Food & Beverage
Yakima Chief Hops presents brewers with solution-based ordering system
Bringing beer’s ‘chief’ ingredient to brewers of all sizes
Based in Yakima, Washington, Yakima Chief Hops (YCH) is a 100% grower-owned hop supplier for the global brewing industry. Sourced from a network of multigenerational family farms from across the Pacific Northwest, YCH provides brewers with solution-based hop products that honor the hard work of their hop growers. The original group of grower-owners was formed in 1988, and YCH has been operating under its current name since 2018. It is now the largest hop supplier in North America, selling hops globally with offices in Belgium and Hong Kong, as well as distributor partnerships in place all over the world.
Most of the company’s revenue is driven by multi-year contracts. Because of the dynamic nature of both the agriculture and beer industries, the contracting and ordering process is unique and complex. YCH sells hops to commercial breweries, as well as distributors that also contract with and sell to breweries and homebrew retail shops. Customers come to Yakima from all over the world to see, smell and touch hop samples, allowing them to select exact lots from specific farms and fields based on aroma profile and quality score. Once customers have selected the specific hops they want, they can reserve them for their pre-negotiated contract volumes and pricing for the following calendar year, after the harvested hops have been processed. Inventory that isn’t under contract is sold through the Spot Market in cases weighing up to 44 pounds, and through the Homebrew Market in 1 to 2-ounce packages.
The largest customer segments are macro breweries, craft breweries and distributors. These customers buy hops on contracts ranging from 1 to 5 years in duration. However, commercial breweries will also choose to purchase some hops from the Spot Market. It is typical for nano-brewers — neighborhood breweries on a relatively smaller scale — to only buy hops from the Spot Market. Larger craft brewers will often purchase “hops on spot” to supplement their unexpected needs throughout the year such as limited edition, one-off or seasonal beers. Homebrewers who produce small batches of beer as a hobby typically buy hops in much smaller packaging sizes from retail shops, though they can now purchase directly from Yakima Chief.
Streamlining order and contract management with a self-service portal
Until 2018, YCH had a basic website built on a homegrown content management system with limited capabilities. Customers had to place contracted orders through a sales or customer service representative, and if they were shopping the Spot Market, they could explore options in an online catalog and place the items in a shopping cart. However, they’d then have to wait for a customer service representative to send a price quote via email. Managing these orders was labor-intensive, with waiting periods and a probability of human or technical error. As the industry grew and brewers’ needs became more complex and specific, it was time for a change.
At YCH, each contract has a high level of customization, and customers may have multiple contracts that are active at the same time. For example, if a customer has two overlapping contracts, YCH wants to make sure the customer draws down their full allotment from the older contract before purchasing hops against the newer one.
From a customer’s perspective, they want to be able to plan ahead and ensure that their preferred hops will be available with maximum flexibility. Since hops must be stored in a refrigerated environment, customers with limited storage space tend to order them just before they need them, preferring to let YCH store them for as long as possible before they are shipped. In addition, customers also want convenience and they want to be able to buy contracted and Spot Market inventory at the same time.
“Many brewers work around the clock, outside of our normal business hours,” explains Aric Gamache, VP of IT at YCH. “If it’s two in the morning and they want to order hops, check their contracted inventory, or check the status of a shipment, we want to provide them with the accessibility and freedom to do so. In addition, the majority of our customer base is digitally savvy and comfortable with online shopping. We wanted to better accommodate their buying habits as well as their business.”
YCH’s main goal was to make the buying experience more convenient for customers so that they can buy hops and manage their accounts at any time, from any place. In addition, as the industry continues to grow, they also wanted to reduce labor costs by automating key aspects of the order management process. Lastly, they hoped to increase Spot Market sales by allowing customers to make spot hop and contract inventory purchases at the same time.
The next phase was to put these plans into action.
Delighting customers, driving revenue, and expanding the business model
YCH chose Magento Commerce because they needed a solution that adapted to their unique business needs. Working with Magento Solution Partner Binary Anvil, YCH extended Magento Commerce with a custom order management system and integrated it with their enterprise resource planning (ERP) and warehouse management systems (WMS) to create a self-service portal where both commercial and retail customers can place orders through an easy online process. Contracts are created in the ERP system but they’re visible in the e-commerce portal, and information flows back and forth automatically via custom enterprise integration services.
Now, when customers log into the e-commerce portal, they can see their contract details, including their negotiated pricing, remaining inventory and consumption projections. When they place an order, the inventory is reserved in ERP and then sent to WMS where it is allocated based on the lot number.
“With our new fully automated self-service experience, Magento orders arrive in the warehouse within minutes to be picked, packed and shipped,” said Jordan Gottlieb, Director of Software Engineering at YCH. “Our custom Magento OMS and proprietary Enterprise Integration Services work together to ensure complex orders are fulfilled accurately and efficiently. Automated transactions requiring triage are surfaced directly to the Business Analyst, Sales, Finance or Logistics teams for rapid resolution via proactive monitoring and alerting systems.”
Small and midsize breweries have embraced the new e-commerce platform, which currently serves North American customers. As the platform is rolled out globally, larger breweries with global footprints will also have the opportunity to adopt it.
Today, more than 70% of all US orders are now processed through the e-commerce platform instead of directly through the ERP. That represents huge savings in labor costs, as each customer service representative averages roughly 5 complex, high-AOV orders per day.
In addition to streamlining contract orders, the new system makes it easier for customers to purchase extra inventory through the Spot Market. As a result, revenue from spot sales has increased by 7%.
The Magento e-commerce platform gives YCH the opportunity to build a direct-to-consumer business. Although the system was primarily designed as a B2B customer portal, YCH has also leveraged the flexibility of Magento Commerce to launch a B2C homebrew catalog.
The feedback from customers has been “nothing but fantastic,” said Bryan Pierce, VP of North American Sales at YCH. “They recognize the complexity of what YCH is doing and appreciate the ongoing efforts being made to accommodate their needs and bring value to their business.”
As COVID-19 has accelerated a greater shift to online platforms for daily business operations, YCH is doubling down and accelerating its digital roadmap. “Our leadership team is fast-tracking digital projects that were potentially several years out, amending policies and processes to help us expand our services and global reach as the world faces these unprecedented times,” said Ryan Hopkins, CEO at YCH. “The team is working hard to support our brewers and hop growers as they work to overcome these challenges by offering increased communications, tools and solutions. We are also working closely with our customers to reallocate contracted inventory whenever possible to ease some of the financial burden. We value our brewing community and are continuously seeking ways to offer our support.”