The BA Technical Committee Keg Repatriation working group members believe that education at all levels of the beer supply chain is key to solving the expensive problem of keg repatriation. Here are basic questions and answers about stray kegs to help you understand the problem.
Why and how do my kegs end up in the wrong place?
- Brewers, wholesalers, retailers, logistics companies, and the public simply don’t know who to return a keg to;
- Holders who came into possession of a stray keg honestly are threatened with legal action by brewers, so have a disincentive to return a keg;
- Holders who came into possession of a stray keg honestly, and paid a deposit for the keg, are not offered the deposit amount, so have a disincentive to return a keg;
- Retailers close down;
- Wholesalers close, move, consolidate;
- A brand franchise moves from one wholesaler to another;
- Passersby steal kegs from unsecured locations at retail;
- Unauthorized parties convert kegs into furniture, barbecues or homebrewing equipment;
- Unauthorized parties scrap kegs;
- Scrap yards accept kegs for scrap without requiring title or proof of ownership (illegal in many states);
- Wholesalers knowingly or unknowingly pick up the wrong keg at retail;
- Wholesalers knowingly or unknowingly send stray kegs back to the wrong brewery;
- Broadening geographical distribution results in kegs thousands of miles from their home brewery with less well developed or unfamiliar logistic support;
- Wholesaler inability to collect on deposits from retailers due to accounting difficulty;
- Wholesaler reluctance to collect on deposits from retailers in the event of keg loss;
- Keg logistics companies simply don’t know who to return a keg to;
- Brewer inability to collect on deposits from wholesalers due to accounting difficulty;
- Brewer reluctance to collect on deposits from wholesalers in the event of keg loss;
- Brewers knowingly or unknowingly accept stray kegs from distributors;
- Brewers won’t follow through when contacted by a stray keg holder.
How much does keg loss cost craft brewers annually?
According to Brewers Association member brewery data, keg loss costs every brewer between $0.46 and $1.37 per-barrel of annual keg production. This varies depending on the size of the brewery, percent of beer produced that is sold in kegs and other factors. Assuming 2011 craft beer sales of 11.5 million barrels, that is a total direct capital charge to craft brewers of $5.3 million and $15.8 million annually.
The indirect costs of product outages at wholesale and at retail caused by a shortened keg float are likely far higher.
Why do I have to pay to get my kegs back?
Often, brewers, wholesalers and keg logistic companies pay keg deposits and freight to receive a truckload of kegs, only to find that the load contains one or more kegs that are not theirs. In these situations, the party that paid deposit and freight costs rightly wants to be compensated for these incurred costs when the time comes to send the keg home.
Regional and large brewers, wholesalers, and keg handling/logistic companies have entire operations and staff dedicated to handling kegs, so it’s easier for them to recognize and quantify the costs of keg management. Time, space and freight all cost money, and large piles of stray kegs take up precious space. As they linger in the warehouse or yard, they are repeatedly moved to make room until they are shipped. Staff may spend time on the phone coordinating freight with other brewers.
It’s important for brewers to remember that replacing a keg costs significantly more money and takes significantly more time than reimbursing a holder for deposits, freight, and arranging for the keg to come home.
Why is keg scrapping and the illegal traffic of kegs such a big issue?
Many brewers have observed both the public and other brewers scrapping kegs that don’t belong to them. Depending on the current price of scrap stainless steel, the scrap value of a keg may be substantially more than the deposit cost. If a keg is in fact stolen, the scrap value is pure profit.
Many brewers favor legislation prohibiting the sale of kegs by anyone other than the titled owner, and in fact several states have such laws in place. Ebay and Craigslist routinely list kegs for sale, often explicitly showing the owners label or stamp. These kegs are destined to become furniture, barbecue grills, brewing equipment, or other uses not intended by the legal owner. The Brewers Association plans outreach to companies that facilitate the sale of kegs, requesting that they notify sellers that they must have legal title to kegs they sell.
Most brewers will request that other brewers simply provide them the opportunity to pay for the return of their kegs, with a phone call or an email. One brewer has suggested the development of a standardized email address: firstname.lastname@example.org could help. Imprinting this information on each keg might simplify the notification process enough to help grease the wheels.
Why not ship all empty kegs back to one, or a few, central location(s)?
