Rehrig Pacific Co., an East L.A. manufacturer of plastic packaging systems, is moving into the rent-a-keg business.
The 100-year-old company, which makes plastic pallets, crates and containers for a variety of industries, has been providing containers to breweries and wineries for four years. Under its recently launched program, instead of selling kegs, Rehrig Pacific is delivering, retrieving and reusing them.
The move is being pitched to beverage manufacturers as offering time savings and therefore money savings.
Evan Weinberg, co-founder of Cismontane Brewing Co. in Rancho Santa Margarita, an early adopter of the rental program, said it has thus far proved effective.
For the last two years, Cismontane has been buying Rehrig’s plastic kegs, which are made up of a hard plastic outer shell and removable inner bladder, for about $26 each. The brewer fills the kegs and a distributor picks them up and puts them in bars, restaurants and other retailers. When emptied, the kegs are picked up by the distributor, who returns them to Cismontane. The brewer swaps out the bladder and reuses the shell. The cost of a new bladder is $9.
With the new system, Cismontane pays a flat fee of about $15 each to Rehrig. It’s now up to the manufacturer to track the kegs and pick them up from retailers. Rehrig cleans the shells and changes bladders.
On a straight cost-of-goods basis, said Weinberg, the deal is a bit more expensive. But after removing the costs associated with logistics and cleaning, there is a net savings under the program.
“We just get what we need and move on,” he said. “Every time we need more, we let them know and they ship them over.”
Cismontane spends about $1,500 a month for the 100 plastic kegs it uses. It could cost the company as much as $10,000 with stainless steel kegs.
“The opportunity for us to use the dollars for something else is a huge advantage,” he said.
The plastic keg business is still a small part of the overall market – and a small part of Rehrig’s business. While much cheaper, plastic kegs lack the strength and durability of stainless steel kegs. As a result, many breweries and wineries usually only use plastic kegs when they need a single delivery. They typically allow the end user to dispose of them. Stainless steel kegs, which can be reused many times, are favored for repeat customers and therefore are used more widely.
Rehrig is trying to take a slice of that market by initiating the recycling program.
“This is the first time we are producing our own products and we are actually managing the reverse logistics ourselves,” said Leslie LeMair, beer, wine and spirits industry manager for the company. “We are competing against stainless steel companies that are offering purchase-rental solutions.”
The company was founded by Will Rehrig in 1913 as a business making reusable wooden crates. The company grew over time to become a large manufacturer of plastic packaging and now has eight plants across the country. Rehrig’s great-grandson, also named Will Rehrig, is president of the company. It has more than 1,500 employees nationwide and annual sales of more than $300 million.
The plastic kegs, which are all manufactured at the L.A plant, are expected to reach a capacity of 250,000 units in 2014.
While she wouldn’t put a precise number on sales, LeMair said the reusable plastic keg is the company’s fastest growing product in recent years, with sales tripling since it was first offered four years ago.
She expects further growth in the next few years as breweries and wineries look for cheaper and more sustainable keg solutions.
Two-way plastic kegs are not brand new to the market, and Rehrig faces competition from Plastic Kegs America Inc., a Georgetown, Texas, company that has been providing reusable plastic kegs for a couple of years.
“I do not have a good figure for market share of two-way plastic kegs, but I would assume it is very small,” said Paul Gatza, director at Brewers Association in Boulder, Colo., in an email.
Gatza has seen some companies that tried two-way plastic kegs switch back to stainless steel kegs.
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