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Craft Beer Fans May Face Squeeze with Hops in Short Supply

Fans of craft beers could soon face higher bar bills as small, independent brewers face a potentially serious shortage of a vital ingredient: hops.

Last summer's hot and dry weather blighted the European hop harvest and strong demand for increasingly popular craft beers, which use a lot of hops, is putting small brewers' profit margins under pressure and forcing them to raise their prices.

Read More: Trouble Brewing? Drought-Hit Hops Crop Concerns Craft Beer Brewers

Prices of some hop varieties have risen by up to 50 percent, industry sources say, while industry insiders say others are up to five times more expensive or simply not available.

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On his farm in Kent, not far from London, Tony Redsell has been growing hops since 1948 and some of the varieties he cultivates, strung along yarns supported by rows of high poles in traditional fashion, are more than 200 years old.

He sells most of his hops under contract to small brewers in the United States and his prices have risen by 20 percent in the past three years. Last year the German crop was well down and American growers could not make up the difference, suggesting prices will go up again.

"The growth of craft brewing in the United States has boosted demand for English varieties," Redsell told Reuters.

"It's a good time to be hop farmer."

Most brewers have contracts with hop growers that protect them from sudden price surges, but future supply is at risk. The scarcity may also get worse as multinationals such as Anheuser-Busch InBev and SABMiller buy up craft brands and ramp up their production.

Read More: Medium-Size Beer Brewers Caught Between a Giant and Small Upstarts

"It's tough for brewers, especially brewers that don't have hop contracts or who were a little late to the contracting game," said Bill Manley, small batch product manager at Californian craft pioneer Sierra Nevada.

If you underestimate sales and need more hops, as can happen if a beer suddenly gets popular, he said "you have to go around and knock on doors like a neighbor trying to borrow a cup of sugar."

Along with water, malt and yeast, hops are one of the main ingredients of beer. Germany and the United States are the two dominant hop growers, each accounting for one-third of world production.

But Germany's harvest shrunk by 27 percent last summer, according to the International Hop Growers' Convention. There were also sharp declines in other European producers such as the Czech Republic and Slovenia.