The Ultimate Guide to Hop Contracting

Hop Contracting is an essential part of commercial brewing. Let’s face it, hop contracting can be a scary and daunting task, one that most brewers hate to face. We’ve all heard stories of breweries caught up in bad contracts, sometimes for several years. Creating, signing, keeping up with a hop contract, and, crucially, acknowledging when it can’t be done – is something we have all been guilty of putting off, especially as it often involves poring over spreadsheets and attempting to forecast the future. This is never fun.

We must recognise that hop contracts are one of the most important tools in your armoury as a brewer or operations manager, and, armed with the right knowledge and the right partner, a hop contract can guarantee you get the most out of one of the key ingredients in your beer.

If you’ve not contracted hops before, or if you haven’t contracted for a while, it could be the time to re-evaluate and give hop contracting a go. Even if you already hop contract, you even might find a few useful hop contracting tips in here which might help you out in the future. Read on…

Hop Contracting in 2024

Just like the brewing industry – as well as both on-trade and off-trade consumer beer demand – the hop industry has been in a state of flux. The craft boom, Covid, supply chain issues, war in Ukraine, cost of living crisis, interest rate rises – all have compounded to have their effect in micro and macro levels on consumer behaviour, and on brewery business models too. With this, we’ve seen changing demands and trends – from the historic days of a simple core range of beers, to a VAST proliferation of experimental styles, and, as things stand currently, back to something approaching a consolidation of the two. Given that hops are an agricultural product used (almost) solely in the production of beer, this has left the hop industry in a state of flux as well. With an ever-changing market, it’s more important than ever to review your approach to hop contracting.

Why Should I Have a Hop Contract?

The elephant in the room is the most fundamental one – particularly for those of us who’ve enjoyed a relatively good pick of hops from spot lists over the last few years – and that is, should you bother with a hop contract at all?

The answer here is that hop contracts aren’t right for every brewery, and it’s inadvisable for every brewery to take ALL of their hops on a contract (more on that later). However, there are crucial benefits to hop contracting. Some of those benefits are obvious, and some you might not be expecting:

Guarantee Your Hop Supply

The only way to absolutely guarantee you have the supply of the hop you need is to contract that variety. There are numerous factors at play which affect the spot hop market – poor harvests with low yields, spikes in demand, or simply a hop not being brought in on spot by your supplier that year. In the last few years, we’ve seen poor yields of hops like Centennial in the Pacific North West USA (down over 30% year on year in Oregon), and of almost all German hop varieties as a result of climate change. If these hops are in short supply, then the breweries with contracts will always receive priority.

We’re seeing more evidence of an ever-changing market too. In reaction to fairly strong spot hop stocks over the last few years, there have been far fewer hops strung in the Pacific North West USA this year – down some 18%, hitting both public and privately owned varieties. Farmers are unable to take the risk of growing too many hops if they’re unsure of the market, with the possible result that there are fewer available on spot next year (but more on that later). The predictions from Europe aren’t all that positive either – despite challenging yields over the last few years, acreage strung in Europe will actually be down slightly year on year.

The takeaway message is this – if a hop variety is essential to your core range of beers and you don’t have a good stock of it already, it’s absolutely something you should consider contracting in order to guarantee your supply. You can’t expect it to necessarily be available for spot purchase next year.

Help Farmers Grow the Hops You Need

We are all interconnected in the industry. Margins are tight and risks high. But the biggest risk and tightest margin sits with the farmer growing your hops. The only way a hop farmer can estimate what to grow is through forecasting, with a hop contract providing the most accurate kind of forecast. As a hop is a specialised beer only ingredient, it’s a simple fact that a farmer needs to know there’s a market for a hop variety when it’s taking up valuable acreage which could be used to cultivate another hop, or just something grow else altogether. Couple this with the immensely long lead times plus the slow process of growing hops, and the need for accurate forward forecasting provided by a contract becomes crucial. Many hop farmers are independent family farms too, like Goschie Farms, Coleman Agriculture, and the Crosby Estate, who are going to be even more reliant on forecasting information. These hop growers need security in their planning for future years and this can only be provided by a hop contract.

