KEGS: RENTING, LEASING, OWNING or PLASTIC?

Gretta Beer News, Technical Article

 

Kegs are a topic of broad opinion, confusion and frustration for many brewers; is it best to Rent, Lease or ‘take the plunge’ and buy them outright?

It is widely considered that about 10% of the wholesale cost of every draught beer goes toward the keg cost, be it rental, leasing or purchase; the numbers are significant. With Australian brewers losing an estimated $20 million worth of kegs per annum, the impact on their finances is undeniably large.

Australia’s brewers lease about 25,000 kegs a year. When combined with 500,000+ individual keg rentals, it would appear that in five short years, Australian brewers have fallen out of love with owning their kegs.

Who could begrudge a brewery owner for having sleepless nights when they see their shiny new $150 kegs loaded onto a truck, unsure if they will ever be seen again. Coupled with ever increasing costs and subsequent downward pressure on margins, the financial impact of losing a keg can take many additional keg sales to recover. So, what are the options and their pros and cons?

The life-stage of a brewer, their geographic market and access to working capital all play a key role in choosing the ideal keg solution. The graphic below illustrates the predominant (not exclusive) preferences of many Australian brewers.

 

 

Renting

Otherwise known as pooling or pay-per-fill, keg rental was pioneered in North America by Microstar more than 20 years ago and remains the preferred model for a significant number of independent craft brewers today.

Keg rental was launched in Australia in December 2012 by ex. McLaren Vale Brewing Co. founder Adam Trippe-Smith under the Kegstar brand.

Beginning with just 880 kegs and an order from (then) small brewer Stone & Wood, Trippe-Smith has built Kegstar into a global business of 400,000+ kegs, 1,000,000+ rentals per annum and a reach spanning Australia, New Zealand, America, United Kingdom and Ireland with additional markets on the radar.

The benefits Kegstar offers have clearly resonated, with over 200 brewers, cider producers, distillers and winemakers utilising the rental model.

The great benefits of Keg Rental and Kegstar include:

  • Affordability; At between $20 and $25 for the average 50L keg rental, it’s a more accessible number than buying a new keg
  • Cash preservation; Saving your cash to invest in growing your business eg. sales, brewhouse expansion, hiring new staff
  • Collections; Kegstar collects kegs from any venue in the country
  • Reverse Logistics; No more trucking empty kegs from Perth to Brisbane!
  • Tracking; Kegstar’s proprietary tracking software means you can track your kegs through the supply chain with full transparency
  • Flexibility; Choose between 50L and the soon to be very popular 30L & 19.5L
  • Lost Kegs; As long as kegs are ‘scanned’ to the venue, Kegstar accepts liability for them and wears the cost for any that go missing

 

Leasing

Keg Leasing in Australia continues to gain in popularity, as is the case in North America and Europe. This model offers many similarities to renting, with a number of subtle differences that appealing particularly to brewers who sell the majority of beer they produce in their own taprooms and/or in the local vicinity.

 

Keg Lease in Australia was created by the Meddings family in 2012 and run parallel to their Bintani ingredients business for several years. In July 2017, Keg Lease was sold to Trippe-Smith and Kegstar as a complementary addition to the existing keg rental business.

Keg Leasing simply allows brewers to pay a set monthly fee over the term of contract, leaving them to control their own supply chain and keg movements.

The benefits of keg leasing include:

  • The ability of brewers to brand the kegs as if they owned them
  • Having complete knowledge of the prior contents of the keg
  • Being able to budget a single fixed cost each month for your kegs
  • Availability of on-call kegs to instantly grow a fleet
  • Brewers are provided with support to control their own supply chain
  • The working capital savings of paying as little as $4 per month to lease
  • Ability to return kegs at the conclusion of a lease term and/or manipulate a keg fleet based on changing needs

 

Owning

Given the relatively young age of the alternatives, owning kegs is currently the most popular option by volume.

There are a number of traditional European manufacturers who have been making premium quality barrels and kegs for over a century, namely Portinox  Thielmann), Franke (Blefa) and Schaefer.

While it is possible to order full containers of kegs from a number of these manufacturers, Australian based agents such as Keg Services (Blefa) hold strong local stock levels, offer small volume pricing and a complete branding and service offering. In addition, the long lead times often experienced when ordering direct from Europe are avoided.

Over the last decade, China has emerged as a major player in many manufacturing industries and kegs are no different. Major Keg and Pengali Jinfu are amongst those who have made strong inroads with keg quality and speed to market, leveraging their geographic and low cost of production advantages over Europe. Many people in the brewing industry are monitoring Chinese kegs closely, assessing whether they will endure 30+ years of use in the same way European kegs do.

The benefits of owning a keg mirror those of leasing with the added benefit of knowing the keg is yours to keep and use for its life.

 

Plastic

Now over a decade old, plastic keg technology has have thankfully improved, with nasty stories of exploding kegs and high rates of spoilage becoming far less common.

Plastic kegs play a strong role in the export of Australian beer, particularly to countries where international pooling of steel kegs is not yet available.

The use of plastic kegs domestically is rare, with the majority of brewers preferring the quality, strength, environmental (re-fill) benefits, insulation properties and transport worthiness of steel kegs.

The benefits of plastic kegs include:

  • Single use to any location in the world
  • Relatively low cost when compared with buying
  • No cleaning required

It’s important to note that as any brewing business evolves, so will its keg needs. Regular dialogue between owners, brewers, logistics partners and customers is essential to ensure brewers have an articulated keg strategy that works financially and delivers their beer into the glasses of drinkers as it was intended.

 

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