When I was the director of Hop Growers of America, I took a delegation of American hop growers on a tour through the Hallertau region of Germany. We visited one farmer who was building a new house for his son on their property. He proudly took us through the half-completed brick building. The walls were more than a foot thick. One of the American growers commented on this in amazement.
With a very satisfied look on his face, the German hops grower said, “Do you see these walls? When Germans build a house, they build it to last 300 years. When you build houses in America, you build them to last 30. That is one difference between our two countries.” Even though 10 years have passed, I will never forget the look on his face and those words. He was right – Germans do things differently than we do in the US.
Earlier this month we were in Europe at the Brau. I asked several producers of hops from different countries what it would take for more hops to go into production. The answers varied, of course, but there was one common thread to all of the conversations– once existing infrastructure reaches capacity, European growers are very reluctant to invest in new acreage and infrastructure regardless of hop prices. Barring a sustained crazy-high price caused by an industry-wide shortage, for all intents and purposes, we’re stuck with what we have in Europe.
It seems once the European hop basket is full, we won’t be getting a bigger basket unless something changes in the psyche of European growers. If the people with whom I spoke with were correct, you can disregard what you know about supply and demand.
There are already select shortages of certain varieties. It hasn’t caused any significant changes in production. Why is everybody so afraid to go with the craft trend? The answer I often hear from European growers and merchants is, “What if in a couple years the demand for craft beer is no longer there?” I had that debate again this trip with a good friend who thinks I’m the most optimistic man in the hop industry. Once again, the debate ended with him saying, “I hope you’re right. Nobody hopes you’re right more than me.” He still doesn’t believe though. You can feel it. He doesn’t agree that we’re at the beginning of a trend that will last a long time. That’s an über-conservative approach, but in the past hops has been a very risky business. His skepticism makes sense when you consider the volatile past of the hop industry.
It was only three years ago when the Czechs were sitting on about 600 metric tons of unsold inventory after a mega brewer canceled some contracts after harvest. Something was rotten in the state of Denmark! Luckily for the Czechs, the Chinese market opened up and saved the day. Americans have the reputation for having an appetite for risk, for moving too quickly and for changing direction. Culturally, that’s about as different as you can get from Germans, who proudly boast the number of centuries their business have been in operation on their storefronts. Maybe in part because of the past and in part because of the American-ness of the trend, some Europeans are a bit skeptical of the longevity of the craft market.
Even when we visited the future site of Stone Brewery in Berlin earlier this month, the property manager there told us at first they were a bit nervous about their new tenants because they’re American. In that case, Stone’s commitment to the project as evidenced by the investment they’ll be pouring into the facility eased some nerves.
German hop growers are running a marathon. The merchants absorb the highs and try to keep away from the lows. The growers are insulated from the market by tradition and by pools, which severely limit their ability to react quickly. These strategies, combined with the naturally slow reaction time to plant and remove acreage relative to Washington hop growers, has not always served German growers well. The majority of German growers miss the high prices of short markets. Still, they are content. The growers don’t get rich, but they’re able to stay in business. Maybe it’s their lot in life. Grower numbers today in Germany are half of what they were 20 years ago, but, nevertheless, they feel safe. That’s worth something, isn’t it?
Contrast that today with the number of American growers who seem comfortable with the risk and who are trying every way possible to keep up with the craft demand for hops. The surge of new hop farms across the United States is unprecedented. They’re sprinting to get where they need to be, to keep up with the market. It’s a race that also requires endurance, but there is more to the game than just endurance.
There will be Consequences:
The global trend (and it is a trend) towards American craft beer changes the game. It may still be a long race, but it’s not the same marathon. Fear of potential losses eliminates potential gains too, which makes the status-quo approach a weaker strategy in the long-term relative to the competition if they are moving quickly.
Each year more new varieties enter the market. Those that wait to supply today’s market with their special varieties lose market share they could secure for the long term. If more brewers want Variety X and there is no more Variety X available, brewers will take Variety Y because it’s there — assuming it’s not a dog. The grower who has Variety X may cite some excuse as to why he didn’t produce more, but ultimately he is giving an opportunity to his competition.
Hops are beautiful and there is a lot of romance in the hop industry, but it’s still a business. Business is about money. That doesn’t mean greed though. It takes a lot of money to buy the things necessary to produce quality hops. The farm that gets the better price today survives the one that doesn’t regardless of what language they’re speaking.
The American craft revolution is an opportunity for hop growers worldwide. Some growers may think they’ll outsmart history in the long run by playing it safe today. There were probably a lot of buggy whip makers who thought that too when the car came along. Every decision has consequences.