Video: ‘Little guys’ especially hard hit

By M. Alex Johnson Reporter
msnbc.com
updated 1/24/2008 4:08:53 PM ET 2008-01-24T21:08:53

Double-whammy shortages of two main ingredients are threatening to send the price of beer significantly higher, just in time for the national drinking holiday known as Super Bowl Sunday.

After water, the biggest components of most beers are malted barley, whose sugar starches are fermented into alcohol, and hops, which add the bitter tang. In recent months, both have been in increasingly short supply, and when they have been available, their prices have leaped — by as much as 500 percent in the case of hops.

“We were told about a week ago we wouldn’t be able to buy hops again this year unless we were on a waiting list, and there [were] 100 brewers ahead of us,” said Peter Martin, head brewer at Brown’s Brewing Co. in Troy, N.Y.

In September, Martin paid $4 for a pound for hops. By late October, he said, it was $50 a pound. Likewise, barley prices have almost doubled in the same period.

Just a few weeks ago, George Peterson, owner of Central Coast Brewery in San Luis Obispo, Calif., spent $160 to brew a batch of beer equal to eight kegs. Last week, he was spending a staggering $920 per batch.

“It’s a big deal, and it’s something that you have to think about every day because it’s an ingredient. I can’t just pick up the phone like I used to and say, ‘Hi, I need 45 pounds of this,’ ” Peterson said.

Small breweries feel the worst pinch
Brewers said the average cost of a six-pack of domestic beer would likely rise about a dollar by the end of the month, just a few days before the Super Bowl. Retail tracking services say beer sales traditionally rise as much 15 percent in the two weeks before the game.

Customers at Tied House Cafe & Brewery in Mountain View, Calif., are already paying more after the pub raised prices by 25 cents a pint — a bargain compared with the 75-cent-a-pint hike at Los Gatos Brewing Co. in Los Gatos, Calif.

“As a smaller brewery, it’s hard to find the hops that I need because some of the bigger guys have them,” said Kent Wheat, brewmaster at Los Gatos Brewing.

By “the bigger guys,” Wheat meant the so-called macrobrewers, like Anheuser-Busch, which makes many of the most popular brands in America, including Budweiser, Bud Lite, Michelob, Busch and Rolling Rock. Large brewers can more easily absorb the higher costs because they negotiated longer-term contracts when prices were lower, locking up supplies that are now out the reach of many microbreweries.

“The input price on barley and hops hits small breweries the hardest,” said Trevor Schaben, brewmaster at Thunderhead Brewery #2 in Grand Island, Neb., which recently raised the price of its pints to $6.

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In a statement, Anheuser-Busch said: “Like many industries, the beer industry is experiencing cost increases in raw materials. This is just one of many factors that contribute to beer costs. While we cannot disclose details of pricing, we feel it is important to offer competitive prices to growers.”

Brewers blame a variety of culprits.

Among the less obvious is corn, which doesn’t even appear in most beers. High demand for corn-based ethanol has persuaded many farmers to devote more of their fields to corn and less to barley, creating a shortage and the resulting higher prices. Ethanol has also been blamed for higher milk, ice cream and pizza prices.

“It’s become more attractive to grow corn, so farmers have made a choice to do that,” said Ronald Manabe, brewmaster at Tied House.

Rain in Europe and drought in Australia also withered barley crops. Summer prices for German spring barley rose 50 euros a ton, for example, nearly 20 percent over the previous year’s price.

Doug Odell, owner of Odell Brewing Co. in Fort Collins, Colo., has seen the price of barley — which he called the “backbone of every beer” — skyrocket, and he said he did not know when it would stop.

“It’s kind of scary to think about,” Odell said.

Changing the recipes
It’s been even worse for hops, one of the main determiners in a beer’s flavor profile. Flooding has driven down European yields for the last two years just as historically low prices have led  many domestic farmers to abandon the crop.

Hot weather and circumstances also slashed the crop in the Pacific Northwest, where the vast majority of domestic hops are grown. Nearly 4 percent of the entire 2006 domestic crop went up in smoke thanks to a fire at a single warehouse in Yakima, Wash., in October 2006.

“We get online, call hop providers just to see if they have anything we can buy virtually every day,” said Martin, of Brown’s Brewing in New York, which is drastically cutting back production of especially hoppy beer because of the shortage.

“We still have yet to find a solution other than buying in very small quantities, which really doesn’t have much of a future for the next year,” Martin said. “We’re not quite sure what we’re going to do yet.”

They’re also changing the recipes at Central Coast in California.

“Our brewer will make the adjustment to circumvent the hop shortage to keep the quality and the taste of the beer good and on task,” said Jim Aaron, the brewery’s sales and marketing manager. “We will have to make some adjustments.”

Peterson, Central Coast’s owner, said hops were important for more than flavor — they’re also the main preservative in artisan beers. If prices remain high and supplies remain short, consumers will not only have to get used to blander beers, but they also won’t be able to keep them in the refrigerator for long.

“If it got to $40 a pound, you’re going to see some hop-free beers, and it’s not going to [have] a ‘born on’ date,” he said. “It’s going to be ‘drink by tomorrow.’ ”

With Stacy Daniel of NBC affiliate KSBY of San Luis Obispo, Calif., and Darren Rovell of CNBC. NBC affiliates KYFR of Bismarck, N.D.; KHAS of Hastings, Neb.; KNTV of San Francisco; WCSH of Portland, Maine; WGAL of Lancaster, Pa.; and WNYT of Albany, N.Y., contributed to this report.

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