Creating value through transparency in the hop supply chain | Steve Carpenter | TEDxYakimaSalon


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Behind the scenes stories of the transformation of the international hop supply industry: suppliers and brewers collaborate to create innovative craft brews. Steve is Chief Supply Chain Officer at Yakima Chief Hops, a global hop supplier. His family has been growing hops since 1869, for which he followed in the footsteps until becoming the CEO at Yakima Chief. When Yakima Chief combined business operations with Hopunion in 2014, he was appointed CEO and most recently, CSCO. While farming, he played a role in creating and nurturing the concept of a grower-owned hop mechant and grower-owned hop breeding business. He has been instrumental in designing supply chain systems to deliver quality, food safety and transparency. He has a passion for process, continuous improvement and great beer. This talk was given at a TEDx event using the TED conference format but independently organized by a local community. Learn more at <br> <h3>Auto Generated Captions</h3>

I grew up on a hot farm in Grainger just
down the valley here and in doing so my
family still farms down there they still
grow hops and as Barbara mentioned I
left the farm a few years ago to take a
position in management at Yakima chief
my great-great-grandfather Charles
carpenter he planted the first hops in
the Yakima Valley back in the late
1860’s about three miles that direction
if you know where the autonomy youth
Park is that’s where the original
homestead was and then my grandfather
moved the farm down to the Lower Valley
there’s been a lot of changes over the
years and I think those changes in the
hop industry have really taken on a
exponential rate of change the last 30
years there wasn’t a lot of trust and
transparency in the hop industry back in
the 1980s and as an example there was
the Department of Justice on behalf of a
group of hop growers brought an
antitrust lawsuit alleging price-fixing
and collusion against some of the major
hop dealers of the era back in those
days and then on the heels of that
lawsuit based in part on what was
learned anheuser-busch the largest
brewer in the world at that time
followed up with a suit against the same
major hop dealers alleging the same
thing so you can see it wasn’t an
environment for creating a lot of trust
and transparency now a couple things
happened in the late 1980s that I think
in hindsight assured in a new period of
hope for transparency in the hop
one of the things that happened was
anheuser-busch decided to secure at
least part of their hops supply by
contracting directly with hop growers
now this changed the role of a deal the
dealer a little bit because all of a
sudden instead of relying on profit
coming from buy sell margins they became
a service provider for anheuser-busch
providing handling services storage
services and processing for
anheuser-busch for us as growers this
was a wonderful development because for
the first time we were able to sit down
not just with a brewer but the world’s
largest brewer and communicate with them
we learned what they wanted in terms of
quality and they learned from us the
economics of that quality there’s a
welcome development for my family and so
we took all of that business that we
could and that consisted primarily in
those days of aroma hops early maturing
hops varieties like Willamette us Teton
Aang and cascade were three of the
varieties they were interested yet
unfortunately for us as growers it took
a big chunk of that business
we still had late maturing alpha hops
that we needed to sell and the dealers
at the time weren’t quite as anxious to
buy hops from us because we had buddied
up with the biggest Brewer in the world
so another development that happened in
1988 a gentleman by the name of Chuck
Zimmerman and I’ll talk more about Chuck
later he left his employment with a
local hop dealer here and became a
consultant for Pfizer yes that Pfizer
the pharmaceutical company that also
happened to own a hop extract plant in
Sidney Nebraska now I don’t know if
you’ve ever been to Sydney Nebraska it’s
not the end of the world but you can see
it from there
it’s out in the middle of nowhere and
what they did is they took a safflower
oil extraction plant Pfizer did and
converted it to a hop extract plant it
was really done to kind of recapture
some of the research and development
technology that they had developed in
their pharmaceutical company and applied
that to hop extract treating specialty
products with different attributes for
Brewers now we saw an opportunity
because Chuck’s job was to find a source
of alpha hops late maturing alpha hops
my family the parol family and the Smith
family three families that are still
growing hops and have been for many
generations here in the valley saw this
is an opportunity to find a home for our
alpha hops outside of the traditional
dealer network now this strategic
alliance that we formed with Pfizer
required that we not only grow the hops
but also store the hops and later on
pelletized the hops before shipping them
off to Sydney and so we went to the bank
we borrowed some money we bought a
warehouse down in Sunnyside and we
subsequently borrowed money to build a
pellet plant now Chuck at the same time
Chuck Zimmerman was also involved with
private hop greedy hop breeding is a
very complex thing it’s a generational
thing it takes a long time and Chuck
wanted to see his private breeding
continued so he worked with us to secure
this germ plasm he had been working on
and we’ve taken that program back since
1989 and we did develop some interesting
new hopper IDs from that germ plasm now
in hindsight growers securing access to
a warehouse and a pellet plant
was a little bit like giving a group of
teenagers a case of beer in your car
we were very production driven we were
very proud of what we grew we had a good
handle on what it cost and we were not
going to sell unless we got the price
that we wanted and the result of that
was by ignoring the market the result
was eight the banks pretty nervous they
lent us cash to build these facilities
and they wanted to get paid back in cash
instead of hop extract or hot products
so it dawned on us this lesson that we
learn from a B well we’ve been able to
sit down and open up this two-way
communication with them we have
forgotten that lesson we had figured we
grew these hops there’s got to be a
market for it in reality what we should
have been asking is Brewer customer what
do you want us to grow what varieties
and what volume so we quickly reload
that lesson and we started building a
dialogue with their brewer customers and
not only did we learn the volumes and
the varieties that they wanted we also
learn what they wanted in terms of
quality we also learned what they wanted
in terms of sustainability and we
