Wednesday, January 2, 2008

Beer Price Increases - A Recurring Theme

There's been a rash of articles in the popular press lately regarding the anticipated, and very real, price increases in craft and mega-beers. Three recent articles in area papers do a good job of bringing the point home.

On Friday, Don Russell, AKA "Joe Sixpack", mentioned the issue in his weekly Philadelphia Daily News column.
Beer money isn't just pocket change anymore, and I'm not talking just about those pricey bottles of premium craft brews.
In '07, brewers around the world suddenly faced big increases in the cost of raw materials: glass for bottles, fuel for delivery trucks, malt for the suds and even paper for labels. The price of hops alone jumped 500 percent. A case of Bud is closing in on the $20 mark.

Both the wallet and the palate took a hit. Many small brewers found hops were unavailable at any price, forcing some to halt production of some of their hugely popular bitter ales, like imperial India pale ale. 2008 outlook: Victory HopDevil Lite.

On Monday there was an editorial in the Philadelphia Inquirer that placed the blame squarely on the increased demand for ethanol.
Ethanol one reason beer price is hopping

Have you noticed that the price of beer is going up?
The simple explanation is that supplies of hops and barley, two key ingredients in brew-making, are shrinking while demand for beer is increasing.

Bad harvests and low prices for these commodities bear some of the blame, but another major factor is the nation's poorly fashioned energy policy.

Thanks to government subsidies to promote ethanol production, more and more farmers are abandoning a variety of crops - including barley and hops - and switching to corn.

Not just the price of beer is at stake here. Surely you've also noticed the higher prices for a box of cereal and a gallon of milk.

Now all of this would not be so bad if corn-derived ethanol held any real promise. But, by some calculations, the cost of the fossil fuels burned to produce a gallon of ethanol are greater than any savings it provides.

Hardest hit by the hop and barley shortages are the craft brewers. Not only do they use more hops per batch than the big commercial brewers to flavor their beers, they do not have the buying power of Anheuser-Busch or Coors.

But even the big beer names are bound to feel the pinch eventually. That's when Joe Sixpacks everywhere will join the throng wondering if subsidizing corn crops as a source for alternative fuels is really worth it.

The reference to "Joe Sixpacks" points to your average beer drinker, not the Don Russell quoted above. Both these articles raise an interesting point though. Much of the previous chatter on the price increases focused on craft beer rather than the big breweries and the average beer drinker. A Google search will produce more reading on how the increased, and perhaps misguided, ethanol subsidies have affected beer prices.

This morning's Washington Post has an interesting article from Greg Kitsock entitled Brewers See Higher Prices Ahead. Greg makes reference to a perfect storm.
Will 2008 be frothy or flat for beer drinkers? Unfortunately, the new year brings portents of major price increases. Hang out with some brewers and you'll hear the phrase "perfect storm" tossed around a lot. A convergence of factors -- bad harvests, reduced acreage, burgeoning demand for beer in China -- is driving the price of barley and hops skyward.

"Malt is up as much as 100 percent," reports Julia Herz, craft beer marketing director for the Colorado-based Brewers Association, "and I've seen increases as high as 300 to 400 percent on certain hop varieties."

The increased demand for beer in China is an issue I had not read much about previously. The editorial goes on to talk with some local brewers about the problems they are facing. It's an interesting read so be sure to see the whole article.

I made a previous post on the prices increases here and the effect on one local brewer here.

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