Scrap Yards & Keg theft - from post by Neil Witte

[Brewinfo]

Keeping tabs on your kegs

Lew Bryson asked for experiences with dealing with kegs and keg theft. This is something we have been grappling with lately. I have been visiting local scrapyards lately and finding that they seem to not know or care that beer kegs are stolen property. They just keep buying them, chopping them up and selling the metal. In some rare instances they will give you the 3 or 4 kegs they have, but that is the exception. Some have large quantities that must be repurchased if you want your cooperage back. There are few things more frustrating than having to buy your own stolen property back. But what do you do when a scrapyard has 50 of your kegs? They have paid money for them, so they won't just give them to you. The police won't get involved until a retailer has filed a report about kegs being stolen. And prosecution could involve identifying the keg IDs from the reporting retailer and matching them to the scrapyard kegs - a difficult proposition. And even if you did convince the yard to not buy the kegs, the sellers will just go to the next yard or the next town. We are currently formulating a plan for dealing with the scrapyards in our region, but this is something that the industry needs to come together on. As the price of stainless continues to rise, brewers will see an increase in their kegs disappearing and ending up as scrap. This is an issue I would like to see the BA address, as it affects us all. Has this been discussed within the BA? Can we somehow get some industry mobilization to put some legal pressure on scrapyards and take away the market for scrapping kegs? The railroad industry did it for rails - scrapyards won't touch 'em.

Neil Witte
Boulevard Brewing Company
nwitte@boulevard.com

[MikeJordan]

Neil,

We have dealt with some similar issues at Widmer brewing with keg theft. We had several instances where kegs were stolen in broad daylight by transient types, most likely meth addicts. We had to install an automatic gate for trucks pulling into/out of the loading dock to limit theft as well as hiring night guard(s) to watch the empty keg yard. In the end we knew they were reappearing at local scrapyards so we contacted the scrapyards and asked them to quit accepting kegs for scrap metal. They complied and the problem seems to have disappeared.... not to say it won't reappear. It is a real concern as we figure we lost thousands of dollars worth of cooperage. It would be great if we could get the industry voice of the BA to put some squeeze on scrapyards so keg scrapping is not an option.

MJ

[Sir Brewsalot]

I don't keep tabs on stainless prices, but it seems to me that a keg deposit has to AT LEAST match the scrap value of the keg.

What's a keg go for if sold for scrap?

Scott

[Brewinfo]

I called the local scrap metal yard and they are paying 0.35/# for "scrap" stainless steel, which would
include kegs. At this rate a standard empty 1/2 Bbl(29.7#) would fetch $10.40.

What is the going rate for keg deposits for brewpubs, micros, and regionals?

We are a small brewpub, and have several wholesale accounts, of which we charge $25.00 each for our keg deposits. Our retail customers pay $100.00 deposit (for tap, tub, and keg), and rarely blink an eye. Our retail customers who do balk, usually come around when they realize that I don't have thousands of kegs in the market, so the subsequent loss of even one keg affects me much more.

I am not advocating you start charging $100.00 deposit, not even what a keg replacement charge would
be. It would appear on the surface though, that returning the keg to where you purchased it would make much more sense, even if the deposit were only $10.00! I am curious Neil, what kind of shortages are you seeing at Boulevard? How many of your kegs have you picked up at the junkyard?

On the flip side, buying your keg back from Wausau Steel would cost you 1.13/#, or $33.56!!

Kevin Eichelberger

Kevin Eichelberger
Hereford & Hops Steakhouse and Brewpub
Wausau, WI

[Brewinfo]

This is in response to Neil Witte's e-mail about his kegs going to scrap yards. We also have suspicions of this happening locally, but no proof. How much does a scrap yard get for a stainless half-barrel? If it is more than the "standard" $12 deposit, we're all in trouble. I've always had a beef with what (in my opinion) are artificially low (but traditional) keg deposit amounts ($10 per quarter-bbl, and $12 per half-barrel in Oregon). I assume these dollar values were set after Prohibition was repealed, and probably represented the replacement value of kegs in those days. Steelhead is a small producer, which means we buy cooperage in small quantities. Sometimes with shipping, new kegs can cost us $100 +/- to replace.