The same is true in developing new hop varieties too.  Bringing a new hop to market is challenging. Programs like the Indie Hops Flavor Project are carefully planned, supported by world-class agronomy (via the only public-private partnership of its kind with Sean Townsend of Oregon State University), as well as a close relationship with nurseries and farms, meticulous sensory panels, and brewing trials. Even with all this, a new hop’s first few years in the market are crucial, and hop contracts play a key role in sustaining, nurturing and guaranteeing supply of new varieties. If there’s a new hop you’ve fallen in love with, then consider contracting it. This will not only help to guarantee your supply when it proves a smash hit on the spot market, but will also allow producers and developers to accurately predict future demand and commit to the acreage to make sure that there are enough plants in the fields for the following year.

You Can’t Rely on Spot Hop Availability

While brewers in the UK and Ireland are fortunate to have many locally grown hops which serve traditional beers very well, the fact remains that the bulk of our hops which meet modern craft beer consumer demand are imported from the USA, New Zealand, Australia, or mainland Europe. Moving hops across country, sea, and even whole continents is a long , complex and expensive process. If there’s not the justification through contract demand to move a hop variety into your market for that crop year, you can’t guarantee you’re going to find it on your spot hop list. And, with the costs and lengths of time of moving these hops, that might be your only intake of crops from that country for that crop year.  If there’s a hop you can’t risk waiting months and months or more until you have it, contracting is your best way of securing your supply.

Without A Contract, You May Be Using Older Crop Year Spot Hops

If you haven’t got a hop contract, you may have to accept that the only way to get access to your favourite variety is through an older crop year. If there’s no contract in place and with acreage being cut, then you’re going to have to accept that there’s going to be less of that hop around for the current crop year, so there will inevitably be less on the spot market too. This isn’t always a negative, as the canny brewer will understand that there are variations between crop years, and an exceptional quality harvest from a previous crop year – if stored cold and under the correct conditions – can be preferable to a current lot. But if newest is always best for you then this is something to bear in mind, and a risk you need to weigh up if you don’t contract.

The Best Way to Get Stable Prices on Hops

It would be dishonest to say that a hop contract will always offer the rock bottom cheapest ever price on a hop. As we’ve established, the challenges of the hop market mean that there can be occasions where prices on spot for a certain hop variety and crop year do end up cheaper. However, this can’t be guaranteed, and as the old adage goes, prices can go up as well as down. What is guaranteed though, is that a hop contract offers you the only promise of pricing stability for your hops, which is absolutely crucial for your business. With a contract, you have the peace of mind knowing you’ve locked in your pricing at a competitive rate for the duration of your contract, and you can now accurately plan and predict at least one portion of your ingredients costs for your recipes which is essential to your year-on-year planning. If the last few years of energy prices have taught us anything, pricing stability for a core aspect of your business makes life a lot less stressful – and makes you more popular with your finance team and accountant too.

Hop Contracts Bring Guaranteed Hop Quality & Consistency

Hot on the heels of pricing stability and supply (if you haven’t guessed yet, hop contracts are all about security and guarantees) is quality and consistency. The only way you can ensure you get the same lot of hops for your brews is with a contract, where you can draw down on your specific selected lot as and when you need. With spot purchasing, you may be fortunate enough to be accessing a pool of the same lot, but once this runs out you can end up with a different lot altogether. Worse yet, without a contract, you may even be forced to switch to a different hop supplier on the spot market, and this supplier may not offer the quality of hop or hop processing you are used to, which can totally undermine the consistency of your beers.

Hop Contracts Give Access to Market Expertise

Perhaps one of the most overlooked (or underestimated) benefits of hop contracting is the opportunity it brings to connect you to the hop producer and supplier of your hops.

As you draft your hop contract, tap into the expertise available. Your supplier will have a good understanding of the current and future hop market, given that they’re dealing with multiple breweries, and with the best hop producers and farmers too. Use their knowledge and experience to help inform your contract, and reap the benefits.

Hop Contracts Can Bring Sales & Marketing Opportunities

Remember that a hop contract relationship doesn’t stop with the signing of a contract either. The right supplier for your hop contract will be the one who stays in touch with you throughout your contract drawdown, and one you can maintain a good dialogue with (more on that later). As the relationship and contract grows and evolves you reap the benefits of your relationship, with potential opportunities to select your specific lots yourself, travelling directly to your hop producer to meet the farmers who grow your hops and the pelletisers who produce them. Selecting directly from bales is an amazing experience (as well as a fantastic story for your marketing team), and one your brewery can engage with through a well-developed hop contract relationship.

