- Beer makers face many challenges as inflation and supply chain issues increase brewing and shipping costs.
- Shortages of aluminum cans and carbon dioxide, used in brewing, have hampered some brewers.
- For consumers, beer prices are rising — up 5% so far this year — but not as fast as those of other goods, including food, which are up around 11%.
We haven’t had any shortages of shortages recently. There was toilet paper and computer chips, followed by tampons and formula. Could the next shortage be beer?
The potential arises as beer makers big and small come under pressure from a confluence of inflation and several supply chain issues. Some breweries have struggled to get carbon dioxide (CO2), which is used to clean vats and carbonate beer. When they get it, the price is often higher, sometimes double what they were paying before.
Also on the rise: the price of other ingredients such as malted barley and the cost of shipping it and other products.
All of this could lead to higher beer prices. Plus, some of your favorite beers might be out of stock or not on tap.
“I don’t know if I can think of a scenario where there is no beer from one brewery, but I can understand a scenario where there is a limited or smaller supply, because beer has a short life. preservation,” said Chuck Aaron, owner and founder of Jersey Girl Brewing in Hackettstown, NJ
The environment is tough enough to force some breweries to close. “That could definitely be a closing factor,” Brewers Association chief economist Bart Watson told USA TODAY.
In a mid-year survey of association members – about 5,600 small independent American breweries – the sentiment of some brewers was: “We’re selling as much beer as before the pandemic, but we’re producing much less, and we don’t know how long that’s sustainable,” Watson said.
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Why might there be a shortage of beer?
Because breweries, accustomed to certain supply chain difficulties, face a growing list of headaches. The price and availability of aluminum cans has become increasingly volatile as cans have become essential to the survival of breweries. Many had pivoted to curbside pickup and offsite distribution during the national shutdown caused by COVID-19.
Likewise, CO2 supply has “remained tight since the spring 2020 shortages,” Watson said in a recent report. Breweries often received less than they ordered – or worse, did not deliver the promised quantities at all.
Today, inflation has driven up the total cost of the brewery shopping list, as it does for all Americans. That means breweries are likely paying more for CO2, cans, paper goods, malt (the grain needed to make beer), and hops.
“What’s unprecedented is the number of areas where we’re having challenges,” Watson told USA TODAY.
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Settle Down Easy Brewing Co. in Falls Church, Va., hasn’t been hit hard by CO2 price hikes, but is paying an extra two cents per can for its canning line, purchased during the pandemic, said co-owner Frank Kuhns.
But other price increases hit harder, including a $150 to $300 “gas trip” fee for each supplier delivery, and 30% labor and equipment costs. 40% more than originally planned, for the construction of a second location in Northern Virginia a few miles away. in Oakton, Virginia.
So far, “we have made the decision to hold on and not pass these increases on to the customer and seek new suppliers or reduce costs without sacrificing quality,” Kuhns said.
Despite the dilemma, the country’s beer taps are unlikely to run out. But they could be tempered, he said.
“I’m not sure I’m going so far as to say there will be shortages. Individual producers may have problems, but it’s not so widespread that you’re going to see empty beer shelves,” said Watson. “I think the brand of beer that consumers sometimes want to be out of stock is closer to precision. And brewers can make different beers or less.”
Why is carbon dioxide needed to make beer?
Most beer lovers know that brewers use CO2 to carbonate beer. But CO2 is also used to clean fermentation tanks and prevent oxygen from entering before they are filled. “Oxygen is the devil of beer and kills a beer if it has oxygen in it,” Aaron said.
But many breweries have struggled to get the CO2 they need. One of the main contributors is that a natural source of CO2, the Jackson Dome, an extinct volcano in Mississippi, “is facing a contamination issue with raw gas from the mine, creating a significant drop in food-grade CO available,” Watson told brewers in a July report.
Strong demand and some closures of ammonia plants, which create and capture CO2 to sell to other industries, have worsened the shortage. The same goes for rail disputes, which have disrupted deliveries, wrote Forbes columnist Richard Howells, a supply chain manager.
“Yes, you heard that right,” Howells wrote. “At this time of trying to reduce CO2 emissions into the atmosphere, we are actually going to have a shortage of CO2 which provides the carbonation so loved by millions of concerned beer drinkers.”
How are breweries coping with the CO2 shortage?
Most had to pay more for the CO2, while many had to find other suppliers. And if a brewer doesn’t have enough, it could prevent some beers from being made, said Tomme Arthur, co-founder and chief operating officer of Port Brewing and The Lost Abbey in San Diego County, California. California.
“I don’t expect 18 packs of lager to be missing from grocery store aisles,” he said. “But your local craft brewer is certainly likely to have to adjust brewing schedules and deliverables based on this lack of CO2 and its need in so many brewing practices.”
At Jersey Girl Brewing, the cost has doubled over the past year, from about 20 cents a pound to 44 cents.
Aaron said he “watched the price of the bill go up and up as we filled” the brewery’s bulk tanks capable of holding 1,500 pounds of gas.
Aaron also had to decide not to make certain beers, such as a Helles lager, because the German grain needed was too expensive with rising shipping prices. And some beers requiring New Zealand International hops were not produced.
“Hopefully once the prices come back we can reintroduce them to the market,” he said.
Earlier this week, Axios reported that a “US beer shortage is looming with a lack of carbon dioxide supply.” He also noted that some breweries have equipment to capture the CO2 emitted during the brewing process, but it is very expensive.
Also in the running for CO2: Other industries, including soft drink manufacturers and food manufacturers. “As we’ve learned, brewers are a relatively small user of CO2 in the grand scheme of things,” Watson said.
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Could beer get more expensive?
It’s already the case. The makers of Miller Lite and Coors Light, and Bud Light – as well as Stella Artois – have all recently increased their prices. But beer prices are rising much less than the cost of production.
The price of beer bought to drink at home had risen about 5% in August 2022, compared to August 2021, according to the Consumer Price Index. This is more than whiskey (3%), wine (2.5%) and other spirits (1.2%).
Another barometer of prices: the average cost to consumers of beer has increased by 3.4%, over the past year, for the equivalent of a 24-pack of 12 oz. cans, based on prices for the week ending September 10, 2022, according to Nielsen IQ.
Beer price increases also remained lower than other consumer goods – overall, prices were up 8.3% from a year ago, and food was up 11, 4%. The price increases haven’t “stopped consumers from buying” craft beers, imported beers or canned cocktails and sodas, said Bump Williams, a beverage industry consultant.
Consumers also bought more 12-packs and single-serve cans as they “changed their buying behavior with rising inflation, rising interest rates, rising gasoline prices and the stock market decline turning 401,000 into 201,000,” Williams said. “So people are managing their affordable luxury spending a little differently today.”
Could the price of cans also affect the supply of beer?
Probably indirectly, since aluminum prices are just one of many costs that brewers are seeing rise. Can costs “are still a lot higher than they used to be and I think once prices go up like we’ve seen them, you tend not to see them come back down,” Aaron said.
Although there has been less volatility recently, some breweries had to find a new supplier when Ball Corp., one of the nation’s largest can makers, raised its minimum requirements for customers earlier this year, citing an unprecedented request.
“We were sent to find another supplier,” which charges 1.5 cents more per unit, Arthur said. “A truckload of cans is about 156,000 units, so the pennies add up,” he said.
“I’ve never seen this level of inflationary pressures combined with outright shortages. It’s bonkers, to say the least,” Arthur said. “I suspect almost every brewery in town is stuck on the same fronts.”
Follow Mike Snider on Twitter: @mikesnider.
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