CBC 2014: Managing a Seasonal Portfolio

NinkasiAs seasons change, so too do the leaves of trees, providing shade as canopies of green in the summer before evolving into bouquets of yellow and orange in autumn, only to wither away entirely in the cold of winter. Then, they bloom again in spring.

Craft brewers might find it more poetic to note the passing of time by paying attention to the seasonal SKUs that line the shelves of their retailers — the category is big business, after all.

In 2013, seasonals accounted for 17.9 percent of all craft sales in supermarkets, according to data from IRI, a Chicago-based market research firm. The category reached $219.4 million in sales, second only to IPAs in terms of dollar sales.

Despite booming sales for the category, craft brewers often have to contend with the fickle nature of seasonal beer consumers.

“As anyone who makes an Oktoberfest knows, no one wants to buy that beer on November 1st,” said Jessica Jones, COO of Ninkasi Brewing in Eugene, Ore. during a panel discussion on seasonal offerings at last week’s Craft Brewers Conference in Denver, Colo.

Nevertheless, seasonal beer is playing an increasingly important role in the portfolio of craft brewers. Jones, alongside Matt Gordon, the director of operations at Brooklyn Brewery, and Erik Lars Myers, the founder of Mystery Brewery, offered their respective takes on how to properly manage the segment, emphasizing the importance of forecasting what materials will be needed, when they will be needed and finding the middle ground between cost and convenience in the acquisition of those materials. Panelists also suggested that craft brewers incentivize wholesalers to “buy smart.”

Ninkasi already has its seasonal calendar set for 2015, said Jones, adding that the brewery likes to plan as far ahead as possible. This kind of advanced planning helps to shrink lead times on packaging and ingredient needs, she said.

It also helps to consider the size and locality of a given supplier.

“We have some packaging material suppliers for whom we’re a very small fish in their pond,” she said. “When their normal lead time is four weeks, sometimes they come back to us and say, ‘Hey, this time around it’s six.’ Well, that just screwed me, because I was counting on four.”

It works the other way too, Jones noted.

“We’ve got other guys — our label suppliers, they’re right in Eugene — and we’re a big customer for them,” she continued. “[We have] our normal lead time, [but] if I come back to them and say, ‘Can you get me this in three days?’ They’ll say, ‘Yeah, we’ll get that to you in three days.’”

However, Gordon said there is a balance to strike between speed, lead times and price.

“With our Oktoberfest beer, we have specialty malts coming from Germany,” he said. “We can get a much better price by ordering a container’s worth, but that order has to be placed three, four months in advance. We can go through a supplier or broker who is much more local to us where we can get that same malt with a week’s lead time but at a much higher price. We’re constantly balancing those tradeoffs.”

Myers, whose North Carolina-based company brews only seasonal and one-off beers, said due to the small size of Mystery — it produced 850 barrels in 2013 — it will almost always err on the side of local and fast.

“It’s so important to get things in a timely manner because for us it’s our entire portfolio,” he said.

Whichever route a company chooses, no matter the size, the panel agreed that scheduling is key and companies should communicate timelines to both distributors and suppliers, to help keep everyone in the loop.

“It’s absolutely worth talking to your suppliers no matter how small you are to get that in place,” Myers added.

But exemplary preparation in getting the beer ready won’t clear hurdles that arise once the beer is out of a brewery’s hands. Opting into buy back agreements with distributors is also a thin line that brewers need to be wary of and toe carefully. On the one hand, if a wholesaler has a safety net in the form of a brewer’s willingness to buy back 100 percent of that which doesn’t sell, “what incentive does a distributor have at that point to order smart?” asked Jones.

“We’ve seen distributors place order for five times as much as they could possibly ever sell, because they’re just insuring themselves,” said Jones. “They come back to you and say ‘Hey, I want to give you all this beer back.”

On the flipside, a staunch no-refund type of policy isn’t exactly favored by distributors, she said, adding that some sort of compromise or balance is necessary in order to keep out of season beer off shelves and away from consumers.

“I like something a little balanced where distributors have some skin in the game,” said Jones. “But you also have a way to cooperate and show that you’re also invested in getting fresh, good beer out there at the beginning of each new season.”

Myers said that at Mystery, the company tries to incentivize sales reps to move through the newest, freshest beer, so it buys back everything that doesn’t sell two weeks after the end of the season (though Mystery, he added, has the luxury of being able to pull that beer back into its pub).

Gordon said it’s hard work to avoid these types of situations, where a brewer is either forced to buy back beer or see it hit the market outside of its prime. To do so, he said, companies must time the changeover between seasons accurately.

“[It’s about] avoiding having any excess inventory in one place of the supply chain when it could actually have been used in another place,” he said.

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