The ROI of CBC

If we’re being honest isn’t the purpose of a hop merchant having a booth at the trade show to sell hops? If you think it’s just to say hi to everybody and shake hands with customers, I’ve got some Hopi Luwak™ to sell you. This year, we took a second look at whether there could be enough hop sales resulting from the CBC to pay for a cool booth. With so many large brewers well stocked on hops, the chances of them buying much more are virtually non-existent. The odds of paying for CBC by making sales to small brewers who can afford to attend are slim. Three days just isn’t enough time to do so many deals. A lot of small brewers can’t even afford the thousands of dollars it would cost to attend. We don’t want to do CBC just because everybody else is doing it. It has to pay for itself one way or another.

We asked ourselves, “How could we do this whole CBC thing better than we’ve been doing it?” The answer we came up with was fun and a little crazy. We decided it might be possible to chuck the whole idea. Why mess around with baby steps, right? Go big or go home. To figure out if we were on the right track, we asked some brewer friends if they thought the booth was a necessary part of the merchant / brewer relationship. We searched for a compelling reason to spend several times the average American’s annual salary in just three short days. For the 2017 show, we couldn’t find one.

Responses from our brewer friends varied. Some were surprised. Others were encouraging. In general, they supported our plan. Most take it for granted that every merchant will have a booth at the show. Nobody seemed to think that having a booth at the CBC was all that important. The consensus was that it was just nice to see your hop supplier. Brewers with whom we have the most candid relationships shared with us that they had always wondered, how much they were over paying hop dealers so they can afford those booths. We decided that there was so much more we could do with that CBC booth money.

“How much are we over paying hop dealers

so they can afford those booths?”

So … We’re experimenting in 2017. Whether we exhibit at the 2018 CBC will depend on how it all goes. We’ll be at the show. We’ll attend the presentations. We plan to roam the show like gypsy hop merchants. If you see one of us walking around in a 47Hops shirt and want to talk hops, say howdy. The deepest discounts and opportunities are reserved for people who buy online or who stop us in person at the show. We’ll still offer sale prices during CBC week for people stuck in the 20th century who prefer to email or call. So … If that’s how you roll, don’t worry. Since we’re not blowing a small fortune on a booth this year, we can offer a metric butt load of discounts. Take advantage of that! 😉

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Merchants of Hope … and Hops at Brau 2015

I accidentally write “hops” more often than not when I try to type the word “hope”!  I’m sure that’s a sign I’ve been in the hop industry a while. It seems interchanging the two was elevated from a simple typo on the computer to a strategy for some hop merchants at the 2015 Brau trade show in Nürnberg, Germany last week. More than one key player in the hop market decided to collect demand requests from visitors to the show. They also continued to search for any potential supply that might be lurking in the shadows. The strategy seems to be to match any available supply with demand after Brau in the comfort of their own offices. Kudos to them for coming up with this clever strategy! This is a brilliant way to manipulate the market and keep prices low. Instead of the fear of deficits and potential shortages spreading through the show like wildfire, inflating prices and causing a potentially significant market event, everybody left the show with something. They may not have left the show with a hop contract, but they left with the promise that somebody would be looking at their needs and would work to take care of them in the next couple weeks. In short, they left the show with the hope that their needs would be taken care of. Yes, I did just write hops there instead of hope … again.


Hope is a powerful thing … For that reason, there aren’t any crazy price spikes to report from the Brau … We didn’t expect there would be though. You didn’t either if you read our previous blog. Still, it seems some growers were holding out hope for a very different outcome. I say that because of the amount of growers contacting me from all different parts of the world asking if there was any news. I’m not sure what they expected, but we saw just what we expected to see. Prices for German aroma hops increased to levels double what they were just a few months ago. Prices for future contracts took a significant leap upward. Prices for alpha increased slightly, yet again. Older crop years were in high demand. The 2014 crop year is not being offered at a discount to 2015. Any remaining 2012 and 2013 crop hops that surfaced were available at slightly discounted prices. Those prices were still higher than market prices for 2015 crop just a few months ago. From what we hear, those old crop years are moving fast.

