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Craft beer
A framework for a sustainable supply chain
craft beer supply chain
Harish C. Bahl
College of Business, California State University Chico, Chico, California, USA
Jatinder N.D. Gupta
College of Business, The University of Alabama in Huntsville, Huntsville, Received 4 August 2020
Revised 9 October 2020
Alabama, USA, and 11 November 2020
Accepted 12 November 2020
Kenneth G. Elzinga
Department of Economics, University of Virginia, Charlottesville, Virginia, USA
Abstract
Purpose – This study aims to propose a framework for developing strategies for the supply chain of craft
beer that can make the business efficient and profitable, and at the same time, generate sustainability benefits
from reducing waste, conserving natural resources and reducing pollution.
Design/methodology/approach – Based on an extensive review of the literature of academic and
industry publications, source material from craft brewers primarily situated in the USA and industry
experience in craft brewing, the proposed framework describes strategies to establish sustainable craft beer
supply chains.
Findings – The framework for craft beer supply chain consists of four categories that contribute to craft
beer sustainability: ingredient procurement, recycling efforts, energy usage and distribution systems – some
of these mimicking those used by macrobrewers. Each of the categories is further subdivided. Successful
practices and examples are highlighted for each of the subcategories.
Research limitations/implications – This proposed framework was built upon current practices and
available literature in the USA and focused on the environmental pillar of sustainability. Further, the
proposed framework arises from the fact that current best practices in sustainability were available primarily
from larger craft brewers, like Sierra Nevada and New Belgium.
Practical implications – By paying attention to operational changes in their supply chains, craft brewers
can manage costs and improve their sustainability track record by reducing waste, conserving natural
resources and improving upon their pollution footprint. Craft brewers can economize in the use of water,
grains, hops and yeast by using practices discussed in this paper.
Originality/value – This is the first time that all aspects of supply chain and sustainability considerations
in craft beer production are discussed in a comprehensive manner to propose a framework for analysis and
enhancement of productivity and sustainability at the same time. The fact that the proposed framework can
be used in future studies to empirically evaluate the utility of various sustainability strategies adds to the
originality and value of this research.
Keywords Conceptual/ theoretical, Alcoholic drinks, Not applicable, Alcoholic drinks industry,
Suppliers, Brewing, Craft brewing, Sustainability, Supply chain, Strategies for building supply chain,
The beer industry
Paper type Research paper
Figure 1.
Proposed framework
for a sustainable
supply chain for craft
beer
up approximately 95% of a beer’s content (Littman, 2015). Beer is expensive to ship relative Craft beer
to its value because, in part, of the amount of water in the final product. To make beer with a supply chain
congenial taste signature, the water usually requires specialized filtering. It is no surprise
that, for years, brewers sought to locate their breweries near freshwater sources when
filtering technology was nascent.
Economizing water usage is central to craft beer sustainability, particularly in the
western part of the USA, where the craft beer segment was birthed. In the west, the cost of
water has increased and is expected to be higher in the future (Thompson and Bahl, 2018). In
response, two of the largest craft brewers in the USA, Sierra Nevada and Lagunitas, have
added brewing capacity in locations with more favorable water supplies [1]. Lagunitas
opened a brewery in Chicago, and Sierra Nevada opened a brewery in Mills River, North
Carolina.
To be sure, water supply was not the only variable in these capacity expansion decisions.
Both companies also pointed to lowering transportation costs as an economic rationale for
making the move to the Eastern USA. But in the western USA, prospective drought
conditions are provoking some West Coast brewers to find ways to restrict their water
consumption (Thompson and Bahl, 2018). Because water is a necessary input for beer,
reducing water usage in the production function is no easy task.
There are essentially three methods used by craft brewers for water sustainability:
water conservation, recycling and the treatment of wastewater. They are summarized
in Table 1.
Sierra Nevada (Anonymous, 2019) is a leader among craft brewers in economizing water.
The company has reduced its water usage by 25%, a notable achievement in brewing
because beer is such a water-intensive product. Notwithstanding, officials from the city of
Chico recently told Sierra Nevada that the company must decrease its water use by 32%
(Watson, 2015). This presents a major problem because any additional cuts would limit
Sierra Nevada’s output or raise its unit costs relative to its more water-abundant
competitors.
