SAVE THE DATE!

Right now, looks like "2024 is going to be an easier year than the last couple of years" as far as major input costs for most craft brewers are concerned. Across major cost buckets, including transportation, aluminum, barley, paper and hops, it should be a "more predictable" year with "less severe" disruption, Tim Near, operating partner of Agrowgate and senior advisor at Boston Consulting Group told Craft Brew News. For instance, brewers should be able to get the cans they need and deal with more common 6-wk ocean freight lead times, not the 16 wks it sometimes took in recent yrs, the longtime procurement and supply chain exec explained. But "if things change," it can happen "very quickly" and brewers "can very quickly get left behind." For a lot of craft brewers, "topline growth has flattened out," which "puts a lot more pressure on your costs and operations," Agrowgate partner David van Wees commented. And a dollar saved on costs can result in 5-10x the benefit on the bottom line, he likes to emphasize. The last few yrs have made brewers "much more sensitive" to the possibility that "things can change quickly," he said. So even younger craft brewers and beverage makers that are still getting good growth, who feel the "sun on my back right now," know that won't go on forever and are being more "pragmatic" about their financials and costs, David finds. Indeed, CBN has seen a growing group of consultants and advisors emphasizing paths to profitability during presentations at state brewers guild events recently.Who's Agrowgate? Founded in 2016, Agrowgate offers group buying and selling services connecting craft bev makers with suppliers, but it ain't just "strategic sourcing" and offering better deals on major inputs, David explained. Recall, he ran Latis Imports for a decade after yrs as mktg exec at InBev, including leading Stella Artois globally. Tim was ABI's logistics and procurement veep for North America before spending 5 yrs as prexy of that co's sourcing consortium with PepsiCo. At one pt he was the worlds single biggest buyer of hops, he noted. The pair have built a group of advisors with deep experience at large and small cos across both operations and commercial roles. So co also offers strategic advice to help bev co clients "realize results beyond what they could themselves," David said. Total up the volume of all the US & Canadian brewers and NA drink makers Agrowgate works with and "we'd be a top-10" US brewer, he said, pushing from #8 toward #7 or even 6. That's in realm of 3+ mil bbls, or well over 40 mil cases.2024 Calls on Major Inputs: Transportation Up 5% (or More?) Tim and David gave CBN a peek at their recently completed annual category review, covering categories and commodities that represent up to 80% of the avg brewer's input costs, they explained. Transportation is top consideration since it affects everything, Tim commented. This yr there was a "fairly significant reduction in the cost of transportation," down an avg of 20-30%. But next yr he expects it to "start going back up again," pointing to signals of demand already increasing and supply decreasing. In all, Tim's call on 2024 transportation costs pegs them "up to 5% higher," but major disruptions and further big freight bankruptcies could push them up more, he couched.Aluminum and Cans: "A Breath" He's also seen "consistent reductions in the cost of aluminum" after it hit an "all time high" just after start of the war in Ukraine early in 2022, Tim explained. "Inventory levels have stabilized" for aluminum and when it comes to cans, there are "enough" these days, contrary to situation a couple yrs ago. So there's "some security" on can supply and "can prices should be fairly stable," he expects. "We have the opportunity to take a breath." That opens up the possibility of ways to "premiumize the package" with innovation, including new can sizes and a wave of "new digital printing technologies."Barley & Oats: Rough Year, Reduced Yields While Tim had "better news on aluminum," it's "bad news on barley," he said. "Unfortunately" 2023 provided "a pretty rough growing season" for North American barley. Tho acreage was roughly flat, yields were hit pretty hard, including a 22% reduction per acre in Canada. So "prices are going to stay fairly high," he expects. And the oat crop was hit even harder, he commented, with yields down by over half. That's a watchout for an increasingly common ingredient given its use in many hazy IPAs.Paper: 5-10% Improvement After "Significant Run Up" There was a "very significant run up" in paper costs for brewers, primarily thru cost of linerboard, which jumped 30% since 2020, Tim shared. But "price started coming down" after a peak late last yr and folks at Agrowgate "expect it to continue to come down." Tim and team called it at about a "5-10% improvement" in paper packaging costs next yr.Hops: Varietal Specific Obviously, depending on the brewer, hops costs "can be a very significant expenditure," Tim noted, so Agrowgate sees a "big, big range" in "how important to the cost structure" they are. Generally, "the hop crop did harvest well" in the PacNW, with only select "tough spots," including Centennial. Reductions in Citra and Mosaic acreage means supply of those varietals "will be a different world" than it's been in recent yrs when they were widely available, Tim said. The German crop "was much better" than 2022, too. So in all, folks at Agrowgate "do continue to see reasonable supply of hops."

More "Predictable" Year for Top Craft Brewer Input Costs Coming, Agrowgate Predicts

Publishing Info