Is your hop bill too high? Avoid these 8 common mistakes & keep it down.

There are a lot more people buying hops these days than ever before. Not everybody has the benefit of years of experience. With this blog, we hope to help speed up the learning curve. There is a certain mystery about buying hops and how the hop market works. It’s complicated since there’s no exchange that determines prices like there is for corn and wheat. You can’t just look online to find what’s available and order some like you can with just about anything nowadays on Amazon. Below is a list of some of the mistakes some people make when buying hops. If you have to buy hops, hopefully you can learn from these mistakes made by others to your advantage.

 
 
 
1) Buying Too Many Hops
If you’re a brewer and you buy extra hops so you can guarantee that you have enough for your needs, most people think that’s great. After all, it’s better to have too many than too few when it comes time to make the beer, right?  Some brewers go a little too far. They anticipate 100% growth for a few years in a row and they want to contract all those hops now. It’s great to be enthusiastic and optimistic about your success, but a dose of realism is also a good idea. Buy what you know you’ll need. If you need an extra 10% or so to feel comfortable with your position, that’s great. It’s hard to predict the future. Sometimes our crystal ball doesn’t even show us anything. Imagine you lose a little weight … not that you’re looking fat today. If you lose a little weight, you’d be happy to go buy yourself a new pair of jeans. Likewise, if you’re having success with a beer and need more hops, you’ll be happier dealing with the challenges of finding those hops then. The grief associated with finding more hops will be less than trying to unload a bunch of hops you don’t really need.Chances are the merchant you’re working with will be happy to help you grow too. There are always hops out there if you really need them. If you buy extra hops, you should consider extra hops as an insurance policy and part of the cost of the beer you produce. Large volumes of hops are not something a brewer can easily trade on a secondary market. It’s tempting to think that you can sell excess hops and recoup your investment, but it doesn’t happen often. Some brewers take a hit on those hops when they try to sell them again and you should assume you will too, but if you’ve guaranteed the production you wanted, maybe that’s an acceptable price to pay.
 
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2) Ignoring Excess Hop Inventory
You can’t afford to bury your head in the sand when it comes to your inventory. You don’t want to be in the position where you have to ask to renegotiate contracts after the crop year has passed and the next crop year is approaching. It’s best to be proactive and honest with your expectations and needs as soon as you know them. Unless you’re talking about a very high-demand variety, expect to take a hit when getting out of any contract … if you’re able to get out at all.  if it’s May of 2016 (for example) and you are only now starting a dialogue with the merchant with whom you have a contract for 2015 hops you don’t need, you don’t have a strong position from which to bargain and rely completely on the good graces of the merchant holding that contract. 

 
3) Relying on Hard-To-Find Proprietary Varieties
Did you really just make that awesome flagship beer with a variety that’s really hard to find and owned by one or two guys you’ve probably never met?  When creating beer recipes take a moment to consider the availability of the hops. Don’t link your brand’s growth and possibly the success of your brewery to somebody else’s decision-making process. Consider that you might not be able to get those proprietary varieties you need on a regular basis. To counter that, why not create a recipe that uses multiple hop varieties. If one needs to be replaced or substituted, the change will not be noticed as easily. Using hard-to-find hops can be OK if you can get them, but you should always be ready to go with substitutes you can more easily find on the market. A lot of life is about Plan B.
 
 
4) Buying Spot Hops in a Contract World
Back in 2004-2005, relying on the spot market was a good strategy. Back then, there was a surplus of hops. Hops were everywhere and you could hardly give some varieties away. Brewers who were around back then remember Cascades going for $2.00 per pound. A lot of brewers still don’t contract forward for their hops thinking that this whole trend of higher hop prices is temporary. Technically, that’s true … As John Meynard Keynes said, “In the long run, we’re all dead.”  If you wait long enough, prices may someday be $2.00 per pound again, but that’s not the case in the foreseeable future. With so much growth in the craft market and demand for hops higher than ever, buying hops on the spot market is risky at best … unless you really don’t care about the varieties you get. If you only buy spot hops and need a certain variety, you can get burned and not get the hops you need unless you’re ready to pay $20 or more per pound. Contracting, even for a portion of what you think you need, at the right time of the year will go a long way toward lowering your hop bill.
 