Many craft brewers are now proactive in water-economizing endeavors and have
invested funds to make their wastewater reusable. About five gallons of water are required
to produce one gallon of beer. It is in the nature of the product that the amount of water that
ends up in the can or bottle cannot be reduced. This means water-economizing efforts must
focus on the water that does not end up in the container. In short, it is important, especially
for water-constrained craft brewers, to reuse as much water as possible – and this is a major
shift in craft beer production.
With their growth in number and size, craft brewers are no longer a drop in the bucket
when it comes to water usage in beer production. Their “David” status does not buy them all
a pass when it comes to issues of sustainability and water consumption. As an aside, the
macrobrewers also face pressure to use water more efficiently. In this area, some craft
Table 3.
Supply chain
Ingredient Type of sustainability Examples
sustainability
examples for beer Hops Quality and variety of hops Collaboration and long-term relationships with growers
ingredient – hops Grow own hops for experimentation
3.2 Byproducts recycling Craft beer
When it comes to reducing an environmental footprint by recycling measures, it is again supply chain
instructive to consider measures taken by Sierra Nevada as a leader in the craft beer segment.
The company has implemented several innovations to recycle byproducts of the brewing
process back into production. The company’s Chico brewery was certified as a Platinum TRUE
Zero waste facility in 2013. To gain this recognition, protein-rich spent grain and yeast are sent
to nearby cattle and dairy farms. Also, CO2 produced from fermentation is recovered and
recycled to pressurized tanks in the brewery. This reduces operating expenses and eliminates
buying and taking delivery of CO2 in the open market. Recovered CO2 also contains less
oxygen than most CO2 purchased in the open market, which improves the quality of beer. Fryer
oil left over from the brewery’s restaurant is used to make biodiesel fuel in an onsite processor.
This fuel is then used by trucks that deliver Sierra Nevada products to retail outlets in
California. Finally, the brewery installed a unique HotRot composter in 2010, which turns
discarded food and spent brewing ingredients into compost. This compost is then used by the
brewery in its agriculture operations (Anonymous, 2019).
These efforts directed to recycling illustrate how some craft brewers are adopting new
practices to improve the long-run sustainability of their operations. These efforts are a far
cry from the conventional portrayal of the craft beer segment as having a singular focus on
new and edgy product varieties. Table 5 summarizes the connection between sustainability
and recycling.
Looking outside of the USA, Kerby and Vriesekoop (2017) studied the operational
practices of 90 craft brewers in England. The survey focused on the recycling practices of
spent grain, hops and yeast. They found that the primary method of recycling spent grain
was its use as animal feed by local farmers. This was true for both urban and rural
breweries. A few craft brewers delivered the spent materials to farmers for use in making
compost or to be used as fertilizer. Spent yeast was disposed of mainly in sewage both by
rural and urban craft brewers. A small number of urban brewers directed their spent yeast
for use as fertilizer. Due to its bitter taste, spent hops were not used as animal feed and
instead were deployed for use as compost by farmers.
Table 4.
Supply chain
Ingredient Type of sustainability Examples
sustainability
Yeast Quality Sanitation examples for beer
Cultivate own yeast ingredient – yeast
Table 7.
Distribution component Type of sustainability Examples
Supply chain
sustainability Use of distributor in a Avoid storage and Reducing or avoiding
examples for three-tier system transportation intermediate distribution
distribution systems Use of bottles and cans Reduce waste and transportation Use cans when practical
and comparing practices outside of the USA would be instructive in developing quantitative Craft beer
measures for a sustainable craft beer supply chain. As the article focused on the supply chain
environmental pillar of sustainability, investigating the economic and social pillars of
sustainability would be beneficial for an expanded framework for a sustainable craft beer
supply chain.
Another limitation of our framework arises from the fact that current best practices in
sustainability were available primarily from larger craft brewers, like Sierra Nevada and New
Belgium. The majority of craft brewers are smaller companies. Further analyses of practices in
smaller breweries would be very useful for future study. Our proposed framework also can be
used for further empirical studies of the craft beer industry to examine current supply chain
practices and to suggest ways to improve upon business models for the future.
Note
1. Because of its acquisition by Heineken in 2015, Lagunitas is no longer considered a craft brewer
by industry standards. However, for our purposes, it is included in analyses of the craft industry
as a whole.
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Corresponding author
Jatinder N.D. Gupta can be contacted at: guptaj@uah.edu
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