Hop contracts or spot buying for a small Indian brewery

How hop contracts work

A hop contract is an agreement to buy a set quantity of a variety, from one or more future harvests, at an agreed price. Contracts are made through hop merchants and often run for several crop years ahead.

The benefit is security. When a variety is in high demand, contracted buyers get their allocation first. Price is fixed, which makes costing more predictable. The catch is that you are committed. If your sales fall or your recipe changes, you still owe for the hops.

In recent years, many breweries worldwide found themselves holding contracts for more hops than they could use as demand for some styles levelled off. That is the main risk to understand before signing.

How spot buying works

Spot buying means purchasing hops from current stock as you need them, at the going price. In India this usually means buying from a local importer or distributor who has already imported the hops and holds them in a cold store.

The benefit is flexibility. You buy what you need for the next few months, can switch varieties easily and do not tie up cash in a year of stock. The risks are availability and price. A popular variety may be sold out when you need it. Prices also change with each harvest.

What this looks like for a small Indian brewery

Most Indian craft breweries use hops in quantities that are small by global standards. Contracting directly with a hop merchant may not be possible at that scale. Importing a single variety in small lots is expensive. So in practice, most rely on importers.

Some importers offer their own forward arrangements: you commit to a quantity for the year and they reserve it from their next shipment. That gives some of the security of a contract while the importer handles customs and cold storage. Ask whether such an arrangement is binding, how price is set and what happens if you need less.

Decide variety by variety

Sort your hops into three groups.

• Flagship hops. Varieties that define your best-selling beer, which you cannot substitute without changing it. These justify some form of forward commitment.
• Workhorse hops. Bittering hops and common varieties that are widely available and easy to swap. Spot buying is usually fine.
• Seasonal and experimental hops. One-off beers and trials. Always spot buy, in small amounts.

For flagship hops, commit to no more than your realistic minimum use, not your hopeful maximum. You can always top up on the spot market. Our guide to trialling a new hop variety covers how to test before committing.

Cash and storage

Any hop you buy ahead is cash locked in a freezer. For a young brewery, cash flow is often tighter than margin. Count the cost of money tied up in stock, plus the cold storage you need to keep it fresh.

Hops lose quality over time even when frozen. A contract that delivers a full year in one shipment means your last bags are much older than your first. Ask whether delivery can be split across the year.

Founders who cost recipes with current hop prices often miss the effect of a price rise on next year's crop. Our guide to costing a recipe before you brew shows how to build that sensitivity in.

Working with other breweries

Small breweries in the same city sometimes pool demand for a variety and place a joint forward order with an importer. That can reach a quantity worth reserving. It needs clear agreement on who pays, who stores and how stock is split. Write it down, even between friends.

A simple starting policy

For a brewery in its first two years, a sensible default is to spot buy almost everything and keep a close eye on stock levels for the one or two hops that define your flagship. Once sales are steady and predictable, move those flagship hops to a forward arrangement with your importer covering part of your expected use. Review the split every year at harvest time.

Hop purchasing sits alongside every other supply and cash decision a founder makes. It is better made with a clear model than by habit.

Common questions

Should a small brewery sign hop contracts?

Usually only for the one or two varieties that define a flagship beer. Even then, commit only to a realistic minimum quantity. Spot buying covers the rest.

What is spot buying hops?

Buying hops from current stock as you need them, usually from a local importer, at the going price.

What is the main risk of a hop contract?

Being committed to more hops than you can use if sales fall or recipes change, while still paying for them.