Brewery Best Practices: Keg Inventory

Brewery Best Practices: Keg Inventory

Breweries buy or lease kegs, fill them with beer and send them out the door.

Do you have a Brewery Best Practice to make sure you get them all back? If you were to look at your balance sheet, would you be able to find all the kegs that you are supposed to have on hand?

If you’re like many craft breweries the answer is no.

Kegs are not just stainless steel, they are dollar bills. Kegs have legs and they disappear. Every day, there are a lot of dollar bills walking out your door.

In this article we’ll review the cost of all those kegs, and share the process that the big breweries use to keep track of their kegs

  • The Fatal Flaw with Keg management
  • Treat kegs like inventory or be prepared to lose a lot of money
  • Count kegs regularly: Follow this process…

The Fatal Flaw with Keg Returns

The fatal flaw with most keg deposit and return systems is that there is no incentive for anyone to return the keg to you. You are the rightful owner of those kegs, but the system doesn’t care if you ever get them back.

Follow the money. You sell a keg of beer to the distributor, and charge them a deposit. The distributor sells that keg to the retailer and charges them a deposit. If the retailer makes off premise sales, they charge the end customer a deposit.

At this point in the keg cycle, everyone has been paid back except for you. As a result, no one really cares what happens to your kegs.

A typical keg deposit ranges from $30 to $50. However, the actual value of the keg far exceeds this amount.

The retailer has been paid. The distributor has been paid. The only one that hasn’t been paid is you – the brewery. No one has an incentive to get your keg back, and you are left to eat the loss. The loss is the difference between what you charge for a deposit and what the keg cost you.

Understand that no one in the cycle has as much to lose financially as you do. If you don’t fix the keg problem, no one else is going to step up and fix it for you.

Kegs are Assets: Treat them that way

Your balance sheet keeps track of all your brewery assets. Here you’ll find the cost of your brewhouse, tanks, and capital improvements made to your brewery. You will also find the cost of all the kegs you have purchased.

You may have a couple hundred or many tens of thousands of kegs listed on your balance sheet. At an average cost of $100 per keg, this adds to up to tens or hundreds of thousands of dollars in assets. The question is: do you know where these kegs are?

Companies go to great lengths to safeguard and protect their assets. You wouldn’t dream of letting a fermentation or brite tank out of your sight, but you let kegs go unaccounted for weeks or months at a time. Sometimes, these kegs never return at all.

Action item: Look at your balance sheet and find out how many kegs you are supposed to have on hand. How big is the number?

Chances are it is huge and will surprise you.

Count your Kegs or Risk a Huge Financial Loss

Once you’ve checked your balance sheet to see how many kegs you should have, it’s time to find out if you actually still have them. It’s time to count the kegs.

Kegs are located all over the place. There are empty and full kegs in your brewery, at the distributor and at the retailer. Finding the kegs is challenge enough, let alone counting them and reconciling them to your balance sheet assets.

To begin, borrow this count process..

Establish a count process to determine how many kegs are actually on hand. Use the count process consistently so that you don’t lose any more kegs (or any more money). The Best Practice is to do a full physical inventory of your kegs at least twice per year.

Steal this idea…

Many of the big breweries hold distributors responsible for lost kegs. They track how many kegs they send to the distributor, and how many they get back. If there’s a shortfall, the distributor pays for them.

Borrow this process, and use it in your brewery to save money:

  • Count Full cooperage in inventory +
  • Count Empty cooperage in inventory +
  • Count Full and empty cooperage in the hands of retailers =
  • Total cooperage in the distributor territory.

The grand total of kegs counted is then compared to the brewery records of how many kegs the distributor should have on hand. Any shortfall is charged back to the distributor at a pre-determined rate.

The rate should be at least the difference between the cost of the keg and the amount of deposit received from the distributor.

Wrap Up + Action Items

Kegs are dollars. Look at your balance sheet and determine how many are you supposed to have. Count your kegs now and figure out how many you’ve lost. Count your kegs regularly going forward so you don’t lose any more.

Many big breweries hold their distributor responsible for any lost kegs. You can do the same so that you can save tens or hundreds of thousands of dollars in missing cooperage.