American hop varieties were in extremely high demand and the premium prices they command did not scare buyers away. Some of you are undoubtedly reading this right now and thinking, “Hang on a minute … I heard there weren’t any American hops available.” That was the message from at least one American hop merchant at the show … but that’s a bit misleading. That just means that they didn’t have any hops to offer, not that there aren’t any out there to be found. Even without a booth, quite a few people in need of American hops approached us as we walked around the show. We sold quite a few hops … 47Hops does have hops available … European and American varieties.


There were a lot of Russians at the Brau this year! People were speaking it in the hallways, in the raw material hall and in every other hall at the show. That’s key to the story because the Russian market is typically a very price sensitive market, but that is not to imply that they do not have money to spend. The current political and economic situation in Russia have its citizens believing their currency will continue to be devalued relative to other world currencies and they were eager to spend it on things that will retain value going forward.  The Russian presence heightened the buzz at the Brau, which is always an exciting place to begin with.

Even the news of one Eastern European hop merchant, who shall remain nameless, defaulting on their contracts and selling hops at expensive prices on the spot market was not enough to jumpstart a runaway market. Hope is a powerful thing … as is the willing suspension of disbelief and cognitive estrangement. What?!?

Suspension of disbelief or willing suspension of disbelief is a term coined in 1817 by the poet and aesthetic philosopher Samuel Taylor Coleridge, who suggested that if a writer could infuse a “human interest and a semblance of truth” into a fantastic tale, the reader would suspend judgment concerning the implausibility of the narrative. Suspension of disbelief often applies to fictional works of the action, comedy, fantasy, and horror genres. Cognitive estrangement in fiction involves using a person’s ignorance or lack of knowledge to promote suspension of disbelief.


Some brewers have over bought due to an overly optimism vision of their future sales . We see some adjustments in contracts on a variety-by-variety basis, but the adjustments are minor. Overall, we are seeing huge net increases in demand for hops. Based on information we received at the International Hop Growers Convention meeting also in Nürnberg last week, we have reason to believe that every hop producing country will reach production capacity for the 2016 crop. There are always ways to extend harvest, but only at the expense of hop quality. That means that without further increases in the market price enabling further investment in infrastructure we will not see the supply hops develop at a rate to match demand. All that, and we still haven’t touched on the alpha market, but we’ll save that for another time. There is enough excitement in the aroma market. We expect prices will continue to strengthen in the coming weeks and months as structural deficits within the industry surrounding the 2016 crop become more apparent.


Sure, there are a few doubting Thomases that may say the situation is not so extreme, but they probably can’t see the forest for the trees. Maybe they enjoy being merchants of hope. You can’t brew beer with hope.

Brau Beviale 2015, Deficits & Hop Prices

47Hops is in Europe this week and next for some meetings and for the Brau Beviale trade show in Nurnberg.  This year promises to be an interesting Brau due to the terrible European crop.  I’ve noticed some growers and merchants are anxious for the event. They seem to think prices will spike due to the poor European crop and obvious deficit of production this year. Prices are increasing as a result. Already, Pre-Brau, I’ve found prices for European spot hops offered for prices as high as $20.00 per pound (40 Euros/Kg.) in anticipation of a shortage. I haven’t heard of any sales at those prices yet and we certainly didn’t buy anything at those prices. That gives you an idea the “optimism” regarding prices out there at the moment.


The thing about big market events in any industry is that they are big because they’re unpredictable. That’s why they happen in the first place. I am a bit skeptical that we’re about to see a huge price spike a-la 2007 in 2015. The fact that so many people are anticipating a price spike in 2015 has an effect in and of itself. True, nobody saw the drought of 2015 coming, but people have anticipated another alpha shortage for sometime now.


Like an army of squirrels, hop growers and dealers worldwide have hidden away hops for a rainy day. It’s raining. The question is how much must it rain before those volumes are released into the market. With no sign of chronic oversupply of hops on the horizon, some of those squirrels might be willing and able to hold on for what they think will be a larger return next year. The deficit in this year’s market will certainly have a cleansing effect on the supply of old inventory, which is a nice way to say that prices will increase and tolerances will decrease enough to lure out a lot of old inventory out of hiding as everybody tries to find the least expensive solutions to the 2015 hop deficit. At the end of the day, that is good and bad. It’s good because they’re hiding and can’t otherwise be accounted for. On the downside, the disappearance of the old inventory removes the buffer and places the market precariously on the edge of the precipice of supply and demand to face whatever may come in 2016 and the years beyond.

