Money doesn’t trust anybody

I sold an old truck to the wife of our farm manager. He and I had a great relationship, and I gave him a great deal on my dad’s old truck. The truck was in great shape. His wife gave me an envelope with the money. Right away, without thinking, I put it in my pocket. She insisted that I count it. I told her that I trusted them. To that, she responded,

Money doesn’t trust anybody … count it.

She was right. Whenever there is money involved, personal feelings should go out the window. It’s business! It is your responsibility to make sure the deal is done correctly. 

Why am I mentioning this now? There are a lot of hop contracts today. They exist to guide how companies should work together. There are renegotiations happening too. There are some things that may happen during the course of those renegotiations that neither side will like. It’s not personal. It’s just business. Sometimes that sucks when things don’t go your way. I’ve learned the importance of divorcing yourself from your emotions when it comes to business. I used to get offended or hold a grudge from some transactions. In the long run though, it’s not worth it. The only person whose life you affect by doing that is your own.

Some brewers in the industry today are new to running a business. They get butt hurt when they feel like they don’t get what they want. This message is for you. 

Sales … Avoid the Douchebaggery

Yesterday morning I received a special offer from an ad sales agent to advertise in a brewing industry magazine. The email, written by a guy we will call John, wasn’t rude. For some reason though, his request bothered me. It was so very one-sided. He really wanted to know what I could do for him. He phrased it as if he was doing me a favor by telling me which ad I could place in their next edition.

I don’t get too excited by opportunities in print magazines claiming to reach millions of beer lovers every month. A couple years back, I calculated that if you placed a full-page ad in all the industry magazines each month, it would cost hundreds of thousands of dollars over the course of a year. It’s not worth even a fraction of that in my opinion. You cannot track if the expense yield results unless you have a coupon offer or promo code in it. Unfortunately, I’ve tried that before too. Maybe that works for peas and carrots at the grocery store, but it doesn’t seem to work with hops.

Back to our ad salesman … He didn’t care about my time or what might be in my best interest. Well, to be fair, I should say that if he did care, he didn’t communicate that very well to his target. He acted as if we were old friends and he was just checking back in with me (we’re not friends and this was a cold email). He cared about selling ad space for the magazine, not about me.

Actually, the email arrived at just the right time for another reason. We had a sales meeting yesterday afternoon and I was thinking about what I would say to the group. The email from John helped. I emphasized to our team that nobody really wants to buy anything from a company. People want to buy something from a person who cares about them and who will try to solve their problems. Being personable might not result in a sale every time, but treating people like people, not accounts, is the right thing to do and that they should keep that in mind. That, in my opinion, is what sales should be about, taking care of people. If that’s not possible, please let me buy what I need online. I’d rather not interact with douchebag salespeople if I don’t have to.

 

The virtue of vicious competition

Competition is fierce in the hop industry. I watched the movie Founder a couple weeks ago. There are so many similarities between things that happened in the movie and things I see happening in the hop industry. The following quote symbolizes the competition, visceral hatred and greed that we see from time to time.

 

“It’s a dog eat dog and a rat eat rat world, and if I saw my competitor drowning I’d stick a hose in his mouth …”

     – Michael Keaton as Ray Kroc from the movie Founder

 

That may sound a little extreme at first. It may make millions of movie goers think that Ray Kroc was an evil man. I’m sure there are growers who would stick that hose down their competitors’ throat. I know merchants feel this way about other merchants. I’d like to think I have not let what seems to be the dark side of the hop industry, and business, affect me. I suppose I have though … by necessity. The force is strong. When I heard that quote, I thought, “Yep, that’s probably not far from the truth.” There … I said it. Mind you, growers and merchants work with each other every day, also out of necessity. It’s a small industry. Hops make for strange bedfellows.

The hop industry is fierce like that … seriously. I often think to myself how nice it must be that the craft brewing industry has not yet turned so fiercely competitive. Perhaps it already has among the largest craft brewers who are competing for shelf space with discount pricing and slotting fees. Perhaps it will someday too amongst smaller craft brewers … if they are lucky.

It is exactly that fierce competitiveness that keeps people on their toes. Knowing your competitor will stick that hose down your throat if they get the chance, keeps you aware of the consequences of gluttony and laziness. The person who takes the time to sit back and admire how clever they are because they have been successful, regardless of whether they are a grower, merchant or a brewer is the one who fails because these things apply to business in general. While you’re sitting back thinking about how well you have done, you watch the competition pass right by. The sloppiness and gluttony that can happen in the absence of such fierce competitiveness encourages mistakes. People get lazy. Scarcity creates an instinct for survival that we all need to thrive. It makes us try new things. We become more efficient through experimentation. For that reason, even the fiercest of competition is a very good thing.

