In our most recent poll, we stated that higher ingredient costs and other supplier costs have some microbreweries scrambling. These costs have risen sharply; for example, the price of barley has risen to roughly $400 per metric ton (compared to about $125 - $135 in 2005). In some cases, craft breweries can’t even get the right types of hops they need to make their beer, as these supplies have been quite limited. We asked how microbreweries should handle this crisis, and the majority of respondents had a definite point of view. Nearly 70 percent agreed that craft breweries should just pass on these costs directly to customers, simple as that. After all, they concurred, craft brews are enjoying a wave of popularity in the U.S., showing very strong growth, compared to other beer segments.
However, approximately 20 percent had a different point of view, and this group agreed that these brewers need to find ways to use cheaper or alternative ingredients and/or packaging, if at all possible. The third segment – just over 10 percent, said the best course of action for craft brewers is to cut back on production and/or limit distribution until supplier costs become more reasonable. The fourth possible answer -- Merge with larger brewing companies, as they have more bargaining clout and can better absorb cost increases – received no votes. To respond to our current poll, visit Bevinfogroup.com.
Historically, the problems of brewing material scarcity have bubbled up throughout U.S. brewing history, even going as far back as the colonial era. In every case (no pun intended), it has meant a move towards not necessarily cheaper ingredients, but alternative ones.
While beer writers note that The Founding Fathers were often brewers, some of their surviving recipes wouldn't make the first round at any local homebrew contest. "Alternative" brewing materials aren't necessarily a good thing, although English brewers have certainly demonstrated that good beers can be made, even if they aren't all-malt products.
Food control bills during WW I and grain restictions during WW II and the Marshall Plan meant more adjustments to the kettle.
Passing along the new higher costs can hit the price-sensitive beer drinker and give the macros a chance to fill the gap with clean and well-crafted "pseudo crafts." Depending on your point of view, that could be a good thing, giving the average beer drinker a chance to taste what craft beers might be all about.
On the other hand, because of lower prices and widespread availability, it could also mean a Coors drinker, for instance, might just move sideways to a product in the Blue Moon line, never jumping to a craft product.
I suspect we'll see a lot of tweaking in craft beer styles in the next few years, maybe even a sabbath on some of the more aggressively-hopped beers such as IPAs. Despite the spin that some beers can be priced in the range of lower-priced wines, for many, it all comes down to the notion that "it's just beer."
With no real industry leadership, such as what the USBA used to offer, it would be nice to nonetheless see the formation of some sort of perhaps regional co-op development between breweries to help them lower material and production costs by economies of scale.
While no one has bowed to the very real idea of merging with bigger breweries in the survey---whether macro or well-heeled regional---it's already happening and it looks to be with good results...and once again, I note that this is a repeat of a historical pattern.
Posted by: Bob Skilnik | May 08, 2008 at 11:55 AM