Supply and Demand, Ensuring our raw material future together Justin Livengood Inventory Manager BSG Ph: ;

In an age of massive brewery expansions, new breweries, and an overall explosion of growth in craft beer comes an increasingly tighter strain on the raw materials needed to support this growth.

Ring Ring– Hello favorite supplier – I need ingredients now….. help! This is Mr. Norris, you know, from Make My Day Brewing Company! Our Brewmaster has done it again, and our branding, marketing, and sales folks have pre-sold 500 bbl’s. of a new seasonal that we need to begin brewing ASAP to meet demand.

Favorite supplier - I’m sorry but we are all out.

Supply Chain 101 Farm (Plan, Grow, Harvest) Distribution (Plan, Source, Buy) Brewery (Plan, Source, Buy) Customer ( Buy…..Drink) Once the actual product is ready for distribution, this process can take anywhere from 2 to16 weeks depending on where the origination point is located.

Can supply really dry up? YES Decreased farm acreage Pricing wars with feed and ethanol leading to change in planted crops. Production, malting, and roasting capacity Weather instability Rising populations Unprecedented growth in craft beer

What growth? Total bbls produced are actually down 1.64% since “Beer is considered a mature product so that growth is primarily the result of increased in population” - Agricultural Marketing Resource Center 2013

U.S. Brewery Count

Growth in U.S. Craft

Growth in Worldwide Craft

How does this translate to raw materials?

Rice

Corn

Barley

Wheat

Hop Extract

Hops (Dry)

Acreage is up but production is down Hops

Acreage strung report U.S. Aroma Hops U.S. Alpha Hops Ahtanum(D) Apollo ® Cascade Bravo ® Centennial Chelan(D) 292 Citra ™ Chinook Cluster CTZ Crystal(D) Galena El Dorado ® - -(D) 96 Magnum(D) Glacier Millennium Golding(D) 263 Nugget Liberty(D) Simcoe Mosaic ™ - - -(D)339 Summit ™ Mt. Hood Super Galena ® Northern Brew Warrior ® Palisade ® Perle - -98(D) Sterling (D)122 Tettnanger(D) Vanguard -(D) 5976 Willamette Other 1/ Other 1/ Total Acreage Total Acreage Source: USDA (D) Withheld to avoid disclosing data for individual operations % acreage aroma42% 1/ Includes data withheld to avoid disclosure of individual operations and varieties not listed % acreage alpha58%

Supply VS Demand $$$

Barley Acres and Price

Wheat Acres and Price

How do we move forward and ensure the best possible future for our industry? With communication and planning.

Key Challenges

Fight For Acreage – Western Canada

Ever- increasing number of hop varieties

Hop production capacity

Malt Roasting Capacity The sooner you can give contracts or projections for the following year the better to secure that roasting space.  Large volume brewers should look into contracting to ensure security of supply.  Small volume brewers should provide projections to ensure supply

Heritage Barley Varieties

Don’t go at it alone. Together is always better.