On Molson Coors' Barley Days, the temperature is hot but the beer is cold and the taps are free flowing. The annual event brings company executives together with barley growers to celebrate the crop's yearly harvest.
While the harvest and celebration take place every summer, Molson Coors works year round to protect and grow its barley supply chain. Over the last decade, the company has poured $20 million into sustainability investments and its Better Barley, Better Beer program, incentivizing sustainable farming and securing its supply of barley.
Barley sourcing has come into focus — especially from beer manufacturers reliant on the ingredient — as the crop faces increased risk from severe weather and climate change. Extreme drought and heat can damage barley and decrease yields up to 17% depending on severity, according to a study published in Nature last year.
"Without barley, we have no beer — it's that simple," Bill Dempsey, Molson Coors' chief procurement officer, said in a press release. The manufacturer owns beer brands which include Blue Moon, Coors, Keystone and Miller.
The risks to barley have prompted beer manufacturers to develop close relationships with their barley growers and use real-time data and technology to protect the crucial crop.
Real-time data, real-time risk management
Malting grade barley is a particularly sensitive crop and needs just the right weather conditions to thrive, according to Molson Coors. Too much or too little water or heat can produce low-quality yields — or worse, no grain at all.
"The game in managing this really comes down to data," Dempsey told Supply Chain Dive in an interview. "It's putting the data at your folks' fingertips so that they can make decisions quickly."
Molson Coors brought data to the fingertips of growers, agronomists (soil management and crop production experts) and procurement executives four years ago with the launch of its digital platform, the Grower Direct Portal.
"You've always got to be careful of severe weather at harvest that would damage the the beautifully grown barley that we've got."
Chief Procurement Officer, Molson Coors
"Like all new tools, it did take some time to adopt over the last four years, but we now have full participation from all our 800+ growers" in the U.S., Wade Malchow, global senior barley program manager at Molson Coors, told Supply Chain Dive in an email. The growers are in Colorado, Wyoming, Montana and Idaho.
In the portal, barley growers input data on yield, water use, pesticide use, tillage and more, Malchow said. In turn, Molson Coors overlays its own data, such as estimated rainfall in the farm location. With 100% direct supplier participation on the portal in the U.S., Molson Coors can "drill down ... findings to a farm level and help identify trends and opportunities," it said in its 2018 Beer Print report.
Much of the data comes from technologies put in place on or near barley farms. Weather stations and soil moisture probes continuously monitor weather conditions, which Dempsey said is the biggest source of volatility in the barley supply chain.
"You've always got to be careful of severe weather at harvest that would damage the the beautifully grown barley that we've got," he said.
With real-time data, Molson Coors, farmers and agronomists can make data-driven decisions to mitigate risk, such as whether to delay harvest or how quickly to harvest crops and move them to grain elevators.
Molson Coors also uses the data to make longer-term, proactive decisions about farming techniques. "We use the data to develop benchmarks for crop management factors, such as water use across farms in a specific growing region," Malchow said.
Other beer manufacturers have employed similar techniques to cultivate data from growers to mitigate risk.
Anheuser-Busch InBev developed a SmartBarley program, which includes agronomists in the field and an online platform for growers to input data similar to the data entered in the Grower Direct Portal. The SmartBarley platform identifies benchmarks to improve farm performance, and the "Bud Lab" at University of Illinois Urbana Champaign combines the data with climate and soil models.
Supplier relationships span generations
Molson Coors' supplier relationship building started long before the portal launch in 2015.
Bill Coors, grandson of company founder Adolph Coors, incorporated a direct supplier program in the 1940s and formed contractual and exclusive relationships with barley growers.
Even without today's high-tech soil monitors and digital portals, the fundamentals of supplier relationship management started Molson Coors on a path to a vertically-integrated business. "Some of these relationships we've had for generations," Dempsey said.
A presentation from MillerCoors, the U.S. business operation of Molson Coors, described suppliers as "partners" under its fundamental procurement philosophies.
"Our relationship with our growers starts right at the seed."
Chief Procurement Officer, Molson Coors
The concept of supplier relationship management (SRM) has taken a new path recently, as procurement executives move away from low-cost-at-all-cost models and recognize suppliers as a value-added component of the supply chain.
Molson Coors isn't focused on procuring barley for the lowest price. Rather, the brewer says it pays more per bushel to growers who practice sustainable farming techniques as recommended by Molson Coors.
Shifting toward sustainability
Molson Coors' farmers plant a variety of barley known as Bill Coors 100, which the manufacturer launched in 2016. The variety requires less water than traditional barley crops and can create 33% higher yields, according to Molson Coors.
"Our relationship with our growers starts right at the seed," Dempsey said. Through developed barley varieties for suppliers, the brewer uses its supply chain to meet its own goals of improving water efficiency in the supply chain and operations by 10% by 2025, set against a 2016 baseline.
Financial incentives help accelerate the goal of sourcing 100% of barley and hops from what it deems sustainable suppliers by 2025 to maintain soil fertility, water resources, air quality and biodiversity.
Sustainability and reduced water usage are common goals among major beer manufacturers. AB InBev set goals, also for 2025, to reduce carbon emissions, acquire energy from renewable sources and improve water efficiency. Heineken met its goal to reduce water consumption in breweries by 30% by 2020, compared to 2008 levels. CDP named Molson Coors and AB InBev to its 2019 Supplier Engagement Leader Board, along with Diageo, the parent company of Guinness, and Kirin.
As climate change persists, barley crops, particularly malting grade ones, will remain at risk. Molson Coors plans to continue using supplier relationships and its Grower Direct Portal to meet sustainability goals. In future iterations of the portal, Malchow said the manufacturer will use farm data to give growers feedback on how to improve barley quality and efficiency of farm operations.
"The biggest tactic ... is to be very direct with those relationships," Dempsey said. "We've got agronomists in the field. We spend a lot of time with our growers."
This story was first published in our weekly newsletter, Supply Chain Dive: Procurement. Sign up here.