We’ve all been to a party or event (maybe even one hosted ourselves) where a keg or two of our favorite brew was purchased to be enjoyed by all. We paid a deposit for the keg shell, intending to return it to its rightful owner and get our deposit back. After the good times are over though, was that keg returned? Quite often, these now empty keg shells get tossed to the side and even used as furniture. You may even know a friend or family member with one.
Over the years these keg shells have become a cheaper alternative for many to upgrade their home brewing system, using the shells as boil kettles (keggles), mash tuns or hot liquor tanks. Much less noble is sale of these keg shells to scrap yards for cash, as the money earned far outweighs the deposit lost.
What this means for the brewery that owns the keg is not something we usually even think about, but indeed has a real impact. Kegs aren’t cheap and it can be a real pain to replace them, costing a brewery more money (now having less money to brew more beer) and even delaying getting their beer to accounts. According to industry data, breweries lose between 4-5% of their keg assets in any given year and some reports show up to 6%. That may not seem like much, however it adds up. In recent years multiple options for tracking or finding kegs have taken root helping breweries protect their investment and their bottom line.
In 2013, the Brewers Association launched kegreturn.com in an effort to help existing breweries locate and recover their missing keg shells. The site has a search option for consumers who think they’ve found a missing or stray keg, allowing for a search by brewing name, as well as identifying characteristics on the keg shell; search by brewery name, as well as register a keg. With both consumers and the industry working together, this is a helpful tool to return keg shells to their rightful owners and reduce the cost of the beer we drink.
Scott Mettzger, Founder and CEO of San Antonio, Texas based Freetail Brewing Co, says that this issue still goes back to consumers keeping the kegs for personal use, bars using kegs for decoration and even some bars cellaring kegs without permission. It’s this latter issue that has Metzger more frustrated recently “When we buy a keg, we expect to get 2 – 2.5 turns in a year on it (this is industry average). So when an account buys a keg to sit in their cellar for 2 years, that is 4 to 5 kegs I need to buy to replace it while it is out of commission. So say I sold that keg to my wholesaler for $110… now that keg is costing me $400 – $500 bucks, so I lost money on that sale.”
In a 2013 press release, the Brewers Association advised that “keg loss costs craft brewers between $0.46 and $1.37 per-barrel of annual keg production. Assuming 2011 craft beer sales of 11.5 million barrels, that is a total direct capital charge to craft brewers of $5.3 million and $15.8 million annually. Lost kegs act as an enormous additional and unintended tax on beer, ultimately having a direct impact on job growth and profit reduction for brewers, wholesalers and retailers.”
“Craft beer sales have grown tremendously over the past decade, which means the number of kegs owned by brewers has increased as well,” said Paul Gatza, director of the Brewers Association. “Keg disappearances and the resulting profit loss are hindering opportunities for craft brewers. We must ensure kegs are returned to their owners, it’s the right thing to do.”
Often times we don’t know what we don’t know. Meaning that there may be many more missing kegs than breweries even realize. One way to tackle this problem, and not just not treat the symptom, is tracking. In recent years several companies have cropped up with tracking technology that allows brewery owners to brand or ‘tag’ their kegs, often with a bar code, making it much harder to lose a valuable keg shell.
Companies such as KegID, Schafer Container Systems, Microstar Logistics and Trackabout have established processes for tracking the movement of a keg every step of the way.
KegID for example, utilizes industrial barcodes on each keg that allows each brewery to see where their assets are each step of the way. Bar codes come in two styles: 1D, the more traditional bar code we’re used to seeing; and 2D, what’s known to most as a ‘QR code. From there, each keg, or pallet of kegs, is scanned every time they change possession. This includes those distributors that have agreed to the process with the breweries. Through mobile apps, and the website, breweries can see where their kegs are each step of the way.
Jaime Jurado, Director of Brewing Operations for New Orleans based Abita Brewing, reflected that during his days as Director of Brewing Operations at Gambrinus Company (who owns Spoetzel Brewing, Trumer Brauerei Berkeley and Bridgeport Brewing) “We used a novel ORBID ID system where we scanned each keg going to specific distributors (on a 2DMI laser-etched code) and Gambrinus’ Jim Hackbarth created the Access-program system to alert us when specific kegs were not returned after 9 months and again after 12 months. My role was to write letters to each distributor after approximately 18 months advising of specific kegs of Trumer Pils that were never returned. And… they just shrugged. It was quite depressing to me as I followed up with each letter and documentation with a scheduled phone call.” All this he added only told them which kegs were not returned by the last distributor to receive them.
Some Breweries have opted not to even deal with purchasing their own kegs and then work through finding a way to track them. Often this results in the purchase of more kegs to replace those that have gone missing. Colorado based Microstar Logistics, furnishes the kegs and handles all of the tracking for a yearly fee. “We went to Microstar so that we don’t have to track this stuff. Downside is we spend a lot of money to operate this way. It sucks all the way around” said Nebraska Brewing founder Paul Kavulak “the rub is that when you look at the expense of paying Microstar in 1 year – you could have purchased a lot of kegs – and then you head right back into keg management, which sucks.”
The process seems simple and many breweries are jumping on board with the concept of tracking their own kegs. “Kegs are the one capital expense that leaves the brewery and the only capital expense that is barely managed, if managed at all.” states Chris Spradley, Craft Account Manager for KegID. Chris Swersey, Brewers Association technical brewing projects coordinator, advised “Brewers incur a huge per barrel charge on keg loss. In many states, this amount is more than the state excise tax on beer. There is no better incentive for a consumer than the threat of more expensive beer, or the promise of less expensive beer.”
For the consumer. It can be hard to see this effect on breweries, until higher beer prices result or less beer is produced for us to enjoy. Consider this the next time you rent a keg from your local brewery or bottle shop. By not returning or losing keg shells, you’re hurting yourself and your local brewery.