The price of hops, that's what.
Get a grip on your pint glass, the price of beer is going up by as much as $2 a six pack or more, and you can blame rising costs of hops and barley for it.
Currently there are worldwide hops shortages of 10 to 15 percent, according to Ralph Olson, owner of supply house Hopunion LLC in Yakima, Washington. Hops prices have bumped as much as 400 percent since the most recent harvest. That astronomical rise is due to a decrease in hop acreage, weather problems and the weak dollar. Hops, of course, give beer its characteristic aroma, flavor and bitterness.
“Hops are coming down from a 10- to 12-year surplus and so the market is having an adjustment,” says Julia Herz, craft beer division director for the Boulder, Colorado-based Brewers Association, representing the micro-brewing industry.
A glut of hops in the 1990s brought such low prices that many growers reduced their acreage or quit the business altogether. Hop acreage has decreased by 50 percent over the last decade.
That was compounded last year by bad weather conditions that have adversely affected the current hops harvest worldwide. Domestically, the Pacific Northwest, which grows about 25 percent of the world’s hops, had a good harvest. But the big European brewers, armed with a strong euro, quickly purchased the crop, which drove up prices. American brewers, who often formulate their beers with many European-grown hops varieties, were further stymied by the weak dollar.
Coincidentally, barley—the grain that’s malted to give beer its flavor, color, body and sweetness—is also in short supply. Price increases of up to 100 percent have been reported.
Two consecutive poor harvests have contributed to the shortage—as has the growing demand for biofuel: as more corn is used for ethanol, more cattle are being fed barley.
How long will barley and hops be in short supply? The barley situation might be corrected within a year, given good weather and a good harvest. Hops are another story.
“We’re hoping to see more acreage get re-devoted to hops soon,” says Herz. But, she explains, it takes about three years for newly planted hops to bear.
Prices of microbrews will likely rise faster than mass-market lagers. Mega-brewers have locked in long-term supply commitments.
Microbrewers don’t have that kind of leverage and are scrambling. These small craft brewers also generally use much more malt and hops per barrel to produce their full-flavored brews. Import beers are also being impacted.
What can restaurant and bar operators do?
“Right now, I’ve no idea how high [prices] will go,” says Craig Fass, chef-owner of Cooper’s in Chicago, which boasts a 90-beer selection. “There’s not much we can do about it.” Cooper’s focus on fine beers means he’ll have to bite the bullet. Fass says he’ll probably have to pass along some of the increase to his customers.
“We’re reluctant to pass along any price increases to our customers,” says Tom Nelson, brewer at the Schaumburg, Illinois, location of Ram Restaurant & Brewery, a 23-unit, Lakewood, Washington-based brewpub. Nelson says he may tinker with one of his ale’s hops formulation.
Operators can tune up their tap systems to maximize keg yields and pay closer attention to inventory. Prices of domestic lagers like Budweiser and Coors probably won’t rise as much as craft beers. And those global corporations have wide-ranging portfolios, including a few craft brews of their own, plus regional specialties and trendy imports.
Educating customers about the price of quality beer is key, insists Herz. “In the wine world, mother nature delivers challenges every year,” she notes. “Customers understand that, they’re used to it.” Brewers are also working with raw ingredients affected by weather.
After all, craft-beer drinkers have already proved they’re willing to pay a premium for beer.