Supply chain issues hitting local breweries in unique and painful ways

That cart with the green containers will eventually have to move at Bow & Arrow to make room for three new 30-barrel tanks. When those arrive, however, is anyone’s guess. (Photo courtesy of Ted O’Hanlan)

Stop us if you have heard this before, but the global supply chain is a mess right now.

As one might expect, this is having an effect on breweries throughout New Mexico, just like all the other businesses around the world. Over the last few weeks, via email and in-person interviews, we found a handful of brewery representatives who were willing to talk about the many challenges they now face, and how that will impact almost everything going forward through the slowest time of year in terms of sales.

“Please, this winter, encourage everyone to go out and drink beer on draft, fill your growlers, fill your kegs, and help as many breweries as you can,” said La Cumbre owner/master brewer Jeff Erway.

This is the cold new reality that breweries are facing.

The breakdown of the global breakdown

“I don’t know how much you’ve read about what’s happened in global shipping, but that Suez Canal debacle was about the last thing in the world we needed to have happened,” Erway said. “China is not accepting recycled goods from the United States right now. So, how do we get Conex boxes back to China? The Port of Beijing, every time there’s a single COVID case, they shut the whole thing down for 10 days. It’s happened like eight times in the last 18 months. The Port of Houston, the Port of Long Beach, all of them have shut down at least once for quarantines. So what this means is very often there’s 50 to 100 tankers, huge freighters out in the middle of the Gulf of Mexico or just off the L.A. coastline, just waiting for somebody to unload them.”

Conex boxes, for those unfamiliar with the term, are the standard metal shipping containers that you see on top of ships, at ports, on train cars, and flatbed semi-trucks. At one point in recent years, there was such a surplus that many unused Conex boxes were repurposed into creating places like Green Jeans Farmery and Tin Can Alley.

“And then, there’s just the overall shortage of Conex boxes,” Erway said. “But, every single port that I know of, every major port has gotten shut down at least once, if not several times. The Port of Hamburg where our malt is coming from has gotten shut down twice, I know.”

As for when this might all end and go back to normal, or what passed for normal in 2019 and earlier, the honest truth is it may never do that.

“I think anyone who can tell you with certainty when things will return to pre-pandemic expectations is lying,” said Steel Bender sales manager Adam Auden. “There’s still a lot of backlog in the system and it’s really impossible to say when it will be cleared. It’s just a case of planning ahead as best you can and keeping some buffer built in to your planning to ride out any unforeseen delays.

“As Shelby (Chant, co-owner and marketing director) has often said, we’ve got really good at pivoting through all this, and agility is key when these surprises show up to test us.”

Roasted barley, wherefore art thou?

German malts are in short supply for just about everyone these days. (Photo courtesy of Bob Haggerty)

The malted grains that make up the base of every beer have been particularly affected, not in terms of being grown, packaged, and prepared, but in terms of getting them to the breweries, big and small.

“For malt, domestic malt has not been an issue except for the shipping issue,” Erway said. “Where we used to be able to call our bulk silo (malt) supplier and have something here within two to three days, now they’re asking for two to three weeks lead time. Well, we fill it every two to three weeks. Especially during the busy months, it’s like every two weeks, so you’re telling me that as soon as it gets in I’ve got to order my next one, and I’d better not be off by more than about 8,000 pounds. Because if I’m off by more than 8,000 pounds we’re either going to overfill the silo or we’re going to run out of malt.”

Even for those ordering just bags of malt, as opposed to filling silos, it has been equally difficult.

“We’ve seen interruptions locally, too,” said Bow & Arrow head brewer Ted O’Hanlan. “There’s so much going through the system right now that domestic shipping is really backed up as well. It’s sometimes taking an extra day or two, sometimes an extra week to get malt that’s just coming to us from Denver. It’s not anybody’s fault. I can get frustrated about it, and sometimes I do, but it’s not one person screwing something up. The system is just overwhelmed right now.”

That is certainly a pain, but nothing compared to getting malt from overseas to keep those German-style and English-style beers flowing.