From this, another benefit of a good hop contract relationship is the direct links it builds between you and the producer of your hops – like Crosby Hops™, Indie Hops or Hop Revolution™. Projects like DEYA’s annual ‘Steady Rolling Strata’ release (substituting Indie Hops own developed variety Strata® into ‘Steady Rolling Man’) would not be possible without DEYA’s ongoing strong relationship with Indie Hops, and their commitment to contracting Strata® each year for this project. Contracting Indie Hops Strata® allows DEYA the chance to select their Strata® lot from bales, and this forecasting through a contract gives Indie Hops the time to plan and pelletise the Strata® and have it reach DEYA in double quick time – from farm to glass in just a few months.

Similarly, through contracting, DEYA, and breweries like Northern Monk and Wylam are able to gain access to brand new Indie Hops releases like Luminosa® to brew with before there’s enough of that variety to hit the spot list.

Can Small Breweries Hop Contract?

Many breweries will have been put off the idea of contracting hops on the assumption that they’re not ‘big’ enough for a contract. Whilst it’s true that a lot of brewery needs can be met by spot hop purchases, as we’ve established, there’s loads of benefits to hop contracting, and a smaller brewery really shouldn’t miss out. We’re able to offer you the opportunity contract as little as 5 kg on all hop varieties we offer, so barrelage a year is not a barrier to guaranteeing the supply of the hops you need for your core beers.

Can you Change a Hop Contract?

Contrary to some perceptions, hop contracts aren’t completely inflexible. A good supplier wants to create a contract which is workable for both parties, and, crucially, is mutually beneficial. On the occasion when the worst happens and a brewery doesn’t think they’re going to be able to draw down their contract, the most important aspect is good clear communication and dialogue with the supplier. If the brewer is honest with the supplier, then often, a solution can be found. This might involve moving allocations around, and swopping out one variety for another. Whilst a contract shouldn’t be entered into lightly, it’s in everyone’s best interests to find a workable solution to a drawdown problem, and a contract with the right supplier can and does have the facility to offer this when it really comes to it.

Hop Contracting Mistakes

Despite the many benefits of hop contracting, we all know tales of breweries who have found themselves in difficult situations. A lot of the time this can be as a result of mistakes made at the point when the contract was drawn up. Here’s a few classic hop contracting mistakes to avoid:

Badly Forecasting Beer Demand

No one can predict the future, but a degree of sensible planning is a must. There is no point coming up with a wildly inaccurate and impossible to meet forecast which will rely on you brewing an insane volume of beer with a crazy gramme per litre dry hop. You’re never likely to meet this – leaving you with a surplus of hops. You might not even be able to store this huge volume of hops properly, and, worst of all, not be able to afford to pay for them. Be realistic. If it comes to it, you can always have a conversation with your supplier to try and acquire more, or dip into the spot market to top up.

Over-Contracting Hops

Being stuck with loads of a particular hop variety which you’re just not moving through is a big barrier to recipe creativity and evolving your brewery too. Again, be realistic on what you think you need to give yourself some wiggle room to follow some of your creative whims, which brings us on to…

Issues Predicting Consumer Tastes in Beer

It is impossible to predict the consumer’s whims, but careful consideration should allow you to weather most changes in consumer behaviour (within reason). The key here would be to avoid putting all your eggs in one basket.

Signing Bad Hop Contracts Over Multiple Years

It is crucial to regularly review your hop usage, inventory, and hop contract, and not make the same mistake year-on-year and compound any of the issues above. Proceeding to just keep doing the same as before can be more than a risk than you think, especially given that we know the market is regularly in a state of flux. If in doubt, or if you’re new to it, perhaps focus on just contracting one year ahead.

Bad Communication Leads to Hop Contract Problems

Failing to communicate with your hop supplier, either when you need to draw down hops, or are going to be unable to draw down all the hops in your contract is always going to lead to problems. We’ve already seen that a lot of contract issues can be solved with a good dialogue between you and your supplier.

Similarly, a bad hop contract situation can often be created by poor communication between the production, finance and sales/marketing teams in your brewery. If the sales and marketing team is focused on pushing a beer which doesn’t use your contracted hops, and your finance team is unaware of the terms of the contract (or worse yet, doesn’t have the funds to fulfil the contract you’ve signed), you’re going to end up with a messy contract which could otherwise have been avoided. Make sure everyone is on the same page.

