Understanding Pay Per Fill Keg Programs...

As a craft brewer, if you have researched different options for obtaining kegs or managing your keg fleet, then you have likely heard of the Pay Per Use or Pay Per Fill model for kegs. Given conversations we’ve had with brewers, we thought we’d post short blog entry to cover the basics of this model.

Pooled Asset Model

The underlying premise is applying a pooled asset model to keg usage. Unfortunately, kegs may sometimes end up in a swimming pool, but this is a pool of a different sort. Think of a rental car company having a pool of cars or Netjets having a fleet of jets that lucky passengers pay a fee to use but ultimately do not have to own a specific private jet. Asset Pooling can work and be extremely efficient when the following conditions apply: the asset is standard across users, it can be shared and reused, it has a relatively long life, it is mobile and moves throughout a supply chain, and its retrieval can be cumbersome and complex. Sounds like a good fit for kegs, right?

Life of a Keg

So let’s review the life of a keg. As you know the Three-tiered distribution model results in most kegs moving from the brewery to the distributor to retail (e.g. bar, restaurant) and then when empty, back to the distributor, and finally back to brewery. When multiplied by several distributor relationships, there is plenty of opportunity for kegs to sit for lengthy periods or even disappear. Thus, the nature of this supply chain makes it especially conducive to a pooled asset / pay per fill model.

Pay Per Fill

We’ll end with a brief overview of how our program works for the brewer: First the brewer places an order for how many kegs they need. After receiving the kegs and filling them with delicious beer, the brewer ships the kegs to the distributor and pays a per keg usage fee. The brewer then cleans his/her hands of the responsibility for the keg. 124, the keg provider, collects the deposit from the distributor and coordinates the eventual collection of the empty kegs...after which they are delivered back to the same or to another brewery in the pay per fill network and the cycle starts over.

Hopefully that provides a clear picture of the basics...and how this model can make life easier by moving cooperage management off your plate. Please contact us, if you would like to learn more about our approach to providing Pay Per Fill to breweries in the southeast.