Back to basics? Variety trends are reversing in the pandemic economy

In January, the LEx team presented “A View From the Spot” at the Annual Hop Conference in Portland. We highlighted increasing price and demand gaps between public and proprietary varieties. LEx market data from 2018 and 2019 demonstrate that proprietaries like Citra, Mosaic, and Simcoe tend to maintain long-term desirability and fetch ever higher prices while the value of publics like Cascade, Centennial, and Chinook pitch downward as soon as they hit the market and often converge into a commodity-like rope. Longer range analyses of sold vs. unsold LEx listings over the past five years reveal similar trends – public varieties listed on LEx are less than half as likely to sell. Overall, it’s been a tough go in recent years for the classic hops that flavored a craft beer revolution.

Then COVID-19 happened, and so far, contrasting trends are emerging. Although overall market volume is down significantly, we’re seeing steady or increasing trading for top public varieties while trading for top proprietaries is dropping precipitously. Supply trends are following a similar trajectory. For instance, compared to “business-as-usual February,” “pandemic March” saw twice as much Citra hit the market, but only half as much Cascade. The table below displays selected market indicators for top public and private varieties. The last column is a measure of change in supply and demand between February and March. Lower numbers indicate that supply is increasing relative to demand, and higher number indicate that demand is increasing relative to supply. Public varieties have gained real traction for the first time in years.

Why is this happening? We don’t know yet, but here are some possibilities:

  1. Cash strapped breweries are liquidating high dollar hops to generate cashflow.
  2. Brewers with tight budgets are favoring recipes that exclude $20+/lb varieties, leading them to list excess proprietaries for sale and buy more reasonably-priced publics.
  3. An existential account. This is an extension of the “back to basics” trend we’re witnessing on a global scale. For instance, a Google search for “Back to basics” and “COVID-19” returns well over two million hits. As much of modern life is stripped away, craft brewers are gaining a new appreciation for the classic hop varieties that helped build their reputations and livelihoods.

Updates to follow. Please share your perspective with the LEx community in the comments below.

Very interesting and spot on, no pun intended, It’s troubling to see the consolidating of the industry into the hands of a few mega-brokers.