By Jamie Barrie W ith the successful explosion of craft breweries in coun- tries around the world it was inevitable the laws of supply and demand would ruin the party. These hard working independent brewers face a potentially serious shortage of a vital ingredient: hops. Crops of the sought after key ingredi- ent of craft beer and for all beer for that matter have been well below expectation after last summer’s hot and dry weather damaged the European harvest. Now add into the mix a rising demand by more brew makers in the market and what you have brewing is a price increase. Some hop varieties have seen prices go up by 50 percent, industry sources say, while industry insiders say the more sought after variants are nearly five times more expensive as demand increase or are completely unavail- able, not good news to brewer or drinkers alike. Most hops are sold under contract. The boom in craft brewing in the U.S. has made it a great time to be a hops
farmer with many investing their time and efforts perfecting their crops for decades and now enjoying the highest profit margins they have ever seen.
Most brewers have contracts with hop growers which help protect them from short term price shock however, their big worry is long term supply, as short- ages may get worse with strategy acquiring strategies from multinational breweries like Anheuser-Busch and SABMiller, two giants in the industry, buying up craft brands with the intent to ramp up production and tap in to the craft brew explosion. Bill Manley, who is a small batch product manager at Californian craft pioneer Sierra Nevada said, “It’s tough for brewers, especially brewers that don’t have hop contracts or who were a little late to the contracting game.” Manley added that unexpected sales can deplete your hops supply and “you have to go around and knock on doors like a neighbor trying to borrow a cup of sugar.” Germany and the United States are the two main hops suppliers with each contributing one third of the world production. Last summer hot and dry weather caused the German harvest to shrink 27% and other European nations also saw declines. Stephan Barth of German-based global hopmerchant the BarthHaas Group stated “There has been a considerable tightening of supplies on the European hopmarket after the major reduction in the 2015 harvest with a sharp increase in prices.” Barth said some suppliers have raised prices 35 to 50 percent already depend- ing on the type of hops they sell. Brewers have their eyes on Germany’s as they crops yields has become a “growing” concern for the industry. Barth said “Europe will need at least an average harvest in 2016 otherwise we could see serious supply shortages”. As for brewers they are hoping for an exceptional harvest to get prices to head in the right direction.
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OCTOBER 2016 • SPOTLIGHT ON BUSINESS
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