Buying a cold one can put a tear in your beer
Artist Jeff Foye savors the bitter flavor and floral aromas that emanate from a well-crafted beer. Lately, the San Pedro resident has experienced an unexpected sensation when he reaches for a brew -- the unpleasant taste of rising prices.
A worldwide shortage of hops -- a key ingredient for the pale ales Foye likes so much -- and rising prices for malted barley have pushed up the cost of imbibing a tall cold one.
These days, he’s paying $9.99 a six-pack, about 40% more than a year ago, for such California-crafted favorites as Union Jack India Pale Ale brewed by Firestone Walker Brewing Co. of Paso Robles and Racer 5 made by Bear Republic Brewing Co. of Cloverdale.
Add beer to the growing list of what many people consider basic foods -- like bread, coffee and pizza -- that are costing more. The cost of groceries has risen at an annual rate of about 5% in each of the last six months, the fastest food inflation since 1990.
“It is a big hit,” Foye said as he leaned over a microbrew at the bar of Beachwood BBQ on Main Street in Seal Beach this week. He doesn’t drink enough beer to make higher prices a “budget buster,” yet Foye still finds it “irksome. . . . It’s like gas prices, what are you going to do about it?”
After barely budging for several years, beer prices started to inch up in the second half of last year and are now rising at about a 4% annual rate, according to government statistics.
It’s showing up in what brewers and distributors are charging for both domestic and imported beer, said Ken Hollingswood, owner of Hollingswood Delicatessen, a popular hangout for hopheads in Orange. He’s had to raise the price of better domestic brews by about 15% and European beer by 20%.
“Those are big increases, and I don’t think we have seen the end of it yet,” Hollingswood said.
Prices for microbrews are rising faster than the mass-produced beers. That’s because they come from small brewers less likely to hedge expenses with advance purchases of barley and hops than Anheuser-Busch and the other giants that control most of the market.
But even the big brewers aren’t totally immune.
“Like all brewers, we are experiencing cost increases due to the rising prices of brewing ingredients,” said Maureen Roth, spokeswoman for Anheuser-Busch, the nation’s largest brewer. She declined to comment on how that was affecting the company’s prices, except to say that Busch has “aggressive cost-savings programs in place throughout the company designed to partially offset rising commodity costs.”
Two ingredients -- hops and malted barley -- are behind much of the price increases.
Hops produce the chemicals that give beer its distinct flavor. Some varieties are used to bitter the drink. Others impart its floral aromas. Most commercially grown domestic hops come from Washington, Oregon and Idaho.
After water, malted barely is the next-biggest ingredient in beer. It provides the sugars that turns into alcohol when the beer is fermented.
Barley prices have risen because of worldwide demand for grains, including wheat, corn and rice. Philip Sutton, owner of Skyscraper Brewing Co., a small brewery in El Monte, said the price of a 50-pound bag of malted barley had jumped to $22, or 57% higher than a year ago.
Hops prices are soaring even more. Sutton paid $3.40 to $4.70 a pound for hops a year ago. The least expensive hops he has found this year were $12.63 a pound, and he’s paid all the way up to $22.45. But that’s only if he can find them.
“The hops that we like to use just aren’t available,” Sutton said. That has forced him to substitute other hops in some of his beer recipes “and that makes a different beer. It’s still good but isn’t what we would ideally have,” said Sutton, who has raised his prices 20% to 30%.
For many years, farmers didn’t make much money selling hops. Back in 1996, hop farming peaked at an estimated 44,000 acres.
All that acreage, combined with the planting of higher-yielding varieties, created a giant surplus. That was made worse because the beer-making ingredients that come from hops can be easily stored for years. That drove prices down and pushed farmers out of the business, said Ann George of the Washington Hop Commission.
By 2004, acreage had fallen to a low of 27,742 but has grown slowly since, hitting almost 31,000 in 2007. That wasn’t enough to stave off a hops shortage this year that is expected to last into next year. George estimates that farmers will plant 6,000 to 8,000 new acres this year.
The hops shortage is hitting the small, fast-growing craft brewers that have become the most dynamic part of the American beer market. That segment accounts for less than 4% of U.S. beer production but uses almost 10% of the hops, according to industry statistics.
Microbrews are where most beer innovation is taking place, said Gabriel Gordon, owner of Beachwood BBQ.
Gordon has built his eatery around beer. He typically has 23 brews on tap and another 45 in bottles.
Brewers are charging Gordon 20% to 40% more for their beer, and that’s forced him to raise prices about 50 cents a glass to $6 or $6.50, depending on the beer.
“I am not looking to get rich,” Gordon said. He would rather limit his price increases and “have my repeat customers walk away satisfied rather than feel like they were gouged.”