Keg Deposits? What are you going to do?
The used keg market is drying up. I finally gave up looking and ordered some new kegs. Now I am having nightmares about loosing my new $100+ kegs. I have lost some to a less-than-honest local distributor in the past. I didn't like it but I didn't go to war because I only paid $15 for 'em anyway, Those days are gone. Is anyone contemplating raising keg deposits? I think everyone in this area is waiting for someone else to pull the trigger first. Then you gotta ask, how high should it be? Maybe I should have an agreement on the invoice that says, If you loose my keg you pay $100. I do this with my dock sales. We secure it with a visa. Haven't lost a dock sale keg yet! That eliminates the "money down" deposit.
What are you all doing?
Fearless Brewing Company
Boy, I've been burned enough already to make the jump. Then again I have bar owners raising their eyebrows at me for my current 15 buck deposit when they're used to seeing 10 bucks.
I've thought about just invoicing the bars for the full value of the lost kegs, since ultimately they can reign in the sticky fingered distributors, but how will this be received?
So by "dock sales" do you mean direct-to-consumer sales? Interesting idea there, hitting them with a full amount.
Personally, I'm ready to make the move to full value deposits.
It's a problem for everyone. AB reports that they annually lose about 10-15% of their keg float. Assumming they lose 10% (the low end of their estimation) and assumming they have about 8 million (another low figure) kegs in their fleet thats about 800,000 lost kegs. Now of course they can afford to just pay it out but the problem is $10 isn't that much money anymore. The deposit used to be more than the value of the beer but with mainstream beers selling for $50-$60/half and crafts selling over $100/half, $10 isn't much. Even worse is the fact that a half barrel keg is worth over $20 in scrap! And for some people its not even worth the drive back to the brewery for $10.
But as for what anyone can do, I think one of the big guys has to make the first move. No small brewery can afford to be the odd ball in the group, it surely wouldn't go over well.
There's not really a great solution but a good preventative measure is to make sure your kegs are embossed on the chimes and have at least one or two other CLEAR markings so everyone knows whose keg it is. Make sure it's not worth the time and effort of another brewer to try and change the markings.
Last edited by Straub; 06-21-2005 at 05:35 PM.
Good Topic.......Tap Handles, too?
Just to mirror what Straub is hitting on..........the "Bigs" really need to be the bad guy and break ranks for higher deposits from their distribution network. It would make our sales efforts even harder to have to do this on our own.
When we sell to a walk-in customer ("dock sales"?), we take a credit card number we use as a deposit or a check for $100, which we tear up (return) afterwords. We always explain that we want the stainless, not their money. It works every time. Also, we keep a list of contact info for each retail sale and call regulary for delinquent cooperage.
Wholesale..........weeeellllllll...........that's another item. The standard here in the Puget Sound is around $12 for a deposit.........woefully low........and really no effort on anyone's part to see that kegs are returned to their rightfull owners once they've been mistakingly taken. If the other distributor or Brewery knows you, they'll call.
As you can tell from my prior posts, we use the Sankey - Hoff Stevens Mods which are becoming like rare gold to find. We have lost several from our float and it hurts every time. Ultimately, we'll be going to the newer straight side just to maintain a supply. I really wish I knew where they all went, because they don't make good homebrew kettles and they're a bit of a hassle to deal with. We probably reduce our losses quite a bit by self distributing.
Since we're on this interesting subject, we also have the same issues with tap handles. At DK, we make our own and have big "Tap Handle Parties" where we crank out a bunch in a single afternoon. We've always made ours by hand, wich makes them a bit more attractive, I suppose.
Since we do make them, our costs are basically materials and some lost time, so they're relatively inexpensive, but I can't imagine what you folks that pay upwards of $14 a piece think when you lose them out in the trades. I see them on e-Bay on sale to collectors and have even seen our own.
When you consider that the wholesale account may only buy one keg, your cooperage gets jacked, and you lost a tap handle to boot, you've taken a bath on the margin..........that and the fact a distributer is also taking $25 - $30 of that margin as well per keg.
I proposed to our Washington Brewer's Guild a while back the possiblity of requiring a tap handle deposit. I was met with the accusation of trying to insight 'collusionistic tactics" in the market place that would be considered a supplier driven requirement on the customer base. I countered that we do it with keg deposits, so why not?
Theoretically, tap handles are supposed to be paid for as part of "money's worth", where gifts are not allowed between Wholesale and Retail, but I've never seen anyone pay for one, nor ask to be paid. I have, for a fact, delivered the same beer to the same accounts who've "needed" tap handles probably upwards of 4 times. Not all are this bad, but a few are.
For the larger Regional Breweries, this is the cost of doing business. For the 2,000 - 5,000 Bbl "Nano-Brewery" like us, it's a pain in the backside to keep bleeding this cost of stolen cooperage.........and that's what it is when it's taken by a distributer..........and "lost" tap handles.........into the market.
If my trusty slide rule serves me, and based on Straub's data, A-B could be losing about $64M (anually, I assume) for 800,000 kegs at $80 each. That's a huge incentive to make the distributers "buck up" and maintain the cooperage counts. My guess is A-B eats it as part of marketing costs or similar, since if they get picky about it and Miller / Coors / Molsen doesn't, they look bad and could lose a few points of market share.
It sucks, but it helps to just look at taphandles as a marketing cost and not as an asset. They are basically small billboards for your beer, for a lot less money!
We have that problem at one place here, that when I really sat down a looked at it a different way, was easy to solve. Why do taphandles come off? Because the keg is empty and the bartender doesn't want anyone asking for it until they get a keg back in! Now we do a better job of checking their inventory before the weekend, even though that should be handled by our distributor and by the restaurant itself. Now instead of complaining about them losing taphandles, we're selling three or four extra kegs a month just because we don't let them run out.