“As far as specialty malts, what can I say?” Erway said. “If you’re looking for malt from overseas, especially from Germany, some of the suppliers have simply run out completely. You’ve got to feel for some of the smaller guys here that’s their bread and butter, they use Weyermann pilsner malt, I think for about six or seven weeks you could’t get it. We are lucky that we direct-ship malt from the Port of Hamburg. But, the lead time on that has gone from six weeks to 14 weeks. And, that was six weeks from the mastery door to our door. Now it’s 12 to 16 weeks, in quotation marks. Basically, it’s going to take them 12 to 16 weeks, they think. What that really means is it’s going to take 12 weeks to reach port, and once it reaches port, who the hell knows how long it’s going to take to get the Conex box off the freighter, on a truck, going through customs, that kind of stuff. That’s been a nightmare.”

In a way, everyone should probably be thankful that any Oktoberfest-style beers made it to taps and in cans this fall.

“Like everybody else, we’ve had issues,” O’Hanlan said. “It can something as simple as an international ingredient that you’re used to getting, like some specialty pilsner malt, or really any European malts in general. We mostly use domestic malts in our beer, but specialty malts are just something you can’t really substitute. Special B is what it is. There are dozens of examples like that. You call up or email your representative and try to put in an order and they say we’re out of this one this week. Munich? You’re out of Munich? OK! It is what it is and you wait a few weeks and you order again.”

Ponderosa head brewer Antonio Fernandez said he has also faced shortages and delays, which can be especially tough on a smaller brewery.

“Malt has been my main concern in the brewery, with it being tough to get the German malt I use frequently,” he said. “Luckily there are very good American Euro-style malts that are available now, maybe not quite the same, but very doable in the circumstances.”

How are all those hops and yeasts coming along?

All those little hop pellets are taking a lot longer to arrive at breweries, and costing more.

The majority of hops used in breweries are grown and processed in the Pacific Northwest, but the more exotic brands from other countries are facing the same delays as anything else that requires ocean transit.

“It’s been a hell of an ordeal this year getting Southern Hemisphere hops into the U.S.,” O’Hanlan said. “Typically those usually drop between June and August. We’re in October and our Motueka hasn’t made it to the country yet. It’s somewhere and they don’t really know where. We got our Nelson (Sauvin) contract in, so that’s good. But, Motueka not yet.”

As if hops were not expensive enough, the domestic delays are making things even more difficult.

“On the hops front, luckily the harvest is the harvest, so we haven’t had huge supply issue problems,” Erway said. “That’s been shipping issues. What used to be a $3,000 shipment from Yakima is now an $8,000 shipment from Yakima. And, that same Conex box we used to get from Hamburg that was $4,500 is now $11,000 to get it here.”

One good thing, if you can call it that, has been a development on the yeast front.

“Yeast, the only major issue with yeast was the shipping delays, major shipping delays,” Erway said. “What used to get here overnight, or at most six or seven days is now taking a lot longer. That’s the other issue, (is that) it’s actually opened up the market quite a bit. It’s nice to see there’s quite a bit more competition in the yeast supplier market. Because of the pandemic, because all these breweries were brewing specialty beers, (and) because all the brewers were trying to get specialty beers into cans. The three major suppliers of yeast in this country were just completely overloaded. Lead times went from six to seven days to 21 days to we don’t know when we’re going to be able to get it to you. I’m talking for Chico Ale Yeast, the most widely used yeast in this country. Now that’s kind of opened up the market. There had been three or four other yeast suppliers that had a small portion of the market; well, they’ve gotten a much bigger portion of the market. So that’s been good.”

Brother, can you spare some spare parts and packaging?

Keeping the canning lines running, like this one at Bow & Arrow, is becoming a tougher task.

The can shortage that was already impacting breweries is still around, though certain breweries are dealing with it better than others.

“That seems to be slightly alleviating as of recently, but it’s certainly not gone,” Erway said.

Bow & Arrow has not been as lucky.

“We were really fortunate not to have an issue with receiving cans for a long time, but now we’re dealing with that, too,” O’Hanlan said. “We’re really a small fish in this whole sea of can buyers. We’re very insignificant, but we’re able to roll with it. We’re doing fine. It helps that we’re not using any printed cans. But, our label producer has been having trouble keeping up, too, receiving raw materials, and shipping has been backed up. They’re not even giving us predictions on delivery dates anymore. They say order as early as you can.”

In terms of labels, La Cumbre has been dealing with that issue, too.

