history of any hop variety, you can probably find it on the Interwebs.


We want to focus on what to expect when you use Cluster hops. Depending on when you use them in the brewing process, it offers flavors ranging from black currant to pineapple melon and citrus. In short, Cluster can provide a combination of earthiness and fruitiness while it brings a clean bitterness to the table.

OK … Let’s address the dark side of Clusters, cattiness. If you’ve never ever heard the term before, it’s not referring to that nice warm kitty purring on your lap as you sit by the fire. It means a cat pee flavor or smell. Yes, you read that right! Some claim that they can smell or taste a litter box / cat pee aroma from Cluster hops. Some people claim the same about other varieties too. Others say they have never experienced cattiness. Cluster is present in plenty of beers that don’t exhibit cattiness. You shouldn’t write off the variety on that rumor alone. Double Mountain Brewery in Hood River, Oregon, successfully brewed their Clusterf#ck single hop IPA with … guess which variety. Here’s a link to  their experience.

If that wasn’t enough, here’s a great blog post from Beervana from a few years ago that mentions some Cluster history. It also offers very colorful and favorable review of the Cluster variety in the Clusterf#ck IPA mentioned above.  

Today, new varieties are all the rage. Legacy varieties aren’t sexy in today’s market. Today everybody wants something new, just for its newness alone. For that reason, Cluster, which once dominated American hop variety, is now counterculture. Allow your creative juices to flow. Challenge yourself as a brewer. Don’t follow the herd. Give Clusters a try. You might be surprised what you’ll find there … Or, you can go ahead and brew another Citra® IPA like everybody else and their dog.

Starting tomorrow, February 16, 2017, for a limited time, we are featuring Cluster in our #throwbackthursday sale on our web site store. Save on this American Legacy Variety while supplies last. 

Contract Repudiation? – Letter to a Brewer

One of our salespeople recently received several emails from an upset brewer in which he seemed to be discussing the repudiation of his contract with us.  It was not entirely clear however. We offered several options for the brewer to change the terms of their contract in an attempt to make them more amenable, but all were shot down. We decided since our salesperson was not able to make any progress, that perhaps our lawyer would. So, we sent the brewer the following letter:

 

February 13, 2017

 

Dear John,

I would like to thank you for your business. I am writing you today regarding your recent communication with one of the members of our sales staff. I have read through your emails and understand that you are not happy with the contract you signed. From my interpretation of your emails, it seems that you do not plan to honor the terms of your agreement in full.

It seems there may be some confusion on your part as to the purpose of our contract. Our contract exists to dictate how our companies will work together. Unless we mutually agree to changes in writing, those are the terms. In your emails, you appear to dictate what you are willing and not willing to do and you unilaterally intend to change the terms of our agreement. That, I am afraid, is not how this works. We are very willing to discuss reasonable adjustments that are mutually agreeable for both parties. However, the changes you have requested are unreasonable, completely one-sided, and therefore unacceptable.

I would like to ask you to clarify for me if it is your intention to repudiate your contract. If you choose to do so, please be aware that we will not relinquish any rights we have under this contract to any remedies to which we are entitled. The remedies, and our willingness to pursue them, are clearly presented in your contract. I am hopeful that our companies can find a compromise on this issue so we may continue to work together in the future.

Kindest Regards,

Steven

In-house counsel, 47Hops

 

Following that letter, not surprisingly, the brewer’s attitude seemed to change a little bit. Honestly, we want nothing more than to find an agreeable solution for both parties. It is not in our interest to bring any brewer to his or her knees. Hopefully the brewers don’t want that for us either. During the challenging times that lie ahead, we must all remember that we need each other. We should strive to work toward goals that are mutually beneficial so we can all survive long into the future.