One distributor I know has a trophy wall of all the rival taphandles they took.
I'm curious to know why you guys don't use a keg management company like Microstar http://www.trenstar.com/microstar/index.asp. It seems to me that this would solve one of your problems and free up your time to concentrate on other more important issues in running your business.
Originally Posted by beerfairy
They don't work with Sankey - Hoff Stevens Mods.............at least to my knowledge. Also, it is an added cost, but it would be interesting to trade off against the cost of replacing a percentage of your float.
We may use them when we change our keg style.
Originally Posted by lhall
Out here in the Puget Sound the market is a bit more rotary. Handles aren't pulled because we didn't deliver the keg, they're pulled because the Pub owners/managers fly through so many different brands in a short time............they rotate their line-up and quite often there's no brand loyalty. They don't want a second keg within an "X" amount of time. Also, I've seen bartenders take the handle down just to hand it over the bar to a collector.............especially the expensive looking ones.
I definitely hear what your saying, and on one level it makes sense (tap handle as marketing cost), but I would much rather have that cost working for me in a different way, marketing wise, than sitting on some collector's shelf or in a box up in the Alehouse's office.
Here's where I was going guys;
Since I have had 100% success with the dock sale (retail, walk-in, home draft system) agreement (AGREEMENT not a deposit) to charge $100.00 for a keg not returned within a specified time frame, maybe this is something that needs to be done in the wholesale arena? I think the tap handle situation could/should be similar. The question is, how will the market respond to it? Has anyone else done this yet?
I think the people who think it's fine to steal (yes, I said steal) kegs and handles are pigs. They are the same stock as the folks who think we are all getting rich and deserve to be robbed (corporations are evil-yata-yata). I think the atmosphere has to long been, "Whatever the customer wants". The distributor drivers don't want to lose a tap to anyone and they do whatever it takes to keep it. Including giving away your property. Turning a blind eye to theft is the same thing.
Just as craft brewers have set the standard of beer quality for 25 years now, I wonder if it's time to set the standard in the business of beer as well. Now if we can just get our guilds to consider this, we may just have a discussion started. No one brewery is going to pull this off. We are all going to have to stick together if we want the situation to change. If we don't, then so be it.
Fearless Brewing Company
Why Not Microstar? Here's Why...
Good point... Now counterpoint... Microstar's solution seems great because there is no investment in cooperage, no worries about loss or repair, and no real deposit system to monkey with. But the price is steep. Look at these costs (per keg use)...
Originally Posted by beerfairy
1/2 Barrel Keg
Local (Self Distribution)--------------------$5.50
Regional (0-500 miles)---------------------$8.50
Extended Regional (500-1000 miles)--------$11.50
National (1000+ miles in U.S.)--------------$15.00
1/6 Barrel Keg
Local (Self Distribution)--------------------$5.00
Regional (0-500 miles)---------------------$7.00
Extended Regional (500-1000 miles)--------$8.50
National (1000+ miles in U.S.)--------------$12.00
When you are a small regional brewery selling beer to distributors in that 0-500 mile range at about $40-45/half, $8.50 is a ton to pay for keg rental. Now add to that they don't offer quarter barrels, the second most popular draft beer package in America and there are the reasons.
Last edited by Straub; 06-21-2005 at 05:40 PM.
1.4 bbls - microstar
Straub - good points.
Just one thought, though. I do know the company sold 1/4 bbls, at least at one time, at least in one market. While I was with Goose Island (as Nat'l Dist. Mgr.), we were using microstar, and we moved 1/4 bbls through them.
Delivered 4 kegs on 6/29. The invoices had a message on the back that stated that the account was liable for return of the kegs. We have always done a $15 deposit and we will continue to do this. But, if the keg isn't returned the message states that they are liable for an extra $100. Haven't had any calls or remarks on this yet. I suppose I am risking loosing these accounts but something has to be done.
If all goes well I am going to have some 2-part invoices printed with the same format. That will be the policy going forward. I hate it but I can't leave this to chance any more.
I'll keep you all informed,
Ken Johnson, President
Fearless Brewing Company
326 S. Broadway
P.O. Box 1883
Estacada, Or. 97023
All kegs and sales
I have changed our keg deposit to $100.00 for all customers who order them. I take there credit card # or a check, we have even called the bank to verify funds. This has been working great, we are now getting our kegs back and in a timely manner, with not alot of complaints.
Last edited by Lisa33; 11-01-2005 at 02:08 PM.
Finally had a problem with our new keg deposit policy. "The Brew" is a draft account in Milwaukie, Or. They have had our beer on and off for some time. Even had 2 beers on for a while. Katrina is one of the owners. I had personal discussions with her about the keg theft situation and what our answer was to it. Well, we finally lost a brand new keg. I suspended all business immediately because Katrina would not speak with me about the situation. After about 6 weeks of gentle chasing, I finally got a letter with a check for $100. I was still mourning the loss of the keg but was glad I got the money to replace it. The saddest part of the letter; she states that a "replacement keg" was offered to me and I refused it. Huh? So what lucky company gets to loose a keg this time? I was repulsed. It's outright theft and that's what I called it from that point on.
I think most draft accounts know what they are doing. Wanton ignorance by some will never disappear. All I have ever said is that we don't have to do business with accounts like this. I told you I would report back. Otherwise, It's going great. Most accounts understand. I am surprised at how well most of them are taking it. Any more stories?
Ken Johnson, President
Fearless Brewing Company