In case you don’t follow beer news religiously, we are in the midst of a world-wide hop shortage. It’s more likely that you noticed the price of beer going up over the last few months. I’ve definitely noticed the prices going up $1 or $2 per six-pack of craft beer. (I haven’t priced Bud in a while.) Well, one of the key factors in the rise of beer prices is the shortage of hops along with an increase in the price of barley.
Many microbreweries are really feeling the hit, as it has driven up their production costs. Some have run out of hops and have had to halt production. So is it all over for the craft beer industry? Will it all go back to low-hopped light lagers? As rough as it might be for some individual breweries, I think as a whole we’ll be ok.
Craft beer consumption is up by about 15% over last year. And if there is one thing I learned when I got my MBA (for the amount of money I spent, I wish I had learned more than one thing…) it’s that where there is demand, someone will supply. As more and more people demand quality, locally produced beer, there will be more people willing to supply it.
Several years ago there was a hop surplus, so the price was very low. Hop farmers began switching to higher paying crops, such as corn. As that shift took place, the supply of hops went down, causing the the price to go up. Now, as there is a critical shortage, the price of hops is 3 to 4 times higher than it was a year ago. I’m sure that is going to get the attention of several farmers who will be willing to produce hops knowing they can sell at much higher prices.
Again, it’s all a matter of supply and demand. The market will eventually stabilize supply and demand, and pricing will fall into line somewhere. The biggest disadvantage in this situation is that it often takes 2 to 3 years to develop a mature hop crop. That means that even if the farming shift starts now, we’re at least 3 years from seeing the effects.
So brace yourself for higher prices at the stores and the bars, but as long as you can find the change in your pocketbook, please continue to support the craft beer revolution. Supporting those breweries in these dark times is the only thing that will keep them afloat. Keep the dream alive!