We've basically solved the problem with our Dock Sales kegs: $70 cash or credit card for deposit - no checks allowed. (And we run the credit card charge. When they return the keg, we run a refund credit on the same card.) If we don't get the keg back, at least we've got $70 in hand. (Plus $30 for the tap deposit, for a total deposit of $100.) Eugene is a university town, and this cash or credit card deposit system was the only way we could get our kegs back. You'd be shocked at the number of
people who went ahead and PAID that $100 on their credit card, and then forgot they paid it, and didn't remember they paid it until we called them and dangled the refund in front of them for incentive. They
usually brought back the keg & tap within a week once we called them. Our Dock Sales keg-return ratio is "the good news". Our Distributor Sales keg-return ratio is "the bad news".

Do any breweries out there collect the replacement value on kegs that the distributor has lost? We wish we could! Somewhere out there are over 150 of our kegs, and we have no idea what people are doing with them. We suspect some have been sold to the local stainless scrap yard.

It will require a group effort with all small (and hopefully large) beer producers buying into the program of raising the dollar value of keg deposits. We would absolutely love to see ALL keg deposits go to $70 or $100, but that would be an industry-wide (and nationwide) move, and possibly the wholesaler and retailer organizations would fight us all the way. As far as I'm concerned, having an artificially low deposit system falls in the category of "give-aways" to wholesalers and retailers, which is mostly illegal in most states.

In my opinion, this would be an excellent initiative for the BA and other national brewer organizations to pursue. (And would save us even more money than the BA's last initiative of reducing our "Brewer's
Report of Operations" paperwork filing requirements from monthly to quarterly!)

This is a hot-button issue for lots of small brewers. Thanks for helping us get it out in the open for discussion, Lew & Neil. Are there any other brewers/breweries out there that would like to see the "standard" keg deposit values raised to $100 per keg?

Cheers, Teri
Teri Fahrendorf
Brewmaster
Steelhead Brewing Co.

[Brewinfo]

Teri, we have had a problem with people stealing kegs and returning them to beverage centers for the $10 deposit. The kegs are being stolen from bars and restaurants. It doesn't seem to matter whether they are locked up or not. Our largest loss was to a chain restaurant that locked their empties shed every night. They lost dozens of our kegs in less than a year. Someone made a copy of the key and emptied the shed every week. We later bought the kegs back from a beverage center a few miles from the restaurant. Someone was making a living out of stealing $10 kegs. I can't imagine how many we'll lose once people find out they are worth $70 to $100 a piece!

The good news is New York enacted a new "keg law" requiring all kegs sold retail to have certain paperwork attached to them as a form of identification and the supermarkets and beverage centers will not take back empties that do not have this paperwork still attached. This has dramatically cut our keg losses. I have not checked the scrapyards yet, but I intend to.

Cheers,
Jason Fox
Head Brewer/Operations Manager
Custom BrewCrafters, Inc.
Honeoye Falls, NY

[Brewinfo]

Loss of cooperage is not just a problem in the US, but is also an acute problem in the UK, where I believe the percentage of sales from casks or kegs is higher than in the US. Keg Watch http://www.kegwatch.co.uk/index.html is an industry organization that operates a tip line for reports of stolen kegs and serves to educate the trade and the public abut the issue of stolen kegs. Perhaps the time has come for a similar organization to be formed in the US, either under the umbrella of the Brewers Association or the Draught Beer Guild http://www.draughtbeerguild.com/index.htm

Cheers - Elis.

Elis M. Owens
Quality Control and Technical Support
Birko Corporation
http://www.birkocorp.com
eowens@birkocorp.com

[Brewinfo]

When Mt. Hood Brewing Co. started in 1992, I felt (and our owners agreed) that the $12 deposit our distributor would have paid us was a ridiculous and abitrary amount, and not worth the effort. The cost of the bookkeeping and invoicing for keg deposits would just add to the losses when kegs went missing, and the small deposit certainly would not have any effect on preventing shrinkage. Over 13 years we experienced the seemingly below average shrinkage of our keg inventory of about 5-8%. We never regretted the decision.

(For our direct dock sales to the public, we charged a deposit of $80; $40 for ponies. We offered hand tappers FOR SALE for $30, and then offered to buy them back for $25, if they were returned in good condition! This worked beautifully for all the reasons you can imagine.)