“We were in the middle of a big packaging line expansion,” Erway said. “We have a 100-can-per-minute line on the way. Lead times on that were greatly extended due to the microchip shortage. They’re hoping they’ll be able to have it to us by late February/early March, but they can’t really guarantee it right now. All the other components that go along with it, the conveyor belts, the X-ray, the date coders, the labeler … that’s the other thing, the labeler company that we’ve been using for a while, I won’t throw them under the bus, but they probably deserve it. They simply were caught with their pants down. They did not realize how much … obviously, who could have predicted how many (more) breweries would be canning and labeling cans coming into this. But, they were woefully unprepared when it comes to all the support equipment that would be needed to keep these labelers up and running.”

With spare parts in short supply, breweries are getting creative to keep everything running.

“Like everything on the packaging line, everything is a wear part,” Erway said. “The labeler is no different. We actually ended up machining several of our own parts just to keep things running. No, it’s not (fun).”

Other elements of packaging are doing fine, but costing more.

“Luckily we haven’t had any issues with cardboard,” Erway said. “Because of the whole issue with recycling plastics, our pack-tech carriers have gone up significantly in price.”

The not-so-wonderful journey of Bow & Arrow’s new tanks

We just want everyone at Bow & Arrow to be as happy as Erin was when we brewed Pastry Slayer last year.

As already stated, getting any product from overseas has been an ordeal. Malts and hops, however, pale in comparison to actually brewing tanks.

“The primary issue that we’ve been dealing with this year is our planned expansion,” O’Hanlan said. “I’m trying to remember exactly when we put a deposit on three 30-barrel uni-tanks, which effectively doubles our production capacity. They took longer to complete, because there’s a labor shortage. The tanks were being manufactured in China. Then there was a long delay from the end of manufacturing until they shipped, because there’s a shipping container shortage which there continues to be.”

That all sounds familiar by now. But, oh, it is just the beginning of this tale.

“Then it took another month to cross the Pacific — I’m not exactly sure what’s up with that, we never got any (specific) information on it — so once they got over, the tanker sat off the Port of Long Beach for six weeks or so,” O’Hanlan said. “It was something like that before the port authority told them to turn around and sail back. I’m not sure if this related to the oil spill or whether it was too many ships creating a dangerous situation.”

All of it has led to a crash course for the Bow & Arrow team to learn about the process.

“I’ve been trying to stay on top of general updates about international shipping,” O’Hanlan said. “The company we’ve been buying from has been sending us interesting information. He sent me this in June or July, but in May, Long Beach did something like 1,043,000 containers, and no port in the Western Hemisphere has ever processed more than a million in a single month. It’s like we’re breaking records every month. People are hungry. Products need to get back out there again. It’s everything, it’s every conceivable product from golf clubs and bicycles to brewing tanks, anything that’s fabricated overseas.”

So where are those uni-tanks now?

“Now it’s back on a boat,” O’Hanlan said. “It was supposed to arrive in Long Beach on Saturday the 16th. Our estimates are somewhere in that four-to-eight-week range for it to get unloaded. Customs isn’t holding anything up right now. There’s no red tape. They’re letting anything that passes inspection through immediately. Then it’s a matter of finding a domestic carrier who can get it to you. It might wait for a couple more weeks for a domestic carrier that can drive across three states to bring you your product. We’re optimistic that we’ll get our tanks in and brewing into them in December, but we’ve been optimistic before.”

The smaller breweries try to stay optimistic

The beer hasn’t been an issue at Rumor Brewing, but keeping the delicious pizzas rolling out the door has been a challenge.

Right from the start of our interview, Erway said that the issues La Cumbre was dealing with were likely nothing compared to what the many smaller breweries in Albuquerque and beyond were facing.

“I think for the smallest of brewers you’re probably looking at some pretty dire circumstances, simply not being able to get ingredients that you want, not being able to get cans and stuff,” he said. “For larger brewers like us, it’s just a logistics nightmare.

“And, once again I find myself bitching and moaning about how much everything is costing and how short of supply everything is and how long everything is taking, and yet I look at some of the smallest of breweries, people who I was in their shoes 11, 12 years ago, and I simply can’t imagine how challenging this has been when you’re only ordering a pallet of malt every two weeks. How high on that supplier’s priority list are you?”

Of the smaller breweries that did respond to us, they all tried to paint a somewhat more optimistic picture.

