{"id":25126,"date":"2017-11-15T19:45:57","date_gmt":"2017-11-16T00:45:57","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/r-i-p-a-can-sierra-nevada-lead-the-charge-to-give-us-cool-craft-ipa-in-a-hotter-world\/"},"modified":"2017-11-15T19:45:57","modified_gmt":"2017-11-16T00:45:57","slug":"r-i-p-a-can-sierra-nevada-lead-the-charge-to-give-us-cool-craft-ipa-in-a-hotter-world","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/r-i-p-a-can-sierra-nevada-lead-the-charge-to-give-us-cool-craft-ipa-in-a-hotter-world\/","title":{"rendered":"R.I.P.(A) \u2013 Can Sierra Nevada lead the charge to give us cool craft IPA in a hotter world?"},"content":{"rendered":"

How kegsistential is the threat?<\/em><\/strong><\/p>\n

When brewing is your business, change in the supply of hops and water is bad news. The last five years have seen a ~250% increase in the number of US craft breweries [1]<\/a>, whose success is underpinned by the wide variety of tastes that comes from using more hops than traditional brewers and access to sources of clean water. The Pacific Northwest produces ~90% of the national hops yield\u00a0[2]<\/a> and is experiencing increasingly unpredictable weather and drought incidence. While overall hops production has risen in past years to meet increasing demand, yields in 2015 declined in tandem with unusually warm conditions, which scientists expect to persist in coming decades. This may constrain hops supply and continue the increase in prices of ~250% craft brewers have seen in the last decade [3]<\/a>. Competitive responses to this have been startling, exemplified by ABInBev taking steps in May 2017 to effectively monopolize the production of South African hops and stop its distribution to US craft brewers [4]<\/a>. Further down the beer supply chain, drought in Northern California is causing breweries to rely more heavily on groundwater. This can compromise both beer taste and production levels [5]<\/a>, exemplified by Bear Republic Brewing pulling out of distribution to 27 states in 2015 and digging wells in its hometown. \u00a0As water and hops availability becomes challenged, how can craft breweries keep our favorite IPAs in stock and at low cost?<\/p>\n

 <\/p>\n

What is Sierra Nevada doing?<\/em><\/strong><\/p>\n

The US\u2019 second largest brewer, Sierra Nevada (est. ~$250M sales in 2015), has long been heralded as an industry leader in embedding sustainable practices into its production processes and supply chain to drive down production costs and mitigate climate change risk. The Company\u2019s approach is centered around (i) \u2018closing\u2019 its own resource loops to lower operating costs, (ii) working closely with agricultural suppliers to improve supply chain operations and, (iii) mitigating geographical risk by diversifying production facilities. To make brewery operations sustainable and cost-effective, since 2007 the company has reduced the amount of water required to produce a barrel of beer by 25%\u00a0[6]<\/a>, has generated ~80% of its energy on-site and has reduced packaging and facility waste to drive savings of ~$8M annually [7]<\/a>.\u00a0 To mitigate the impact of climate change on its supply chain, Sierra Nevada grows a portion of its own hops adjacent to its brewery to help control supply [8]<\/a>. The Company also encourages suppliers to take up sustainable practices learnt from its own production efforts to mitigate the potential yield impacts of reduced water supply [9]<\/a>. At a more strategic level, to diversify exposure to the climate risk of California and expand distribution, a second brewery was opened in 2014 in Asheville, NC [10]<\/a>. Overall, Sierra Nevada\u2019s actions provide a blueprint to craft brewers to minimize the impact of their own operations and those of their supplier base to adapt to the threat posed by climate change. The Company has simultaneously improved its bottom line in the process, becoming more competitive in a low margin industry facing increasing raw material pressures.<\/p>\n

 <\/p>\n

How can Sierra Nevada raise its bar?<\/em><\/strong><\/p>\n

Sierra Nevada\u2019s blueprint is laudable, yet it can be improved. To-date, it appears that the Company sources a minority of its hops from outside the US, from large producers such as Germany and South Africa. Further diversifying its Pacific Northwest supply chain would reduce exposure to regional climate change risks. The Company has experimented with using temperature hardy wild hops yet with little evident success [11]<\/a>. Pushing the take-up of more drought-resistant hops strains in Sierra Nevada\u2019s supply chain remains an option. The Company is now reaching a point where it can have significant influence on the behaviors of its suppliers and fellow craft brewers. Most of its efforts with suppliers have been voluntary to-date yet a more impactful approach may be to mandate these changes. A last area of major effort is to continue reduction in water usage; in 2015, Sierra Nevada was asked by the City of Chico to reduce its water usage by 32% in response to prolonged drought [12]<\/a>. The brewer was issued a reprieve, managing the aforementioned 25% reduction, but it is clear that the Company can still improve.<\/p>\n

