When hop contracts go bad

Hop contracts can run years ahead, but in a world of uncertainty, not everything goes according to plan. It’s good to talk, says John Willetts of Simply Hops

Hop contracts can run years ahead, but in a world of uncertainty, not everything goes according to plan. It’s good to talk, says John Willetts of Simply Hops

Even with the very best will in the world, it is not always easy for a brewery to accurately forecast what’s going to happen in the next 12, 24 or 36 months. This means that while contracts with hop suppliers are always entered into with the best intentions, things don’t always go as planned. The IPA you were in love with and were expecting to dominate your sales just doesn’t perform, and the wit you did as a seasonal suddenly takes on a life of its own until suddenly everyone wants some! Anything can happen, good or bad, which means that the contract you signed may no longer fit your needs. What happens then?

Well, I can’t speak for all hop merchants, but I  can speak for Simply Hops. First: never sit on an issue.  The sooner you inform us of a problem, the more likely we are able to do something about it. If you wait until 2018 crop is being picked before you tell us about a problem with your 2016 crop, then the potential for us to re-use those hops, and therefore release you of your unwanted obligation, is severely diminished.
We write to all our contracted customers to update them on the state of their contracts and ask to help formulate a plan together in order to ensure that there are no major problems at a later date. Invariably, the only big issues arise when those letters are ignored. Once a certain amount of time has passed, it becomes difficult, or indeed in some cases impossible to be as flexible as we would like to be, so responding at the first available opportunity is vital.

Rebalancing is the easiest way to proceed with your hop contracts in a healthy way. Regular meetings with your merchants to discuss what’s working and what’s not can often allow them to release some volumes of hops in preference for others. This ensures your brewery has what it needs when it needs it, rather than building up issues for future headaches. Also, remember that although some years you may feel your contracted price is higher than the current market price, there will also be years where you are buying at lower than the current price. Considering this, buying from alternative sources whilst tempting, is not always the best strategy in the long term, as it may not aid you in future negotiations with the contracted supplier.

When is comes to renegotiating, it is important for both parties to consider all options. Longer-term storage, rebalancing into future years, maybe extended payment terms to avoid a big hit to cash flow, or even in extreme cases an agreed settlement figure to ensure costs and losses are kept to a minimum.

As a company, we see flexibility and communication as the key to a successful partnership between ourselves and the excellent breweries we supply. While we cannot always help in every situation, and sadly we have had to pursue legal channels in the past to get a contract settled, we will always try our best to find a mutually beneficial solution first. After all, as lovers of good beer in this wonderful industry we share, it is vital to keep the pumps flowing.