The end of group bulk buys? - Brain Sparging on Brewing

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July 28, 2013

The end of group bulk buys?

A shift in policy by brewing supply wholesalers may cut off homebrewers from getting deep discounts on grain by purchasing bulk orders direct from the wholesalers. This news is probably a couple months old now but since it's still not completely resolved, I thought I would comment on the current state of things.

For a long time now, homebrewers have come together informally through the internet and through brew clubs to place bulk grain purchases from the grain wholesalers, bypassing homebrew shops entirely, even those that offer discounts when grain is bought by the sack, rather than the pound or ounce. It is a substantial discount. Even with shipping costs factored in, a pallet of grain can break down to as cheap as $35-45 for a 50-55 pound sack of base malt. Even buying by the sack it is common to see sacks of base grain go for $45-60 at homebrew shops, so the group bulk buys are a huge discount.

Over the past 12-18 months, the wholesalers have begun to move away from supporting direct sales to homebrewers under pressure from their homebrew shop customers. A year to a year and a half ago the wholesalers began the process of moving away from the direct sales by declining to open new accounts for homebrew groups. Existing accounts would continue to be serviced, which meant any brewing club or informal buying group that had placed orders in the past could continue to purchase but any new groups would be locked out. The initial shift wasn't too big of a problem. Lots of people found other ways to get their group buys through tagging their group's order to another local group that had an existing account or through a local brewery.

A couple months ago, Cargill released a statement that due to continued pressure from homebrew shops and a shift in their business they would begin the process of discontinuing all direct sales. The official policy appears to be unresolved within Cargill, based on their conduct the past couple months, but an official policy statement was released. All informal groups would be first cut off from placing orders, limiting purchases to organized brewing clubs and only orders placed through a homebrew shop. The bottom line to the policy is that homebrew shops will control the sales and they will be allowed to put a retail markup on the purchase. The requirement that the orders are placed through formal brewing clubs is curious at first glance but actually makes a lot of sense since homebrew shops tend to have strong relationships with the local clubs, which means the shop's most likely-to-be-loyal customers will be the ones able to get whatever discount is left in a group order. But if your local shop(s) do not want to support the group buys (as it seems the Dallas and Fort Worth shops do not want to) then you are out of luck, unless you can find a brewery willing to let you tag on the back of their orders.

I haven't seen any clarification or consistent results from Cargill (CMG) or other wholesalers about this change. Cargill has indicated that it would like to get away from selling to the homebrewing community entirely, even the shops, to focus on selling only to breweries. It's probably a lot easier and more profitable to sell multiple pallets each month to 2000 U.S. breweries than all the brewery orders plus a pallet every few months to each of the homebrew shops all over the country. However, Cargill acquired a sales unit to cover sales to homebrew shops so we'll see how that all shakes out. BSG and LD Carlson will probably take over CMG's business if they exit the homebrew market.

As a consumer, I don't like it but I understand the shift in policy. Homebrewers got together and used their numbers to get away from homebrew shop prices to buy in bulk directly from the wholesalers. The homebrew shops are using their purchasing power to leverage the wholesalers out of the direct sales business. The breweries may end up leveraging out homebrew shops to make sure they get the grains they need. After all, there is only so much barley grown and malted in the world. Demand does not automatically create supply.



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