 
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In the Long Run, We’re All Dead
– John Meynard Keynes
 
 
5) Buying at the Wrong Time
So, when is the right time to buy? First rule of thumb is never buy hops as a knee-jerk reaction to an increasing market price. Brewers often pay too much by buying at the wrong time of year. Sure, you can call up your friendly neighborhood hop merchant any time and try to buy hops, but then you take what the market has to offer. There are times when prices are likely to be much higher and other times when the market is naturally lower. On the farm side of things, the agricultural cycle determines the times during the year that are best, and worst, times to buy. Directly after harvest, if there is a poor or average crop, you’re likely to pay higher prices, particularly for high-demand varieties … if you can get them at all. Popular varieties are sold quickly and are often to favorite accounts of merchants or those who are on waiting lists. After April or May for popular varieties, you’re also likely to pay higher prices. In the late spring, the hops are already planted, roots are dug long ago and idle ground is hard to come by. It’s a bit too soon for growers to feel confident about how the year will turn out so they don’t feel comfortable yet selling into their reserve unless you’re really good friends. All that affects the price to the brewer.
 
 
6) Not Buying Enough Hops
Some brewers have contracted for the hops they need to keep their costs down, but then realize that they’ve underestimated demand, or have growth they couldn’t anticipate. What do you do? You could go into the market ready to pay any prices for aroma hops, but really, who wants to do that? You could also change up the way you’re using your aroma hops to make them last longer. If you want to make your aroma hop supply last longer, you could substitute and use alpha hops for your bittering during the boil and finish off with aroma hops or even dry hop to maximize the benefits of the different hop flavors. Something like a German Magnum or Herkules will have much less harshness than an American CTZ should some of the flavor creep into your beer. Granted, this is a basic idea, but it seems to have gone largely unnoticed by smaller brewers.
 
 
7) Paying too Much for Shipping
Most hops you buy do not include shipping in their price. You would not believe the number of brewers who call and need urgent shipments of hops. Sometimes, they have the hops in inventory, but the hops are at our warehouse, not at the brewery and they pay to overnight a 44-pound box of hops across the country. More than a few times, I have seen cases where the shipping is as expensive as the hops being shipped.  A little planning can prevent a lot of shipping expenses.  It’s cheaper to send half a pallet of hops by freight than it is to send one box by express mail.  You could literally buy a chest freezer at Home Depot with the money you save on shipping and store the extra hops you shipped there. 


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8) Putting All Your Hops in One Basket
As the saying goes, “You should never put all your eggs in one basket”. There are plenty of reasons for old sayings. You should never buy all your hops from one merchant! I know.  47Hops is a hop merchant and we’re saying this. Is it a cold day in hell? Are cats and dogs now living together? No … It’s just good advice. Different merchants have different philosophies and strategies when it comes to supplying their customers. Some will sell as much, or even more, hops than they plan to receive that year. They oversell to people who want to overbuy and play the over purchasing of some brewers against the overselling and hope to break even. Other merchants take the safer path of leaving a reserve. Some will tell you in the spring that the previous crop was short and give you two days notice that your contracts will be cut. Others will let you know as soon as they find out during harvest if harvest will be short so that you have time to plan ahead in case you won’t get your full delivery for some reason. Some merchants have certain proprietary varieties available. Others have different proprietary varieties available. You get the idea. The reason to play with multiple merchants is to try to take advantage of all of their strengths and hopefully avoid their weaknesses.
 
 

 

 

 

This list probably does not include all the mistakes that can be avoided when purchasing hops.  It’s a good start though and hopefully it was helpful.  If you’ve survived making some mistakes of your own that you wouldn’t mind sharing, we’d love to see them below in the 

One thought on “Is your hop bill too high? Avoid these 8 common mistakes & keep it down.

  1. NZHopguy says:

    Mistake 9. Always insist on new season hops or current crop year. This is a bad idea, there's plenty of great hops available if you're prepared to base your purchase on the HSI result rather than the crop year.

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