This is one possible solution that is already implemented in a few ways. Keg leasing companies provide this service commercially by leasing kegs to brewers on a per turn basis. The brewer never takes ownership of the kegs and does not have to worry about retrieving them once they leave their facility full. In a way, the entire market is the “central location.”
One keg refurbishment supplier has indicated they receive over 20,000 stray kegs per year from other brewing companies who dump their strays on them. The company incurs freight and deposit charges of roughly $30 per keg received, and rightly wants to be compensated for these costs when a keg leaves their possession; most brewers understand this. But occasional brewer reluctance to reimburse these costs provides a disincentive to achieving the ultimate goal of getting the keg back. The alternative is for stray kegs to linger in purgatory for a very long period of time.
In the past, a few keg logistic companies have set up regional depots as central collecting points. In some instances, resistance to funding the cost of these operations have made them unfeasible, and several have closed. Perhaps this will change, given the awareness brewers have quantifying the direct costs of keg loss, or if the industry average deposit amount were to increase.
There are also sustainability arguments for and against such systems, wherein a keg might travel hundreds or thousands of miles round-trip for the purposes of sorting, whereas a direct trip home might be significantly shorter.
The companies that provide kegs seem to have a monopoly. What can I do?
The marketplace for keg suppliers and logistics solutions companies appears to be becoming more diverse rather than consolidating into a monopoly. The broadly accepted Sankey valve is used by multiple keg suppliers (though not exclusively) and in more than one format (U.S. Sankey, European Sankey, etc.).
This increasing variety of kegs in the market actually results in, rather than solves, many of the issues inherent in keg repatriation. Theoretically if all brewers participated in a large unified float using only one kind of keg, then ownership would become moot. But multiple players in the keg supply market, and the development of alternative keg size and shape formats, mean that adoption of a single national or worldwide keg standard is highly unlikely.
Can I solve this issue by self-distribution?
Some brewers who self-distribute their draught beer seem to think so. Your state must allow self-distribution, and the size of your company must allow for self-distribution to be possible and profitable. So for many brewers, self-distribution is not feasible.
Brewers who self-distribute do enjoy a few advantages with respect to stray kegs. They are less likely to pick up a keg belonging to another brewer, and can charge a relatively large deposit (one survey respondent indicated they charge $100) on their cooperage. With this large amount of money on the line, keg loss is far less likely. Last, brewers who self-distribute are likely smaller, personally present in their local market, and are therefore able to maintain personal knowledge of the location of their keg float.
Why not use kegs with distinctive marks or materials?
Nearly all brewers employ unique looking kegs marked with colored stripes or chimes, wraparound permanent stickers, or rubberized sides or chimes. Some use kegs in non-traditional shapes or sizes, which stand out in the marketplace. All of these strategies make their kegs somewhat more likely to make their way home, thereby reducing loss and resulting in a return on the investment. Even so, no strategy will guarantee that a keg makes its way home.
One brewer has suggested the development of a standardized email address: email@example.com could help. Imprinting this information on each keg might simplify the notification process enough to help grease the wheels.
What about wholesalers—why don’t they help more?
Wholesalers have the same underlying issues as brewers with respect to keg repatriation, although their exposure is significantly less on a per-keg basis since cooperage deposits are usually much smaller than keg replacement costs.
Wholesalers dedicate staff time, space and resources to keg handling, sorting, and shipping as part of their day to day operations. Wholesalers also have to account for keg deposits they owe to the brewers, and owed to them by retailers. They often end up with stray kegs, usually unknowingly or unintentionally. Conversely, distributors sometimes ship strays with a load of kegs to suppliers, usually accidentally, although in certain instances habitually. At least one 2010 stray keg survey respondent indicated that a wholesaler has repeatedly and knowingly offered to ship them kegs from other brewers—an unethical and illegal business practice.
Without question, wholesalers will play an important role in solving the expensive, complex stray keg problem. For example, technical solutions that are implemented in the future must work easily for salesmen and delivery staff. A few brewers have increased their deposit amounts to distributors, who in turn charge higher deposit amounts so that retailers have a bigger stake in the keg float. While a high deposit amount might fund actual keg replacement costs in the case of loss, many brewers are unwilling to collect a higher deposit than their peers.