A friend and I made the trek to an iconic, beloved brewery a little while back. Like a lot of Top 50 breweries, they have a well-known, hop-forward flagship brand that's held in the highest regard. While I'm a fan of it, it is my friend's absolute favorite. I’ve stressed to him over the years to look at code dates before buying, to avoid occasionally paying for beer that’s past its prime. On that drive, he told me that he was excited to buy a case from the source and get the opportunity drink it fresher than he ever has. Unfortunately, that wasn't in the cards...
In Accounting 101, you learn about the different ways to value the cost of inventory that you sell. This is relevant in beer because every batch of the same beer is going to vary in cost, due to a long list of variables. The valuation options include First-In-First-Out (FIFO), which means that the value of product sold is at the cost of the first (oldest) batch, the first one in if you will. Then there's Last-In-First-Out (LIFO), which means that the value of the last (most recent) produced batch is how you value the inventory being sold first. While these are the official definitions of FIFO and LIFO, they're also commonly used more informally by accountants in other aspects of the business.
We had an awesome visit to the brewery, trying our favorites and some new innovations, then hit the gift shop on the way out. While being rung up, I realized there was a problem. The beer in question, which is definitely packaged regularly, was nearly 3 months old. Assuming it must have been a simple rotation issue, the following conversation followed:
Me: Hi, is there any way that we could get a case that was packaged more recently? This one is over three months old and we were hoping to take a whole case home that would last us awhile.
Brewery Cashier: This beer is built to last for up to 6 months, so you should be fine.
Me: I don't disagree, but we drove a long way to come to the source and are hoping to take home a fresher version than what’s available to us normally.
Brewery Cashier: I’m sorry, there’s nothing I can do
I don’t enjoy lifting up six-packs and checking code dates at the store or bottle shop. It actually makes me uncomfortable for whatever reason, but is a very necessary practice these days. Part of the reason that I lean toward new beers is because the unfamiliar label serves as a freshness indicator. This is part of the reason why brands often see a healthy lift immediately after a brand refresh. After being burned by my favorite breweries, local and out-of-town, from this same scenario at the gift shop, it's become a regular ritual for me.
I recall a time where I walked into a Chicago taproom and paid for two 4-packs of their Pale Ale. As I was walking to my car, I saw they were 10 weeks old. I walked back in and very politely explained that they were for a friend overseas and might take a while to reach him and could I get a fresher batch? Without hesitation, the gentleman kindly went looking in the back and exchanged me a couple-day-old version. I left happy, but why were those 10 week old versions the batch being presented to me in the cooler?
You might first think that it’s greed, or perhaps even laziness. Instead, I think it’s more of a simple lack of procedure and accountability that’s never been assigned to a given person or department. Sure, the cost of being able to make high quality beer and operate a brewery is very high, from a fixed/sunk cost perspective. The incremental cost of beer itself however, is not nearly as concerning, and not worth the reputation hit from consumers buying old, subpar versions of your core beers that you package every 1-2 weeks. They might taste “OK”, but this practice has the potential to leave a malty taste in their mouth. Eh?
Here's a bare bones head start for the easiest SOP you'll ever implement:
Title: Freshness To-Go, Last-In-First-Out (LIFO)
Purpose: Ensure that Taproom visitors buying beer to-go receive the freshest version available.
Procedure: Upon packaging and warehousing of a freshly canned beer, the cans currently for sale in the Taproom of that brand are immediately replaced by the new, fresher version.
You may ask, what about the slightly older beer getting replaced? Use it for employee beers, use it for donations, it doesn’t matter to me. If there’s that much leftover then perhaps you’re overproducing or not forecasting well enough. Your direct-to-consumer margins allow you to take your occasional lumps, as needed, for the sake of hospitality, if you choose to make that a priority. Just don’t let a customer who trusted you to give them a great experience, arrive at home only to find out that you sold them old beer. The last ones in MUST be the first ones out. LIFO, or GTFO.
Doug is a CPA with a knack for photography, design, and social media. Professionally, he is the CFO & Head of Communications for Revolution Brewing. Opinions are his own.