Supply chain challenges? How breweries can keep running smoothly as issues mount

While business may be back across the country, the return to business-as-usual has not been seamless for most. Most recently, supply chain issues have plagued businesses and severely limited basic operations and growth. From lumber to sporting goods retailers to automobile manufacturers and now the brewery industry, supply chain issues, compounded by a labor shortage and the COVID-19 pandemic, are impacting operations nationwide. 

Recently, Bloomberg reported that global supply chain issues will likely last until at least February or March of 2022, if not even longer. As these challenges continue to cause problems for breweries, in terms of a hop shortage, can supplies and more, what can brewery owners and managers do to keep their business running seamlessly and their revenue intact?

How has the supply chain issue impacted breweries?

While supply chain issues have prompted some major retailers to announce major delays and limitations, from what we’ve seen, breweries have not been terribly impacted for the most part. We’ve heard from breweries reporting significant inconveniences to their operations, but nothing at this point has led to them to have to cease operations – though that could change.

Extreme heat this summer has caused major damage to harvests across the nation, damaging hops among other crops. The unusual heat and drought conditions have also caused problems with barley production. Growers have reported lower yields and poor quality at harvest. According to data from the American Malting Barley Association Production Report, malt production is forecasted at 106 million bushels, down 36 percent from 2020. 

Additionally, breweries are struggling with can supply. For example, many brewers receive their can supply the first of every month, but due to the supply chain issues and transportation delays caused by the labor shortage, they’ve seen delays of two weeks or longer in shipment time. 

While we’re not seeing too many issues yet, a shortage of quality hops or cans could obviously prove troublesome, if not disastrous for many breweries. Fortunately, brewery owners can take steps now to keep their business, not only operational, but profitable, as these supply chain issues continue and possibly worsen. It all starts with good planning and a little ingenuity. 

Stock Up 

One thing we’ve all learned from this pandemic is it doesn’t hurt to be prepared. Knowing that we are experiencing global supply chain challenges, brewery owners should think proactively. For example, brewery owners should act now to order the cans they’ll need for the foreseeable future. This way, they might be able to avoid problems related to a delayed shipment. The last thing a brewer wants to do is let a perfectly good batch of beer go to waste because they are unable to can it. While we want to be considerate of other breweries in the same boat, if your brewery normally orders 5,000 cans a month, you may want to renegotiate to 7,500 cans a month to be safe.

Ingenuity and perseverance

Confronting the challenges of the last year and several months, we’ve seen breweries not only survive, but thrive due to their ingenuity and perseverance. 

No cans? No problem. We’ve seen breweries take blank cans and use their label applying machines to take care of the issue themselves. We’ve seen others keg beers they had planned to can to keep the beer fresh for as long as possible. In some cases, brewers are setting aside bright tanks to keep the beer refrigerated until cans arrive. 

We’ve been impressed by the creativity we’ve seen across the industry throughout the pandemic and we have no doubt it will continue. To get you inspired, here are a few tips:

1. Find another supplier: The whole industry may be struggling with a shortage, but that does not mean switching suppliers won’t be helpful. If your supplier is taking too long to deliver inventory, consider looking into a new one.
2. Diversify your product: Breweries are struggling with malt and hops quality due to the excessive heat. If that’s the case at your business, consider brewing other styles or a hard seltzer. The hard seltzer market has been hot for a few years now and has been less impacted by the shortage.
3. Hire a sales associate and do some outreach: If you cannot can your beer, it may be time to reach out to local bars and restaurants with kegs. Hiring a sales associate who can reach out to local bars and restaurants can save your business from wasting good beer while also providing a new revenue stream. 

Additional protection

It’s critical that breweries plan ahead for possible supply chain issues to avoid a financial hit.

Unfortunately, from an insurance perspective, beer lost because it could not be canned in time is typically not considered an insurable loss. This is why we encourage brewery owners to plan ahead and think outside the box. 

That said, it’s always smart for breweries to have comprehensive insurance coverage, preferably provided by a specialty insurer who knows the brewery space. When talking about supply chain issues, insurance should continue to be a critical part of any business operation. In fact, breweries with a quality policy will have contingent business interruption coverage should a vendor or supplier experience an insurable loss. This coverage could prove invaluable to breweries as we continue to wade through these challenging times.

The supply chain issue may linger well into 2022, but brewery owners can do more than sit around and wait for delayed shipments. Taking proactive steps like building a surplus of cans or getting creative with products and offerings can go a long way toward preventing significant business hardships and keeping your business profitable well into the future.

Paul Martinez is program manager and insurance brewmaster for Brewery PAK Insurance Program. Martinez has 20+ years of commercial insurance experience and 10 years of experience underwriting breweries. He can be reached at 888-386-5701 or [email protected].