That said, if I had thought we could charge distributor $100 deposits, I would have supported charging keg deposits to our distributors wholeheartedly. Keeping in mind that the industry standard is that it takes at least 5 kegs to support sales on one tap handle, why shouldn't the distributors share in the liability of the loss of the kegs that they handle? And have significant incentive to assure their safe and timely return to your brewery??

Bear in mind, with the status quo, the distributor has only the cash liability of the few kegs it has on its premises at any given time, or 1-2 kegs per tap handle. The retailers have also paid them $12 for each keg in their possession, offsetting most of the distributor's liability. They would undoubtedly pass on the increased deposit (or some portion of it... $25? $40?) to the retailers, potentially making small brewers less competitive against bigger brewers who would choose to keep their keg deposits low. This makes industry-wide cooperation imperative, and some sort of negotiation with wholesalers necessary.

The system of keg deposits is broken, and needs to be fixed. An industry-wide, coordinated push for higher keg deposits to distributors (and retailers) is called-for, and the BA is the best entity to organize this effort.

Cheers,
Jon

Jon B. Graber
Western States Sales Representative
Crosby & Baker, LTD.
jon@crosby-baker.com

[Brewinfo]

I really appreciate the discussion on this topic. As I stated in my previous post, this will only become worse as the price of stainless increases. Right now it seems the local scrapyards are getting about 30 cents per lb. for stainless. Retailers charge anywhere from $15 (this seems to be the typical deposit passed on to them) to $75 (if they really want their kegs back). While the rate at the scrapyards does not approach the amount a person could get back by merely returning the keg for their deposit, remember that the keg may have a significant amount of beer left in it and they are sold by weight. The less savvy yards may be paying much more, especially if the keg is part of a larger load being purchased.

But in our situation, I believe this may not be the critical part of the discussion. I believe most of our kegs are not being sold by the guy who had the keg party, I think most are stolen from the back alleys of retailers or pilfered by unscrupulous workers within the retail industry. I have heard about at least one local person who drops off a carload of kegs at a local scrapyard 2-3 times a week. We have already picked up about 100 of our kegs at this particular yard this year. That particular yard aside, the rest may have 2 here, 4 there. I find it hard to believe there are that many people just not returning the kegs for the deposit. Theft seems more likely. While I do not have hard, fast numbers on how many of our kegs are stolen every year, I know it is too much to ignore.

As far as charging distributors back for unreturned kegs, that just doesn't work. Most of these kegs are lost at the retail level. What are the distributors going to do? They can't charge back the retailer who lost it because they would lose the business. And raising the deposit industry-wide sounds nice, but bringing everyone together at once to do that seems an unlikely scenario.

What does sound reasonable is an industry-wide effort to eliminate the market for stolen property. A letter to every scrapyard informing them that buying kegs is illegal and doing so is opening them up to prosecution is a good place to start. All we would need is some industry teeth to back it up and we may make some progress.

Neil Witte
Boulevard Brewing Company
nwitte@boulevard.com

[Moonlight]

I agree that the biggest problem is bulk theft, not someone scrapping the keg they paid deposit on. I have found some luck in explaining to bar owners that there is a rash of keg thefts, and I lose $100 for each keg but most importantly they lose hundreds as the entire pile of empties gets stolen repeatedly. This loss of their money is the only thing that gets their attention. I tell them to watch their delivery sheets to see how few deposit returns there are from the other distributors (because the distributors don't care and won't tell them), and consider keeping empties indoors or under better security than a pair of bolt cutters can cut. I also explain that I will have to charge them replacement value for the kegs if after getting them stolen once and are made aware of the problem, they don't protect my kegs better.
Raising awareness where the kegs are stolen is more important than raising the deposit. Aren't we still screwed if we lose a $100 keg but keep a $50 deposit?

[Brewinfo]

I know I have hundreds of kegs out there somewhere, but fewer and fewer kegs come back from the distributor every week. Since I've had to start working another full time job to support my passion (the brewery), I just haven't had time to go chasing around the county doing a keg inventory in a few years.
Trying to do a comprehensive point-in-time inventory of what I have in-house, what the distributor has (typically in several locations in their warehouse), and every retail account nook-and-cranny in the entire county can be a huge effort. Just having a cost effective way to trace/track keg inventory would be a start (suggestions welcome). At least if I know the kegs have gotten nicked, I can take them off the inventory of property that I pay taxes on and write them off my books.

