QUESTION ONE [25]

Read the following and answer the questions that follow: Beer its been a staple in many cultures for thousands of years and is still one of the worlds most popular drinks. From paddock to pint, an intricate set of systems and processes are undertaken to place that frothy cold brew in your hand. Each link in the beer supply chain comes with its own issues and challenges. During 2020 the Covid-19 pandemic was one of these and will continue to be so for some time. Post pandemic, evolving pressures will endure to disrupt the beer supply chain in 2021 and beyond. Beer supply chains will need to be flexible to adapt and survive the changes and challenges ahead.

The beer supply chain is a system of crucial steps taken from recipe conception through to production, brewing, bottling and delivery to the consumer. This journey from the field to the fridge includes sourcing essential raw materials such as malt, hops, and yeast, along with the people, production activities, information, and resources involved in getting a beer into the hands of your customers. Complex beer supply chains involve multiple channel members including growers, brewers, distributors, and retailers. Contemporary supply chains are based on the direct-to-consumer model made possible through the growth in eCommerce and made necessary through the Covid-19 pandemic. Beer, like any other product, follows the rule of supply and demand, but the brewing process can be complicated and so too the beer supply chain. It starts first with the raw ingredients needed for production and packaging and stops when the beer is delivered to the end user. This could be home delivery of a carton from an online order or when the barman pours a pint for a pub patron.

Raw materials

Raw materials include essentials such as water, malt, hops, and yeast. Additional ingredients like coffee beans, spices, and sugar are also used for innovations and twists on the traditional brew. It is estimated that 39 million hectares of barley was harvested in 2019. Roughly 70 percent of that was used as animal feed while the other 30 percent or 11,817 hectares was used to produce malt for the brewing of beer.

The beer industry is currently experiencing a scarcity of hops due to adverse weather, bush fires and other environmental events. With rising temperatures reducing soil moisture and draughts exacerbating water shortages, climate change poses a real threat to the availability of the raw materials of the beer supply chain. Additionally, Ramularia disease is affecting barley crops, and the arable land area used for growing crops are shrinking. Consumer demand for sustainable crops and locally sourced produce is and will continue to be key factors for raw ingredients in the beer supply chain.

Production

Beer production has always been labour-intensive, particularly in the smaller craft and boutique breweries. Brewery software and software-as-a-service platforms offer microbrewers real-time solutions to improve the efficiency of brew production. These tools link forecasts to production schedules and supplier contracts, providing complete and detailed insights to track ingredients and expiry dates, and offer analytics to predict seasonal demand fluctuations. Software solutions replace manual methods of inventory tracking to provide access to better management tools and accurate financial data. Implementing basic automation into brewery operations can reduce labour and improve product consistency. Simple automation reduces manual tasks like checking temperatures using single input computer chips and a single output cooling valve. More complex well-designed automation systems are extremely flexible, enabling brewers to make changes and easily program new recipes.

Packaging

The increase in demand for craft beer has led to a corresponding growth in the beer packaging market. Beer packaging is the part of the beer supply chain that involves the bottling and labelling of bottles, PETs, cases, and kegs. However, the many benefits of glass mean that glass packaging is expected to have the largest market share of the industry moving forward. Glass is reusable, recyclable, and it keeps beer fresher for longer compared to other packaging materials. Glass is also a good insulator which keeps beer colder much longer than any other type of single-use packaging. Additionally, glass reduces the risk of spoilage because it has a zero rate of chemical interaction with other products, and amber glass beer bottles prevent light from entering the bottle The beer packaging market is competitive and appears to be fragmented. Suppliers are competing on price, capacity, volume, and quality. The popularity and demand for original packaging solutions is expected to continue therefore technological innovation is likely to impact the market considerably.

Dispatch

Beer supply chains need to be supported by efficient shipping and logistics. Batch tracking using brewery software tools enables product monitoring to determine the status of all inbound and outbound deliveries to the warehouse. Ensuring timely deliveries and customer stock replenishment. Automation is revolutionising the beer supply chain through automatic storage and retrieval systems that improve warehousing and dispatch efficiency. With the addition of brewery software, brewers can account for all materials and shipping costs to ensure products are accurately priced to maximise revenue.

Distribution

Distribution covers a wide range of activities and a variety of supply chain participants. Quality auditing, marketing, training, and food pairing are all distribution activities. Participants in the beer supply chain vary from wholesalers to retailers, restaurants, bottle stores, pubs, and clubs. Distribution and supply are vulnerable to an unpredictable customer, and ever-changing preferences. Take for example the increased demand for beers with less calories and lower ABV that is expected to be high in flavour and with food-pairing compatibility. The beer supply chain was adversely affected in 2020 due to the Covid-19 pandemic which caused nation-wide lockdowns, the closure of hospitality venues and restrictions on social gatherings. The pandemic changed the way in which beer was packaged and distributed. It generated growth in eCommerce, online demand, and direct-to-consumer supply due to whole nations being forced to stay at home. Brewers had to rethink packaging to meet this change in demand. Twelve-packs replaced kegs, and stock meant for hospitality venues was redirected to retail outlets such as supermarkets and bottle shops. Covid-19 has been extremely disruptive to the distribution and supply of beer products and this is likely to linger. International markets will dry-up as Covid-19 outbreaks continue to shut down countries and more virulent strains emerge. Domestic consumers will remain loyal to local brewers.

Questions:

1.1 From the case study above, construct a graphical representation of the stages of the value chain for the production of beer. (7)

1.2 In a table format, identify the activities of the value chain for beer production. (10)

1.3 Conduct a risk assessment of the value chain for the beer production. (8)