Supply and Demand,

Ensuring our raw material future

together

Justin Livengood Inventory Manager BSGPh: 303.217.8655; E-mail: jlivengood@bsgcraft.com;

www.bsgcraft.com

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 2000.“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 reportU.S. Aroma Hops   U.S. Alpha Hops

  2009 2010 2011 2012 2013     2009 2010 2011 2012 2013

Ahtanum (D) (D) (D) 176 211  Apollo ® 747 827 885 874 974

Cascade 2171 1850 2371 3039 5330  Bravo ® 335 414 593 528 620

Centennial 298 357 820 1686 2233  Chelan (D) (D) (D) (D) 292

Citra ™ 98 113 239 538 1278  Chinook 384 443 572 1215 1672

Cluster 501 392 482 546 682  CTZ 11402 7841 7106 5776 6317

Crystal (D) (D) (D) 154 308  Galena 2412 1920 1415 954 450

El Dorado ® - - (D) (D) 96  Magnum (D) (D) 64 58 86

Glacier 70 61 44 56 98  Millennium 557 555 403 397 381

Golding (D) (D) (D) (D) 263  Nugget 2801 2185 2299 2494 2047

Liberty (D) (D) 108 83 131  Simcoe 183 237 495 940 1264

Mosaic ™ - - - (D) 339  Summit ™ 3286 3100 2700 2721 2881

Mt. Hood 254 250 309 346 247  Super Galena ® 1016 1020 1231 1134 1213

Northern Brew 92 94 159 120 145  Warrior ® 301 296 260 195 183

Palisade ® 351 373 308 264 152             

Perle - - 98 (D) (D)              

Sterling 101 87 86 (D) 122             

Tettnanger (D) (D) 70 137 68             

Vanguard - (D) (D) 59 76             

Willamette 5188 3186 1673 1597 1104             

Other 1/ 3568 2844 2499 2923 1889  Other 1/ 3568 2844 2499 2923 1889

Total Acreage 12692 9607 9266 11724 14772  Total Acreage 26992 21682 20522 20209 20269

Source: USDA

(D) Withheld to avoid disclosing data for individual operations % acreage aroma 42%

1/ Includes data withheld to avoid disclosure of individual operations and varieties not listed % acreage alpha 58%

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

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 -

10,000

20,000

30,000

40,000

50,000

60,000

70,000

Flaxseed Oats Special Crops All Wheat Barley Canola

Year

000

Acr

es

Ever- increasing number of

hop varieties

Hopproduction 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.