I appreciate the effort of Saranac Beer announcing the price increase

The Saranac Beer monthly email came today with their announcement of a price increase coming soon.

Not the greatest of news; however, I truly appreciate Nick and Fred Matt coming forward and informing their customers that this is something they have to do and their hands are tied.

We are all aware that prices everywhere are increasing; we see it every time we fill-up our cars. Unfortunately Saranac is being affected too and thus we are writing to explain why you are going to experience a significant increase in the price of our beers over the next few weeks.

We have heard from literally hundreds of our loyal drinkers over the years that you appreciate the fact that Saranac is somewhat more reasonably priced than other craft beers. Thus we know you are going to be sensitive to the fact that the price of Saranac is going to increase about 8%-10% in the upcoming weeks. This at retail will translate to an increase of $.50 for 6-packs and $1.00 for 12-packs. We recognize it is a big increase and we wish it was avoidable.

Unfortunately it is not. We are experiencing dramatic cost increases for malt and hops, the basic ingredients we use to make our beers. In 2008 the price of malt will go up over 100%, and the price of hops, depending on the variety, will increase from 40% to more than 100%. These price increases are unprecedented! They are the result of a number of factors we have no control over including a poor harvest in 2007, increased world wide demand, a decline in the acreage devoted to growing malt and hops and increased demand for that acreage for making ethanol. All in all, these tremendous increases in malt and hops are going to nearly double the cost for us to make our beer. This combined with the rising cost of package materials, energy and labor, is putting us in a position where we have no choice but to increase our prices.

We regret having to take such significant price increases. We have made every effort to minimize the amount that we pass along to you. In fact this increase will not offset all the cost increases we are facing. We have made the decision to absorb some of the increases ourselves, but we must take a significant price increase if we are going to be able to continue to make the quality beer you expect as a Saranac drinker.

We certainly hope you understand and will continue to support us. As always we thank you for your loyalty and support. If you happen to be in our neck of the woods, please come visit us. We hope to see you soon!


Sincerely,

Nick Matt Fred Matt
President Vice President

It might not be the beer you normally pick up, but I suggest you support these guys, go out and buy a sixpack of Saranac Pale Ale. While you're at it, buy a sixer of your local beer. They are feeling the same pinch.

Crisis in Beer

Foreword: This is a multi-part post on the impending beer crisis. I am not, by any means, a professional journalist, nor do I claim to be. However, I have an opinion that I want to share on the subject. It is based on information that I have read in newspapers, magazine articles, podcast interviews, and brewery consolidations.

Part I: Where are my hops?

It has been reported, over the past several months, that the brewing industry is facing a shortage in the availability of many of the popular hop varieties. News outlets like the Associated Press, the Wall Street Journal, and National Public Radio have picked up on the tremors in the trade.

As most of the folks reading this know, hops are one of the four major ingredients that brewers user to make beer. The other three being malted barley, yeast, and water.

Hops have been used in beer for close to a millennium, while beer in one form or another has been around for close to 5,000 years. Prior to the inclusion of hops, an amalgamation of herbs and spices were used to "preserve" the beer. Unfortunately, some of the ingredients used were actually psychoactives. Once hops were "discovered", the monks, who were the brewers, found the cones to offer a better preserving factor, act as a slight bittering agent, and impart a delicate floral flavor.

If we fast forward to the present day, we find that the most popular style consumed around the globe is that of a Pilsner-type of light lager. By light I mean in color and body. The Big Three (Anheuser-Busch, Molson-Coors, and SABMiller) predominantly focus on this style, and their dedication to consistently and quality control are executed extraordinarily well. Most of these beers are very clear, crisp, and have a low-to-moderate alcohol content. They are also low on the amount of hops used - these beers aren't super-bitter. A lot of the bite comes from the carbonation within the beer. On the flip side, modern American microbreweries tend to use an abnormally high amount of hops in their beer, in order to put their own unique twist on a well-known style, or to experiment with something new (e.g. Watermelon Wheat and Imperial Pilsners). Their beer may range from the moderate lager that the mega-companies produce, to over the top, lip puckering, tongue twisting, mouth-scraping IPAs. For them, the latter generally requires a high amount of hops to be used so they can deliver a well-balanced beer.

The ironic part is both the mega-scale breweries and craft breweries have to use a large amount of hops. You are probably thinking, "in the last paragraph, you said the big guys don't use a lot of hops in their beer; what gives?" It is all about production scale. Whether you brew 5, 200, or 100,000 gallons at a time, you will encounter a time where you will need a lot of hops.

There was a series of events in 2007 that are easily identified as sources of the hops shortage. The first was a series of terribly devastating storms in Europe that destroyed approximately 40% of their hop crop. Now, assuming that Germany alone counts for 25% of the total, global, hop supply, a 40% drop in their yield results in supplying 15% of the world's hops. That is a reduction in availability of 10% on the world-scale. The second event was one of the worst droughts to strike Australia and New Zealand, that allowed them to barely grow enough hops for their own domestic brewing use. New Zealand is known as the world's foremost supplier of certified organic hops. The third event was the abandonment of growing hops in the United States, poor yields in the Pacific Northwest, and ravaging wildfires in the hops-growing region of the US. The sum of these events has led to a skyrocketing increase in price per pound. What the brewer could get for $5 USD a pound now costs in excess of $20 USD per pound. Homebrew supply stores are running out of perennial favorite hop varieties, as are the hop distribution companies who are responsible for providing the essential ingredient to breweries around the globe.

All told, the consumer can expect to see a 10+% price increase, per pint, based on the lack of hops alone.

Within the brewing world, this seems to follow a 7 to 10 year cycle. Unfortunately, something on this scale has never been encountered before.

Hops Shortage = Increased Prices?!?

A friend sent me an article from National Public Radio (NPR) titled - Hops Shortage Likely to Boost Price of Beer.

To sum it up - due to really bad weather in Europe; decreased hops production here, in the US; and an increase in the price of barley, due to farmers switching to raising corn crops for ethanol production (more money to be made with that) we could be looking to have a price increase anywhere between 20 to 80 percent for hops. How wild is that?

This will hit fellow homebrewers hard and the microbrewers even harder, due to the quantity of specialty hops they use. Soooo long double and triple IPAs.