studied what they needed in terms of
customer service to help them make great
so we developed all these systems over
the years taking that transparency
taking that communication and turning it
into concrete programs concrete systems
all up and down the supply chain
designed to help our customers make
great beer and our business grew and as
Barbara mentioned we’re now the largest
hop company in North America now that
was never on our radar to be the largest
we didn’t think of that that’s not what
we’re about
what we’re about was bringing a degree
of transparency to the industry and also
recognizing that the two most important
parts of the Hopf supply chain are
growers and the Brewers that’s all we
wanted we want to do the right things
for the right reasons and the business
grew and as Barbara mentioned were the
largest in North America we handle a
little better than 1/3 of the u.s. crop
last year those three original owners of
Yakima chief the Perrault family my
family in the Smith family had been
joined by 12 other grower owners
sprinkled throughout the Pacific
Northwest and we are driven by a mission
to connect family hop farms with the
world’s finest Brewers thirty years ago
it was rare for Brewers to even visit
hop farms it just didn’t happen and now
every September three or four or five
hundred Brewers descend upon Yakima and
they’re here to do one thing they want
to sniff and smell the hops and pick the
hops that they want to go into the beer
they’re going to be brewing the next
calendar year so this transparency who
was virtually non existence is now the
norm and it’s required us to design
these new systems and let me just share
a couple of them with you one of them
that we developed a couple years ago was
this app for our brewer customers so as
they’re rubbing and sniffing these beers
they got this app where they can kind of
put down on their app their notes and on
the other side we have a grower portal
where growers are able to log on to that
in an almost real-time see that comets
the customers are making about their
hops I’ll tell you a quick story I had
one of our sales guys come to me a
couple years ago he started this he says
Steve I need you to read this comment
that a brewer put on these hops and I’m
paraphrasing but the brewer said
something like these hops smell like my
all my weed and then PETA on my
Christmas tree I said you know that’s
transparency sometimes you hear comments
you don’t want to hear and the salesman
says no no you don’t understand that’s
his way of saying he wants every pound
of that life craft brewers are weird
they really are and you need to be a
little bit weird with them and you know
but really what trap brewers are they’re
artists they’re always looking for a new
color on that palette to create
something new and that’s where our
breeding program has come in there’s
varieties that exist now that didn’t
exist even ten years ago and these
Brewers who are artists take these
varieties and develop these beers with
these unique flavors and aromas and it
really turns on their customers another
thing we do is when we develop a new
variety we have what we call our
footprints program and that program
really involves hiring this army of
interns that go into these hop yards and
they walk through them and they’re
looking for off types because that’s
something that’s important to our
customers to have purity in our hopper
IDs the other thing they’re looking for
our males there’s probably a few ladies
in the audience that will tell you human
males are absolutely worthless except
maybe for breeding purposes it’s the
same extinct in hops
you don’t want males in your hop yards
because they create seed and seed
creates weight without any value to the
brewer so that’s what these interns are
looking at and in the footprints program
are looking for male hops so they can
mark them with their GPS and roll them
out we have a green chief program it’s
another example of something we have and
that’s really a grower forum where we
get growers together we talk about
reducing synthetic pesticide usage we’ve
got a group of growers right now who
are working hard to identify their
carbon and water footprints and if we
can measure it we can develop strategies
to improvement prove it that’s a whole
idea behind that we have a growers
working on that right now and really I
created a new generation of beer
drinkers is really providing the
inspiration for us to do things we’re
doing to create transparency in the hop
industry as my wife’s here
she’ll attest to when I travel I like to
go to the local craft breweries and you
go into these craft breweries and you
always see this group of young people
sitting in the corner they’ve got their
taste or flight and I think it’s a small
measure of our success if you sit close
enough you’ll hear them talking about
the different hop varieties in that beer
and in some cases are even talking about
who the grower was it grew you know and
they may not know them but they know who
that grower is and it goes beyond that
this younger generation of beer drinkers
they want to know were those hops were
those raw materials that are going into
my beer where they grown with attention
to being friendly to the planet they
want to know that all the people in the
supply chain that helped produce those
hops from the farm workers to the
production workers in our business to
the transportation folks getting those
hops to the brew kettles where they
treated fairly and they want to know do
all the companies do the growers the
family farms does yakima chief the
transportation companies are they doing
things to help make their communities
healthier places to live to work in to
play me us baby boomers does it taste
good what does it cost that’s all we
want to know about beer this younger
generation is inspirational and that way
and drives a lot of things that
do our key objective at yakima chief one
of our key objectives is to not only
tell the story of our growers but to
make sure it’s a story worth telling and
so we’ve committed a lot of resources to
developing transparency all up and down
the supply chain with the idea of
creating of accountability for ourselves
and our growers and in turn creating
value for brewery customers I’d like to
leave you with a thought and the thought
is transparency creates trust and Trust
is the foundation for building value in
any relationship and that means in your
business that means in your organization
that means in your personal
relationships as well and as you go out
and celebrate this holiday season or
beyond first and foremost be safe but if
you happen to hoist a pint of beer and
celebration think of us chances are the
hops that are in that beer
we either grew or processed in our
company and now you know the story
behind the hops thanks for your

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