Here’s how it seems to be going down already: Faced with very high prices for spot 2015 crop, inventory that is 2-3 years old, not interesting to brewers in a normal market, will become very interesting in 2015 due to the fact that it sells at a discount to current crop. There are many people for whom price is a deciding factor and they can be flexible on crop year to get the price they need. They’ll find what they need in this year’s market. Nobody knows how many hops from previous crops are quietly sitting out there waiting for an opportunity. I believe there’s a significant volume. Similarly, nobody knows how much demand is waiting out there unsatisfied at the moment. That too, I believe, is significant. The thing we do know is that the worldwide crop was sold at nearly 100% and that we are thousands of tons short of hops due to the European drought. There is no way we see prices decreasing in the near future.

Many people wonder if 2015 will be another 2007. I get asked that a lot lately. For those who don’t remember or weren’t involved back then, here’s what happened: In 2006, prices for alpha, which was the market driver at the time, increased by 50-60% to about 26 Euros/KgA in the days and weeks leading up to Brau. It continued to increase following the Brau until the market thought it was satisfied and could survive until the next crop. Only six months later, prices increased by a factor of 5x. Six months after that, by Brau 2007, prices increased another three-fold. By February 2008, prices were 30x what they were only 16 months earlier. Of course, that was followed by a massive oversupply and severe crash in the market price during the following years. I mention this only to show how irrational the market can be when there is the perception of shortage.

The market is clearly different today than it was in 2007. Today, craft beer and aroma varieties are driving the market. Prices for aroma varieties have doubled, and in some cases tripled, over the past 3 years alone. Alpha is almost an afterthought. That is only because the multinational brewers who rely on alpha have excess inventories they are depleting. Their alpha demand still exists, but it is being satisfied through surplus inventories, which disguises the current annual production deficit. So long as surplus alpha acid inventories exist, they have a depressive effect on alpha market prices. Even alpha prices have moved up in recent years, although not at the pace of aroma hops. In 2011, you could buy a kilogram of alpha acid for 18 Euros/KgA. They are more than double that today. Like earthquakes prior to a volcanic eruption, these price increases are a sign of ominous things to come. When the alpha market erupts it causes a lot of damage.


It is impossible to say exactly where prices will go during the Brau, but we believe this Brau will be a milestone moment.  The pressure in the market is building, increasing the pressure on everybody.  So long as prices do not increase significantly neither will production. Increasing production in today’s hop world means investing in infrastructure, which means millions in investment.  Nowhere in the world is there excess production capacity lying idle as there was between 2006 – 2008.  For Americans to plant additional alpha acreage, they are clear that they require prices to compete with current prices for aroma hops. That means prices of 80-100 Euros/KgA, roughly double where they are today. American growers understand that it is a seller’s market and they can ask for the prices they need to finance their expansion plans. German growers, for the most part, have not yet woken up to the fact that American aroma hop prices are driving the entire hop market. They are still operating as if it is a buyer’s market and they are price takers, not price makers. It’s not that they are somehow less enlightened than the American grower. They just have fewer options due to the structure of the German industry. Merchants in Germany, aware of this fact and extremely conservative by nature, limit their offerings and are encouraging German growers to produce alpha hops at prices half of what American growers will produce them.  Meanwhile, every other hop growing country in the world is interested in producing aroma hops at the moment. The German industry has amazing aroma hop varieties too, and there is significant demand for them at sustainable prices, but these price signals seldom reach the grower so instead they are planting Herkules. Some of the contract offers run as far out as 2025 at flat pricing, locking that alpha, and more importantly the acreage, up for a LONG time at low prices!

German hop growers have become the world leaders in the production of cheap alpha acid, not an enviable position in a market that values aroma hops. Annual alpha acid production is already significantly less than annual alpha acid demand. American growers, however, continue to remove alpha acreage faster than Germans can plant it. German growers, unfortunately, are not calculating the true value of their farms in their pricing and what it will cost to increase their production capacity when the time comes. Without further investment in the industry on both sides of the Atlantic, the industry will soon run into a production ceiling.