How to Get the Best Hop Contract

With the benefits and risks in mind, what should a good hop contract look like?

Which Hops Should I Contract?

Deciding which hops to contract is very difficult. Good advice would include:

Think about contracting hops which go into your core top selling beers.

Pay close attention to the hop market, and particularly the acreage data for what volume of a particular variety has been strung that year. Think about and analyse trends in hops. Based on the evidence of the last few years, and this year’s stringing report, we might say that:

• Contracting hops from the Pacific North West USA could be very prudent as there’s likely to be significantly fewer harvested (so less available on spot)
• Contracting public US varieties may prove sensible – for instance, last year’s Centennial harvest had poor yields. Couple this with the way the market operates with large producers owning trademarked varieties putting their weight and resources behind trademarked varieties, encouraging a farmer to grow your favourite public variety may be prudent.
• Contracting hops from small independent producers who develop new varieties, like Strata®, Luminosa®, Lórien® – or even the brand new Audacia® – could be wise as the demand for these hops can spike as they continue to become established in the market.
• Consider contracting advanced hop products like CGX™ cryogenic lupulin pellets, which are new to the market and can offer you efficiency savings with no compromise in flavour and aroma when judiciously balanced with T90s.
• Contracting German hop varieties may help to guarantee you have access to German hops as climate change continues to have severe effects on hop yields in Northern Europe.
• Consider contracting imported hops, as we’ve established how long winded and complex it is to move them. This is especially true of hops like those all the way from Hop Revolution™ in New Zealand. If there isn’t forecast demand for these hops, there’s no guarantee you’re going to find the New Zealand hops you need on the spot market when you really need them.

Advice on Hop Contracts

Talk to your sales manager. It’s what they’re there for. Ask them what their insight is into the state of the hop market, how other breweries seem to be behaving, and discuss current trends. Your sales manager is uniquely positioned as a bridge between hop farmers and hop producers, and probably talks to more breweries more regularly than you’re realistically able to. Use their knowledge to your advantage when you figure out your hop contract.

Drawing Down Hop Contracts

Talk to your supplier about how you draw down your contract. What are their storage facilities like? How good is their customer service? How speedy is their shipping? Can they get you your hops out quickly when you need them? (We can!) Plus a supplier with an industry-leading next day delivery service who can offer you all your other brewing ingredients like malt, adjuncts, yeast, brewing aids and KeyKegs the next day on the same pallet can be pretty useful here. Just saying…

Hop Contract Terms & Conditions

Make sure you’re aware of all of the terms of your contract, particularly the drawdown period, payment terms, and storage fees. You need to make sure that your finance team is wholly aware of the structure of the contract you’re going to sign to ensure that the contract is paid on time to avoid any delays or complications. If you go into a hop contract fully aware of the terms, you’re unlikely to face any nasty surprises.

Choosing a Hop Contract Supplier

If it hasn’t been obvious enough so far – get to know your hop supplier! This is someone you’re going to be working closely with over the year or more duration of the hop contract. Your supplier should be someone who you can rely on for support, who understands your needs and the industry, has a great focus on quality and a focus on the future and, crucially, shares your values too.

Are You Ready to Start A Hop Contract?

If you’re new to hop contracting, hopefully you’ve found some of our advice on hop contracting useful, and even if you’ve already been working with hop contracts, there might have been some new ideas and tips which can help inform your decision making in the future. A hop contract isn’t right for every single brewery all of the time, and should be balanced with a prudent use of spot hops too. What hop contracts are though is a mitigation against risk, and a guarantee that you can get the hops you need. After all, are you really willing to take a risk on something as important to your beer as hops? There is no one-size-fits-all approach to hop contracting, and the ideal hop contract for your brewery should be tailored to your production size and your needs and be sustainable. It should represent a good distillation of your fantastic relationship with your hop supplier, forming part of your ongoing constant dialogue with some of the best people in the industry.

If you want to talk hop contracts, we’re always here to listen. Drop us a line at sales@brewersselect.co.uk to chat to Rob, Fergal, Jethro or Dan. We’ll source you the best hops from the world’s best producers.