Too small to dream big?<\/em><\/strong><\/p>\n

While Sierra Nevada is leading the pack of craft brewers in terms of adapting to the cost and supply chain implications of climate change, it is only a small player in the wider brewing industry. It\u2019s the poster child for craft brewing but it alone can\u2019t win the battle to protect its supply chain; is Sierra Nevada doing enough to inspire others?<\/p>\n

 <\/p>\n

[793 words]<\/p>\n

 <\/p>\n

 <\/p>\n

[1]\u00a0<\/a>Brewers Association Insights.\u00a0https:\/\/www.brewersassociation.org\/statistics\/<\/a>, accessed November 2017.<\/p>\n

[2]<\/a>\u00a0USDA National Hop Report 2016.\u00a0http:\/\/usda.mannlib.cornell.edu\/usda\/current\/hops\/hops-12-16-2016.pdf<\/a>, accessed November 2017.<\/p>\n

[3]<\/a>\u00a0Maiolo, Derek. Ritchie, Anna. No Hope for Hops (Spring, 2017).\u00a0http:\/\/emilieweiss.com\/envision-journalism\/<\/a>, accessed November 2017.<\/p>\n

[4]<\/a>\u00a0Notte, Jason.\u00a0Anheuser-Busch InBev shuts out craft beer brewers by hoarding hops (May 12, 2017).\u00a0https:\/\/www.marketwatch.com\/story\/anheuser-busch-inbev-shuts-out-craft-beer-brewers-by-hoarding-hops-2017-05-11<\/a>, accessed November 2017.<\/p>\n

[5]<\/a>\u00a0Ivanova, Irina. Climate change is hurting craft breweries (November 1, 2017).\u00a0https:\/\/www.cbsnews.com\/news\/climate-change-is-hurting-craft-breweries\/<\/a>, accessed November 2017.<\/p>\n

[6]<\/a>\u00a0Sierra Nevada Brewing Co. Biennial Sustainability Report 2015.\u00a0\u00a0https:\/\/www.cdn.sierranevada.com\/sites\/www.sierranevada.com\/files\/content\/sustainability\/reports\/SustainabilityReport2015.pdf<\/a>, accessed November 2017.<\/p>\n

[7]<\/a>\u00a0Baldwin, Cheryl.\u00a0 Sierra Nevada: Brewing a Better Business Through Sustainability (June 24, 2015).\u00a0https:\/\/purestrategies.com\/news\/2015-06-24-sierra-nevada-brewing-a-better-business-through-sustainability<\/a>, accessed November 2017.<\/p>\n

[8]<\/a>\u00a0Sierra Nevada Brewing Co.\u00a0https:\/\/sierranevada.com\/brewery\/about-us\/sustainability\/beer-ingredients-agriculture<\/a>, accessed November 2017.<\/p>\n

[9]<\/a>\u00a0Sierra Nevada Brewing Co. Biennial Sustainability Report 2015.\u00a0https:\/\/www.cdn.sierranevada.com\/sites\/www.sierranevada.com\/files\/content\/sustainability\/reports\/SustainabilityReport2015.pdf<\/a>, accessed November 2017.<\/p>\n

[10]<\/a>\u00a0Notte, Jason. Sierra Nevada’s Brewing ambitions spill over to the East Coast (November 21, 2014).\u00a0https:\/\/www.marketwatch.com\/story\/sierra-nevada-brewing-bridges-divide-between-east-coast-and-west-coast-2014-11-21<\/a>, accessed November 2017.<\/p>\n

[11]<\/a>\u00a0Shilton, AC. Meet the Wild Hop Hunters Saving Your Beer From Climate Change (December 14, 2016).\u00a0https:\/\/www.outsideonline.com\/2141991\/meet-wild-hop-hunters-saving-your-beer-climate-change<\/a>, accessed November 2017.<\/p>\n

[12]<\/a>\u00a0Watson, Julie. California craft beer brewers balance drafts and drought (October 11, 2015). http:\/\/www.orlandosentinel.com\/news\/os-ap-california-drought-craft-beer-20151011-story.html, accessed November 2017.<\/p>\n

 <\/p>\n

 <\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

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