200,000 reads in 3 months – Thank YOU!

Since we moved this blog to WordPress from Blogger three months ago, we’ve had over 200,000 reads! When I go to an event like the Hop Growers of America convention, Brau or CBC, people say things like, “I love your blog”, or they tell me to “keep up the good work”. I am happy to hear that people enjoy it … Thank YOU for reading! I enjoy writing it.

If you looked at the comments section alone, you might imagine that nobody reads the blog. The hop industry is very opaque and secretive. In such an industry that is very cloak and dagger by nature, it can be dangerous for anybody to publicly comment using their real name. With anonymous comments, though, the dark troll side of people comes out. When I was Executive Director at Hop Growers of America over 10 years ago, we had that problem with the Coffee Shop, an online forum back in the day.  Apparently, there are some serious trolls in the industry that are emboldened when they’re anonymous. That’s not good for anybody. I’d like to keep this blog free from trolls so the next 200,000 reads are as enjoyable as the first. Everybody in the industry is very careful to never commit to any position in writing. I get that.

 

That doesn’t mean you can’t comment though. I hope you’ll continue to reach out to me the ways you have been, by email and Facebook messages, to let me know your thoughts … positive or negative. Constructive criticism and debate is always welcome here. There have been a few people who have been a little too nasty or self-aggrandizing in the comments section of the Facebook or the Twitter. Honestly, I’m quick to ban or block those people. I see social media like a big elevator. Ideally, it’s taking us to a higher level together. If somebody passes gas while we’re all riding in the elevator though, they should have to get out and should not be allowed back in the elevator again. One strike and you’re out. Nobody wants to stand in an elevator breathing somebody else’s gas! Maybe there are special places on the Internet for those people.