It seems as though the problem has become worse over the past year or so. I hadn't thought about the price of scrap metal potentially being a driver for the problem. We have very little problems getting our dock sales back as we require a $150 deposit for a 1/2 bbl with a CO2 draft system ($125 for 5 gallon keg/draft system sales). It's the 5 gallon kegs that go to the distributor and out into the retail market that we really have trouble hanging onto (deposit on those little guys is only $5). I had assumed that homebrewers were snarfing up my 5 gallon kegs... Guess I ought to call Henry and Loren at the scrap yard.

Perhaps the solution is not to increase the deposit to the wholesalers/retailers, but rather work with our legislators to increase the fines/penalties for selling our cooperage as scrap without a bill of sale from the legal owner of the kegs.

My pennies worth.

Penny Pink
Owner/Brewmistress
Portneuf Valley Brewing
Pocatello, Idaho

[Brewinfo]

Cruising one of my local recyclers produced a view of five (5) pallets of kegs. At 9 per pallet...
One pallet was filled with kegs from a defunct microbrewery, the rest were from Bud-Miller-Coors. In each case, the distributor's warehouse(s) is less than 10 minutes drive from this centrally located scrap yard. And these were not "end of life kegs", either. Most appeared near-new.

Perhaps you might employ a bounty hunter to locate kegs and buy them back? Scrap stainless in MI is $0.65/pound, or about $18.50 to buy a keg vs. purchasing a new one. Just a thought. Oh, I was driving a truck capable of holding 10-20 kegs, and at $5-$10 bounty, I'd have returned them instead of making a phone call.

Thom Cannell
T_Cannell@compuserve.com

[Brewinfo]

In response to the kegs, we have just completed an audit which took place over the course of one year. In this audit we manually inspected every keg in our float and marked it checked it for bar code, serial number, soil or stone build up, pulled every spear, etc. It was not the first thing anyone wanted to jump into as you can imagine. We have purchased, over the thirteen years of business, a bit more than 5,800 kegs. We have two sizes, we have found that we can account for 73.8% of our 1/6th BBL kegs and for 69.4% of our 50 Litre kegs. We also own (owned) roughly the same amount of each type of keg for about 2,900 of each size. I will spare all the details about how much of each lot purchased is missing as it does correlate to the age and thus the depreciation and/or the expense and subsequent property tax on these assets. This may be gossip in terms of having no basis of fact or report, but I had a figure shared with me from an Anheuser Busch employee that this is a 4 to 5 million dollar loss every year. I have always wondered about that and why a company that can save millions by shaving a few millimeters off every label going onto a bottle or by going with a smaller rim size on aluminum cans would not push even if met with resistance from the distribution side of things to issue a deposit that is worthy of covering the asset. In questioning this, I have also been met with the response, in a rather cavalier manner, "well draft beer is all advertising anyway". By that I took that there is not much revenue or profit margin in draft beer for the manufacturer and it gets your product out there and in the public view. I am not in marketing or sales, but I do believe there can be an agreement reached. Draft accounts can certainly relate to theft and "shrinkage" and would be sympathetic, no? It has definitely stirred awake an old splinter in my mind and I will dig around on this issue.

Cheers all,
For the Saint Louis Brewery Inc.
Otto

[Rosie]

Guys,

Just some more insight from the UK...

The issue of cask shrink has meant that some micros here in the UK are turning to plastic casks. I believe they cost about 1/3 (20 gbp versus 60 gbp) of stainless.

Personally, I cringe a bit when I think plastic, but I know a couple micros giving them a go. This is something that is quite feasible with the bung style cask, probably not so feasible with a Sankey keg...

Anyone in the UK with hands on plastic cask experience? Probably an entirely different thread...

Cheers,

[tariq khan]

We've been using plastic casks for exporting to North America since we know we'll never get back our stainless ones. My only complaint is that the shives don't go in easily..and the keystone pops out sometimes as well, but apart from that they seem to do the job. I know some brewers over here that now use them exclusively.

Tariq (Dark Star Brewery)