We believe the German industry will reach capacity on their existing infrastructure within the next year. Most would prefer not to discuss this fact and instead say the situation is “dynamic”. IF that means that more acres will be planted as prices increase, well, of course. Prices need to increase significantly though before that happens. That is why there is a race on for the currently undervalued production. When German growers start to calculate what it costs to build new farms, they will realize too late that the contracts they are making today do not pay the bills and do not allow for reinvestment. They too will be asking for the same prices as the Americans … Prices for German hops will double.

In our opinion, the direction of the market is very clear. Prices have increased over 100% in the past 3 years, and they are not finished. Prices this time next year will be significantly higher than they are today. Although difficult to track, we believe surplus alpha inventories are disappearing at a rate that will severely affect prices in the months following the 2016 harvest.

The hop market is affected more by perception of availability, than it is by actual availability itself. A false sense of security and a lack of information keeps prices artificially low. You can only stretch a rubber band so far before it snaps back and hurts you. The same is true with the hop market. We are stretching that rubber band now and it is only a matter of time before it snaps. It was perception of shortage that drove prices in 2007/08 to increase 30x in 16 months. In 2016 and beyond, an actual lack of availability will exist for the first time in anybody’s memory. Nobody knows what the consequences will be. For that reason, it is easy to predict the direction of the market.  It is even possible to predict significant price increases for some varieties.  It’s impossible though to predict with any certainty how active the market will be and where it will stop.

Beer Geeks Sneak Peeks at CBC15

Do you know the show Beer Geeks, hosted by Michael Ferguson?  We liked the show a lot, so much, in fact, that we arranged with the producers to do a special hop episode … a hopisode back when they were planning season 2.  OK … Why am I mentioning this now?  The new episode with 47Hops won’t be on TV still for a few more months.  At the 47Hops booth, this week at CBC, you’ll be able to get a sneak peek.  We’ll be playing a 10-minute clip of still unseen footage.  Stop by our booth so you can enjoy watching as we tour Michael through the valley and introduce him to some friends we at 47Hops work with every day.
Every episode is special, but this one is different as it is the only time the crew has visited the largest hop farms on the planet and followed the hops through to the brewery. You’ll get to see hop producing, American style. After visiting the hop fields and the brewery, of course, we topped it off by pairing the beers with amazing food at the end of the show.  I hope you’ll enjoy as I take Michael to visit some friends of 47Hops around the Yakima valley for a look at how hops are harvested and where they’re processed.  After processing, we visit a good friend and customer of 47Hops, Mark Hood over at Sound Brewery, to make some amazing beer with those same hops.
The show was a lot of fun to shoot!  Michael makes it look easy on camera.  It’s actually a lot of hard work.  It all seems so effortless and simple when you’re watching.  Michael, and the producers of the show go to great lengths to get the necessary shots no matter how many takes are required.  They’re passionate about their work and it shows in the quality show they produce.  If you enjoy the usual format of the show, you’ll definitely enjoy getting a glimpse inside the hop and brewing world to see some of the hard work that goes into making the beers we all love. 

You’ll have to wait a few more months to catch the whole episode on Ora TV,, but you can get a sneak peak starting on the 15th.  We look forward to seeing you there. 

We’ll be at booth #923 at CBC.  Stop by and check it out

Something Big for the Craft Brewers Conference

We’ve been heads down the past few weeks working on preparations for the Craft Brewers Conference.  Only 10 days left until the show begins!!  47Hops had a last minute opportunity to give back to the industry and sponsor the CBC Closing Reception on Friday afternoon, so we hope you’ll stick around for that too.


If you have a chance to explore Brew Expo America, the trade show attached to the CBC, like over 10,000 people, 47Hops is Booth 923. We’re right on the main aisle so it’ll be hard to miss us. Just to let you know … We have something sensational in store for the show. These are just two of the 5 boxes we’ll be bringing it in. It’ll be fun. No, it’s not a giant hop cone … although we did consider that. Seriously!


Like the good hop merchant we are, we’ll have some exciting Open Source Varieties on display at the show for people to sample. We’ll also be giving out the 2015 State of the Hop Industry report prepared by yours truly. There are some things in it that will rock the boat … again. You won’t want to miss it.

With the growing popularity of craft beer, it’s an exciting time to be involved in the hop industry. We’re looking forward to have the opportunity to participate in the CBC, visit with a lot of our customers, and meet new people. This is only a short post today to update you on our CBC progress. Time to get back to it. Hope to see you at the show!