Pimpin’ Ain’t Easy

In the life of a hop contract, not everything always goes as planned.  Sometimes somebody needs more hops. Sometimes somebody bought too many hops or maybe they contracted for varieties they no longer need.  Sometimes somebody doesn’t pay on a contract and you cancel it.  Stuff happens. We recently had a customer, let’s call him Roger, who had an unpaid balance for some of his hops he had not yet taken.  Roger had some other hops he had paid for, but was not going to use, over at another hop merchant’s warehouse. He asked if he could sell those hops to us to pay for the balance of his debt to us, basically a trade. Roger set the price and the terms. They were reasonable so we agreed.
We picked up the hops after both parties had agreed to the terms.  A couple days passed.  Apparently, seller’s remorse (if there is such a thing) hit Roger, or maybe he was having a beer with a buddy and bragging about his great deal when he realized he might have been able to sell those hops for more somewhere else.  He looked online … source of all things true and accurate.  Lo and behold he found higher prices for those very hop varieties … to home brewers no less. What a noble cause to come to the aid of a disenfranchised home brewer. For a couple days, he wrote what were certainly beer-inspired emails late in the evening. They made for interesting reading as there was no shortage of “logic” explaining how if 47Hops happened to sell those hops at a profit that he deserved the difference. He stated that he could have made more if he had sold those hops elsewhere and said he felt cheated.  
Have you ever watched the show Pawn Stars? I like that show. I know … shame. It’s great though. Somebody always brings something really cool into the shop that they think is worth a mint. They want to sell it to Rick, the owner of the shop. He doesn’t always know the exact value so sometimes he calls in a buddy. That guy (who I would not be surprised to learn in a future scandalous revelation by the History channel is getting a cut of the profits from the items they judge) says what he believes the retail value to be in his professional opinion. Then, the bargaining begins. I love that part! The customer often thinks he should get the retail price mentioned by the buddy … or something very close to it. All this despite the fact he is standing in a pawnshop trying to sell his cool thing to somebody who must then resell it at a profit. Rick usually shoots them a counteroffer that is about one half to two thirds of the retail price. It’s predictable after you watch a few episodes, but it’s still fun to watch.  When the customer protests, Rick often reminds the customer that he has a store and employees he needs to pay and a lot of overhead involved with his business. Plus, he continues, he isn’t sure how long it might sit on the shelf in the store.  These are all valid points, but nevertheless I suspect that Rick is going to call that same buddy up and move the goods quickly.  Who knows?  Nine times out of ten, the customer relents, sometimes reluctantly, and take’s Rick’s price because at the end of the day he doesn’t want to take his stuffed moose head home with them after hauling it all the way into the shop.  I find myself rooting for Rick more often than not. This is the part where I’m inclined to actually talk to my TV even though I know the people can’t hear me, and say, “What the heck did you think was going to happen … you’re selling something at a pawn shop for cryin’ out loud?” I try to refrain myself. It’s the 21st century.  Everybody has a phone in their pocket from which they can access a few billion other people on the planet via the Internet. How are pawn shops even still around? They serve a need … I guess that’s why pawnshops still exist. Regardless, the show is addictive … 
That may seem like a tangent, but it’ll all come together in a paragraph or two so hang in there … There are several points I’d like to make to Roger.  I thought I’d do it through the blog because there are probably a lot of Rogers out there and they should all read this.  Being a hop merchant is not yet so simple as selling something on Ebay. There are expensive barriers to entry like warehouses that cost about $1-2 million each. I’m particularly familiar with those lately since we’re building some.  There’s also a warehouse crew, a sales staff, plenty of other people in the office doing things to keep the ship a float. There’s a pellet mill, which easily costs $2 million. To add some joy to the pile, the local government wants permits, and, of course, the insurance people want their cut. On top of all that, the banker wants to see numbers that show that you actually have a plan and know what you’re doing when half the time it’s chaos.  For Matt and Andrew, our bankers … I’m talking about the other merchants’ chaos. 😉 Anyway, you get the point. The costs add up.  
None of this is any news to anybody in business, particularly in the alcohol industry. Everybody with a business shares the joy of dealing with bureaucracies.  Nevertheless, it seems some people underestimate what it takes to be a hop merchant. It’s kind of like Rick and his pawnshop on Pawn Stars.  Rick provides a service in that he takes in things that people want to sell. He is a hub where people know they can find things.  The shop may not have exactly what somebody is looking for, but they will have something interesting there to take home.  There’s a little bit of chance involved.  Rick needs to buy things he thinks people will want. His experience enables him to do that pretty well, but preferences could change mid stream and he could be wrong.  There’s also a lot of relationship building involved.  I’m sure Rick has a list of regular customers who ask him to give him a call when certain things come into the shop.  Maybe he knows a guy who collects old watches … or a guy who likes Superman Comic books.  All of that brings value to Rick’s shop. He is a hub.
In addition to being a hub, Rick is the tip of the spear … please forgive all the metaphors.  There’s eBay and garage sales, but those serve a different market.  It’s Rick’s job to figure out what prices he can charge his customers without turning them away and how much he can afford to buy things for on the other end while still leaving himself a profit.  That’s a risky place to be and sometimes Rick screws up.  I remember an episode where Rick bought a beautiful old self-winding Swiss clock.  It looked cool.  I probably would have bought it too. Unfortunately, it cost him a fortune to fix it and the market just wasn’t there to recoup his investment. I remember buying a batch of hops that turned out that way once or twice too.  If Rick wants to have more stuff in his store to offer his customers, he needs to add on to the building … or move the inventory more quickly through the shop, which probably means cheaper prices and slimmer margins. Sometimes we get a glimpse of Rick’s warehouse and you see that there’s a lot more than the shiny display cases out front that goes into the business.  Imagine the money tied up there!  There are SO many parallels between Pawn Stars and the hop industry.  Why there isn’t a reality TV-show about the hop industry, I don’t know.  There are definitely plenty of characters worth watching.  
In the hop industry, merchants are building pellet plants, warehouses are going up and companies are hiring a LOT more people.  It’s happening quickly and in the back of every merchant’s mind is, “how long is this going to last?”  Some of the larger slower-moving merchants are preoccupied by those thoughts it has crippled their business.  They think they’re being conservative by not acting hastily to the rapidly increasing demand for aroma hops and craft beer.  Some of them still don’t believe that craft beer is here to stay. Really!  Crazy isn’t it?  They think their size will save them and they’ll “make it up on volume” with the big guys. Let’s not forget, the dinosaurs and wooly mammoths all went extinct. A lack of action is an action in and of itself. I know a lot of hop merchants around the world read this blog (hi guys) and are probably shaking their heads in affirmation right now because they know how many challenges and how much risk the average day of being a hop merchant brings.  NO, I’m not complaining … I know nobody will shed a tear for the poor hop merchant.  I just thought I’d bring a different side of the industry into the spotlight.
I often remember the phone book under a glass case on the 2nd floor of the German hop museum in Wolnzach, Germany. It’s from the 19th or early 20th century … honestly I don’t remember when it’s from, but I know it’s old because it has those yellowed old pages that look like they belong in something Gutenberg would have printed himself … It’s turned to the page that is littered with names of hop merchants nobody alive today has even dreamt of. Why, because they’re all gone, that’s why!  It’s amazing to see how many there were!  Coming from the very hourglass shaped industry we occupy in which the middle is the choke point, it’s a stark revelation that things have been and will likely again be very different. Everything is temporary and the only constant is change.  There are lots of clichés.  I like to think of it as a reminder that no matter how smart you are in business you usually take the stairs up and the elevator down so if you’re going to play the game you need to know the risks.