“We’ve taken big steps to get our supply chain(s) slimmed down as much as possible since opening last October,” said ReSource Brewing co-owner/head brewer Shawn Wright. “That being said, while focusing on a ‘just-in-time’ model our biggest bottleneck has been the shipping itself … most carriers are overloaded globally and it has been taking longer than desired to get the ingredients from point A to point B and ultimately to our brewery. Overall, we’ve just learned to expect this as the ‘new normal,’ and things have been running pretty smoothly. Since all of our beer is sold in pint glasses and glass growlers, things have been flowing well (pun intended). With most of our customers returning their used growlers to us for processing we’ve been able to keep the overall net input of our packaging cost to $0. So in short — things aren’t bad.”

Rumor Brewing owner Patrick Johnson said the issues they have faced in the East Mountains have been less about the beer and more about the food they serve.

“Considering that we don’t currently package beer on a large scale, we are insulated from those shortages,” he said. “We have some minor issues with hop availability, but nothing we can’t work around.

“As far as the pizza kitchen is concerned, however, there has been constant shortages of one thing or another throughout the entire pandemic. At first, we couldn’t get fresh mozzarella. Then suppliers were out of pizza boxes for a few months. At the moment, there seems to be a shortage of semolina flour, which we use to help move pizzas in and out of the oven. To solve this, we actually are making our own semolina flour out of 2-row brewer’s grain, which has been a fun solution to the current challenge. Tastes great, too!”

Breweries well outside the metro area have been able to adapt as well.

“We have had to use substitute ingredients in our house standards on several occasions this year,” said Truth or Consequences Brewing co-owner/head brewer John Masterson. “I signed up with a second malt wholesaler only to find out they also did not have what I wanted. They explained: ‘We are working hard to get products into our distribution centers, but as we’re seeing across all shipping, it’s tough out there. Our international containers are getting stuck in ports, and then there is the shortage of truck drivers, as well. We are seeing that hopefully soon Weyermann outages will be less and less as things start returning to normal.’”

Fernandez was able to provide one positive bit of news for Ponderosa.

“On another note, my spirit still, ordered and paid for back in February, finally shipped out this week!” he said.

The almost inevitable rise in prices is on the horizon

With all the increased costs in terms of shipping, ingredients, equipment, and more, the odds of prices going up have regrettably increased significantly.

“That’s going to happen with everything,” Erway said. “There’s a lot of downward forces from the largest of brewers. Honestly, it feels like from them, too, how many can they push out of business by keeping prices artificially low? But yeah, there’s just not way around the fact that prices are going to have to (increase). We were considering it, anyways. Our prices on our four-pack cans have been the same since 2012. That’s probably going to happen. Prices are going up in Arizona starting next year. We’re going to have to start raising prices on draft and also kegs here soon. We’re going to do our best to not make it unreasonable.”

Throughout all of this period of upheaval, at least one thing has not changed. In some ways, it has even gotten better — people are buying more and more beer. But, even that comes with a caveat.

“The last 18 months have been just about the busiest I’ve ever been,” Erway said. “I often say about our industry, and I’m sure it’s true in other industries, never have so many worked so hard for so little. We’re all killing ourselves. I feel like we’re chasing our tails. We’re all selling way more beer. For breweries like Marble and Bosque and La Cumbre and Santa Fe, we’re all selling way more beer in the least profitable way that we sell it (in cans).

“Don’t get me wrong, I’m very thankful that people kept on buying our beer throughout the pandemic, I’m super thankful that people kept on going out and buying cans. But, while they’re buying all the cans, we’re dumping out draft beer that went bad, or got coded in Arizona or Colorado or even here, because that’s the nature of the beast. Or, we’re turning it into ethanol. We’re struggling to find those cans and sometimes we’re paying two to three times for those cans. Anyway, woe is me.”

That there is still optimism among the breweries is at least a good sign for the future. But, the tough times are not ending even as the number of virus cases are on the decline. As noted at the start of this article, winter is the slowest time of year for sales at breweries. If you can, go out a little more often this year and purchase a pint or two instead of just taking four- and six-packs home. Even the smallest things can help these days.

A huge thank you to Jeff, Ted, Adam, Antonio, Shawn, Patrick, and John for responding. We hope to have an article focusing on the Santa Fe area breweries up soon to see how they are doing, and we will keep on top of all of these issues going forward. In the meantime, just keep doing what you do best, craft beer lovers.

Keep supporting local!

— Stoutmeister

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